CALGARY, Nov. 13, 2014 /CNW/ - PrairieSky Royalty
Ltd. ("PrairieSky" or the "Company") (TSX:PSK) is pleased to
announce that it has entered into an agreement (the "Arrangement
Agreement") to acquire Range Royalty Limited Partnership ("Range"),
a leading private oil and gas royalty company with approximately
3,000 boe/d (40% liquids) of high quality royalty production and
3.5 million acres of royalty lands. Pursuant to the
Arrangement Agreement, Range unitholders will receive 0.8 of a
PrairieSky common share for each Range unit, resulting in
approximately 19.33 million common shares of PrairieSky being
issued on completion of the acquisition. Based on the 20 day
volume weighted average trading price of PrairieSky, total
consideration for Range is approximately $699 million. Upon the successful completion of
this acquisition, PrairieSky intends to increase its annual
dividend from $1.27 per share to
$1.30 per share.
Benefits of the Acquisition
The key benefits of this strategic acquisition to PrairieSky
shareholders are as follows:
- The acquisition is approximately four percent accretive to free
cash flow per share, six percent accretive to production per share
and 39% accretive to acres per share.
- Increases PrairieSky's royalty acreage position to 9.3 million
acres, including approximately 5.3 million acres of Fee Land, 3.6 million acres of gross overriding
royalties ("GORRs"), 0.2 million acres in Gross Royalty Trusts and
0.2 million acres of crown leases or licenses.
- Provides PrairieSky with a significant land position in the
Viking light oil fairway of western Saskatchewan, one of the most economic
resource plays in Western
Canada.
- Expands PrairieSky's acreage position in active drilling areas
of the Alberta Deep Basin, including 70,000 GORR acres of
Duvernay rights contiguous with
PrairieSky's existing Fee Land
position and exposure to Wilrich drilling at Edson.
- PrairieSky maintains a strong financial position with cash on
its balance sheet and no debt.
- Adds approximately $60 million of
tax pools.
- Addition of highly skilled professionals with royalty knowledge
while still achieving significant administrative and operational
synergies through economies of scale.
"With the acquisition of Range, PrairieSky has consolidated a
leading private oil and gas royalty company in Western Canada" commented Andrew Phillips, President and CEO of
PrairieSky. "Range has accumulated a large portfolio of royalties
with high quality, well capitalized producers in addition to
139,000 acres of Fee Lands that are
predominantly unleased. Our expanded footprint provides PrairieSky
shareholders with significant exposure to the highly economic
Viking light oil play in Saskatchewan, which we expect will provide
strong oil production growth in the coming years."
Conference Call and Updated Presentation
A conference call to discuss the proposed transaction has been
scheduled for today, Thursday, November
13, at 7:00 AM MT
(9:00 AM ET) for interested
investors, analysts, brokers and media representatives. To
participate, approximately 10 minutes prior to the conference call,
please dial (888) 231-8191 (toll-free in North America) or (647) 427-7450 (Toronto & International). A digital replay
will be made available approximately two hours after the call's
completion and will remain available until November 20. To listen to the replay, please dial
(855) 859-2056 (toll-free in North
America) or (416) 849-0833 (Toronto & International) and enter Encore
Password 34348276. An updated presentation is currently available
on the investor information page of PrairieSky's website,
http://www.prairiesky.com/investors.
About Range Royalty
Range was founded in 2005 and over a nine year history has
established a large portfolio of royalty lands in Alberta, Saskatchewan and British Columbia. Since 2009, Range has
recorded a 17% compound annual growth rate in production,
highlighted by a 31% compound annual growth rate in liquids
volumes. Production volumes for the three month period ended
September 30, 2014 averaged 2,917
boe/d (39% liquids) with 2014 third party capital spending on the
lands estimated at $300 million.
Range's Viking assets represented approximately 27% of production
and approximately 41% of revenues for the three month period ended
September 30, 2014.
