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Dana Petroleum PLC (DNX)

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Monday 16 February, 2009

Dana Petroleum PLC

Acquisition

RNS Number : 3534N
Dana Petroleum PLC
16 February 2009
 




For release in London at 07.00 on Monday 16 February 2009


PRESS RELEASE


DANA PETROLEUM PLC ("Dana" or "the Company")


Dana Announces Acquisition of Bow Valley Energy


(All figures are in Canadian dollars unless noted otherwise)


Dana Petroleum plc is pleased to announce that it has entered into an agreement (the "Arrangement Agreement") with Bow Valley Energy Ltd. ("Bow Valley") that provides for the acquisition of Bow Valley by Dana pursuant to a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). Pursuant to the Arrangement Agreement, and subject to certain conditions, including Canadian court approval, approval pursuant to the Investment Canada Act (Canada) and the approval of the shareholders of Bow Valley, Dana will acquire all of the outstanding shares of Bow Valley for a cash consideration of $0.50 per share representing an aggregate consideration of $219 million (US$177 million), which includes the assumption of an estimated $175 million (US$142 million) of net debt as at 31 December 2008.

The offer price represents a premium of approximately 70% over Bow Valley's closing share price of $0.295 per share on 13 February 2009 and a premium of 53% to the 20-day volume weighted average trading price of Bow Valley for the period ended 13 February 2009.


Tom Cross, Chief Executive Officer of Dana commented, 


"The acquisition of Bow Valley is directly in line with Dana's successful strategy of growing reserves and production in its core operating areas through both exploration and acquisition. Dana already has a working knowledge of the North Sea assets of Bow Valley which form a close fit with Dana's existing North Sea portfolio. For example, both companies hold interests in the Enoch oil field and Bow Valley's Kyle oil field is tied back to Dana's Banff oil field." 


Transaction Highlights


  • Bow Valley currently has four oil fields producing in the UK, namely Blane, Chestnut, Enoch and Kyle, with a fifth, Ettrick, due to come on-stream within the next three months.

  • Once Ettrick is on-streamDana expects the acquisition of Bow Valley to add approximately 7,800 barrels of oil equivalent ("boe") per day ("boepd") of production to the Dana portfolio, representing an approximate 20% increase over Dana's average production in 2008 of 39,400 boepd.

  • Following completion of the transaction, Dana's total number of producing fields will increase to 35.

  • Bow Valley's production is predominantly oil, with over 80% liquids and less than 20% gas. This is similar in balance to Dana's existing production which in 2008 was 74% liquids and 26% gas.

  • Dana estimates this transaction will increase itproven and probable ("2P") reserves by approximately 11.3 million boe (as at December 2008).

  • Bow Valley's assets have relatively low operating costs, in line with Dana's operations, and are expected to generate strong cash flows, even in today's commodity price environment.

  • The assets are predominantly producing and therefore only limited additional capital investment is required and only relatively modest abandonment commitments are attached to these fields.

  • Bow Valley's existing licence portfolio includes a number of exploration and appraisal opportunities. These will be further analysed by Dana's experienced North Sea team and could lead to additional prospectivity.

  • Dana is currently drilling eight exploration wells across the North Sea and North Africa with a total of 17 wells scheduled for this year.

  • At the end of 2008 Bow Valley had approximately £154 million of UK tax losses which will be available to Dana and which the Company believes will significantly benefit the enlarged Dana group going forward.

  • Based on current estimates of the anticipated benefits of the above tax losses to Danathe net acquisition cost to Dana is approximately US$9.47 per barrel.

  • The transaction is expected to be accretive to Dana in terms of cash flow from year one.


Overview of Bow Valley


Bow Valley is a Toronto Stock Exchange-listed oil and gas exploration and production company focused predominantly on the UK North Sea with additional acreage in Alaska. The company is headquartered in Calgary with a local UK office in BerkshireEngland.  


On 29 December 2008, Bow valley announced that its UK subsidiary had entered into a Sale and Purchase Agreement with Centrica plc to sell Bow Valley's 66.667% interest in UK Licence P.090, Block 9/15a for US$30 million to Centrica plc. Block 9/15a contains a portion of the Peik field, which straddles the UK/Norwegian trans-median boundary and included 2P reserves of 13.8 million boe net to Bow Valley. This sale to Centrica plc is expected to complete before Dana's acquisition of Bow Valley is completed.


As at 1 December 2008Dana estimates that Bow Valley had net 2P reserves of 11.3 million boe (adjusted for the disposal of Peik).


 The key assets being acquired by Dana include:


Field or Area

W.I.

 Operator

Net 2P Reserves

 

(%)


(million boe)

North Sea




Kyle

14.3%

Canadian Natural Resources

1.8

Enoch

12.0%

Talisman

1.2

Blane

12.5%

Talisman

3.0

Chestnut

15.1%

Venture

1.4

Ettrick

12.0%

Nexen

3.0

J1

15.0%

Talisman

0.9

9/10b

15.0%

Lundin

-

Blackbird

12.0%

Nexen

-

 




Alaska




Tofkat

20.0%

Brooks Range

-

 




Total



11.3


For the year ended 31 December 2007Bow Valley reported profit on continuing activities before taxation of $37 million and gross assets of $438 million. For the nine months to 30 September 2008Bow Valley reported profit on continuing activities before taxation of $23 million and gross assets of $460 million.


