Contango Oil & Gas Company (NYSE MKT: MCF) (“Contango”) and
Crimson Exploration Inc. (NasdaqGM: CXPO) (“Crimson”) jointly
announced today that they have signed a merger agreement for an
all-stock transaction pursuant to which Crimson would become a wholly
owned subsidiary of Contango. Upon consummation of the merger, each
share of Crimson stock will be converted into 0.08288 shares of Contango
stock resulting in Crimson stockholders owning 20.3% of the post-merger
Contango.
Following the merger, the combined company will be a premier
Houston-based independent oil and gas company with a balanced offshore
Gulf of Mexico (“GoM”) and onshore Texas production profile and a deep
inventory of high-impact GoM prospects complemented by Crimson’s onshore
oil and natural gas liquids-focused, lower-risk unconventional resource
positions in several prolific plays. Pro forma for the merger,
Contango’s net daily production for the quarter ending March 31, 2013
would be approximately 101 Mmcfe (31% oil and natural gas liquids) and
the proforma combined company’s total proved reserves are estimated to
be approximately 312 Bcfe (31% oil and natural gas liquids), based on
SEC pricing at March 31, 2013. Pro forma PV-10 of the estimated proved
reserves of the combined company would be approximately $932.5 million.
The enhanced size and scale of the combined company and its
conservatively capitalized balance sheet will position it to implement
an accelerated oil and natural gas liquids-focused drilling program.
This transaction is expected to be immediately accretive to cash flow
per share for Contango.
Joseph Romano, President, Chief Executive Officer and Chairman of
Contango said, “We are excited about the complementary nature of this
combination and the numerous benefits make it a win-win for the
stockholders of each company. We also are very pleased to welcome Allan
Keel and his Crimson team to Contango. We all see a great opportunity to
accelerate and optimize the development of Crimson’s significant
resource potential in parallel with continuing Contango’s GoM
exploration focus. Contango will look to optimize capital allocation
across the combined portfolio and we currently expect to continue to
drill two to four exploration prospects per year in the GoM while
operating two to four onshore rigs focused on unconventional resource
development. This transaction is consistent with Contango’s strategy of
increasing stockholder value through the drill-bit and it helps us
achieve a number of our long-term strategic objectives.”
Allan D. Keel, Crimson’s President and Chief Executive Officer said, “We
look forward to joining Contango and assuming responsibility for a
portfolio of top tier offshore assets and combine them with Crimson’s
extensive inventory of onshore opportunities. The combination with
Contango provides substantial offshore cash flow generation that can be
used to accelerate our drilling program in our oil and natural gas
liquids-rich acreage targeting the Woodbine, Buda, Eagle Ford, James
Lime and Liberty County prospects. This accelerated development should
result in meaningful reserve, production and cash flow growth for the
combined company. Furthermore, the merger will allow Crimson to de-lever
our balance sheet and increase our trading float. We believe this merger
is a great combination of two complimentary companies and a great
opportunity to unlock value more quickly for Crimson’s stockholders.”
TERMS OF THE TRANSACTION
Crimson stockholders will receive per-share consideration consisting of
0.08288 shares of Contango common stock for each Crimson share. Based on
Contango’s closing stock price on April 29, 2013, this transaction
represents an implied price per share for Crimson of $3.19, a premium of
approximately 8% percent to the most recent closing price of Crimson
common stock. Aggregate consideration in the transaction is
approximately $390 million based on the assumed issuance of
approximately 3.9 million shares of Contango common stock and the
assumption by Contango of approximately $244 million of long-term debt
of Crimson.
The merger is subject to the approval of the stockholders of both
Contango and Crimson as well as customary closing conditions. The Estate
of Kenneth R. Peak, Brad Juneau, members of the management teams of
Contango and Crimson, and affiliates of Oaktree Capital Management
(Crimson’s largest stockholder) have all entered into voting agreements
in support of the transaction. The merger is expected to close in the
third quarter of 2013.
