CREDO Petroleum Corporation Announces Strategic Investment in the Company by RCH Energy Opportunity Fund II, LP
June 04 2008 - 7:38AM
Business Wire
CREDO Petroleum Corporation (NASDAQ: CRED), an independent oil and
gas company, reported today that the company and certain of its
directors have entered into agreements with RCH Energy Opportunity
Fund II, LP (�RCH� or the �Fund�) a private investment fund based
in Houston, Texas, whereby RCH will acquire approximately 17.5% of
CREDO�s outstanding stock. Closing under the agreements is subject
to certain customary closing conditions. RCH will acquire a total
of 1,837,000 shares of the company�s stock at a price of $14.50 per
share, representing a 13% premium to the stock�s 30-day moving
average. CREDO will sell 1,150,000 newly issued common shares, or
approximately 11% of the company�s total outstanding shares on a
proforma basis. Directors Huffman, Stevens and Skewes will sell
425,000, 192,000 and 70,000 shares, respectively, or about 40% of
the CREDO shares held by Mr. Huffman and his family and
approximately 50% of the shares held by Messrs. Stevens and Skewes.
CREDO�s Board will be expanded from six to seven members and RCH
will nominate two directors, one to fill a current vacancy on the
Board and another to fill the newly created Board seat. All of the
shares acquired by RCH will initially be restricted and not freely
tradable in the open market, however, RCH will have certain future
registration rights. The company agreement contains a standstill
provision providing that RCH will not purchase additional CREDO
stock for a period of two years from the date of the agreement
without the consent of the Board of Directors. James T. Huffman,
CREDO�s Chief Executive Officer and Chairman of the Board of
Directors, stated, �We are very pleased to have RCH as an investor
and strategic partner. RCH is a successful and highly regarded
investor in oil and gas companies, both public and private. We are
excited about the knowledge and experience they will bring to our
business.� Mark Meyer, President of RR Advisors, LLC, the General
Partner of the Fund, said, �We look forward to entering into a
long-term partnership with CREDO and its shareholders. Jim Huffman
and his team have built a solid asset base and a company which is
uniquely positioned in the industry. We intend to help the company
further exploit its existing opportunity set, accelerate growth
through the capture of new opportunities, and enhance value for all
of its shareholders.� This transaction represents the culmination
of an extensive evaluation process started last year whereby the
company�s management and directors, in consultation with Merrill
Lynch & Co., have thoroughly reviewed and explored strategic
options and alternatives available to CREDO. In addition to new
capital, this transaction brings directors to CREDO�s Board who
have extensive technical engineering, financial and capital market
experience in the oil and gas industry. �CREDO has a strong asset
base with excellent growth potential in both its conventional oil
and gas and intellectual property assets,� Huffman said. �The RCH
transaction will allow us to accelerate development of our oil and
gas properties and to consolidate our Calliope ownership. In
addition, both CREDO and RCH expect this relationship to
substantially increase CREDO�s opportunities to monetize Calliope.�
Merrill Lynch & CO. represented CREDO in the transaction and
Davis Graham & Stubbs LLP acted as legal counsel to CREDO.
Proceeds from the RCH investment totaling $16,675,000 will be used,
among other things, to fund increased exploration and development
of properties where the company currently has unbooked reserves. In
addition, the company will consolidate ownership in its Calliope
Gas Recovery System by purchasing the Calliope patents together
with the 13.75% ownership in Calliope and related intellectual
property that the company does not already own. CREDO and RCH
previously entered into a Calliope joint venture agreement in
January of this year. Subsequent discussions ultimately culminated
in RCH purchasing a significant stake in the company and becoming
part of CREDO�s policy and direction-setting team. The new
relationship with RCH as an equity owner and decision making
partner is intended to meaningfully expand the existing
relationship, creating an enhanced opportunity for CREDO to
present, promote and implement Calliope as a growth opportunity to
a larger universe of private and public oil and gas companies.
About CREDO Petroleum Corporation � CREDO Petroleum Corporation is
a publicly traded independent energy company headquartered in
Denver, Colorado. The company is engaged in the exploration for and
the acquisition, development and marketing of natural gas and crude
oil and in application of its patented Calliope Gas Recovery
System. CREDO owns working and royalty interests in approximately
1,445 wells. The company�s stock is traded on the NASDAQ System
under the symbol �CRED� and is quoted daily in the �NASDAQ Global
Market� section of The Wall Street Journal. About RCH Energy
Opportunity Fund II, LLP - RCH Energy Opportunity Fund II, L.P. is
a private investment fund headquartered in Houston, Texas that
focuses exclusively on the oil and gas sector. The Fund�s
investment in CREDO Petroleum Corporation is managed by John Rigas
and Mark Meyer, both of whom have extensive operating, technical
and financial experience in the oil and gas industry. For more
information about the company, visit http://www.credopetroleum.com.
This press release includes certain statements that may be deemed
to be �forward-looking statements� within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements
included in this press release, other than statements of historical
facts, address matters that the company reasonably expects,
believes or anticipates will or may occur in the future. Such
statements are subject to various assumptions, risks and
uncertainties, many of which are beyond the control of the company.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may
differ materially from those described in the forward-looking
statements. Investors are encouraged to read the �Forward-Looking
Statements� and �Risk Factors� sections included in the company�s
2007�Annual Report on Form 10-K for more information. Although the
company may from time to time voluntarily update its prior forward
looking statements, it disclaims any commitment to do so except as
required by securities laws.
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