CALGARY, June 5 /CNW/ - ENMAX Acquisition Corp., an indirect wholly-owned
subsidiary of ENMAX Corporation (collectively "ENMAX"), provides the following
additional commentary further to its press release dated May 28, 2008.
Ember Resources Inc. ("Ember") delivered an unsolicited proposal (the
"Ember Proposal") to Cordero Energy Inc. ("Cordero") on May 28, 2008, which
proposed the acquisition of Cordero by Ember in exchange for shares of Ember.
The board of directors of Cordero subsequently announced that it carefully
considered the Ember Proposal, including the advice of both Cordero's
financial advisor and legal counsel, and concluded that the Ember Proposal was
not financially superior to the outstanding offer by ENMAX to acquire all of
the outstanding common shares of Cordero for $4.75 cash for each share (the
"Offer"). The Ember Proposal has since expired.
It is possible that Ember may make another unsolicited proposal prior to
the final expiry date of the Offer on June 13, 2008. In order to minimize any
confusion that may result from such a last-minute proposal, ENMAX wishes to
make certain comments regarding its views on the quality and value of the
- In the event that Cordero were to complete a transaction with Ember at
any time over the next six months, a break fee of $7 million would
become payable to ENMAX, which represents approximately $0.18 per
- Ember's market capitalization is less than half of Cordero's, and a
reverse takeover by Ember offers no certainty of improved liquidity
for Cordero shareholders.
- ENMAX believes that the group of approximately 25.7% of Cordero
shareholders that supported the Ember Proposal was comprised
principally of institutional shareholders motivated to receive Ember
shares rather than cash, and who are also shareholders of Ember.
- Ember wishes to put more capital into advancing its contingent
Mannville coal bed methane resources, which have unknown ultimate
commercial viability and disappointing results to date.
- Ember has historically generated lower cash flow netbacks per barrel
of oil equivalent ("boe") of production than Cordero.
- Approximately 22% of Ember's undeveloped Mannville land holdings are
scheduled to expire in 2008.
- Ember has a higher level of relative indebtedness than Cordero.
- Ember's proven and probable reserves are forecast to require
approximately $51 million in capital expenditures over the next three
years; Ember's cash flow for the first quarter of 2008 was
- Ember has a commitment to pay for approximately $17 million in
existing infrastructure over the next six years, regardless of
production levels from related areas.
By contrast, the ENMAX Offer provides Cordero shareholders with full
liquidity in the form of cash consideration, which would enable shareholders
of Cordero to make their own re-investment decisions regarding the subsequent
purchase of shares of Ember, or the securities of any other oil and natural
gas exploration and production company. ENMAX reiterates that it has no
intention of varying the Offer of $4.75 cash per Cordero share. The Offer
expires at 4:30 p.m. (MST) on June 13, 2008.
ENMAX also makes the following observations, based on public disclosure
- Ember carries a materially higher debt burden than Cordero, as
evidenced by 12-month trailing net debt to cash flow ratios of 2.9x
for Ember versus 1.5x for Cordero at March 31, 2008.
- Ember has stated that it would like to obtain and deploy additional
capital to further advance its Mannville resources towards commercial
production, but has also stated that these resources have not been
proven commercial to date. ENMAX notes that Ember's Mannville
operating costs were $80.50 per boe ($13.42 per mcf) for the first
quarter of 2008.
- Page 10 of the 2007 Ember annual report states that the proven plus
probable finding and development costs, including future capital, for
the Mannville resources were $98.90 and $42.60 per boe for 2005 and
2006, respectively. The 2007 finding and development costs were
reported as 'not meaningful' due to reserves write-downs during 2007.
- ENMAX notes a downward technical gross proved plus probable reserves
revision of 16.6 bcf as set out on page 19 of the 2007 annual
information form of Ember (the "AIF").
- The statement by Ember in its press release on May 27, 2008 regarding
its contingent resource estimates lacks specificity with respect to
costs, timing and recoverability. The Ember press release only states
that management believes that the "Mannville coals will become
commercial on a larger scale over time". On page 22 of the AIF, Ember
stated that it expects to develop the contingent resources in its
Mannville areas during the next five to 20 years.
- Ember currently has a commitment to pay AltaGas approximately
$17 million over the next six years in relation to the construction by
AltaGas of field gathering and processing facilities on Ember's Acme
lands, regardless of natural gas production throughput by Ember.
- On page 20 of the AIF, the year end proved and the proved plus
probable reserves of Ember are contingent on significant future
capital expenditures of $29.5 million and $51.2 million, respectively,
- On page 21 of the AIF, it is notable that 44,276 net undeveloped acres
of land in the three operating areas of Ember where the Mannville
resources are located expire in 2008 and a total 115,516 net
undeveloped acres are scheduled to expire in the next five years
(representing 22% and 58%, respectively, of Ember's total net
undeveloped acres in its Mannville areas).
ENMAX encourages Cordero shareholders to review Ember's full public
disclosure record, which can be found at www.sedar.com.
ENMAX Corporation, through subsidiaries and predecessors, has provided
Albertans with safe and reliable electricity for more than 100 years. ENMAX
provides electricity, natural gas and value-added services to more than half a
million residential, commercial and industrial customer accounts in Alberta.
Through a subsidiary, ENMAX Energy is one of Alberta's largest investors in
renewable energy with partial ownership of the McBride Lake Wind Farm and
complete ownership of the Taber Wind Farm. ENMAX Energy's Greenmax was one of
the first green power marketing programs in Canada, and celebrates its 10th
anniversary in 2008. Visit our website at enmax.com.
You can choose any retailer listed at www.ucahelps.gov.ab.ca or at
310-4822. Electricity delivery to your home or business isn't affected by your
choice of retailer.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
For further information:
For further information: Peter Hunt, VP, Public Affairs, ENMAX
Corporation, 141 - 50 Avenue SE, Calgary, Alberta, T2G 4S7, (403) 689-6150