Range has amassed 3.5 million acres of high quality royalty
lands including 139,000 acres of Fee
Lands, 3.0 million acres of GORR lands, 185,000 acres in
Gross Royalty Trusts and 179,000 acres of crown leases and
licenses. Crown leases and licenses are available for future
farmout royalty agreements. Within the Viking fairways of
Alberta and Saskatchewan, Range holds royalty interests in
approximately 500,000 acres. Over 1,600 Viking locations have
been identified on Range's lands.
Drilling activity has continued to increase on the Range land
base with an estimated 250 wells drilled or licensed to date during
2014, of which approximately 75% are focused on Viking targets. The
Viking land base is in the early phase of drilling with only 21% of
the lands being developed. In addition to the current Viking
activity, 11 wells are currently licensed targeting the Wilrich in
west central Alberta and five
wells licensed or drilled for the Duvernay at Willesden Green. Of Range's 3.5
million acres, only 5% is fully developed.
Range maintains a high quality and diverse roster of
approximately 165 royalty payors on its land base including the top
Viking operators in Alberta and
Saskatchewan. An average
royalty of 5% is paid on approximately 5,300 producing wells.
Within the Viking, Range receives an average royalty of 8%.
Dividend Increase
PrairieSky maintains a conservative dividend philosophy by
providing shareholders with a sustainable, consistent dividend.
Based on accretion related to the Range acquisition, while being
mindful of the current commodity price environment, the Board of
Directors has approved an increased dividend of $1.30 per share (annualized). The first increased
dividend is expected to be paid in February
2015 to shareholders of record on January 30, 2015. The Board of Directors of
PrairieSky expects to review the dividend during the first quarter
of each fiscal year. The amount of cash to be distributed as
dividends will be determined at the discretion of the Board after
consideration of numerous factors including: (i) the earnings of
the Company; (ii) financial requirements for the Company's
operations; and (iii) the satisfaction by the Company of liquidity
and insolvency tests described in the applicable legislation.
Summary of the Transaction
Under the terms of the Arrangement Agreement, Range unitholders
will receive 0.8 of a PrairieSky share for each Range unit held,
resulting in approximately 19.33 million common shares of
PrairieSky being issued on completion of the acquisition. Based on
the 20 day volume weighted average trading price of PrairieSky,
total consideration for Range is approximately $699 million, including transaction costs and
cash payments to cancel incentive securities granted by Range to
its executives, directors and employees. After completion of
the proposed acquisition the combined assets and employees will be
led by PrairieSky's existing management team.
The Board of Directors of PrairieSky has unanimously (other than
the directors who have recused themselves from the process of
considering the proposed transaction) approved the Arrangement
Agreement. The Board of Directors of Range has unanimously
approved the Arrangement Agreement and has concluded that the
proposed transaction is in the best interests of Range. The
Board of Directors of Range has recommended that its unitholders
vote their Range securities in favor of the Arrangement. Each
of the directors and officers and certain other securityholders of
Range, representing approximately 35% of the voting securities of
Range, have delivered support agreements pursuant to which they
have agreed to vote in favor of the proposed transaction.
The proposed transaction will be carried out by way of a
court-approved plan of arrangement (the "Arrangement") and will
require the approval of at least 66 2/3% of holders of Range
securities represented in person or by proxy at the special meeting
of Range unitholders (the "Range Meeting") to be called to consider
the Arrangement. It is expected that the proposed transaction
will be exempt from the registration requirements of the U.S.
Securities Act of 1933, as amended, pursuant to the court approval
exemption afforded by section 3(a)(10) under that Act. The proposed
transaction is subject to applicable regulatory approvals and the
satisfaction of certain other closing conditions customary in
transactions of this nature, including compliance with the
Competition Act (Canada)
and the acceptance of the Toronto Stock Exchange (the "TSX").
It is expected that the Range Meeting will take place in late
December, 2014, with closing expected to occur as soon as possible
thereafter subject to regulatory and other approvals.
A copy of the Arrangement Agreement will be filed on
PrairieSky's SEDAR profile and will be available for viewing at
www.sedar.com.
