PetroBakken Energy Ltd.
TSX : PBN

PetroBakken Energy Ltd.
Result Energy Inc.
TSX VENTURE : RTE

Result Energy Inc.

January 28, 2010 08:21 ET

PetroBakken Announces Strategic Acquisition of Result Energy

CALGARY, ALBERTA--(Marketwire - Jan. 28, 2010) - PetroBakken Energy Ltd. ("PetroBakken") (TSX:PBN) and Result Energy Inc. ("Result") (TSX VENTURE:RTE) are pleased to announce that the two companies have entered into an arrangement agreement (the "Agreement"), pursuant to which PetroBakken will, subject to certain conditions, acquire all of the issued and outstanding shares of Result for $0.42 per Result share (the "Transaction") by way of plan of Arrangement (the "Arrangement"). The Transaction is valued at approximately $480 million, including Result's positive working capital of more than $60 million. Consideration for the Transaction is comprised of $200 million cash with the remainder of the consideration to be paid in PetroBakken shares, at a deemed price of $32.25 per PetroBakken share, being the five day weighted average trading price of PetroBakken's shares ending January 22, 2010. Based on the expected fully diluted shares outstanding of Result at the closing of the Arrangement, each Result shareholder will receive, at their election, (a) $0.42 in cash, or (b) 0.013023 of a PetroBakken share, or (c) a combination thereof for each Result share held. The final consideration received by each Result shareholder is subject to proration such that $200 million in cash is paid to Result shareholders in aggregate. The Arrangement is expected to close on or about April 1, 2010.

Acquisition Highlights

Result management has pursued a focused, pure play strategy of growing its exposure to the emerging Cardium light sweet crude oil resource play. After the closing of the plan of arrangement (the "Nexstar Arrangement") between Result and Nexstar Energy Inc. ("Nexstar"), Result will have amassed an asset base that includes:

  • Land position of 150 (over 105 net) sections that are prospective for Cardium light oil;
  • A significant horizontal drilling inventory that currently has in excess of 300 identified net potential Cardium locations, which is expected to increase as a result of future drilling;
  • More than $120 million of tax pools;
  • 2009 exit production of more than 750 boepd, and expected production in excess of 1,300 boepd at closing; and
  • Result has more than 2.9 mmboe of proved plus probable reserves (not including any Cardium light oil locations identified above).

Drilling on Result lands has recently commenced with plans to drill 10 (8.0 net) Cardium horizontal wells in the first quarter of 2010.

A Nexstar special shareholder meeting is planned for February 16, 2010 to approve the Nexstar Arrangement, with closing expected to occur on February 17, 2010, subject to customary regulatory and court approvals, approval of Nexstar shareholders and certain other conditions. The Board of Directors, management and certain shareholders of Nexstar, representing 30 percent of the fully diluted Nexstar shares outstanding have entered into lock-up agreements to vote their securities in favour of the Nexstar Arrangement. As the consideration to Nexstar shareholders under the Nexstar arrangement consists of Result shares, current Nexstar shareholders will be eligible to participate in the Arrangement with PetroBakken.

The Transaction

The strategic Transaction with Result provides PetroBakken with significant additional exposure to the exciting Cardium light oil resource play and complements PetroBakken's strong growth platform centered on high-netback light oil resource plays. The Cardium play shares many similarities to the Bakken light oil resource play located in southeast Saskatchewan. PetroBakken has been a leader in the development of the Bakken play having pioneered the use of many new technologies focused on maximizing oil recovery while drilling over 500 horizontal, multi stage fractured wells. This vast experience should provide significant benefits in developing the Cardium lands. After PetroBakken's acquisition of Result and Berens Energy Ltd. (announced January 4, 2010 and expected to close February 25, 2010), PetroBakken will have access to over 225 gross (150 net) sections of land that are prospective for the Cardium light oil resource play, and over 400 net potential Cardium locations with the expectation that this drilling inventory will increase with further evaluation work of the lands. 

Gregg Smith, President and Chief Operating Officer of PetroBakken, commented, "This strategic acquisition is a key piece in developing our expanding Cardium light oil platform. The Cardium play is a natural fit with our current asset base and we believe that our technical expertise in the Bakken will provide a strong advantage in this resource play through cost reduction, technology transfer, and reservoir exploitation."

Brett Herman, President and Chief Executive Officer of Result, added, "Result has assembled a premier position in the Cardium light oil resource play through an aggressive strategy of land sale purchases, acquisitions, and farm-in opportunities. The Cardium play holds tremendous potential and we believe PetroBakken provides our shareholders with an excellent vehicle for its development as PetroBakken will use its access to capital, economies of scale and technical experience to accelerate the development of this significant resource play."