MANAGEMENT TEAM AND BOARD OF DIRECTORS
Mr. Joseph Romano will serve as Chairman of the Board of Directors and
Chairman of the newly-created Investment Committee of the Board of
Directors of the combined company. Mr. Allan D. Keel will become
President, Chief Executive Officer and a member of the Investment
Committee and Mr. E. Joseph Grady will become Senior Vice President and
Chief Financial Officer of the combined company. Mr. Keel and Mr. Grady
each have signed employment agreements that are subject to the closing
of the transaction. It is expected that all of the Crimson senior
management team will join Contango in positions similar to those they
currently hold at Crimson. The Board of Directors of the combined
company will consist of eight directors, five of whom will be selected
by Contango and three of whom will be selected by Crimson. Brad Juneau
will continue to be a member of the Board and will continue to generate
GoM prospects for the combined company through Juneau Exploration L.P.
The corporate headquarters of the combined company will continue to be
in Houston, Texas.
FINANCIAL POLICY
Contango has an established track-record of maintaining a strong
financial position, investing in projects with attractive rates of
return and maintaining adequate credit lines to implement its capital
program. Following the transaction, Contango intends to use its current
liquidity and future free cash flow to invest in both offshore and
onshore prospects and to restructure, refinance and/or repay a portion
of Crimson’s debt.
WEBCAST INFORMATION
Managements of Contango and Crimson will host a combined conference call
for investors at 10:00 a.m. CDT, Tuesday, April 30, 2013, to discuss the
details of the transaction. Those interested in participating in the
call may do so by calling the following phone number: 800-691-0338,
(International 785-830-7981) and entering the following participation
code 6626916. A replay of the call will be available from April 30, 2013
at 1:00 p.m. CDT through May 7, 2013 at 1:00 p.m. CDT by dialing toll
free 888-203-1112, (International 719-457-0820) and asking for replay ID
code 6626916. A copy of the presentation will be posted to each
company’s website under the “Investor Relations” section prior to the
call.
ADVISORS AND COUNSEL
Petrie Partners Securities, LLC acted as financial advisor to Contango
and rendered a fairness opinion in connection with the transaction.
Morgan, Lewis & Bockius LLP acted as legal advisor to Contango. Barclays
acted as financial advisor to Crimson and rendered a fairness opinion in
connection with the transaction. Vinson & Elkins LLP acted as legal
advisor to Crimson.
ABOUT CONTANGO
Contango is a Houston, Texas based, independent natural gas and oil
company. The Company’s core business is to explore, develop, produce and
acquire natural gas and oil properties offshore in the shallow waters of
the Gulf of Mexico. Contango has additional onshore investments in i)
Alta Resources Investments, LLC, whose primary area of focus is the
liquids-rich Kaybob Duvernay in Alberta, Canada; ii) Exaro Energy III
LLC, which is primarily focused on the development of proved natural gas
reserves in the Jonah Field in Wyoming; and iii) the Tuscaloosa Marine
Shale where we own approximately 24,000 acres. Additional information
can be found on Contango’s web page at www.contango.com.
ABOUT CRIMSON
Crimson is a Houston, Texas based independent energy company engaged in
the exploitation, exploration, development and acquisition of crude oil
and natural gas, primarily in the onshore Gulf Coast regions of the
United States. Crimson currently owns approximately 95,000 net acres
onshore in Texas, Louisiana, Colorado and Mississippi, including
approximately 19,000 net acres in Madison and Grimes Counties in
Southeast Texas, approximately 8,600 net acres in the Eagle Ford Shale
in South Texas, approximately 10,000 net acres in the DJ Basin of
Colorado, and approximately 4,800 net acres in the Haynesville Shale and
Mid-Bossier gas plays and James Lime gas/liquids play in East Texas.
