NR todayPetroBakken Completes Plan of Arrangement With TriStar
19:36 EST Thursday, Oct 01, 2009
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CALGARY,ALBERTA--(Marketwire - Oct. 1, 2009) - PetroBakken Energy Ltd.("PetroBakken" or the "Company") (TSX:PBN), Petrobank Energy andResources Ltd. ("Petrobank") (TSX:PBG), and TriStar Oil & Gas Ltd.("TriStar") (TSX:TOG) are pleased to announce the closing of the planof arrangement ("Arrangement") whereby the companies have completed astrategic combination of TriStar and Petrobank's Canadian Business Unit(the "Transaction"). The combination has resulted in PetroBakken, a newpublicly listed company, that is a premier, Bakken-focused, light oilexploration and production company. It is anticipated that thePetroBakken shares will commence trading on the Toronto Stock Exchange("TSX") under the symbol "PBN", on or about October 6, 2009.
TheArrangement was approved at the special meeting of TriStar shareholdersheld on September 30, 2009 and by the Court of Queen's Bench of Albertaon September 30, 2009. Approximately 99.97% of the votes cast by theTriStar shareholders present at the meeting in person or by proxy votedin favour of the special resolution to approve the Arrangement.Further, the ordinary resolution to approve the share basedcompensation plans of PetroBakken was approved.
In accordancewith the maximum amount of Share Consideration and Cash Considerationpermitted pursuant to the Arrangement, 67.48% of TriStar shareholderselected the Share Consideration option and will receive $1.3416 cashand a pro-rated amount of PetroBakken shares equal to 0.4851 of aPetroBakken share for each TriStar share held, 13.12% of TriStarshareholders elected the Cash Consideration option and will receive$14.75 per TriStar share held. The remaining 19.40% of the TriStarshareholders will receive $4.7503 cash and 0.3617 of a PetroBakkenshare for each TriStar share held. TriStar shares will continue totrade on the TSX until such time as the PetroBakken shares commencetrading on the TSX, at which time the TriStar shares will be de-listed.Those who acquire TriStar shares during this period will receive$4.7503 cash and 0.3617 of a PetroBakken share for each TriStar shareheld.
The Transaction
Petrobank capitalizedPetroBakken with its Canadian Business Unit assets. In return,Petrobank received 109.8 million shares of PetroBakken which represents64% of PetroBakken's shares outstanding. Pursuant to the Arrangement,PetroBakken acquired all the outstanding shares of TriStar, withTriStar shareholders receiving, in the aggregate, approximately $584.5million in cash and 61.8 million shares of PetroBakken, representing36% of PetroBakken's shares outstanding.
Advisors
TDSecurities Inc. acted as sole financial advisor to Petrobank andPetroBakken for the Transaction. Haywood Securities Inc., Merril LynchCanada Inc. and UBS Securities Canada Inc. acted as strategic advisorsto Petrobank and PetroBakken.
Macquarie Capital MarketsCanada Ltd. and BMO Capital Markets acted as financial advisors toTriStar. CIBC World Markets Inc., GMP Securities L.P., and NationalBank Financial Inc. acted as strategic advisors to TriStar.
FirstEnergy Capital Corp. and TD Securities Inc. have agreed to manage the sales process for PetroBakken's Alberta assets.
Key Attributes of PetroBakken
PetroBakkencombines significant, high growth, long-life Bakken reserves andproduction with legacy conventional light oil assets, which providehigh netbacks and a low production decline profile. PetroBakken is apremier Bakken player in Canada with a greater proportion of itsproduction coming from the Bakken than any other material producer, andrepresents a compelling new investment opportunity for investors. Inaddition, the Company has significant future development opportunitiesin the Horn River and Montney gas resource plays in northeast BC thatwill add long term growth to PetroBakken's attractive light oilposition. After the anticipated sale of the majority of Company'sAlberta-based assets, PetroBakken will have the following keyattributes:
- 2009 total Company exit production greater than37,000 boepd (after the planned Alberta asset dispositions), more than95% light oil.
- More than 27,000 boepd from the Bakken (greater than 70% of total Company exit 2009 production).
