NuVista Energy Ltd. Announces Strategic Business Combination With Rider Resources Ltd. and Enters Into Private Placement Financing With Ontario Teachers' Pension Plan
CALGARY, ALBERTA--(Marketwire - Jan. 7, 2008) - NuVista Energy Ltd. ("NuVista") (TSX:NVA) and Rider Resources Ltd. ("Rider") (TSX:RRZ) are pleased to announce that they have entered into an agreement that provides for the strategic combination of Rider with NuVista.
Under the terms of the agreement, Rider shareholders will receive 0.3540 of a NuVista common share for each Rider common share (the "Transaction"). Rider shareholders will receive an aggregate value of $5.07 per Rider common share based on the closing price of NuVista common shares on the Toronto Stock Exchange ("TSX") as at January 4, 2008 which represents a premium of 25 percent to the closing price of Rider common shares on the TSX as at January 4, 2008. This Transaction is expected to be tax-deferred for Canadian resident Rider shareholders.
The Transaction is subject to stock exchange, court and regulatory approval, and the approval of at least 66 2/3 percent of Rider shareholders who vote at a meeting to be called to vote on the Transaction and approval of a majority of the NuVista shareholders who vote at a meeting to be called to vote on the Transaction. It is expected that the NuVista and Rider shareholder meetings to vote on the Transaction will occur in mid-March 2008. A joint information circular is expected to be mailed to shareholders of both NuVista and Rider in mid-February 2008.
The Board of Directors of NuVista and Rider have both unanimously approved the agreement and have concluded that the Transaction is in the best interests of their respective shareholders.
In connection with the Transaction, the Ontario Teachers' Pension Plan ("OTPP") has agreed to subscribe for 6.0 million units ("Units") of NuVista at a price of $14.00 per Unit for proceeds of $84.0 million to be issued on a private placement basis (the "Investment"). Each Unit will be comprised of one common share in the capital of NuVista and one-half of one common share purchase warrant of NuVista. Each full warrant will entitle the holder within 365 days from the closing of the Investment to purchase one common share for an exercise price of $15.50, subject to the usual adjustment provisions. Closing of the Investment is subject to the successful completion of the Transaction and the receipt of all necessary regulatory, stock exchange and third party approvals. Closing of the Investment will occur concurrently with the closing of the Transaction, which is anticipated to occur in mid-March 2008. The proceeds of the Investment will initially be used to reduce the aggregate outstanding indebtedness of NuVista following completion of the Transaction.
Prior to the Investment, OTPP owns approximately 9.8% percent of NuVista's common shares outstanding. Upon closing of the Investment and the Transaction, OTPP will own approximately 14 percent of NuVista's common shares outstanding (approximately 17 percent assuming the exercise of the common share warrants).
Strategic Benefits of the Business Combination
With this defining Transaction, NuVista transitions from an Eastern Alberta and Western Saskatchewan company with opportunities focused on shallow gas and heavy oil to a company with a balanced portfolio of assets. The strategic benefits of this Transaction include:
- addition of three new core areas in liquid rich natural gas prone regions of Alberta that are characterized by high netbacks and longer reserve life production;
- addition of a high impact deep gas drilling inventory to our exploration and development program; and
- material equity investment by a strategic long-term equity partner.
The Rider asset base is well suited to NuVista's existing business strategy which emphasizes long-term sustainability based upon an acquire and develop business model in multi-zone areas with a focus on low operating costs and high working interests. Key attributes of the business combination, calculated as at December 31, 2007 based upon management's pro forma estimates, are as follows:
- increase to NuVista's production per share of 19%;
- increase to NuVista's proved plus probable reserves per share of 27%;
- increase to NuVista's funds flow from operations per share of 19%;
- addition of 11,500 boe per day of production (approximately 77% natural gas) and approximately 33 million boe of proved plus probable reserves;
- addition of over 155,000 net acres of undeveloped land in liquid rich natural gas prone areas with an average working interest of 77%; and
- an additional 75 drilling location have been identified on undeveloped lands.
