ArPetrol Ltd. announces execution of agreement to sell substantially all of its assets

CALGARY, March 18, 2016 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") is pleased to announce the signing of a share and debt purchase agreement (the "Agreement") with Empresa Nacional Del Petróleo ("ENAP"), the state owned oil and gas company of Chile, and its subsidiary ENAP Sipetrol Argentina S.A. (the "Purchaser") that provides for the sale of substantially all of the assets of the Company (the "Transaction").  Pursuant to the Agreement, the Purchaser will acquire all of the shares of ArPetrol International Financial Company Inc. ("AIFC"), the wholly owned subsidiary of the Company which indirectly holds the shares of ArPetrol Argentina S.A. ("AASA").  AASA holds all of the Company's operating assets in Argentina.  In consideration, the Purchaser will pay the Company an aggregate cash purchase price of US$9.0 million (CAN$11.7 million converted at the March 17, 2016 exchange rate reported by the Bank of Canada) plus an estimated amount of CAN$3.0 million for AASA net working capital at closing, for an estimated total purchase price of approximately CAN$14.7 million (see working capital assumptions in "Forward Looking Information" below).

The estimated total purchase price of CAN$14.7 million, would represent approximate proceeds of CAN$0.65 for each issued and outstanding common share of ArPetrol, most of which the Company intends to distribute to the shareholders of the Company (the "Shareholders") as a return of capital.  The Transaction is expected to close in May 2016. 

Key Benefits of the Transaction

The Transaction provides Shareholders of ArPetrol with a significant premium over the Company's current share price.  Current market conditions for international junior oil and gas companies, and the ability to raise capital in this environment to further develop and expand the Company's assets in Argentina, are very uncertain. It is difficult to predict whether ArPetrol's share price could return to this Transaction valuation or when it could do so. Accordingly, the management and board of directors of the Company determined that this was a unique opportunity to realize such a premium in a very uncertain market.  

In the event that the Transaction is ultimately approved and completed according to the terms of the Agreement, the Company will not have any active business operations or assets other than cash.  The Company expects to be delisted from the TSX Venture Exchange and to proceed with a voluntary windup and dissolution process following completion of the Transaction. In connection therewith, the Company intends to distribute the available portion of the net proceeds of the Transaction (after payment of Transaction costs and payment of all liabilities and obligations of the Company) to Shareholders in multiple installments as a return of capital.  Based on the Transaction terms, it is expected that the initial distribution of approximately 65-70%  of the net proceeds of the Transaction will be made to Shareholders shortly after the 90-day purchase price adjustment period for working capital following closing, and a final distribution of the remaining funds will be made after settling all liabilities and expenses of the Company and deducting all Transaction and dissolution costs.  

There are many unknown variables that cannot be accurately predicted as this time, along with known items that are difficult to quantify, all of which will impact the ultimate amount of the distribution payable to Shareholders and the distributions may ultimately be materially lower than currently anticipated.  However, based on the best available information at the current time (including assumptions regarding currency exchange rates and working capital assumptions in "Forward Looking Information" below), it is anticipated that the cumulative distributions to be paid to Shareholders subsequent to completion of the Transaction are likely to be in the range of approximately CAN$0.59 to $0.62 per common share.   

Completion of the Transaction and Windup of the Company

Completion of the Transaction is subject to customary conditions for a transaction of this nature, which include applicable regulatory and stock exchange approvals and the approval by not less than 66 2/3% of the votes cast by Shareholders represented in person or by proxy at a meeting of Shareholders to be called to consider and approve the Transaction in accordance with the Business Corporations Act (Alberta).  The outside date under the Agreement to satisfy all conditions and close the Transaction is December 31, 2016.

The Agreement includes customary non-solicitation covenants by ArPetrol and provides ArPetrol with the ability to respond to unsolicited proposals considered superior to the Transaction in accordance with the terms of the Agreement.  In the event ArPetrol accepts a superior proposal, ArPetrol will be required to pay a break fee of $US500,000 to ENAP. ENAP has a right to match any superior proposal.  An escrowed holdback amount of $US2,250,000 will be withheld from the Transaction proceeds at closing.  Subject to any post-closing adjustments or indemnity claims that may arise under the Agreement, this escrowed amount will be released to ArPetrol approximately six months after closing.

