/R E P E A T -- Twin Butte Energy to acquire private heavy oil producer Waseca Energy and increase monthly dividend/


CALGARY, Sept. 3, 2012 /CNW/ - Twin Butte Energy Ltd. (TSX: TBE) ("Twin Butte" or the "Company") is pleased to announce that it has entered into an arrangement agreement providing for the acquisition (the "Waseca Acquisition") by Twin Butte of all of the outstanding securities of Waseca Energy Inc. ("Waseca") for total consideration of approximately $127 million including the assumption of approximately $7.5 million of positive working capital after accounting for estimated transaction costs.

Waseca is a private company with a focused asset base in the greater Lloydminster area with 100 percent of its production consisting of heavy oil.

The consideration for the Waseca Acquisition will be comprised of a minimum of $32.2 million and a maximum of $58.9 million in cash (assuming the Waseca options and performance shares are arranged in accordance with the  arrangement agreement) and a minimum of 28.9 million and a maximum of 39 million in Twin Butte common shares depending on elections between cash and shares made by Waseca shareholders. At closing, Twin Butte anticipates it will have approximately 245.9 to 256.1 million shares outstanding.

Waseca is owned 81.1 percent by Sprott Resource Corp. On closing of the Waseca Acquisition it is anticipated that Sprott Resource Corp. will own approximately 9 percent of the outstanding Twin Butte common shares.

Waseca shareholders choosing Twin Butte shares will receive 0.5133 Twin Butte shares for each Waseca share. This ratio was based on the 10 day volume weighted average trading price of Twin Butte ended on August 31, 2012 of $2.63 per share.

Twin Butte is also pleased to announce that conditional on the closing of the Waseca Acquisition, it will increase its monthly dividend by 6.7 percent from $0.015 to $0.016 per share, or to $0.192 per share annually. It is anticipated that the increased dividend will be payable on December 17, 2012 to shareholders of record on November 30, 2012.  The Company believes that the Waseca Acquisition in combination with the recently completed Avalon Exploration Ltd. acquisition have created accretive growth for Twin Butte allowing the Company  to increase its return to shareholders.

Key attributes of the Waseca Acquisition are:

  • Current production of 3,500 bbls per day of conventional heavy oil within Twin Butte's core Lloydminster heavy oil area, all of which is operated, the majority being 100 percent working interest, bringing Twin Butte pro-forma production to 19,100 boe/d of which 89% is oil & liquids;

  • Undeveloped lands in excess of 46,000 net acres in the Lloydminster area which increases Twin Butte's undeveloped heavy oil lands in this area to approximately 220,000 net undeveloped acres. Most lands are 100 percent working interest. Twin Butte has valued Waseca's lands based on recent offset activity at approximately $14.8 million ($320/acre). Twin Butte will also receive a significant seismic data base of 2,500 km of 2D data and 16 km2 of 3D data;

  • Proved Reserves of 4,420 mboe and Proved plus Probable Reserves of 7,950 mboe based on an independent reserve report effective December 31, 2011. The pre-tax present value of the Proved plus Probable reserves (PV10) as at the report date was $197 million;

  • A low risk, high rate of return portfolio of over 130 development heavy oil drilling locations as well as over 30 exploratory targets providing significant upside potential for long term reserve appreciation; and

  • Estimated annual G&A savings in excess of $2.0 million.

Strategic Benefits and Waseca Acquisition Summary

The Waseca Acquisition is accretive to Twin Butte on all key metrics:

  • Attractive transaction metrics (after deducting estimated net undeveloped land value of $14.8 million) of $32,114 per boe/d; $14.14 per Proven plus Probable boe;

  • Increases Twin Butte's liquids production weighting from 84 to 89 percent; and

  • The operational and strategic fit in Twin Butte's Lloydminster heavy oil area is significant.

The Waseca Acquisition is consistent with Twin Butte's historic strategy of acquiring quality assets, with large resource potential within focus areas where Twin Butte has expertise. The Waseca Acquisition like previous ones materially increases the size and scope of heavy oil lands and opportunities for Twin Butte.  Twin Butte's undeveloped land, seismic, and development and exploratory drilling inventories have increased materially since the beginning of 2012 which will lead to strong capital efficiencies in its capital plan for many years.

The Waseca lands are contiguous to Twin Butte's existing lands in the Lloydminster area, and enhance Twin Butte's position as a significant operator in the area. Twin Butte management has a successful history operating and growing heavy oil production and has extensive operational experience within the Lloydminster heavy oil fairway which will ensure a seamless transition and ultimately generate numerous operational efficiencies. As a larger, stronger company, Twin Butte will use its financial flexibility to capitalize on its expanded low risk drilling inventory.

In addition, it is anticipated that the Company's credit facility will be increased to $280 million from the current $240 million upon closing.

