Bitech to acquire Vanguard Oil VA-t:
See Bitech Petroleum Corp (BPU) News Release
Mr. Raymond De Smedt reports
Bitech Petroleum has entered into an agreement to acquire all of the
outstanding shares of Vanguard Oil Corporation by way of a plan of
arrangement under Alberta law for a total consideration of $6.9-million
(Canadian)($4.4-million (U.S.)). The proposed transaction allows each
Vanguard shareholder to elect to receive one Bitech share for every 10
Vanguard shares or eight Canadian cents per Vanguard share to a maximum
cash element of $2,057,365 (Canadian) ($1,335,950 (U.S.)).
Bitech will also provide Vanguard with an immediate short-term loan of
$1.2-million (U.S.) to meet its current working capital needs. The loan is
secured against certain of Vanguard's assets.
Bitech has entered into binding agreements with the directors and officers
of Vanguard representing 9 per cent of the outstanding share capital to
vote in favour of the arrangement.
Vanguard's assets
Vanguard holds licences in Egypt, Morocco, Tunisia and Colombia.
In Egypt, Vanguard operates the West Esh El Mallaha concession, which
contains the Rabeh field. Rabeh and adjacent discoveries are currently
producing 1,200 barrels of oil a day, (600 bopd net to Vanguard's working
interest). Bitech estimates that Vanguard's net working interest share of
reserves is approximately 1.25 million barrels of proven and probable
additional oil. It is planned to carry out further exploration and
development drilling during the course of this year. Bitech believes that
this exploration could result in additional discoveries that would more
than double the known reserves.
The Moroccan acreage consists of three onshore concessions. Two of these
are located in the Rharb basin, which has been shown to contain gas in
commercial quantities. Though these are usually small, they are economic
and can easily be tied back with the gas being sold for electricity
generation. Vanguard's well, Zhana-2, drilled in mid-2000 discovered gas
but this remains to be tested. Vanguard has been generating positive cash
flow from its earlier Zhana-1 discovery.
Vanguard's Tunisian asset represents a 100-per-cent holding in the Chebba
Marin offshore block. The block is highly prospective and has been shown to
contain hydrocarbons. The operations on the block are currently suspended
due to force majeure caused by a border dispute with Malta.
In Colombia, Vanguard holds two licences in the Magdalena Valley. Wells
drilled by Vanguard on these licences have encountered hydrocarbons. In
mid-2000 Vanguard reached agreement under which it farmed out its remaining
licence commitments. Vanguard retains equity interests in the licences of
between 21.25 per cent and 42.5 per cent but has no further financial
obligations.
Bitech
Bitech produces approximately 9,500 bopd from three oil licences in the
Komi Republic of Russia. Bitech operates the licences through its
100-per-cent-owned subsidiary, Bitech-Silur JSC. Since late 1995, it has
built a business from the ground floor, developed a strong operating
platform and has proved that it is possible for a small western oil company
to build a business in Russia, and shown itself to be considerably more
successful in this regard than most of its larger competitors.
The future
Until now Bitech has had a singular focus on Russia. Though Bitech will
continue to seek to grow its existing business in Russia, the combined
entity will provide a new dimension. Bitech intends to build a business
outside Russia that provides a stable cash flow to underpin development but
also to acquire further assets in Russia, which can offer high reward.
The combination of the two companies offers a number of benefits to each
set of shareholders. Vanguard's existing shareholders obtain access to
Bitech's strong operating platform and cash flow. This will allow
Vanguard's asset base to be developed in a way that is not currently
possible.
Bitech's shareholders will be provided with access to the potential offered
by Vanguard's asset base and access to additional cash flow that is not
subject to the uncertainties of the Russian business environment. The
combined entity will provide the platform for strong growth in the future.
Raymond De Smedt, chairman of Bitech, commented: "This is Bitech's first
step out of Russia. It has only been taken after much considered thought
within the company. We believe the choice of North Africa allows us to
apply many of the skills we have learned and developed. We also believe
that our shareholders will benefit from the opportunities that Vanguard
presents. These extend beyond its current asset portfolio, and also give
access to its personnel and database. These will provide the ingredients
for continued expansion.
"We, at Bitech, also believe we have a lot to offer the Vanguard
shareholders. Bitech is a well-run company with a strong management team,
solid cash flow and a proven ability to operate in difficult environments.
The negotiations leading to this offer have also shown that we have a group
of like-minded people who are determined to build a thriving business for
the benefit of all our shareholders."
Timing
The transaction is expected to close in late spring and is subject to
certain conditions, including regulatory and court approval in Canada. A
condition of the transaction is approval by 66-2/3 per cent of Vanguard's
shareholders who vote by proxy or at the meeting.
Jennings Capital Inc. advised Vanguard and will provide a fairness opinion.
WARNING: The company relies upon litigation protection for
"forward-looking" statements. |
