One Exploration Inc. announces strategic acquisition of Canext Energy Ltd.
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Shareholders of Canext will receive 2.0 class A shares of OneEx (the "Class A Shares") for each Canext Share outstanding, representing a premium of approximately 20% (based on the
The Canext transaction represents a significant progression of management's business plan to build a high quality oil asset base with a focus on horizontal drilling and multi-frac completion applications. OneEx's growth strategy follows a balanced combination of exploitation, exploration and strategic acquisitions that increase the company's critical mass and provide a larger platform with identifiable light oil production and reserve growth opportunities. The Canext transaction fits with OneEx's growth strategy on all fronts.
Transaction Highlights
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- Canext's quality, focused asset base materially increases OneEx's
production, reserves and oil weighting, and adds a dominant land
position in a new oil core focus area in the large Original Oil In
Place ("OOIP") Sweeney Triassic Oil Pool. This new pool is a high
quality oil reservoir with average porosities of 20 percent and
permeabilities of 40 millidarcies. The current reserve booking has
13.5 million boe OOIP within an area of only 352 hectares and a 12.3%
recovery factor. OneEx anticipates substantial reserve and production
additions within the currently defined Sweeney pool boundary through
expected increases in recovery factor, infill drilling and refined
drilling/completion techniques.
- Type horizontal wells within the Sweeney Triassic light oil pool have
well costs of $1.7 million, initial production rates of 200 boe/d,
P+P reserves of 225,000 boe and an NPV10 of $5 million (based on
Canext's independent reserve report effective September 30, 2009).
The Sweeney property is operated, with high working interests ranging
from 60-100%. OneEx has identified six (6) drilling locations within
the existing booked reserve area. Refinements to the 3D seismic
interpretation has the potential to identify extensions to the pool
on Canext owned lands.
- At Canext's Pouce Coupe Montney gas resource property, OneEx has
identified 25 additional net locations targeting both the Upper and
Lower Montney that have the potential to significantly increase the
current production and reserve bookings. Pouce Coupe adds 32 gross
sections (11.5 net) of land, 33% of which is operated.
- Canext's current production is approximately 1,000 boe/d
- 50% oil weighted
- 89% operated
- Canext proved plus probable reserves of 6.0 million boe as at
September 30, 2009
- 87% of proved plus probable reserves value is at Sweeney and Pouce
Coupe
- Reserves life index of 16.7 years based on current production
- Estimated total acquisition cost of $64.8 million (based on the
February 10, 2010 $0.295 Class A Share closing price on the TSXV),
including the assumption of $12.9 million in net debt at closing,
including transaction costs. The acquisition cost, net of land value,
is $58.7 million, based on an undeveloped land value of $6.1 million
(60,824 acres at $100 per acre)
- Acquisition metrics, based on the net acquisition cost of $58.7
million
- $58,700 per boe/d
- $9.78/ boe P+P
- 4.9 times estimated 2010 cash flow (based on WTI US $75.00/barrel
and AECO CDN $5.00/GJ)
- Significant accretion on a per share basis to OneEx's production,
cash flow, reserves and net asset value
- 89% on estimated 2010 cash flow per share
- 105% on current production per share
- 123% on proved reserves per share
- 133% on P+P reserves per share
- 20% on net asset value per share
Pro Forma OneEx Highlights:
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Upon closing of the transaction, OneEx will have the following key
operating and financial characteristics. OneEx will provide updated 2010
guidance subsequent to the completion of the transaction.
- Current production of approximately 1,400 boe/d, 50% oil weighted
- Core oil operating areas in Saskatchewan at Tableland targeting the
Sanish and Bakken, and in Alberta at Sweeney, Queenstown, Lochend and
Coronation, targeting the Triassic, Pekisko, Cardium and Viking
formations, respectively
- High quality drilling inventory of over 160 gross (63.9 net) wells
- Core Montney liquids-rich natural gas resource property at Pouce
Coupe, Alberta
- High quality drilling inventory of over 80 gross (28.8 net) wells
- 117,824 net undeveloped acres
- Estimated remaining 2010 capital program of approximately $26.5
million
- Risked 2010 drilling program of approximately 24 gross horizontal
(12.6 net) wells
- Strong balance sheet:
- Estimated net cash position at closing of $7 million
- No debt with combined unutilized credit facility of $19.5 million
- Combined tax pools of approximately $180 million
- Basic shares outstanding (assuming the exercise of the 100,000,000
special warrants outstanding) of 419.3 million (21.0 million assuming
completion of the Proposed Consolidation and Name Change (as
described below))
- Fully Diluted shares outstanding of 443.3 million (22.1 million
assuming completion of the Proposed Consolidation and Name Change)
- Former Canext Shareholders are expected to hold approximately 42%
(basic) of the outstanding Class A Shares (40% fully diluted)
following completion of the Arrangement.
"The Canext transaction positions OneEx with a significant growth platform and the critical mass to undertake an aggressive horizontal drilling program on its existing light oil plays at Tableland, Milo and Lochend" said Russell J. Tripp, President and CEO of OneEx. "With the addition of the Sweeney Triassic light oil pool, OneEx increases its current oil weighting and adds a high reservoir quality new oil pool with material production and reserve growth potential. The OneEx technical and management team has extensive experience with analogous oil pools and has identified additional exploitation and exploration opportunities at Sweeney."
