PrimeWest Energy Trust and Shiningbank Energy Income Fund Announce Merger
MAY 10, 2007 - 07:09 ET
CALGARY, ALBERTA--(CCNMatthews - May 10, 2007) - PrimeWest Energy Trust ("PrimeWest")
(TSX:PWI.UN)(TSX:PWX)(TSX:PWI.DB.A)(TSX:PWI.DB.B)(TSX:PWI.DB.C)(NYSE:PWI) and Shiningbank
Energy Income Fund ("Shiningbank") (TSX:SHN.UN) are pleased to announce that their
respective Boards of Directors have unanimously approved an agreement providing
for the merger (the "Merger") of PrimeWest and Shiningbank into a single trust ("New
PrimeWest") to be managed by a combination of the respective management and directors
of both trusts. The new entity will continue to operate under the name PrimeWest
Energy Trust.
Under the terms of the Merger, each Shiningbank trust unit will be exchanged for
0.62 of a PrimeWest trust unit on a tax-deferred rollover basis with the filing
of appropriate election forms. Based on the May 9, 2007 closing price on the Toronto
Stock Exchange of PrimeWest trust units, the exchange ratio reflects a value of
$14.60 for each Shiningbank trust unit. Based on the 30 day weighted average trading
prices on the Toronto Stock Exchange of PrimeWest and Shiningbank trust units, the
exchange ratio reflects a 4.2% premium for each Shiningbank trust unit.
The transaction is subject to stock exchange, court and regulatory approval and
other conditions that are typical of transactions of this nature, including approval
by the holders of at least 66 2/3% of Shiningbank trust units represented in person
or by proxy at a Shiningbank unitholder meeting and at least 66 2/3% of PrimeWest
trust units represented in person or by proxy at a PrimeWest unitholder meeting.
A joint information circular regarding the Merger is expected to be mailed to unitholders
of both PrimeWest and Shiningbank in early June 2007 for meetings expected to take
place in mid July. The Merger is expected to close on or about July 11th, 2007 after
the meetings, but no later than the anticipated first distribution record date of
New PrimeWest on July 20th, 2007.
As a result, PrimeWest unitholders of record on June 22nd, 2007 will be entitled
to receive the June PrimeWest distribution, expected to be payable on July 13th,
2007. Shiningbank unitholders of record on June 30th, 2007 will be eligible to receive
the June Shiningbank distribution, expected to be payable on July 15th, 2007. Former
unitholders of both PrimeWest and Shiningbank who are holders of record of New PrimeWest
on July 20th, 2007 will receive the first distribution of New PrimeWest, expected
to be payable August 15th, 2007.
Based on the combined first quarter results of PrimeWest and Shiningbank, New PrimeWest
would have had production of approximately 66,000 BOE per day. Currently, PrimeWest
and Shiningbank are each marketing the sale of approximately 1,000 BOE per day of
non-core production and, with the completion of the Merger, approximately 2,000
BOE per day of additional production is planned for disposition, with the proceeds
used to reduce debt and fund ongoing development activities.
BENEFITS OF THE MERGER
The proposed Merger is expected to be accretive upon closing to PrimeWest unitholders
on a cash flow and production per unit basis, while providing Shiningbank unitholders
an increase in reserves per unit, a 3.3% increase in monthly cash distributions
and a longer reserve life index (RLI) increased to 11.5 years from 9.8 years.
The proposed Merger will create a larger gas-weighted trust positioned for development
of a well-diversified asset base.
As one of the largest publicly traded oil and gas trusts, New PrimeWest will generate
the following opportunities and benefits for unitholders of both PrimeWest and Shiningbank:
- New PrimeWest will have a larger suite of diversified natural gas and light oil
assets, with a large portfolio of internal development opportunities:
-- Based on first quarter 2007 results, production of approximately 66,000 BOE per
day allocated 70% to natural gas and 30% to crude oil and natural gas liquids;
-- Combined proved plus probable reserves of approximately 280 million BOE, excluding
the impact of 2007 production, and development activities and acquisition and disposition
activities;
-- Following the closing of the transaction, the combined entity will have an undeveloped
land base of more than 1.1 million net acres, one of the largest undeveloped land
bases in the oil and gas trust sector;
-- A multi-year suite of development opportunities now in excess of C$1.4 billion,
reflecting the potential in the combined asset bases; and
-- Total 2007 capital expenditures for New PrimeWest of approximately C$250 million
will be deployed to pursue attractive development drilling prospects and opportunities
from both asset bases. This C$250 million does not include capital spent by Shiningbank
prior to completion of the merger, which is forecast to be approximately $60 million
by that time.
