MERGERS-ACQUISITIONS / The Board of Directors of Kensington
of Draig Offer
ASE SYMBOL: KNN.A KNN.B
JUNE 19, 1998
CALGARY, ALBERTA--The board of directors of Kensington Energy Ltd.
("Kensington"), has concluded that the offer from Draig Energy
Ltd. ("Draig") for all of the Class A and Class B Shares of
Kensington is inadequate and unfair to Kensington's shareholders
and does not reflect the full value of Kensington's underlying
assets. The special committee of the board of directors received
advice and valuation analysis from its financial advisor,
Griffiths McBurney & Partners ("Griffiths McBurney").
Kensington and Griffiths McBurney have concerns about the current
market price of Draig's common shares relative to Draig's
underlying value. Kensington and Griffiths McBurney do not believe
Draig will achieve its previously stated production forecast
unless excessive debt is utilized to purchase producing assets or
Draig assumes unrealistic sustainable production rates from newly
drilled wells which have no independent reserve valuation or
dependable production history to provide any confidence in the
Draig estimates.
Kensington, in its review of Draig, has already noted rapid
production declines at Draig's Chigwell property, where production
net to Draig has declined from 305 bbl/d on November 30,1997 to
approximately 20 bbl/d in April. This raises concerns about
corresponding booked reserves and also explains the cautionary
approach taken by Kensington to public announcements by Draig
concerning its production forecasts, production exit rates and
related drilling results.
Because the offer is inadequate and unfair as well as other
considerations regarding Kensington's future stand-alone potential
and concerns about a business combination with Draig, the board of
directors of Kensington unanimously recommends that the offer be
REJECTED and that shareholders NOT tender their Shares to the
offer. Each of the directors and officers of Kensington,
representing aggregate holdings of approximately 15.7 percent of
the Class A Shares, has indicated his intention not to accept the
offer.
A Directors' Circular which will more fully describe the board of
directors' recommendation and supporting analysis will be mailed
to Kensington shareholders on Monday, June 22.
Kensington's Class A Shares and Class B Shares trade on The
Alberta Stock Exchange under the symbols KNN.A and KNN.B,
respectively.
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