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Pursuant to the Amalgamation, shareholders of Palliser will receive 0.1393 of a common share of New Maha (a "New
Based on the price of
Completion of the Amalgamation is conditional on customary closing conditions and is subject to conditions precedent with respect to net indebtedness and transaction costs of Palliser at closing. In addition, it is a condition to the completion of the Amalgamation that Maha must complete bond and/or equity financings for combined aggregate gross proceeds of not less than
All outstanding options of Palliser and Maha at the effective time of the Amalgamation will be exchanged for options of New Maha in accordance with the Palliser and Maha option plans.
The Amalgamation is subject to receipt of customary regulatory approvals, including the approval of the TSXV and the approval of 66 2/3% of each of the Palliser shareholders and the Maha shareholders.
Further information regarding the Amalgamation will be contained in a joint information circular to be prepared by Maha and Palliser, which the parties will prepare, file and mail in due course to their respective shareholders in connection with the requisite shareholder approvals of the Amalgamation and associated transactions. It is expected that the Maha and Palliser shareholder meetings will take place in mid-October, with closing of the Amalgamation expected to occur shortly thereafter, but in any event on or before the Outside Date. Further details regarding the respective shareholders' meetings will be provided in the joint information circular. All shareholders are urged to read the joint information circular once it becomes available as it will contain additional information concerning the Amalgamation.
Each of the directors and officers of Palliser, representing in aggregate approximately 7% of the issued and outstanding Palliser Shares (on a non-diluted basis), have committed to vote their Palliser Shares in favour of the Amalgamation at the Palliser shareholder meeting.
Each of the directors and officers, and certain significant shareholders, of Maha, representing in aggregate approximately 37% of the issued and outstanding Maha Shares (on a non-diluted basis), have committed to vote their Maha Shares in favour of the resolutions to be considered by shareholders of Maha at the Maha shareholder meeting.
Complete details of the Amalgamation are set out in the Amalgamation Agreement, which will be filed by Palliser with SEDAR and will be available for viewing under Palliser's profile at www.sedar.com.
Benefits of the Amalgamation
The board of directors of each of Maha and Palliser believe that the combined entity, with its stronger balance sheet, will have the means to execute a 2014 and 2015 capital expenditure program which will include advancing the development of the cyclic steam project at the LAK Ranch Field as well as pursuing optimization and development opportunities in the greater
The capital expenditure program for the remainder of 2014 will be to continue the development of the
Pro Forma Operational and Financial Data(1)
•Production at closing of approximately 1,650 boe/d (99% oil) Canadian Assets: •Total proved producing reserves of approximately 1.8 million boe, future net revenue of
All reserves and production figures before the deduction of royalties
Palliser reserves information from the independent reserves report prepared by
As described above, New Maha intends to apply for a secondary listing in
New Maha expects to continue looking for opportunities to expand its investor base and pursue strategic acquisitions targeting undervalued asset bases that complement New Maha's business. Maha's management and board of directors believe the proposed transaction will result in a combined entity that has improved access to capital, which will be utilized to develop and explore oil and natural gas properties in
Management and Directors
New Maha will be led by the existing Maha management team under the leadership of
As part of the approval of the Amalgamation, the shareholders will also appoint the board of directors of New Maha for the ensuing year, which are proposed to be
Board of Directors' Recommendation
The board of directors of Palliser has unanimously approved the Amalgamation and, based in part on the verbal fairness opinion from
The board of directors of Maha has unanimously approved the Amalgamation and unanimously determined that the Amalgamation is in the best interests of Maha.
Under the terms of the Amalgamation Agreement, each of Maha and Palliser shall not solicit or initiate any inquiries or discussions regarding any other business combination or sale of assets, subject to the fiduciary duty of the Maha or Palliser board of directors, respectively, in the event that an unsolicited superior proposal is received by either Maha or Palliser. In certain circumstances as set forth in the Amalgamation Agreement Palliser has agreed to pay Maha a termination fee of
Due to the Mr. Hayden's interest in the fee payable to
CONCURRENT ASSET TRANSACTIONS
Concurrent with entering into the Amalgamation Agreement, Palliser has closed the sale of a 50% working interest in its
Palliser has also entered into 2 farmout arrangements with Maha with a view to generating production in the near term from several priority prospects of Palliser.
