Verenex Highlights 3Q 2009 Operating, Financial Results

Verenex has reported its unaudited interim operating and financial results for the three and nine months ended September 30, 2009.

Third Quarter 2009 Highlights

On November 5, the Company announced it had entered into a definitive arrangement agreement with the Libyan Investment Authority (the
"LIA") pursuant to which the LIA, through a subsidiary, has agreed to acquire all of the Verenex shares issued and outstanding upon
completion of the transaction at a price per share in cash equal to $7.09 plus an additional amount per share (the "Working Capital
Amount"). Based on preliminary estimates agreed to by the LIA, Verenex expects the Working Capital Amount to be a nominal amount of
approximately $0.15 per share, assuming completion of the transaction in mid-December.

Financial

  • Net loss in the third quarter of 2009 from continuing operations was ($3.5 million) compared to net income of $0.2 million in the third quarter of 2008.
  • Funds flow from continuing operations in the third quarter of 2009 was ($1.5 million) compared to ($1.1 million) for the third quarter of 2008.
  • Working capital surplus at September 30, 2009 was $8.9 million compared to $29.8 million as at December 31, 2008, including cash amounting to $11.9 million (December 31, 2008 - $55.5 million) net of restricted cash amounting to $nil million (December 31, 2008 - $4.1 million). The decrease in working capital is due to the ongoing investments in the Company's Libya operations.

During the third quarter of 2009, the Company invested approximately $3.3 million. Libya accounted for all of the investment activity level with approximately $1.7 million in drilling, $0.1 million in facilities, $0.1 in completions, $0.1 in G&G and $1.3 million in capitalized General and Administration ("G&A") and office costs.

Outlook

On November 5, the Company announced it had entered into a definitive arrangement agreement with the Libyan Investment Authority (the "LIA") pursuant to which the LIA, through a subsidiary, has agreed to acquire all of the Verenex shares issued and outstanding upon completion of the transaction at a price per share in cash equal to $7.09 plus an additional amount per share (the "Working Capital Amount" and, together with the $7.09 offer price, the "Cash Purchase Consideration") to be determined by the Board of Directors of Verenex and the LIA at the time of completion of the transaction based on the aggregate amount, if any, of positive net working capital in Verenex at such time (determined on a pro-forma basis in accordance with the provisions of the Agreement). It is a condition to the completion of the transaction that such pro-forma closing working capital amount not be negative. Based on preliminary estimates agreed to by the LIA, Verenex expects the Working Capital Amount to be a nominal amount of approximately $0.15 per share, assuming completion of the transaction in mid-December. The final determination of the Working Capital Amount is subject to a number of factors, primarily the period of time for completion of the transaction, the rate of ongoing expenditures (primarily general and administrative expenses) and closing costs.

An irrevocable letter of credit in the amount of $350 million, the aggregate purchase consideration payable by the LIA to acquire Verenex, has been deposited in escrow on behalf of the LIA as security for the availability of the aggregate purchase funds upon satisfaction or waiver of the conditions set out in the Agreement.

The transaction will be completed by way of plan of arrangement (the "Arrangement"), to be submitted to the holders of Verenex securities (Verenex shares, options and performance warrants) for approval at a meeting scheduled for December 11, 2009. In addition to the working capital condition mentioned above, the Arrangement is conditional upon, among other things, securityholder approval of 75% of the votes cast at the meeting, court and regulatory approvals and certain other customary conditions for an agreement of this nature. The parties have provided for a higher than normal voting approval threshold in lieu of granting dissent rights to shareholders. The LIA has represented in the Agreement that the Arrangement has received all necessary Libyan government approvals. The Agreement has been filed on SEDAR at www.sedar.com.

All of the members of the Verenex Board, its executive officers and its major shareholder, Vermilion Resources Ltd. (representing in aggregate approximately 45.2% of the common shares on a fully diluted basis), have entered into voting support agreements pursuant to which they have agreed to vote their securities in favour of the Arrangement.

 

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