- Projected funds flow from operations, DRIP proceeds, and proceeds from dispositions
are expected to be sufficient to adequately fund development activities for 2007
without the need for incremental debt, assuming a payout ratio of 60 to 75% of funds
flow from operations. This transaction moves New PrimeWest towards a business model
where future development capital spending and distributions are expected to be financed
with funds flow from operations.
- Following the anticipated sale of approximately 4,000 BOE per day of non-core
assets, the combined entity will have a strengthened balance sheet.
- One of the oil and gas trust sector's longest RLIs for proved plus probable reserves
of 11.5 years.
- Greater concentration of interest in key operating areas.
- The levering of in-house technical skills from both PrimeWest and Shiningbank
over the combined asset base, potentially achieving operating efficiencies with
commensurate cost savings, and the identification of further internal development
opportunities.
- Substantial reduction in per BOE G&A cost, based on operating synergies, and the
integration of Calgary head offices.
- Greater weighting in the S&P/TSX Capped Energy Trust Index (rising from approximately
2.4% of this index to approximately 3.8% based on May 9th, 2007 closing prices),
the S&P/TSX Capped Income Trust Index (rising from approximately 1.4% of this index
to approximately 2.2% based on May 9th, 2007 closing prices), and the S&P/TSX Composite
Index.
- Additional trading liquidity and enhanced access to capital derived from being
listed on both the TSX and NYSE, and inclusion in the Morgan Stanley Capital International
(MSCI) Canada Energy Index, incremental benefits not previously afforded to unitholders
of Shiningbank.
CHARACTERISTICS AND GUIDANCE OF NEW PRIMEWEST
PrimeWest and Shiningbank view New PrimeWest as one of the largest and best-positioned
natural gas focused trusts in Canada. New PrimeWest will have an operated, long
life asset base primarily focused in West Central Alberta, Northeastern British
Columbia, and the Williston Basin in the United States.
Upon closing of the Merger, New PrimeWest is anticipated to have the following key
operating and financial characteristics:
New PrimeWest
2007 Exit Production (BOE per day) 59,000 (1)
Natural gas weighting (%) 70
Reserve life index (years) 11 .5 (2)
Reserves P+P (mmBOE) 280 (3)
2007 Estimated Capital program (C$ millions) 250
Operating expenses (C$/BOE) 9.50 (4)
Net undeveloped land (thousands of acres) 1,118
Pro forma basic units outstanding (millions) 143.4
Pro forma enterprise value (C$ millions) 4,550 (5)
(1) Exit rate for year-end 2007 includes the impact of asset dispositions and reduction
in combined capital spending.
(2) Based on 2006 year end reserves and production.
(3) Excludes the impact of 2007 production, capital development, or acquisitions
and dispositions.
(4) Based on average 2007 full year estimate
(5) Enterprise value defined as market capitalization plus working capital deficit
plus long term debt plus outstanding convertible debentures.
Donald A. Garner, the current President and Chief Executive Officer of PrimeWest
Energy Trust will lead New PrimeWest. Further announcements regarding the appointment
of the other executive officers of New PrimeWest will be made prior to closing of
the Merger.
The Board of Directors of New PrimeWest will be comprised of Messrs. Harold P. Milavsky
(Chair), Barry E. Emes, Harold N. Kvisle, Kent J. MacIntyre, W. Glen Russell and
Peter Valentine, current members of the Board of Directors of PrimeWest, and Messrs.
David M. Fitzpatrick (also the current President and Chief Executive Officer of
Shiningbank), Robert B. Hodgins and Warren D. Steckley, current members of the Board
of Directors of Shiningbank.
BOARD RECOMMENDATIONS
The Boards of Directors of both PrimeWest and Shiningbank have unanimously approved
the Merger. National Bank Financial Inc. is acting as financial advisor to Shiningbank
and has provided the Shiningbank Board of Directors with a verbal opinion that the
consideration to be received by Shiningbank unitholders is fair from a financial
point of view. The Shiningbank Board of Directors has unanimously concluded that
the transaction is in the best interests of Shiningbank, and the Shiningbank unitholders,
and has resolved to recommend that the Shiningbank unitholders vote their Shiningbank
trust units in favour of the Merger. The Management and Board of Directors of Shiningbank
have agreed to vote their trust units in favour of the Merger.
