Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

June 06, 2008 19:58 ET

Ember Resources Inc. Announces Increased Cash and Share Proposal to Acquire All of the Outstanding Shares of Cordero Energy Inc.

CALGARY, ALBERTA--(Marketwire - June 6, 2008) - Ember Resources Inc. (TSX:EBR) ("Ember") announced today that it has provided Cordero Energy Inc. ("Cordero") with a further formal proposal to acquire all of the outstanding common shares ("Cordero Shares") of Cordero for increased consideration of $5.35 per Cordero Share, payable at the election of each Cordero shareholder, in cash or 2.61 common shares of Ember ("Ember Shares") at a deemed price of $2.05 per Ember Share.

The cash portion of the proposal payable to the Cordero shareholders will total an aggregate of $55 million. In the event that the Cordero shareholders elect, in the aggregate, to receive more than $55 million in cash, the amount of cash to be received by a holder electing to receive cash with respect to a Cordero Share will be reduced proportionately and the balance of the purchase price for that Cordero Share will be paid by a portion of an Ember Share at a deemed price of $2.05 per Ember Share. In the event that the Cordero shareholders elect, in the aggregate, to receive less than $55 million in cash, the number of Ember Shares to be received by a holder electing to receive Ember Shares with respect to a Cordero Share will be reduced proportionately and the balance of the purchase price for that Cordero Share will be paid by in cash.

The value under the proposal of $5.35 per Cordero Share represents a premium of 13% over the outstanding cash offer of $4.75 cash per Cordero Share made by ENMAX Acquisition Corp. (the "Enmax Offer").

The proposal calls for the acquisition to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) and for the execution of a definitive arrangement agreement by June 16, 2008. The arrangement would require court approval and the approval of the holders of 66 2/3% of the Cordero Shares who vote at a special meeting of the holders called by Cordero to consider the transaction. The arrangement would be subject to a number of additional conditions typical to transactions of such a nature, including all applicable regulatory approvals.

To fund a portion of the cash component of the proposal, Ember has entered into subscription agreements which provide for the issuance of 21,951,221 subscription receipts ("Subscription Receipts") at a price of $2.05 per Subscription Receipt for total proceeds of $45 million. The balance of the cash component will be paid out of Ember's existing credit facilities which were recently expanded to $35 million. Each Subscription Receipt will be convertible into one Ember Share upon the completion of the arrangement with Cordero. The issuance of the subscription receipts will occur prior to the completion of the arrangement. The subscription receipt financing would require the approval of the Ember shareholders at a meeting held prior to the completion of the arrangement.

Ember has received commitment letters from shareholders representing an aggregate of 12,396,196 Cordero Shares, or approximately 33.4% of the outstanding Cordero Shares, pursuant to which such holders have agreed, subject to certain terms and conditions or to the receipt of a superior offer, to support Ember's acquisition of the Cordero Shares and not tender their Cordero Shares to the Enmax Offer which expires on Friday, June 13, 2008.

The combination of Ember and Cordero would result in a highly focused and growth oriented coal bed methane (CBM) Resource Company in a natural gas pricing environment that has seen dramatic improvements over the last three months. Combining the two CBM companies would result in an excellent geographic fit of complementary assets.

Key attributes of the combined Company would be as follows;

Focused Production base

- The core operated properties of Cordero's Malmo and Buffalo Lake areas are in close proximity to Ember's core operated properties of Acme, Fenn-Big Valley and Rosalind, all of which are concentrated along major CBM fairways in East Central Alberta;

- Approximately 29 mmcf/d (4,800 boepd) of predominately natural gas production from Horseshoe Canyon Coals (HSC) and complementary conventional sands;

- 525 Bcf of original gas in place (OGIP) resources identified in the HSC;

- Based on 2007 year-end reserves, 96 Bcf of proven and 150 Bcf of proven plus probable reserves over 80% of which is HSC CBM reserves;

- Long life predictable reserves with a reserve life index of 14.2 years.

- High net back natural gas production benefiting from low royalty rates and low operating costs; and

- 450 low risk development HSC CBM locations in current inventory to provide for immediate growth.