"The OneEx transaction gives Canext Shareholders the added benefit of exposure to additional resource plays like the Bakken and Sanish in SE Saskatchewan and the Cardium in West Central, Alberta. Both Canext and OneEx shareholders will enjoy the benefits of a diversified portfolio of high quality assets in a well-financed and larger entity" said Stephen Kapusta, President and CEO of Canext.
The Arrangement
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Pursuant to the terms of the Arrangement Agreement, OneEx expects to acquire all of the issued and outstanding Canext Shares at an exchange ratio of 2.0 Class A Shares for each Canext Share. In addition, OneEx will assume approximately
The Arrangement has the unanimous support of the boards of both OneEx and Canext. After conducting a thorough strategic review process, and receiving the verbal fairness opinion of its financial advisor National Bank Financial Inc., the board of directors of Canext has concluded that the Arrangement is in the best interests of Canext, is fair to Canext Shareholders, and recommends that Canext shareholders vote in favour of the Arrangement. Each of the directors and officers of Canext, holding approximately 24% of the Canext Shares (basic), have entered into support agreements whereby they have agreed, among other things, to vote their Canext Shares in favour of the Arrangement.
Canext has agreed to pay a non-completion fee in the amount of up to
It is anticipated that a meeting of Canext shareholders will be held in early
A copy of the Arrangement Agreement will be filed on each of Canext's and OneEx's SEDAR profiles and will be available for viewing at www.sedar.com.
In the event OneEx's proposed 20 for 1 consolidation of the Class A Shares and proposed name change to "TriOil Resources Ltd." (the "Proposed Consolidation and Name Change") becomes effective prior to the effective date of the Arrangement, holders of Canext Shares will receive, in accordance with the Arrangement, Class A Shares after giving effect to the consolidation and name change. The Proposed Consolidation and Name Change is subject to OneEx shareholder approval at the special meeting of holders of Class A Shares called for
Advisors
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National Bank Financial Inc. acted as sole financial advisor to Canext and has provided Canext's Board of Directors with its opinion that, subject to its review of the final form of the documents effecting the Arrangement, the consideration to be received by Canext Shareholders under the Arrangement is fair, from a financial point of view, to Canext Shareholders. A copy of the fairness opinion will be included in the information circular to be sent to shareholders for the special meeting to be called to approve the Arrangement. Burstall Winger LLP are acting as legal advisors to Canext.
About OneEx
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One Exploration Inc. is a
About Canext
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Canext Energy Ltd. is a
Forward Looking Statements
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This document contains forward-looking statements. More particularly, this document contains statements which include, but are not limited to, the timing of the receipt of the required shareholder approval, the anticipated number of Class A Shares issuable pursuant to the Arrangement, regulatory and third party approvals, the future operations of, and transactions completed by, OneEx as well as the satisfaction of other conditions pertaining to the completion of the Arrangement and the Proposed Consolidation and Name Change.
The forward-looking statements contained in this document are based on certain key expectations and assumptions made by OneEx and Canext, including: (i) with respect to the anticipated closing dates of the Arrangement and the expectations and assumptions concerning timing of receipt of required shareholder, court and regulatory approvals and third party consents and the satisfaction of other conditions to the completion of the Arrangement and the Proposed Consolidation and Name Change, as applicable, and (ii) with respect to the anticipated exploration and development opportunities, anticipated recovery factors, and the anticipated 2010 average and exit rates of production, reserves and resources (including original oil in place), expectations and assumptions concerning the success of future exploration and development activities, the performance of existing wells, the performance of new wells and prevailing commodity prices.
Although OneEx and Canext believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because OneEx and Canext can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the transactions, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in OneEx's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com and Canext's public disclosure documents which have been filed on SEDAR and can be accessed at www.sedar.com.
This document contains future-oriented financial information and financial outlook information (collectively, "FOFI") about prospective results the Arrangement and the potential operating and financial characteristics of OneEx following the Arrangement, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. The FOFI contained in this document was made as of the date of this document and was provided for the purpose of giving a general overview of the Arrangement and the potential results of the Arrangement. Readers are cautioned that the FOFI contained in this document should not be used for purposes other than for which it is disclosed herein as such information may not be appropriate for other purposes.
The forward-looking statements and FOFI contained in this press release are made as of the date hereof and OneEx and Canext undertake no obligation to update publicly or revise any forward-looking statements or information or FOFI, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Meaning of BOE
The term "boe" may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Original Oil in Place
"Original oil in place" or "OOIP" as used in this press release means the total oil and gas estimated to have originally existed in the earth's crust in naturally occurring accumulations (also defined as "discovered resources" in the COGE Handbook). Original oil in place includes discovered resources, and there is no certainty that any portion of the undiscovered resources will be economically viable or technically feasible to recover or produce other than that portion which has been assigned Proved and/or Probable Reserves. Original oil in place also includes volumes that have already been produced from such accumulations. Readers should not unduly rely upon estimates of original oil in place in terms of assessing the OneEx's or the combined entity's reserves or recoverable resources. All estimates of original oil in place contained in this press release are based upon internal estimates of management of OneEx and Canext.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
For further information: Russell J. Tripp, President & CEO, One Exploration Inc., Phone: (403) 265-4115; Stephen Kapusta, President & CEO, Canext Energy Ltd., Phone: (403) 263-3232 (ext 222)
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