Americas Petrogas Inc.
TSX VENTURE : BOE

Americas Petrogas Inc.

June 17, 2015 11:36 ET

Americas Petrogas to Sell Subsidiary to Tecpetrol

Companies agree to US$63 million cash sale plus retention of certain interests by Americas Petrogas

CALGARY, ALBERTA--(Marketwired - June 17, 2015) - Americas Petrogas Inc. ("Americas Petrogas" or the "Company") (TSX VENTURE:BOE) announces that, further to its previously announced strategic review process, the Company has entered into a definitive agreement of purchase and sale (the "Sale Agreement") with Tecpetrol International S.A. and Tecpetrol Internacional S.L. (Unipersonal) ("Tecpetrol" or the "Purchasers") pursuant to which Tecpetrol will acquire all of the issued and outstanding common shares of Americas Petrogas Argentina S.A. ("APASA"), a wholly-owned subsidiary of the Company, as well as assuming certain intercompany indebtedness owing by APASA to the Company and its other subsidiaries (the "Transaction"). APASA will transfer certain assets to the Company's other wholly-owned Argentine subsidiary, Energicon S.A. ("Energicon"), in connection with the APASA sale. In consideration for the Transaction, the Purchasers will pay to the Company an aggregate cash purchase price of US$63 million, subject to adjustment in accordance with the terms of the Sale Agreement.

The cash purchase price of US$63 million (equal to approximately CDN$77.6 million based on the closing exchange rate on June 16, 2015 as reported by the Bank of Canada) is in addition to the Retained Participating Interests (as defined below). The cash purchase price alone, even without considering the valuation of the Retained Participating Interests and GrowMax Agri Corp, equals CDN$0.335 on a per common share basis, which represents a 46% premium to the closing price and a 75% premium to the 30 trading day volume weighted average trading price of the Company's common shares on the TSX Venture Exchange on June 16, 2015.

Mr. Barclay Hambrook, President and Chief Executive Officer of the Company, commented: "We are pleased with the agreement that has been reached with Tecpetrol, a strong partner dedicated to the exploration, production, pipeline transportation and marketing of hydrocarbons in Argentina. The cash will allow the Company to expand its activities on its retained conventional and unconventional properties. As well, Americas Petrogas and Tecpetrol intend to jointly consider investment opportunities in Latin America in the future."

Following completion of the Transaction, the Company will retain the following interests in conventional and unconventional properties in the Neuquén Basin of Argentina (the "Retained Participating Interests"):

Property Potential Gross Acreage Working Interest
Vaca Mahuida Conventional 232,800 25%
Rinconada Norte Conventional 23,500 35%
Loma Ranqueles Unconventional 33,300 25%
Totoral, Yerba Buena, Bajada Colorada Conventional & Unconventional 753,200 90%
Huacalera Unconventional 249,900 19.5%

Americas Petrogas will also retain its 89% ownership interest in GrowMax Agri Corp., which holds phosphate, potash interests, and other minerals in Bayovar, Peru.

Completion of the Transaction is subject to approval by the shareholders of the Company (the "Shareholders") as further described below. The board of directors of Americas Petrogas has unanimously determined that the Transaction is fair from a financial point of view to the Shareholders and that the Transaction is in the best interests of the Company and unanimously recommends that Shareholders vote in favour of the Transaction. Mackie Research Capital Corporation has provided the board of directors with a verbal fairness opinion that the consideration to be received under the Transaction is fair, from a financial point of view, to the Company.

Neither of the Purchasers is a Non-Arm's Length Party (as defined in the TSX Venture Exchange Corporate Finance Manual).

The Sale Agreement

Completion of the Transaction is subject to customary conditions for a transaction of this nature, which include applicable regulatory and stock exchange approvals and the approval of 66 2/3% of the votes cast by Shareholders represented in person or by proxy at a special meeting of Shareholders to be called to consider and approve the Transaction in accordance with the Business Corporations Act (Alberta).

