TUSK to Make Offer for Del Roca
Wednesday December 11, 9:02 am ET
CALGARY, ALBERTA--TUSK Energy Inc. (TKE:TSX) and Del Roca Energy Ltd. (DRQ:TSX-V) jointly announce that they have entered into an agreement whereby TUSK will, no later than December 30, 2002, mail a take-over bid offer and circular to purchase all of the issued and outstanding common shares of Del Roca. Shareholders of Del Roca will be entitled, for each Del Roca share, to accept either (i) the sum of $0.64 in cash, or (ii) 0.25 of one share of TUSK, or (iii) a combination of cash and shares of TUSK, provided that no greater than 2.8 million TUSK shares will be issued (representing 50% of the total consideration if the maximum number of TUSK shares are issued). The offer price of $0.64 represents a 28% premium to the ten day weighted average trading price of Del Roca prior to the announcement of an unsolicited proposed business combination on September 18, 2002 and a 10% premium to the closing price of Del Roca shares on December 10, 2002.
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The Board of Directors of Del Roca, following an extensive auction process through Kobayashi & Associates Ltd., have approved the proposed transaction and will unanimously recommend that its shareholders accept the TUSK offer as being in the best interests of all shareholders. Jennings Capital Inc., financial advisors to Del Roca, has agreed to provide a fairness opinion that the offer is fair, from a financial point of view, to the shareholders of Del Roca. Shareholders of Del Roca, including all of its directors and officers, have entered into lock-up agreements in respect of approximately 29% of the shares of Del Roca, wherein such shareholders have agreed to tender their shares to the offer.
TUSK anticipates mailing a take-over bid offer and circular by December 23, 2002, with closing expected to occur by the end of January, 2003. The offer will be conditional upon, among other things, the tendering of a minimum of 66 2/3% of the Del Roca common shares. Del Roca has agreed not to solicit or initiate further discussions or negotiations with any third party concerning any transaction. Del Roca has also agreed, under certain circumstances, to pay TUSK a non-completion fee in the amount of $500,000. TUSK has a right of first refusal, in certain circumstances, to match any unsolicited competing bid.
"This is a great opportunity for our shareholders," stated Stanley Odut, President & CEO of Del Roca. "In light of the change initiative presented by some of our shareholders in September, our Board conducted an exhaustive process to maximize shareholder value. The TUSK offer presents an excellent choice for our shareholders, whether they elect to cash out or stay invested in a quality oil and gas company. The TUSK team has demonstrated excellent growth in recent years and the addition of the Del Roca assets will make a noticeable contribution to further growth."
Norm Holton, President & CEO of TUSK stated that "the Del Roca assets are characterized by low decline rates and long reserve life. The acquisition of Del Roca will diversify TUSK's production base and provide additional development opportunities".
Current production at TUSK is more than 2,400 boepd (50% natural gas). Average production was 2,232 boepd in the third quarter of 2002, 1,860 boepd in the second quarter of 2002 and 1,712 boepd in the first quarter of 2002. Production growth has been due to a successful drilling program.
On November 15, 2002 TUSK announced its 35% participation in a Kiskatinaw gas discovery in the Shane area of northwestern Alberta which is expected to start production early in 2003. Ten additional wells, five of which are in TUSK's gas development areas at Saddle Lake and Whitefish Lake, Alberta, will be drilled prior to the end of 2002.
On a pro forma basis, TUSK would have production of approximately 3,100 boepd (51% natural gas, 49% oil and NGLs). Assuming the maximum number of TUSK shares are taken up, pro forma debt is expected to be approximately $24 million at the time of closing. On a combined basis the available credit line is expected to be in excess of $30 million. TUSK has approximately 17.6 million shares currently issued and outstanding (19.6 million fully-diluted).
Del Roca has total proven reserves of 1,115 Mstb of oil and liquids and 6.7 Bcf of natural gas and established reserves of 1,464 Mstb of oil and liquids and 8.5 Bcf of natural gas.
After deducting the value of Del Roca tax pools and land, the reserves cost per boe is $7.53 for proven and $5.83 for established reserves. The reserve life index is approximately 10 years for proven reserves and 12.5 years for established reserves. Neither the TSX Exchange nor the TSX Venture Exchange accepts responsibility for the adequacy or accuracy of this release. This news release may contain forward-looking information. Actual future results may differ materially from those contemplated. |
