EnQuest has entered into an Arrangement Agreement to acquire the entire issued share capital of Stratic.
Stratic shareholders shall be entitled to receive 0.089626 EnQuest shares per Stratic share. Based on EnQuest's average closing price on the London Stock Exchange between July 28 to August 2, 2010, this equates to an offer of 17.00 Canadian cents (the "Offer Price") for each existing Stratic share, valuing the issued and to be issued share capital of Stratic at approximately US $45.7 million (the "Offer Value"). The Offer Price represents a 70% premium to Stratic's closing price on Friday, July 30 (the Toronto Stock Exchange was closed on Monday August 2) and a 9% premium to Stratic's three month volume weighted average price of 15.56 Canadian cents. This purchase price is the equivalent, adjusted for tax, to paying approximately US $11.2 per barrel for 2P reserves. All amounts are in US dollars, unless otherwise stated.
As part of the transaction EnQuest will refinance Stratic's US $74.7 million net debt (as at June 30), consisting of bank debt of US $18.9 million, convertible bonds of US $66.7 million and cash of US $10.9 million. EnQuest has agreed with the providers of its existing $280 million committed banking facility to increase the facility size by $70 million.
EnQuest Chief Executive Amjad Bseisu said, "I am delighted to announce EnQuest's first acquisition since our listing in April. The acquisition of Stratic is in line with our strategy to deliver sustainable growth in shareholder value through the exploitation of existing reserves and pursuit of selective acquisitions. The acquisition of Stratic provides a meaningful 7.27MMboe increase in our 2P reserves in the North Sea. It immediately enhances our production profile, it consolidates EnQuest's working interest in West Don and it adds a working interest in the Crawford development to our asset base."
The Acquisition has been unanimously recommended by the Stratic Board of directors and shall be effected by means of a Plan of Arrangement (the "Plan of Arrangement"). A Plan of Arrangement is a Canadian court process used for the acquisition of a company and an Arrangement Agreement is a binding contract entered into by both parties following mutual due diligence. Completion of the Acquisition is subject to court and Stratic shareholder approval and other customary closing conditions being satisfied. The proposed transaction will require Stratic to publish an information circular and to hold a special meeting for its shareholders to consider and vote on the Plan of Arrangement - the resolution requires a majority of not less than two thirds of the votes cast. It is anticipated that this process should take 8 to 10 weeks. An application for the listing of additional EnQuest shares will occur following completion of the Plan of Arrangement.
The Board and management of EnQuest believe that the acquisition of Stratic enhances EnQuest's portfolio delivering further opportunities for development and growth. Key features of this acquisition include:
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