-Significant land inventory of over 1.0 million net acres with over800,000 net acres in southeast Saskatchewan, making PetroBakken thesingle largest landholder in this region. Of this, over 280,000 netacres (440 net sections) are located in the Bakken play fairway withsignificant further exposure to Bakken exploration activity, including80,000 net acres in Montana.
- Further reserve enhancement capabilities on 110 net sections of existing producing Bakken acreage.
- More than 2,000 development drilling locations, including over 1,300 Bakken locations.
- Industry leading operating netbacks in excess of $57.00/boe based on US$75.00 WTI.
- Expected operating costs of approximately $8.00/boe.
- Annualized 2009 exit rate cash flow of more than $700 million based on US$75 WTI oil price and 2009 exit production.
- 2010 capital budget of approximately $550 million based on a US$75 WTI oil price.
-Initial dividend of $0.96 per share per annum, payable monthly,representing a payout ratio of 23% based on run-rate cash flow.
-Excellent financial flexibility with a proforma debt to cash flow ratioof less than one times, following contemplated Alberta-based assetdispositions.
- 171.8 million PetroBakken shares outstanding.
-An industry leading technical team, with resource-play executionexpertise gained and refined through the drilling and completion ofmore than 450 horizontal wells with multi-stage fracs.
PetroBakken Operational Update
ThePetrobank and TriStar teams significantly increased activity during thethird quarter and PetroBakken now has 12 rigs currently working in theBakken. Seven of the twelve rigs are now exclusively drilling bilateralhorizontal wells. A bilateral well has two horizontal legs from onevertical well bore, and each leg will receive 15-stage fracturestimulations for a total of 30 fracture stimulations per well. One ofthe 12 rigs is working on horizontal re-entries of our existingproducing wells. These re-entries will add a second horizontal legadjacent and parallel to the existing horizontal well bore. Eachhorizontal re-entry will receive a 15-stage fracture stimulation andthe well will be immediately placed back on production. The increasedactivity associated with our new drilling and completions strategy hasresulted in a backlog of wells awaiting either fracture stimulation orinfrastructure to commence production.
Current production forPetroBakken is now approximately 43,630 boepd, with productioncontributions from Saskatchewan, Alberta and British Columbia of 33,690boepd, 9,370 boepd and 570 boepd, respectively. During the thirdquarter, 89 (67.3 net) wells were drilled, including 71 (51.4 net)Bakken development wells. Of the wells drilled in the Bakken, 13 werelong bilateral wells with 30 stage fracture stimulations. Four of ournew bilateral wells have just recently been put on production andproduction rates continue to increase as the load fluid from thefracture stimulation is recovered. Nine of our bilateral horizontalwells are being completed and are expected to be on production shortly.
In the fourth quarter, we expect to drill approximately 40Bakken wells primarily using our new bilateral approach and complete anadditional nine Bakken re-entries. Capital expenditures in the fourthquarter are expected to be approximately $140 million.
Alberta Asset Dispositions
PetroBakkenplans to sell a package of Alberta-based assets consisting ofapproximately 9,500 boepd and 40.1 mmboe of proved plus probablereserves to further enhance the focus of PetroBakken on southeastSaskatchewan light oil and resource plays. Proceeds from thecontemplated disposition will be used to further solidify our strongbalance sheet.
Dividend Policy
Based upon theunderlying strength of PetroBakken's high-netback light oil asset baseand flexible balance sheet, PetroBakken intends to adopt a dividendpolicy initially targeting payments of $0.96 per share per annum,payable monthly, with the first dividend expected to be paid inNovember to shareholders of record on October 30, 2009. This dividendpolicy will allow PetroBakken shareholders to benefit from theCompany's industry leading high netback production on a monthly basis.
Financial Capacity
PetroBakkenhas finalized a $1.05 billion borrowing base credit facility. Atclosing, PetroBakken is drawn $925 million on the facility andfollowing the contemplated Alberta asset dispositions, debt to run-ratecash flow is expected to be less than one times, providing excellentfinancial flexibility. PetroBakken plans to maintain an active hedgingstrategy to provide certainty for a portion of our revenue stream andcapital programs.