Similarly, the Board of Directors of PrimeWest has been provided with a verbal opinion
from its financial advisors, GMP Securities L.P. and Scotia Waterous Inc., indicating
that subject to review of the final documentation, the consideration to be offered
pursuant to the Arrangement is fair from a financial point of view to the PrimeWest
unitholders. The PrimeWest Board of Directors has unanimously concluded that the
transaction is in the best interests of PrimeWest, and the PrimeWest unitholders,
and has resolved to recommend that the PrimeWest unitholders vote their PrimeWest
trust units in favour of the Merger. The Management and Board of Directors of PrimeWest
have agreed to vote their trust units in favour of the Merger.
The terms of the Merger restrict PrimeWest and Shiningbank from soliciting or initiating
any discussions regarding any other business combination or sale of material assets,
contain provisions enabling each trust to match competing, unsolicited proposals
and, subject to certain conditions, provides for a C$35 million termination fee.
JOINT CONFERENCE CALL
A joint conference call to discuss the Merger will be held on Thursday, May 10th,
2007 at 9:00 AM Mountain Daylight Time (11:00 AM Eastern). To participate please
call 1-888-575-8232 or in the Toronto area (416) 641-6112. A recording of the call
will be available until June 15th, 2007 by calling 1-800-408-3053 and entering confirmation
number 3222535 followed by the number sign.
FORWARD-LOOKING STATEMENTS
Certain information set forth in this document including management's assessment
of PrimeWest's, Shiningbank's and New PrimeWest's future plans and operations contains
forward-looking statements. These statements relate to future events or performance.
All statements other than statements of historical fact may be forward-looking statements.
Forward-looking statements are often, but not always, identified by the use of words
such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will",
"project", "predict", "potential", "intend", "could", "might", "should", "believe",
"would" and similar expressions. By their nature, forward-looking statements are
subject to numerous risks and uncertainties, some of which are beyond these parties'
control, including the impact of general economic conditions, industry conditions,
changes in laws and regulations including the adoption of new environmental laws
and regulations and changes in how they are interpreted and enforced, volatility
of commodity prices, currency and interest rate fluctuations, imprecision of reserves
estimates, environmental risks, competition from other industry participants, the
lack of availability of qualified personnel or management, stock market volatility,
ability to access sufficient capital from internal and external sources and geological,
technical, drilling and processing challenges.
Readers are cautioned that the assumptions used in the preparation of such information,
although considered reasonable at the time of preparation, may prove to be imprecise
and, as such, undue reliance should not be placed on forward-looking statements.
The actual results, performance, or achievement could differ materially from those
expressed in, or implied by, these forward-looking statements and accordingly, no
assurance can be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what benefits will
be derived. PrimeWest and Shiningbank each disclaim any intention or obligation
to update or review any forward-looking statements, whether as a result of new information,
future events or otherwise.
This news release shall not constitute an offer to sell or the solicitation of an
offer to buy the securities in any jurisdiction. The securities offered have not
and will not be registered under the United States Securities Act of 1933, as amended
(the "U.S. Securities Act") or any state securities laws and my not be offered or
sale in the United States except in certain transactions exempt from the registration
requirements of the U.S. Securities Act and applicable states securities laws.
BOE EXPLANATORY REMARKS
References herein to "BOE" mean barrels of oil equivalent derived by converting
gas to oil in the ratio of six thousand cubic feet ("mcf") of gas to one barrel
("bbl") of oil. BOE may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 mcf:1 bbl is based upon an energy conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the wellhead.
FOR FURTHER INFORMATION PLEASE CONTACT:
PrimeWest Energy Trust
George Kesteven
Manager, Investor Relations
(403) 699-7367 or Toll Free: 1-877-968-7878
Email: investor@primewestenergy.com
Website: www.primewestenergy.com
or
Shiningbank Energy Income Fund
David M. Fitzpatrick
President and C.E.O.
(403) 268-7477 or Toll Free: 1-866-268-7477
or
Shiningbank Energy Income Fund
Bruce K. Gibson
C.F.O.
(403) 268-7477 or Toll Free: 1-866-268-7477
or
Shiningbank Energy Income Fund
Debbie Carver
Investor Relations Coordinator
(403) 268-7477 or Toll Free: 1-866-268-7477
(403) 268-7499 (FAX)
Email: irinfo@shiningbank.com
Website: www.shiningbank.com