The Arrangement is subject to Result shareholder approval and customary regulatory, stock exchange, court, and other approvals. The information circular with respect to the Arrangement is expected to be mailed to all Result shareholders on or before March 1, 2010 and the special meeting of Result shareholders is anticipated to be held on or about March 31, 2010, with closing of the Transaction to occur on or about April 1, 2010.

The Board of Directors of Result has concluded that the Transaction is in the best interests of Result shareholders and unanimously recommends that Result shareholders vote their shares in favour of the Transaction. All of the directors and officers of Result, collectively representing in aggregate approximately 30 percent of the shares of Result on a fully diluted basis, have entered into lock-up agreements with PetroBakken to vote their Result shares in favour of the Arrangement.

Result currently has approximately 515 million special warrants (the "Special Warrants") outstanding from the financing completed on December 29, 2009 which are subject to a four month hold period under applicable Canadian securities laws. The Special Warrants will be exercisable for no additional consideration and all unexercised Special Warrants will be deemed to be exercised on the fifth business day following the issuance of a receipt by the securities regulatory authorities in all of the applicable provinces for a final prospectus qualifying the Result shares to be issued upon the exercise of the Special Warrants. Result plans to obtain such a receipt for a final prospectus on or before February 10, 2010. It is expected that Result Special Warrant holders will be eligible to participate in the Arrangement as they will be holders of free trading stock upon the issue of the prospectus receipt.

Macquarie Capital Markets Canada Ltd. acted as financial advisor to Result and has provided Result's Board of Directors with its opinion that, subject to its review of the final form of the documents effecting the Transaction, the consideration payable to Result under the Arrangement Agreement is fair, from a financial point of view, to Result 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 plan of arrangement.

The Agreement prohibits Result from soliciting or initiating any discussion regarding any other transaction or sale of assets, contains provisions enabling PetroBakken to match competing proposals and, in certain circumstances, provides for a termination fee in the amount of $10 million payable by Result to PetroBakken if the Arrangement is not completed.

Cardium Resource Play Overview

The Cardium at Pembina is an extensive reservoir considered to be the largest onshore light oil pool in North America. The Cardium formation has been producing oil and gas for over 50 years. It is typically a sandstone deposit encased in thick shale and is found across much of the Western Canadian Sedimentary Basin. Reservoir quality varies considerably across the basin as does the thickness and extent of the pay column. Historically the economic limits of drilling activity had been governed by the ability to produce from vertical wellbores. In recent years, the application of horizontal drilling and completion technology has enabled the limits of the play to be extended into what is now considered the Cardium Resource Play.

PetroBakken believes that the Cardium is ideally suited for the application of its industry-leading experience in drilling long horizontal wells with multi-stage fracture stimulation completions, gained primarily through drilling and completing more than 500 wells in the Bakken and continuously evolving the efficiency of this technology.

PetroBakken Energy Ltd. is a premier light oil production company combining, high growth, long-life Bakken reserves and production with legacy conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken has a multi-year inventory of Bakken and light oil development locations, along with significant future development opportunities in the Horn River and Montney gas resource plays in northeast BC and the Cardium in Alberta. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Forward-Looking Statements. Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the Arrangement, potential reserves, production, and drilling locations. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: the failure to obtain necessary Result shareholder approval with respect to the Arrangement, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the Arrangement, general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling; recompletions and related activities; timing and rig availability, the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by PetroBakken that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

BOE. disclosure provided herein in respect of boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent an economic value at the wellhead.

Contact Information

  • PetroBakken Energy Ltd.
    John D. Wright
    Chairman of the Board and Chief Executive Officer
    (403) 750-4400
    or
    PetroBakken Energy Ltd.
    R. Gregg Smith
    President and Chief Operating Officer
    (403) 750-4400
    or
    PetroBakken Energy Ltd.
    Corey C. Ruttan
    Executive Vice President and Chief Financial Officer and
    Director
    (403) 750-4400
    or
    PetroBakken Energy Ltd.
    Peter D. Scott
    Vice President, Finance
    (403) 750-4400
    or
    PetroBakken Energy Ltd.
    Bill A. Kanters
    Vice President Business Development and Corporate Planning
    (403) 750-4400
    ir@petrobakken.com
    www.petrobakken.com
    or
    Result Energy Inc.
    Brett Herman
    President & Chief Executive Officer
    (403) 777-0007
    or
    Result Energy Inc.
    Jason Zabinsky
    Vice President Finance & Chief Financial Officer
    (403) 777-0007