The board of directors of ArPetrol has unanimously determined that the Transaction is in the best interests of the Corporation and is fair to the Shareholders and is unanimously recommending that the Shareholders vote in favour of the Transaction.  Raymond James has provided the board of directors with a verbal fairness opinion that the consideration to be received under the Transaction is fair, from a financial viewpoint, to the Shareholders. 

The windup and dissolution of the Company are also subject to requisite Shareholder approval by not less than 66 2/3% of the votes cast by the Shareholders represented in person or by proxy at the meeting of Shareholders. 

Details of the Transaction and the planned dissolution and windup of the Company, and the risks and procedures associated therewith, will be disclosed in greater detail in the information circular of the Company for the Shareholder meeting which the Company currently anticipates will be mailed to the Shareholders in April 2016 for an annual and special meeting of Shareholders to take place in May 2016, with closing expected to occur shortly thereafter. Certain directors and/or senior officers of the Company, who collectively own approximately 16% of the outstanding ArPetrol common shares have agreed to vote their shares in favour of the Transaction.  A copy the Raymond James fairness opinion will be included in the information circular sent to the Shareholders.

A copy of the Agreement will be made available under the Company's profile on SEDAR at

About ArPetrol Ltd.

ArPetrol is a Calgary-based publicly traded company engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina, where it owns and operates a gas processing facility with capacity of 85 mmcf/d. The Company's common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol "RPT".

Forward-Looking Information

Certain information provided in this press release constitutes forward-looking statements and information within the meaning of applicable securities laws.  Specifically, and without limitation, this press release contains forward-looking statements and information relating to: the anticipated benefits of the Transaction and windup of the Company, estimated working capital, the anticipated timing of the mailing of the information circular and the Shareholder meeting, the anticipated timing for the closing of the Transaction, the amount and timing of distributions to Shareholders and completion of the delisting, dissolution and windup of the Company.  Forward‐looking information typically contains statements with words such as "anticipate", "believe", "forecast", expect", "plan", "intend", "estimate", "propose", "project", or similar words suggesting future outcomes.  The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.

In respect of the forward-looking statements and information set out in this press release, the Company has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to currency exchange rates, estimated working capital based on AASA operations and revenue continuing in the normal course, the time required to prepare and mail Shareholder meeting materials, the ability of the Company to receive, in a timely manner, the necessary Shareholder and stock exchange approvals, the ability of the Company to satisfy, in a timely manner, the other conditions to the closing of the Transaction, the process and timing for winding up the Company, the number of shares outstanding at the time of the distributions to Shareholders, the estimated amount of the Transaction costs and the liabilities and obligations of the Company and the estimated amount of the net proceeds remaining for distribution to Shareholders. 

In addition to the assumptions above, the estimated net working capital at closing is based on the following assumptions: an internal forecasted exchange rate of 11.72 Argentina Pesos to CAN$1 (the actual rate of which will vary each month), the current United States dollar to Canadian dollar exchange rate reported by the Bank of Canada and anticipated revenue and working capital until the closing of the Transaction based on operating at full capacity and normal course operations without any disruptions, unanticipated costs or inflation.

There are many risk factors associated with the completion of the Transaction and the amount of working capital of AASA, the dissolution of the Company and the amount and timing of distributions payable to Shareholders. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to risks and uncertainties inherent in the nature of the Transaction including the failure of the Company to obtain necessary Shareholder and stock exchange approval, or to otherwise satisfy the conditions to the Transaction, in a timely manner by the outside date or at all, risks of a material adverse change to the Company's assets or revenue, risks of indemnity claims under the Agreement or other unknown liabilities that may arise, uncertainties regarding Transaction and dissolution costs and obligations and liabilities of the Company, natural disasters, union activities or workforce disruptions which may impact operations and revenue, change in government policies, currency fluctuations and controls, risks of high inflation and increased costs, the risk of disruptions at the gas plant, changes in currency exchange rates, and other risks associated with international activity and Argentina. AASA operates outside of Canada and as such, is subject to a number of political risks over which it has no control. The forward‐looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward‐looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.

Additional information relating to the Company is also available on SEDAR at

Neither the TSXV nor its Regulation Services Provider (as defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

SOURCE ArPetrol Ltd.

For further information: Ian Habke, President and Chief Financial Officer,, ArPetrol Ltd., Main Phone: 403-263-6738


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