Waseca Acquisition Terms and Conditions

The Waseca Acquisition is to be effected by way of a plan of arrangement under the Business Corporations Act (Alberta). Completion of the Waseca Acquisition, which is anticipated to occur in early November 2012, is subject to, among other things, the approval of at least 66⅔ percent of the Waseca shareholders voting on the arrangement, the approval of the Court of Queen's Bench of Alberta, the receipt of all necessary regulatory and stock exchange approvals, and certain closing conditions that are customary for a transaction of this nature.

The Boards of Directors of each of Twin Butte and Waseca have unanimously approved the Waseca Acquisition and Waseca's Board of Directors has resolved to recommend that its shareholders vote in favour of the Waseca Acquisition. Directors, officers and shareholders of Waseca, including Sprott Resource Corp., who collectively hold approximately 81.9 % of the outstanding Waseca Shares, have entered into support agreements with Twin Butte pursuant to which each has agreed to vote in favour of the Waseca Acquisition.

"We are pleased that Waseca has entered into the Waseca Acquisition with Twin Butte in particular. We believe that Twin Butte's dividend plus growth business model focused on low-risk, high-return Lloyd heavy oil is attractive and sustainable," stated Kevin Bambrough, President & CEO of Sprott Resource Corp.

Waseca has agreed to not solicit or initiate any discussions regarding any other business combination or sale of material assets and has granted Twin Butte the right to match competing, unsolicited proposals.  The arrangement agreement provides for a $4.0 million non-completion fee payable by Waseca in certain circumstances if the Waseca Acquisition is not completed.

Complete details of the terms of the Waseca Acquisition are set out in the arrangement agreement, which will be filed by Twin Butte and will be available for viewing at www.sedar.com.

Financial Advisors

RBC Capital Markets is acting as financial advisor to Waseca and has provided the Board of Directors of Waseca with an opinion that the consideration to be received by the Waseca shareholders pursuant to the Waseca Acquisition is fair, from a financial point of view, to Waseca shareholders.

Peters & Co. Limited is acting as financial advisor and Raymond James Ltd. and National Bank Financial Inc. are acting as strategic advisor to Twin Butte.

About Twin Butte

Twin Butte is a growing, value oriented intermediate producer with a significant low risk, high rate of return drilling inventory focused on large original oil in place conventional heavy oil exploitation. With a stable low decline production base, Twin Butte is well positioned to live within cash flow while providing shareholders a sustainable dividend and moderate per share production growth potential over both the short and long term. Twin Butte is committed to continually enhance its asset quality while focusing on the sustainability of its dividend.  The common shares of Twin Butte are listed on the TSX under the symbol "TBE".

Forward-Looking Statements

In the interest of providing Twin Butte's shareholders and potential investors with information regarding Twin Butte, including management's assessment of the future plans and operations of Twin Butte, certain statements contained in this news release constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this news release contains, without limitation, forward-looking statements pertaining to the following: expectations of management regarding the proposed Waseca Acquisition, including the timing of completion of the Waseca Acquisition, operating and financial metrics of the Waseca Acquisition, potential synergies resulting from the Waseca Acquisition, cost savings as a result of the Waseca Acquisition, and the effect of the Waseca Acquisition on Twin Butte's production, reserves and undeveloped land position, and future dividends.

With respect to forward-looking statements contained in this news release, Twin Butte has made assumptions regarding, among other things: the timing of receipt of regulatory and shareholder approvals; and the ability of Twin Butte to execute and realize on the anticipated benefits of the Waseca Acquisition and previous acquisitions. Although Twin Butte believes that the expectations reflected in the forward looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Twin Butte's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: that the Waseca Acquisition may not close when planned or at all or on the terms and conditions set forth herein; the failure of Twin Butte and Waseca to obtain the necessary shareholder, Court, regulatory and other third party approvals required in order to proceed with the Waseca Acquisition; volatility in market prices for oil and natural gas; incorrect assessment of the value of the Waseca Acquisition; failure to realize the anticipated benefits and synergies of the Waseca Acquisition and/or previous acquisitions, the failure of Twin Butte to increase it's dividend as anticipated or in the timeframe anticipated; the general economic conditions in Canada, the U.S. and globally; and the other factors described under "Risk Factors" in Twin Butte's most recently filed Annual Information Form available in Canada at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this news release speak only as of the date of this news release. Except as expressly required by applicable securities laws, Twin Butte does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Barrels of Oil Equivalent

Barrels of oil equivalent (boe) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities within the United States. The securities to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act or other laws. 

SOURCE: Twin Butte Energy Ltd.

For further information:

Twin Butte Energy Ltd.

Jim Saunders
President and Chief Executive Officer
Tel: (403) 215-2040
Fax: (403) 215-2055

R. Alan Steele
Vice President, Finance, Chief Financial 
Officer and Corporate Secretary
Tel: (403) 215-2692
Fax: (403) 215-2055

Website:  www.twinbutteenergy.com

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Twin Butte Energy Ltd.

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