West Perth-based petroleum explorer ARC Energy Ltd's plans to acquire the Wandoo Petroleum Pty Ltd Australian portfolio for $380 million have suffered a setback, with Canada-based Vermilion Oil & Gas exercising its pre-emptive rights to a major asset
West Perth-based petroleum explorer ARC Energy Ltd's plans to acquire the Wandoo Petroleum Pty Ltd Australian portfolio for $380 million have suffered a setback, with Canada-based Vermilion Oil & Gas exercising its pre-emptive rights to a major asset.
Vermilion held a pre-emptive right to Wandoo's 40 per cent stake in the Wandoo oil field, in the offshore Carnarvon Basin, and will now acquire that right under the same terms.
The total cost of the acquisition will now be, according to ARC, around $229 million, down around $151 million on its previous announcement.
The full text of a company announcement is pasted below
ARC Energy Limited (ASX:ARQ) announces that it has been notified that Vermilion Oil & Gas ("Vermilion") has exercised its pre-emptive right to purchase Wandoo Petroleum Pty Ltd's ("WPP") 40% interest in the Wandoo Oilfield. This pre-emption has been made under the terms of the joint operating agreement governing WPP's interest in permit WA-14-L, the permit that contains the Wandoo Oilfield. Vermilion will now purchase the Wandoo Oilfield on the same commercial terms as agreed between ARC and WPP.
As a result of this pre-emption, the Wandoo Oilfield will be excluded from the assets ARC has previously announced that it willacquire from WPP. ARC will proceed with the acquisition from WPP of WPP's interests in the BassGas and Cliff Head fields, together with associated exploration acreage,1 on the same terms as previously agreed and announced to the market.
The revised total consideration for the Acquisition is US$189.6 million as at the effective date of 1 January 2007. The net amount payable by ARC on completion of the transaction is now expected to be approximately US$180.6 million. The Acquisition remains competitively priced, with the revised total consideration for the Acquisition price representing a 2P reserves value of US$14.93 per boe3. This compares favourably with recent transactions in the E&P sector, which have averaged US$17.95/boe4 on a 2P basis.
The Acquisition of BassGas and Cliff Head will substantially increase ARC's oil and gas production and reserves. ARC's net 2Preserves will increase by 190% from 6.7 to 19.4 million barrels of oil equivalent ("mmboe").5 Net FY2008 production is forecast to increase by 72% from 1.9 to 3.2 mmboe.
Mr Eric Streitberg, Managing Director of ARC, said:
"While we are disappointed not to be able to acquire the Wandoo Oilfield interest, the fact that Vermilion chose to exercise their pre-emptive right vindicates our assessment of the value of the asset. We applied the same rigour to our assessment of the Cliff Head and BassGas assets and are confident that we are acquiring a suite of high quality assets at an attractive price. The revised transaction is extremely positive for ARC shareholders and, importantly, gives the Company the flexibility and financial reserves to take advantage of other opportunities we identify."
Acquisition Funding
As a consequence of the reduced size of the Acquisition consideration, ARC now proposes to fund the Acquisition via:
- a placement of approximately 28% of its issued capital to institutional and sophisticated retail investors to raise A$90 million to A$100 million ("Placement");
- a share purchase plan open to all ARC shareholders, intended to be underwritten by Macquarie Bank up to A$25 million ("SPP"); and
- a senior debt facility with BOS International for the balance of the acquisition funding.
ARC now intends to complete the equity raising and be ready to draw down on the senior debt facility prior to completion of theAcquisition, removing the need for the previously announced bridge financing.
The Placement will be conducted by way of a bookbuild on Wednesday, 9 May 2007 and is expected to comprise two equal tranches:
- Tranche 1 - an unconditional tranche equal to ARC's available 15% placement capacity; and
- Tranche 2 - a conditional tranche, which will be subject to approval at an EGM of ARC shareholders, expected to be held in June 2007.
In recognition of the fact that only institutional and sophisticated retail investors will be eligible to participate in the Placement, ARC is undertaking the SPP under which each ARC shareholder will be able to apply for up to A$5,000 worth of shares at an attractive price.
Further details of the EGM and SPP, including pricing and application forms, will be sent to shareholders shortly.
