Petrobank to Acquire Peerless Energy

Petrobank Energy and Resources Ltd. and Peerless Energy have entered into an arrangement agreement whereby Petrobank will acquire all of the issued and outstanding shares of Peerless.

Peerless is currently producing approximately 4,250 barrels of oil equivalent per day ("boepd"), consisting of light oil, primarily from the Bakken play in Saskatchewan, and natural gas from Alberta and British Columbia. Peerless also has over 100,000 net acres (156 sections) of undeveloped land. Petrobank and Peerless have both achieved significant light oil production growth over the last year from the Bakken play in southeast Saskatchewan. Our combined current production from the Bakken play is approximately 7,900 barrels of oil per day ("bopd"). This Acquisition further strengthens Petrobank's Bakken growth potential by adding 18 net sections of undeveloped land and current production of approximately 1,900 bopd. The Peerless assets will complement Petrobank's Bakken facility and infrastructure plans, allowing us to recover natural gas and liquids production while minimizing operating costs.

The Acquisition will be accomplished through a Plan of Arrangement (the "Arrangement") wherein each Class A share of Peerless will be exchanged for $0.90 cash and 0.08 of one Petrobank common share and each Class B share of Peerless will be exchanged for $10.00 cash. Based on the five-day weighted average share price of Petrobank ending on November 22, 2007 of $54.33/share, the effective price per Peerless Class A share is $5.25. The total Acquisition cost is expected to be approximately $334 million, including assumption of debt and costs of the transaction. It is expected that approximately 4.0 million Petrobank common shares will be issued to effect the Arrangement.

The Acquisition is expected to be accretive to Petrobank shareholders on a production, cash flow and reserves basis and is adding current production of approximately 4,250 boepd, weighted 64% to light oil and 36% to natural gas. During 2007, Peerless undertook an intensive capital program, focused primarily on the Bakken. Approximately 1,900 bopd of Peerless' current production is Bakken light oil strategically located within Petrobank's core properties in southeast Saskatchewan. High commodity prices for light oil, the Saskatchewan royalty regime, and relatively low operating costs all contribute to the very attractive, high netbacks for Bakken light oil. Petrobank's Bakken light oil operating netback during the third quarter of 2007 was $66.75 per barrel. Reserves for the acquired properties will be evaluated by Petrobank's independent reserves evaluator at year end.

With this Acquisition, Petrobank will have a Bakken drilling inventory of 600 (565 net) well locations, based on a future well density of only four wells per prospective section. Petrobank plans on pursuing this drilling inventory by operating seven rigs within the Bakken play, allowing more than 110 (100% Working Interest) horizontal wells to be drilled during 2008. The Bakken light oil resource play is expected to be Petrobank's primary conventional Canadian focus area in 2008 and for years to come. This Acquisition, combined with recent land purchases, and Petrobank's highly effective drilling and stimulation program, further solidifies Petrobank as a key, long-term Bakken player.

The information circular for the Arrangement is expected to be mailed to Peerless shareholders in late December 2007 and it is anticipated that the special meeting of Peerless' shareholders will be held in January 2008. The successful completion of this transaction is subject to the requisite approval of the Peerless shareholders, along with customary regulatory, court and other approvals.

The Board of Directors of both Petrobank and Peerless unanimously approved the Arrangement. The Board of Directors of Peerless concluded that the transaction is in the best interests of the Peerless shareholders from a financial perspective and resolved to recommend that shareholders vote their shares in favour of the Arrangement. The directors and officers of Peerless have also entered into lock-up agreements with Petrobank to vote their Peerless shares in support of the Arrangement.

The Arrangement prohibits Peerless from soliciting or initiating any discussion regarding any other business combination or sale of material assets, contains provisions for Petrobank to match competing, unsolicited proposals and, subject to certain conditions, provides for a $12.5 million termination fee payable to Petrobank.

Tristone Capital Inc. is acting as financial advisor to Peerless with respect to this transaction and has advised the Board of Directors of Peerless that they are of the opinion, as of the date hereof, that the consideration to be received by the Peerless shareholders is fair, from a financial point of view, to Peerless shareholders. Clarus Securities Inc. acted as strategic advisor to Peerless. Haywood Securities Inc. and TD Securities Inc. acted as financial advisors to Petrobank.


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