The Sale Agreement includes customary non-solicitation covenants by Americas Petrogas and provides Americas Petrogas with the ability to respond to unsolicited proposals considered superior to the Transaction in accordance with the terms of the Sale Agreement. In the event Americas Petrogas accepts a superior proposal, Americas Petrogas will be required to pay a break fee of US$5 million to the Purchasers. The Purchasers have a customary right to match any superior proposal. The Sale Agreement also provides for a reverse break fee of US$5 million payable by the Purchasers to the Company upon termination of the Sale Agreement in certain circumstances.

An information circular regarding the Transaction is expected to be mailed to Shareholders in late June for a special meeting of Shareholders to consider the Transaction scheduled to take place in late July 2015, with closing expected to occur in early August 2015.

A copy of the Sale Agreement will be made available under the Company's profile on SEDAR at www.sedar.com.

Certain directors and/or senior officers of the Company and the Company's largest Shareholder, who collectively own approximately 20.4% of the outstanding Americas Petrogas common shares, have agreed to vote their shares in favour of the Transaction.

Key Attributes of the Transaction

Management of the Company believes that the Transaction will provide significant benefits to the Company, including:

  • The cash consideration payable to the Company pursuant to the Transaction is expected to result in a strong debt-free balance sheet for the Company;

  • As a result of the Transaction, the Company will have significantly reduced unconventional drilling commitments, and lower administrative expenses; and

  • The Company, through Energicon, will retain, among other interests:

    • operatorship of the Vaca Mahuida conventional block, a large block fully covered with 3D seismic, where the Company participated in several gas discoveries;

    • an interest in the Rinconada Norte conventional property (in conjunction with Tecpetrol), which is adjacent to the Medanito Sur property;

    • operatorship of three large blocks, Totoral, Yerba Buena, Bajada Colorado, which management believes are prospective for conventional and unconventional resources;

    • an interest in the Loma Ranqueles block (in conjunction with Tecpetrol), which management believes is prospective for shale and tight sands hydrocarbons; and

    • an interest in Huacalera block with YPF. Huacalera is prospective for unconventional resources.

Financial Advisors and Fairness Opinion

Mackie Research Capital Corporation is acting as financial advisor to the board of directors in respect of the Transaction. A copy of Mackie Research Capital Corporation's fairness opinion will be included in the information circular to be sent to Shareholders for the special meeting to be called to consider the Transaction.

Jefferies LLC was engaged by the Company on May 1, 2013 to act as its advisor in connection with its strategic review process. Jefferies LLC will be paid a strategic advisory fee upon completion of the Transaction. No other finder's fee will be paid in connection with the Transaction. Jefferies LLC is not a Non-Arm's Length Party.

About the Purchasers

Tecpetrol is a private company dedicated to the exploration, production, transport and distribution of hydrocarbons as well as power generation. The company is part of the Techint Group and operates in Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru, the United States and Venezuela. With a workforce of approximately 6,000 people, including its own employees and contractors, the company promotes and participates in energy projects which contribute to the development of the countries in which it operates.

www.tecpetrol.com

www.techint.com

About Americas Petrogas Inc.

Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol "BOE". Americas Petrogas has conventional and unconventional shale oil and gas and tight sands oil and gas interests in numerous blocks in the Neuquén Basin of Argentina. Americas Petrogas has joint venture partners, including ExxonMobil and YPF, on various blocks in the shale oil and gas corridor in the Neuquén Basin, Argentina. Americas Petrogas and Indian Farmers Fertiliser Co-operative Limited (IFFCO) own GrowMax Agri Corp., a private company involved in the exploration for near-surface phosphates, potash and other minerals, and potential development of a fertilizer project in Peru.

Forward Looking Information

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements". There are "forward-looking statements" included in this press release that relate to completion of the Transaction and the timing of the mailing of the information circular regarding the Transaction, the meeting date, the closing date and anticipated benefits of the Transaction. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

There can be no assurance that such forward-looking statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In particular, there is no assurance that the conditions set out in the Sale Agreement, including receipt of required Shareholder and regulatory approvals, will be satisfied. There is also no assurance that the Transaction will be completed on the timelines indicated or at all. Accordingly, because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.

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 THE RELEASE.

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