Land Value (1) Land Value (1)
- Estimated purchase price (2) $560 million $525 million
- Price per flowing boe/d (11,500 boe/d) $ 48,700 $ 47,400
- Reserves price per proven plus
probable boe (33 million boe) (3) $ 18.35 $ 17.25
- Cash flow multiple (4) 5.3 times 5.0 times
- Proven plus probable recycle ratio 1.4 times 1.5 times
(1) Undeveloped land valued at $250 per acre.
(2) Based on the five day volume weighted average price to January 4, 2008, for NuVista common shares of $13.74 and estimated debt of $287 million.
(3) Based on NuVista's internal estimates at December 31, 2007 and includes future capital expenditures of $45 million.
(4) Based on Rider's third quarter 2007 operating netback of $25.41/boe
Key Operating and Financial Information for the Combined Company
Pro Forma December 31, 2007 Production (boe/d) 26,500
Estimated 2008 Average Production (boe/d) (1) 24,000 to 24,500
Pro Forma Market Capitalization (2) $1.1 billion
Pro Forma Debt (3) $390 million
Pro Forma Enterprise Value (4) $1.5 billion
Pro Forma Reserve Estimates (5)
Proved plus Probable (mmboe) 70
Reserve Life Index (P+P) (6) 7.2 years
Estimated 2008 Cash Flow (7) $210 million to $220 million
Estimated 2008 Capital Program (8) $155 million to $175 million
Pro Forma December 31, 2007 Debt to
Estimated 2008 Cash Flow Ratio (3)(7) 1.8 times
Estimated Year End 2008 Debt to
Cash Flow Ratio (9) 1.5 times
Shares Outstanding 78.5 million
Undeveloped Land Base (net acres) 750,000
(77% average working interest)
(1) Based on a Transaction closing date of March 13, 2008.
(2) The market capitalization is calculated based on the January 4, 2008 NuVista share price of $14.33.
(3) Estimated debt outstanding at December 31, 2007 including the estimated Transaction costs, less the Investment.
(4) Pro forma enterprise value is equal to pro forma market capitalization plus pro forma debt.
(5) Represents NuVista's estimate for NuVista and Rider reserves as at December 31, 2007.
(6) Based on estimated reserves as at December 31, 2007 and estimated current production of 26,500 boe per day.
(7) Based on a Transaction closing date of March 13, 2008 and is based on budgeted prices of US$90/bbl WTI for oil, $6.85/mcf at AECO for natural gas and a par USD/CAD exchange rate.
(8) Based on a Transaction closing date of March 13, 2008 and excluding the business combination costs of Rider.
(9) Based on estimated annualized fourth quarter 2008 cash flow and assumes none of the common shares warrants are exercised before December 31, 2008.
Management and Staffing
Alex G. Verge, President and Chief Executive Officer of NuVista and the senior management team will continue in their management roles. We expect that the majority of the Rider staff will be offered positions in the combined company in a variety of leadership, technical and support roles; however, certain members of the Rider senior management team are expected to join NuVista for only a transition period.
NuVista's 2007 third quarter press release dated November 2, 2007, indicated that Mr. Rob Froese, Vice President, Finance and Chief Financial Officer of NuVista announced his intention to leave NuVista in early 2008. We are pleased to announce that Rob has reversed his decision and decided to continue in his role of Vice President, Finance and Chief Financial Officer with the combined company on a permanent basis. Rob's leadership experience and management skills will play an important role in the integration of Rider and in the long-term future of NuVista.
In addition, the Board of Directors has approved two additional executive moves. Mr. Steve Dalman, formerly Vice President, Engineering was appointed Vice President, Business Development and Mr. Dan McKinnon, has been promoted to Vice President, Engineering.
Board of Directors
Upon closing of the Transaction, Mr. Craig W. Stewart, President and Chief Executive Officer of Rider, has advised that he will accept a position on the NuVista Board of Directors.