Significant Resource Upside

- Mannville contingent resources of existing Ember assets are estimated at 710 Bcf. Ember estimates additional Cordero Mannville resource potential at 640 Bcf resulting in a combined total resource potential of approximately 1.35 Tcf. Cordero Mannville resources are a continuation of Mannville coals at Ember's Rosalind and Fenn-Big Valley properties where Ember has conducted extensive reservoir evaluation and pilot work.

- Higher production and cashflows in the combined Company will make capital available to selectively evaluate Mannville resources and as conditions dictate, move them towards commercial stage production.

Financial Strength

- Market capitalization of the combined entity of approximately $285 million.

- Net asset value (PV 10% pre-tax) estimated at $400 million using $9 flat AECO pricing using year end reserve reports.

- $105 million of bank lines of credit, $70 million of which is currently used.

- Annualized cashflow estimated at $65-70 million based on current natural gas prices.

Focused CBM Resource Strategy

- Combined resource base of 1.9 TCF with significant upside for recovery of reserves from development drilling and application of existing and new extraction technologies.

- Ember's management team has focused exclusively on CBM resource development and will continue to do so in the combined entity.

- Immediate production growth will come from inventory of 450 low risk drilling locations in HSC coals.

- Capital will be selectively allocated to advance the commercialization of significant Mannville resources for future growth and shareholder value.

- Ember is a leader in CBM development in Alberta. Ember's track record in Horseshoe Canyon CBM development is among the best with 2007 proven plus probable FD&A costs (including future capital) reported at $11.79/BOE and a three year average FD&A costs (including future capital) for the HSC coals of $11.45/BOE.

- Ember is at the forefront of technical work being conducted on the Mannville coals and has extensive experience in drilling and piloting production from this significant resource. Although not proven commercial to date, the current stronger price environment, a royalty regime that continues to favour such development and advances in technology, it is the conviction of Ember that over time the Mannville coals will become commercial on a larger scale.

"Our revised proposal benefits all shareholders of Cordero providing cash for those who wish to crystallize their investment now while providing participation in a new CBM focused growth Company for those shareholders that elect to take Ember shares" said Doug Dafoe, Chairman and CEO of Ember.

FirstEnergy Capital Corp. is acting as exclusive advisor to Ember on this transaction.

Ember Resources Inc. is a resource company specializing in coal bed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember's shares are traded on the Toronto Stock Exchange under the trading symbol "EBR".

Further information concerning Ember's analysis of its proposed transaction with Cordero is available on Ember's website at www.emberresources.com.

Reader Advisory

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities of Ember within the United States. The securities of Ember have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws. Accordingly, the shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws or an exemption from such registration is available.

Forward Looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the intention of Ember to seek to acquire all of the Cordero Shares and the manner in which such an acquisition would be structured and funded. These statements are based on certain key expectations and assumptions made by Ember, including expectations and assumptions concerning the response by Cordero, the Cordero Shareholders and third parties to the proposed acquisition, the receipt of necessary shareholder, regulatory and court approvals and the status of the Enmax Offer. Although Ember believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because inherent risks and uncertainties might result in Ember not proceeding with the proposed acquisition. These risks and uncertainties include a failure to obtain necessary shareholder or third party support or agreements, the emergence of a superior competing bid or the successful completion of the Enmax Offer.

This press release also contains forward-looking statements concerning the estimated annual cash flow of the combined company, the commercial viability of the Manville coals and the potential for production growth from anticipated drilling locations. These forward-looking statements are based on certain key expectations and assumptions made by Ember, including expectations and assumptions concerning prevailing commodity prices and exchange rates, availability and cost of labour and services, the timing of receipt of regulatory approvals, the performance of existing wells, the success obtained in drilling new wells, the performance of new wells and the sufficiency of budgeted capital expenditures in carrying out Ember's planned activities. Although Ember believes that the expectations and assumptions on which these forward-looking statements are based are reasonable, undue reliance should not be placed on these forward-looking statements because Ember can give no assurance that they will prove to be correct. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Ember's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Ember undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contact Information

  • Ember Resources Inc.
    Mr. Douglas A. Dafoe
    Chairman & CEO
    (403) 270-8030
    (403) 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    President & COO
    (403) 270-8030
    (403) 270-2850 (FAX)