Additional information on Crimson is available on Crimson’s website at www.crimsonexploration.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements concerning the
proposed transaction between Contango and Crimson, the expected
timetable for completing the proposed transaction, its financial and
business impact, management’s beliefs and objectives with respect
thereto, and management’s current expectations for future operating and
financial performance. Forward-looking statements are all statements
other than statements of historical facts, which may be identified by
words such as “believes,” “expects,” “anticipates,” “estimates,”
“projects,” “intends,” “should,” “seeks,” “future,” “continue,” or the
negative of such terms, or other comparable terminology. Forward-looking
statements are subject to risks, uncertainties, assumptions and other
factors that are difficult to predict and that could cause actual
results to vary materially from those expressed in or indicated by them.
Factors that could cause actual results to differ materially include,
but are not limited to: (1) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; (2) the outcome of any legal proceedings that may be
instituted against Contango or Crimson and others following announcement
of the merger agreement; (3) the inability to complete the merger due to
the failure to satisfy the conditions to the merger, including obtaining
the affirmative vote of at least a majority of the votes cast by the
holders of Contango’s outstanding shares of common stock entitled to
vote on the approval of issuance of shares of Contango common stock and
at least a majority of the votes cast by the holders of Crimson’s
outstanding shares of common stock entitled to vote on the adoption of
the merger agreement; (4) risks that the proposed transaction disrupts
current plans and operations and potential difficulties in employee and
customer retention as a result of the merger; (5) the ability to
recognize the benefits of the merger; and (6) legislative, regulatory
and economic developments. Contango and Crimson caution that the
foregoing list of factors is not exclusive. Additional information
concerning these and other risk factors is contained in Contango’s and
Crimson’s most recently filed Annual Reports on Form 10-K, subsequent
Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and
other SEC filings, which are available at the SEC’s website, http://www.sec.gov.
Many of the factors that will determine the outcome of the subject
matter of this filing are beyond the ability of Contango or Crimson to
control or predict. Except as required by law, neither Contango nor
Crimson undertakes any obligation to revise or update any
forward-looking statement, or to make any other forward-looking
statements, whether as a result of new information, future events or
otherwise. Each of Contango and Crimson disclaim any responsibility for
updating the information contained in this filing beyond the published
date or for changes made to this filing by wire services or Internet
service providers.
ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION AND WHERE TO
FIND IT
In connection with the proposed transaction, Contango intends to file
with the SEC a registration statement on Form S-4 that will include a
joint proxy statement of Contango and Crimson that also constitutes a
prospectus of Contango. Contango and Crimson also plan to file other
relevant documents with the SEC regarding the proposed transaction.
INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER.
You may obtain a free copy of the joint proxy statement/prospectus (if
and when it becomes available) and other relevant documents filed by
Contango and Crimson with the SEC at the SEC’s website at www.sec.gov.
You may also obtain these documents by contacting Contango’s Investor
Relations department at 713.960.1901, or at Contango’s website or
contacting Crimson’s Investor Relations department at 713.236.7571 or at
Crimson’s website.
Contango and Crimson and their respective directors and executive
officers and other members of management and employees may be deemed to
be participants in the solicitation of proxies in respect of the
proposed transaction. Information about Contango’s directors and
executive officers is available in Contango’s proxy statement dated
October 12, 2012, for its 2012 Annual Meeting of Stockholders.
Information about Crimson’s directors and executive officers is
available in Crimson’s proxy statement dated April 3, 2013 for its 2013
Annual Meeting of Stockholders. Other information regarding the
participants in the proxy solicitation and a description of their direct
and indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other relevant
materials to be filed with the SEC regarding the merger when they become
available. Investors should read the proxy statement/prospectus
carefully when it becomes available before making any voting or
investment decisions. You may obtain free copies of these documents from
Contango or Crimson using the sources indicated above.
This document shall not constitute an offer to sell or the solicitation
of any offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of Section 10 of the U.S. Securities Act of 1933, as amended.
