The transaction has an effective date of May 1, 2001 and involves the sale to Hunt of production that has averaged approximately 2.5 mmcf/d of natural gas during the past year and a 10% working interest in approximately 50,000 gross acres of undeveloped land (5,000 acres of net undeveloped land) but does not include Canadian Superior's extensive foothills seismic database in the area. The properties are currently producing approximately 1.7 mmcf/d.
"The non-operated production and non-operated lands being sold by Canadian Superior are non-core assets and they are being sold to Hunt for top dollar," said Richard Watkins, Canadian Superior's Vice President of Corporate Development. "The proceeds of the sale will be used by Canadian Superior for general corporate purposes including funding drilling planned for later this year on Canadian Superior's 'Marquis Blocks' on the Scotian Shelf Offshore Nova Scotia," Watkins said.
Earlier this year, Canadian 88 entered into a transaction with Hunt to sell its Waterton area assets, including its 90% jointly held interests with Canadian Superior, and Canadian 88's 100% interest in its $33 Million Waterton area regional sour gas gathering pipeline to Hunt for only $112 Million, effective January 1, 2001. "Canadian Superior's asset sale to Hunt recognizes the true value of the combined Waterton asset which are estimated at over $200 Million", Watkins said in Calgary today. "Canadian Superior has always maintained that Canadian 88 didn't get full value when it sold off its Waterton assets. In Canadian Superior's opinion, the Canadian Superior transaction reflects the undervalued nature of Canadian 88's entire asset base and a severe management problem at Canadian 88 related to the inability of Canadian 88's Duke appointed senior management and Duke controlled Board of Directors to properly enhance Canadian 88 shareholder value."
Canadian Superior has recently proposed a plan of arrangement between Canadian Superior and Canadian 88 whereby Canadian 88 shareholders will receive 2.75 shares of Canadian Superior for each share held in Canadian 88 and the Board of Directors of Canadian 88 will be replaced by a new slate of directors proposed to oversee the combined companies (see: Canadian Superior's press releases dated April 26, 2001 and May 11, 2001). The current Board of Directors of Canadian 88 is controlled by Duke Energy Corp. and it is proposed that they be replaced by a new experienced Board of Directors to provide strong independent shareholder and strong institutional shareholder representation, which will allow the Company to move forward with a new focused strategic direction.
After giving effect to the Hunt transaction, Canadian Superior's estimated net asset value has increased to approximately $106 Million, which represents $2.44/share on a fully diluted basis, including approximately $28 Million of positive working capital which will allow Canadian Superior the opportunity to proceed forward aggressively for the balance of 2001.
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