In the first instance , Palliser on behalf of Maha, will recomplete and equip 4 wells targeting the GP formation on its Marwayne,
Under a second farmout arrangement in its
Subject to rig availability, the recompletion well program under the Marwayne Farmout is expected to begin in early
The Manitou Sale, Marwayne Farmout and Manitou Farmout will provide Palliser with working capital to carry out additional development and to assist in maintaining production.
In the second quarter of 2014, Palliser reactivated one (1.0) net well at Lloydminster.
Average production for the quarter was 1,715 boe/d, based on field estimates for
Financial and Outlook
Palliser achieved average production of 1,826 boe/d in the first quarter of the year but saw production decline in Q2 to 1,715 boe/d due to the limited capital program that was executed in the first half of 2014. These declines combined with the Manitou Sale will result in forecast net production in Q3 of 1,360 boe/d. However production growth from a seven well capital program in Q3 is expected to boost Palliser's net production to between 1,550 and 1,650 boe/d in Q4.
The capital program will be undertaken at no cost to Palliser, with the exception that surface equipment for all of the wells will be supplied from Palliser's inventory of surplus equipment.
Palliser has a significant undeveloped land holding in the
Maha is a private Canadian-based, international upstream oil and gas company. Maha's main business activities include exploration, development and production of crude oil, natural gas liquids and natural gas.
Maha was incorporated in
Maha's core expertise is primary, secondary and enhanced oil and gas recovery technologies and its business strategy is to target and develop underperforming hydrocarbon assets. While Maha is currently focussing primarily on the enhanced recovery of heavy oil, other asset type opportunities are being and will be considered as they arise. By focusing on assets with proven hydrocarbon presence and applying state-of-the-art tailored solutions to recover the hydrocarbons in place, Maha's primary risk is not uncertainty in reservoir content but fluid extraction.
As Maha grows in size and value, it is the objective to create a well balanced portfolio of assets with low to medium risk. Ideally 40% of Maha's assets will be in extraction and development projects, 40% will be in delineation and development projects with the remaining 20% in near-field or low-risk exploration.
The LAK Ranch Field requires the application of heat, in the form of steam, to reduce (thin) the viscous oil and allow it to flow to the producing wellbores. A pilot project initiated in 2005, where 3 vertical wells supplied continuous steam into the Upper Newcastle Sandstone reservoir, has mobilized over 55,000 barrels from a 3 acre area to a horizontal producing well bore yielding an estimated recovery factor of 37% to date.
Since Maha acquired the
Maha currently has 35,799,304 common shares outstanding (38,640,185 common shares on a fully diluted basis).
Palliser is a
Palliser currently has 63,915,979 common shares outstanding (68,139,091 common shares on a fully diluted basis).
Forward Looking Statements
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, timing for completion of the Amalgamation and matters related or incidental thereto, timing for recompleting or drilling wells, and the characteristics and plans of New Maha. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Maha and Palliser believe that the expectations reflected in its forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because Maha and Palliser can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things, the timely receipt of any required regulatory approvals (including shareholder approvals). Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Maha and Palliser and described in the forward-looking information. The forward-looking information contained in this press release is made as of the date hereof and Maha and Palliser undertake no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.
United States Matters
This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in
Any financial outlook or future oriented financial information in this presentation, as defined by applicable securities legislation, has been approved by management of Maha and Palliser. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
All calculations converting natural gas to barrels of oil equivalent ("boe") have been made using a conversion ratio of six thousand cubic feet (six "Mcf") of natural gas to one barrel of oil, unless otherwise stated. The use of boe may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Certain information in this news release may constitute "analogous information" as defined in NI 51-101, including, but not limited to, information relating to areas, assets, wells and/or operations that are in geographical proximity to or believed to be on-trend with lands held by Maha. Such information has been obtained from public sources, government sources, regulatory agencies or other industry participants. Management of Maha believes the information may be relevant to help define the reservoir characteristics within lands on which Maha holds an interest and such information has been presented to help demonstrate the basis for Maha's business plans and strategies. However, management cannot confirm whether such analogous information has been prepared in accordance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook and Maha is unable to confirm that the analogous information was prepared by a qualified reserves evaluator or auditor. Maha has no way of verifying the accuracy of such information. There is no certainty that the results of the analogous information or inferred thereby will be achieved by Maha and such information should not be construed as an estimate of future production levels or the actual characteristics and quality Maha's assets. Such information is also not an estimate of the reserves or resources attributable to lands held or to be held by Maha and there is no certainty that such information will prove to be analogous in the future. The reader is cautioned that the data relied upon by Maha may be in error and/or may not be analogous to such lands to be held by Maha.
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