PhosCan Chemical (FOS-T) Nov 30, '15 is pleased to announce that it has entered into an arrangement agreement with Petrus Resources Ltd., Petrus Acquisition Corp. ("New Petrus") and a wholly-owned subsidiary of PhosCan ("SpinCo") whereby New Petrus will acquire all of the outstanding shares of PhosCan by way of a plan of arrangement (the "Arrangement") under the Business Corporations Act (Alberta) (the "ABCA").
Pursuant to the Arrangement Agreement, PhosCan will spin-off its wholly-owned Martison phosphate project (the "Martison Project") and all of its other assets, with the exception of approximately $51 million of cash and cash equivalents, and all of its liabilities to SpinCo and the existing shareholders of PhosCan will retain ownership through the distribution of all the shares SpinCo. PhosCan shares will subsequently be exchanged for common shares of New Petrus ("New Petrus Shares"), on the basis of 0.0452672 New Petrus Shares for each PhosCan share. New Petrus will concurrently acquire all of the issued and outstanding common shares of Petrus ("Petrus Shares") on the basis of 0.25 New Petrus Shares for each Petrus Share, reflecting a notional 4 to 1 consolidation of the Petrus Shares (the "Consolidation").
Based on the implied price of $7.40 per New Petrus Share being paid in the Private Placement described below (after taking into consideration the Consolidation), PhosCan shareholders will receive New Petrus Shares with an implied value of $0.3350 per PhosCan share, representing a 27% premium to the 5-day volume weighted average price for the period ending November 27, 2015. In addition, PhosCan shareholders will retain full ownership of SpinCo.
Stephen Case, President and Chief Executive Officer of PhosCan, stated: "After patiently waiting for the right opportunity to invest PhosCan's excess cash, the Arrangement allows PhosCan shareholders to capitalize on a cyclical low in the oil and gas sector through an intermediate size oil and gas producer with a strong team and track record of value creation. The Arrangement, along with the Private Placement, will provide New Petrus with approximately $81 million in additional financial capability to take advantage of the current market."
Selected Conditions to the Arrangement
Petrus Financing
Closing of the Arrangement is conditional upon, among other things, Petrus completing an equity financing of not less than $30 million. In conjunction with the Arrangement, Petrus and New Petrus have entered into a bought deal letter agreement with a syndicate of underwriters led by FirstEnergy Capital Corp. and GMP Securities L.P. (the "Co-lead Underwriters") for a bought deal private placement of 16,217,000 subscription receipts of New Petrus ("Subscription Receipts") at an issue price of $1.85 per Subscription Receipt (the "Private Placement"), which implies a $7.40 share price for the New Petrus Shares after taking the Consolidation into consideration, for aggregate gross proceeds of approximately $30 million. Wingren B.V. ("NGP"), a subsidiary of Natural Gas Partners and Petrus' current largest shareholder together with management and the directors of Petrus have committed subject to certain conditions, to subscribe for approximately 8.7 million Subscription Receipts under the Private Placement for aggregate gross proceeds of approximately $16.1 million. Closing of the Private Placement is expected to occur on or about December 22, 2015 and is subject to customary conditions and regulatory approvals.
The gross proceeds from the Private Placement will be held in escrow pending the receipt by the escrow agent of a notice from Petrus and New Petrus, acknowledged by the Co-Lead Underwriters, that all conditions precedent to the completion of the Arrangement have been satisfied or waived.
Board Representation
Stephen White, current Chair of the PhosCan Special Committee and a member of the PhosCan Board of Directors, will be appointed to the New Petrus Board of Directors.
Shareholder Approvals
It is expected that separate meetings of the PhosCan shareholders and the Petrus shareholders will be held in late January 2016 to vote on the Arrangement. To be approved, the Arrangement must be approved by not less than two-thirds of the total votes cast in person or by proxy by (i) PhosCan shareholders, and (ii) Petrus shareholders. All of the directors and officers of PhosCan, as well as certain other shareholders of PhosCan, have entered into support agreements pursuant to which they have agreed to vote in favour of the Arrangement at PhosCan's shareholder meeting. In aggregate, holders of approximately 40% of the outstanding common shares of PhosCan have agreed to vote in favour of the Arrangement. Certain Petrus shareholders, including all officers and directors, who collectively beneficially own or exercise control and direction over approximately 38% of the issued and outstanding Petrus Shares, have agreed to vote in favour of the Arrangement.
Other
The Arrangement Agreement contains customary covenants by both PhosCan and Petrus not to solicit offers for competing transactions, a right to match any superior proposal, as well as a reciprocal termination fee of $1.8 million payable upon the termination of the Arrangement Agreement in certain circumstances.
The completion of the Arrangement is subject to satisfaction of certain customary conditions, including but not limited to, PhosCan and Petrus shareholder approval, court and regulatory approvals, including approval of the Toronto Stock Exchange to list the New Petrus Shares, the receipt of third party approvals and consents, and completion of the Private Placement.
Copies of the Arrangement Agreement, support agreements, management information circular and certain related documents will be filed with securities regulators and will be available on SEDAR at www.sedar.com.
New Petrus Following the Arrangement
Assuming the issuance of 16,217,000 Subscription Receipts pursuant to the Private Placement, after taking into account the Consolidation and assuming that all outstanding Petrus Shares and PhosCan Shares are exchanged for New Petrus Shares pursuant to the Arrangement, upon completion of the Arrangement New Petrus will have an additional $81 million in financing ($51 million of cash and cash equivalents in PhosCan and $30 million in gross proceeds from the Private Placement) and there will be approximately 46,094,276 New Petrus Shares outstanding, which would be held as follows:
| Group | | | # of New Petrus Shares | | % of New Petrus Shares | | Existing Petrus Shareholders | | 35,148,150 | | 76.25% | | Existing PhosCan Shareholders | | 6,891,876 | | 14.95% | | Private Placement Subscribers | | 4,054,250 | | 8.80% | | | Total | | 46,094,276 | | 100% |
Some of the key attributes of New Petrus are as follows:
The net proceeds from the Arrangement and the Private Placement will be used to pay down corporate debt, fund the ongoing exploration and development program and for general corporate purposes.
Petrus has an amended syndicated reserve based credit facility of $160 million as of the date hereof.
Management of Petrus will continue in their same positions as officers of New Petrus. The board of directors of New Petrus will include the current directors of Petrus, a nominee of PhosCan being Stephen White, and an additional nominee of Wingren BV, a subsidiary of Natural Gas Partners.
Production in the third quarter of 2015 averaged 8,668 boe per day (38% oil and liquids). Since mid-January, a portion of the Company's sales volume (affecting three of the four operating areas) has been restricted due to transportation curtailments on TransCanada Pipelines Limited ("TCPL") infrastructure. During the third quarter, approximately 1,300 boe per day was curtailed by these third party transportation restrictions.
Petrus has financial commodity derivative contracts in place for 57% and 26% of its forecast total production volume for 2016 and 2017, respectively, the details of which are set out in Petrus' Q3 financial statements, which are available on Petrus' website at: www.petrusresources.com.
In 2016, development capital will be focused on the Ferrier area, where Petrus has identified 165 gross (104 net) drilling locations which are economic at current strip pricing.
Petrus completed construction of an operated gas processing facility in the Ferrier area of Alberta in November 2015. The facility is capable of processing 25 mmcf per day and is directly connected to a TCPL sales pipeline. The facility is capable of NGL refrigeration and liquids recovery in order to reduce reliance on third parties for processing and is expected to significantly reduce operating costs and improve operational control.
PhosCan Chemical Corp.
Stephen Case
President and Chief Executive Officer
(416) 972-9222 |