About the Transaction
The Directors and Officers of Rider, who own approximately 17 percent of the outstanding Rider shares, have agreed to vote their Rider shares in favour of the Transaction. FirstEnergy Capital Corp. and Scotia Waterous Inc. are acting as financial advisors to Rider with respect to the Transaction. FirstEnergy Capital Corp. has advised the Board of Directors of Rider that it is of the opinion, as of the date hereof, that the consideration to be received by Rider shareholders pursuant to the Transaction is fair from a financial point of view to Rider shareholders.
The Directors and Officers of NuVista, who own approximately 14 percent of the outstanding NuVista shares, have agreed to vote their NuVista shares in favour of the Transaction. In addition, OTPP, has agreed to vote their NuVista shares in favour of the Transaction. Peters & Co. Limited is acting as financial advisor to NuVista with respect to the Transaction. Peters & Co. Limited has advised the Board of Directors of NuVista that it is of the opinion, as of the date hereof, that the consideration to be paid by NuVista pursuant to the Transaction is fair from a financial point of view to NuVista shareholders.
Rider has agreed that it will not solicit or initiate any discussions concerning the pursuit of any other business combination. NuVista and Rider have each agreed to pay a non-completion fee of $18.25 million to the other in certain circumstances. In addition, NuVista has the right to match any competing proposal, in the event such a proposal is made.
Investor Conference Call
A joint conference call has been scheduled for Monday, January 7, 2008, at 10:00am Calgary time / 12:00 Noon Toronto time to discuss the Transaction. Members of the investment community may participate by dialing 403-537-9608/800-952-4972
A replay of the joint conference call will be available approximately one hour after completion of the conference call until January 14, 2008, by calling 416-695-5800/408-3053 and entering the Pass code 3247692 followed by the number sign.
NuVista is an independent Canadian oil and natural gas exploration, development and production company with its common shares trading on the Toronto Stock Exchange under the symbol "NVA".
Rider is an independent Canadian oil and natural gas exploration, development and production company with its common shares trading on the Toronto Stock Exchange under the symbol "RRZ".
Advisory Regarding Forward-Looking Statements
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning the combined company's petroleum and natural gas production reserves; undeveloped land holdings; reserve life index; business strategy; future development and growth opportunities; prospects; asset base; anticipated benefits from the Transaction including improved operating efficiencies, field optimizations and cost reductions; future cash flows; value and debt levels; capital programs; treatment under tax laws; oil and natural gas prices; and the impact of the Province of Alberta's new royalty regime. The forward-looking statements and information are based on certain key expectations and assumptions made by NuVista and Rider, including expectations and assumptions concerning prevailing commodity prices and exchange rates, applicable royalty rates and tax laws; future well production rates and reserve volumes; the timing of receipt of regulatory and securityholder approvals, the performance of existing wells; the success obtained in drilling new wells; and the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services.
Although NuVista and Rider believe that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because NuVista and Rider can give no assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations, marketing and transportation, loss of markets, environmental risks, competition, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, ability to access sufficient capital from internal and external sources, failure to obtain required regulatory and other approvals, and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. There are risks also inherent in the nature of the proposed Transaction, including failure to realize anticipated synergies or cost savings; risks regarding the integration of the two entities; incorrect assessments of the values of the other entity; and failure to obtain the required securityholder, court, regulatory and other third party approvals. This press release also contains forward-looking statements and information concerning the anticipated completion of the proposed Transaction and the anticipated timing for completion of the Transaction.
NuVista and Rider have provided these anticipated times in reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required to prepare meeting materials for mailing, the timing of receipt of the necessary regulatory and court approvals and the time necessary to satisfy the conditions to the closing of the Transaction. These dates may change for a number of reasons, including unforeseen delays in preparing meeting materials, inability to secure necessary regulatory or court approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the Transaction. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release concerning these times. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect NuVista's, Rider's or the combined company's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com
), in the case of NuVista, at NuVista's website (www.nuvistaenergy.com
), and in the case of Rider, at Rider's website (www.riderres.com
). The forward-looking statements and information contained in this press release are made as of the date hereof and NuVista and Rider undertake no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Barrels of Oil Equivalent
"Boe" means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.