Bow Valley's executive management team consists of:


Robert G. Moffat               President, Chief Executive Officer and Director

C.W. Leigh Cassidy           Vice President, Chief Financial Officer

Nick. J. Fairbrother            Managing Director, Bow Valley Petroleum (UK) Limited



Board Approvals and Recommendation


The Boards of Directors of Dana and Bow Valley have unanimously approved the transaction and the Bow Valley Board has concluded that the Arrangement is fair to Bow Valley shareholders and is in the best interests of Bow Valley and the Bow Valley shareholders.  Bow Valley's financial advisor has provided the Bow Valley Board with its opinion that, as of the date hereof, the consideration under the Arrangement is fair, from a financial point of view, to the Bow Valley shareholders. Accordingly, the Bow Valley Board unanimously recommends that Bow Valley shareholders vote in favour of the Arrangement. The Bow Valley directors and officers have entered into lock-up agreements in relation to their shareholdings in Bow Valley and have agreed to vote such shareholdings in favour of the Arrangement.


Pursuant to the Arrangement Agreement, Bow Valley has agreed to terminate any discussions with other parties and has agreed that it will not solicit or initiate discussions concerning the sale of material assets or any other business combination.  Bow Valley has agreed to pay to Dana non-completion fee of US$6 million in certain circumstances if the Arrangement is not completed.  In addition, Dana has the right to match any competing proposal for Bow Valley in the event that such a proposal is made.



Financing


In connection with the transaction, and as a broader corporate refinancing initiative, Bank of Scotland is extending to Dana a new three-year US$400 million Revolving Credit Facility, and has itself made an initial commitment to Dana of US$300 million.  This new corporate facility can be used for general corporate purposes including approved acquisitions and provides inter alia, certainty of funding to meet the consideration payable to Bow Valley shareholders and all associated transaction costs, and to fully repay all of Bow Valley's outstanding bank indebtedness. As at 31 December 2008, Dana had cash balances of £159 million and no bank debt outstanding.


Andrew Wright, Director, Bank of Scotland Energy commented, 


"Bank of Scotland is delighted to continue working with Dana and to support it's acquisition of Bow Valley. With the strong track record of Dana and Bank of Scotland in the North Sea we are sure this acquisition, of a complementary business, will be successful for Dana and further strengthen the Bank's long and successful relationship with Tom Cross and his highly experienced management team." 



The Arrangement


The completion of the Arrangement is subject to Canadian court and regulatory approvals, including approval under the Investment Canada Act (Canada) and a resolution to approve the Arrangement being passed by at least 66 2/3 percent of the votes cast by the Bow Valley shareholders present, in person or by proxy, at the Bow Valley shareholders meeting. It is expected that the Bow Valley shareholders meeting to vote on the Arrangement and closing of the transaction will occur in mid April 2009. Full details of the proposed transaction will be included in an information circular which is expected to be mailed to the shareholders of Bow Valley in mid March 2009.


Advisors


In connection with the proposed Arrangement, RBC Capital Markets is acting as financial advisor to Dana and Blake, Cassels and Graydon LLP and Allen & Overy LLP are acting as legal advisors to Dana. McGrigors LLP advised Dana on legal aspects of the new corporate facility. In addition, Ernst & Young LLP and Deloitte & Touche LLP have assisted Dana with financial and tax advice including due diligence, respectively.


 

 For further information please contact:


Dana Petroleum plc

Tom Cross, Chief Executive Officer

01224 652400


David MacFarlane, Finance Director

01224 652400


Stuart Paton, Technical & Commercial Director

01224 652400

College Hill Associates

Nick Elwes

020 7457 2020


www.dana-petroleum.com



The information presented in this press release with respect to Bow Valley has been taken from available public sources, including the System for Electronic Document Analysis and Retrieval (SEDAR). The oil and gas information with respect to Bow Valley has been prepared in accordance with the Canadian standards set out in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities which may differ in material respects from the standards required to be followed by companies listed on the London Stock Exchange. As a consequence, information included in this press release with respect to the oil and gas information of Bow Valley may not be comparable to information made public by oil and gas companies subject to the reporting and disclosure requirements of the London Stock Exchange. 

There are matters discussed in this announcement that constitute "forward-looking statements". These statements, which contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning, reflect Dana's beliefs and expectations and are subject to risks and uncertainties that may cause actual results to differ materially from the forward looking statement. For a discussion of important factors which could cause actual results to differ from the forward looking statements, refer to Dana's Annual Report and Accounts for the year ended 31 December 2007. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. As a result, you are cautioned not to place undue reliance on such forward-looking statements. Dana disclaims any obligation to update their view of such risks and uncertainties or to publicly announce the result of any revision to the forward-looking statements made herein, except where it would be required to do so under applicable law.

RBC Capital Markets is acting for Dana and no-one else in connection with the proposed transaction and will not be responsible to anyone other than Dana for providing the protections afforded to clients of RBC Capital Markets nor for giving advice in relation to the proposed transaction or any other matters referred to in this announcement.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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