Just off the wire - if they are increasing their distribution 20 percent perhaps their price will take a good rise
Mark
Provident Energy Trust - News Release
Provident Energy to acquire Maxx Petroleum
Provident Energy Trust
PVE.UN
Shares issued 7,093,888
2001-03-26 close $10.62
Monday Mar 26 2001
News Release
Also Maxx Petroleum Ltd (MXP)
Mr. Thomas Buchanan reports
Provident Energy Trust and Maxx Petroleum have executed an agreement
whereby Provident has agreed to acquire all of the outstanding shares of Maxx
pursuant to a plan of arrangement. Under the plan, Provident will acquire the
Maxx shares at a price of $7.00 per share payable, at the election of the Maxx
shareholders, on the basis of: a total of $7.00 per Maxx share to a maximum of
$36.2-million; or 0.63 of one Provident unit per Maxx share to a maximum of
7,475,000 units.
The consideration payable for each Maxx share will comprise $2.13 cash and
0.44 of a Provident unit in the event all Maxx shareholders elect all cash.
In addition, Provident intends to raise its distributions, on an annualized basis, to
$3.60 from $3.00 upon completion of the Maxx transaction.
The directors of each of Provident and Maxx have unanimously approved the
transaction. The Maxx board has concluded the transaction is in the best interest
of shareholders and will recommend that shareholders vote their shares in favour
of the plan. Additionally, the directors and officers of Maxx have agreed to vote
their shares in favour of the plan. Griffiths McBurney & Partners, the financial
adviser for Maxx, has provided the board of directors of Maxx with its opinion
that the consideration to be received by the shareholders of Maxx is fair from a
financial point of view. Scotia Capital has acted as the financial adviser on behalf
of Provident in conjunction with the plan.
When advised of the transaction after the agreement was executed, CanFund V.E.
Investors L.P., which holds approximately 16 per cent of the Maxx shares,
indicated its intention to support the transaction.
Bruce Libin, the chairman of Maxx, stated: "The combination of Maxx with
Provident enables our shareholders to realize a meaningful premium to the current
market price for their shares including cash on closing, significant monthly cash
distributions and ongoing equity participation in a growing trust with quality
management and highly complementary assets and operations. We are pleased
with this conclusion to our strategic alternatives process and thank all of our
employees and shareholders for their support during this process."
Tom Buchanan, the chief executive officer of Provident, stated: "We are excited
about this transaction. The acquisition of Maxx is strongly accretive on
fundamental measures, principally cash distributions per unit, production per unit
and reserves per unit. The acquisition of Maxx establishes a significant critical
mass for Provident and more than doubles the number of outstanding units. The
Maxx properties provide an excellent geographic fit with our own key assets and
will enable us to realize significant synergies. In addition we will be pleased to
welcome Bruce Libin and Jeff Smith as current representatives of Maxx to our
board of directors. This transaction is a major step forward in executing the
acquisition element of our business plan."
The shareholders of Maxx will consider the plan at a meeting scheduled to occur
on or prior to May 25, 2001.
The primary benefits to Provident are as follows.
Financial benefits
As a result of this cash flow accretive transaction and its own improved
performance, Provident will increase its annualized cash distributions to $3.60 per
unit for 2001 from an annualized distribution of $3.00 per unit. This represents, on
a monthly basis, an increase from 25 cents per unit to 30 cents per unit. The
increased distribution will be effective for the June 15, 2001, distribution payable
to holders of record of Provident units on May 31, 2001, including the holders of
Maxx shares assuming that the transaction has concluded. As reported in
Stockwatch on March 21, 2001, Provident has declared its initial cash distribution
of 25 cents per unit payable on April 13, 2001, to holders of record on March
31, 2001.
The acquisition of the Maxx shares will result in the issuance of up to 7,475,000
units increasing the total number of units outstanding to approximately 14.6 million.
Provident believes the acquisition of Maxx will be neutral to net asset value and
will result in a net debt to cash flow ratio of approximately 1.1 times. The
transaction values Maxx at a total enterprise value of $133-million, including
$119-million in equity and approximately $14-million in total debt (after giving
effect to a property disposition by Maxx). Based upon the $7.00 offer price, the
offer represents a 43-per-cent premium for the Maxx shares based upon its
20-day weighted average closing price of $4.90.
Operational benefits
The Maxx properties produce at a rate of approximately 8,700 barrels of oil
equivalent per day (gas converted to oil on a 6:1 basis) including 6,600 barrels of
oil, 400 barrels of natural gas liquids and 10 million cubic feet per day of natural
gas, net of Maxx's previously disclosed disposition of approximately 620 barrels
of oil equivalent per day from non-core properties. Accordingly, Provident's daily
production will increase from approximately 4,800 barrels of oil equivalent per
day to approximately 13,500 barrels of oil equivalent per day. This 180-per-cent
increase in production will increase per unit production by approximately 37 per
cent.
The table set forth below outlines the reserves, as included in reports prepared by
Sproule & Associates, independent engineering consultants, effective as of Jan. 1,
2001, of Provident and Maxx individually and on a combined basis:
Oil and NGL Natural gas
(mbbl) (mmcf)
Provident
Proven 6,649 23,831
Established 7,996 30,569
Maxx
Proven 14,608 19,008
Established 16,584 21,120
Combined
Proven 21,257 42,839
Established 24,580 51,689
Total Accretion
BOE (6:1) per unit
(mboe)
Provident
Proven 10,621
Established 13,091
Maxx
Proven 17,776
Established 20,104
Combined
Proven 28,397 30.4%
Established 33,195 23.6%
Combined reserves of Provident and Maxx exclude more than 100 undrilled,
low-risk development locations for heavy oil. This inventory of drilling locations
could provide production replacement for two to three years beyond that
recognized in the reserve report.
Valuation metrics
Based upon the $7.00 acquisition price, the acquisition of Maxx is substantially as
follows (on a 6:1 conversion):
Price per Price per Price per
boed of proven boe established
production boe
$13,563 $6.64 $5.87
Synergies
Provident and Maxx each have three focused and matching core operating areas
in the Lloydminster area of Alberta and Saskatchewan, southeast Saskatchewan,
and west central Alberta. Provident believes it will enjoy financial and operational
synergies due to the similar nature of operations and proximity of these properties.
These synergies will result in reduced general and administration expenses,
operational cost reduction opportunities, and the ability to high grade capital
investment opportunities.
Risk management
Provident believes in stabilizing its cash distributions through risk management of
oil and gas prices. Provident has a target of hedging approximately 50 per cent of
its production. For 2001, Provident presently has in place hedges for over 50 per
cent of its oil and gas production. Maxx has hedges in place for similar volumes. In
conjunction with this transaction Maxx and Provident will attempt to lock in fixed
price hedges for up to 2,000 barrels per day of their combined heavy oil
production for 2002.
The board of directors of Maxx has agreed to pay Provident a fee of $5.0-million
if the transaction is not completed under certain conditions. Maxx has agreed to
terminate any discussions with other parties in respect to business combinations
and, additionally, Provident has the right to match any other proposal that Maxx
may receive.
Provident has scheduled a telephone conference call for 2 p.m., Calgary time, on
Tuesday, March 27, 2001, to discuss the transaction. Interested parties may
participate in the conference call by calling 1-877-888-3855. A replay of the
conference call may be accessed for a period of up to 4 p.m., Monday, April 2,
2001, by calling 1-888-509-0082.
WARNING: The company relies upon litigation protection for "forward-looking"
statements.
(c) Copyright 2001 Canjex Publishing Ltd. canada-stockwatch.com |