Advisors
CIBC World Markets Inc. is acting as exclusive financial advisor
to PrairieSky with respect to the proposed transaction. Blake,
Cassels & Graydon LLP is acting as legal advisor to
PrairieSky.
TD Securities Inc. is acting as exclusive financial advisor to
Range in connection with the Arrangement and has provided the Range
Board with its verbal opinion that the consideration to be received
by the Range unitholders is fair from a financial point of view.
Burnet, Duckworth & Palmer LLP is acting as legal advisor to
Range.
Forward Looking Statements & Information
This press release includes certain statements regarding
PrairieSky's future plans and operations, including with respect to
the Arrangement, and contains forward-looking statements that we
believe allow readers to better understand our business and
prospects. The use of any of the words "expect", "anticipate",
"continue", "estimate", "objective", "ongoing", "may", "will",
"project", "should", "believe", "plans", "intends", "strategy" and
similar expressions are intended to identify forward-looking
information or statements. More particularly and without
limitation, this press release contains forward-looking statements
and information concerning: the anticipated benefits of the
acquisition of Range to PrairieSky shareholders, including
anticipated synergies, anticipated accretion levels, anticipated
future drilling commitments and capital spent on Range's royalty
lands, expected oil production growth from Range's Viking royalty
assets; the timing and anticipated receipt of required regulatory,
court and securityholder approvals for the Arrangement; the ability
of PrairieSky and Range to satisfy the other conditions to, and to
complete, the Arrangement; the anticipated timing of the holding of
the Range Meeting and the closing of the Arrangement; the listing
of PrairieSky's shares to be issued under the Arrangement on the
TSX; and PrairieSky's anticipated dividend increase following
completion of the Arrangement.
With respect to the forward-looking statements and information
concerning the anticipated benefits and completion of the proposed
Arrangement, the anticipated timing for completion of the
Arrangement and the listing of PrairieSky's shares on the TSX,
PrairieSky has provided such in reliance on certain assumptions
that its believes are reasonable at this time, including
assumptions as to the time required to prepare and mail Range
securityholder meeting materials, including the required
information circular; the ability of the parties to receive, in a
timely manner, the necessary regulatory, court, securityholder,
stock exchange and other third party approvals, including but not
limited to the receipt of applicable approvals under the
Competition Act (Canada);
the ability of the parties to satisfy, in a timely manner, the
other conditions to the closing of the Arrangement; and
expectations and assumptions concerning, among other things:
commodity prices and interest and foreign exchange rates; planned
synergies, administrative efficiencies and cost-savings; applicable
tax laws; future production rates; and budgeted capital
expenditures of third parties carrying out planned activities on
PrairieSky and Range royalty lands The anticipated dates provided
may change for a number of reasons, including unforeseen delays in
preparing meeting materials, inability to secure necessary
securityholder, regulatory, court or other third party approvals in
the time assumed or the need for additional time to satisfy the
other conditions to the completion of the Arrangement. Accordingly,
readers should not place undue reliance on the forward-looking
statements and information contained in this press release. In
respect of the forward-looking statements and information
concerning the potential increase in PrairieSky's dividend
following completion of the Arrangement, PrairieSky has provided
such in reliance on certain assumptions that it believes are
reasonable at this time, including assumptions in respect of:
prevailing commodity prices, margins and exchange rates; that
PrairieSky's future results of operations will be consistent with
past performance and management expectations in relation thereto;
the continued availability of capital for third parties at
attractive prices to fund future exploration, development and
production activities on PrairieSky's and Range's royalty lands;
the success of third party exploration, development and
production activities; that counterparties to material agreements
will continue to perform in a timely manner; and that there are no
unforeseen events preventing the performance of contracts. Readers
are cautioned that the assumptions used in the preparation of such
forward-looking information and statements, although considered
reasonable at the time of preparation, may prove to be imprecise
and, as such, undue reliance should not be placed on
forward-looking statements. Our actual results, performance, or
achievement could differ materially from those expressed in, or
implied by, these forward-looking statements. We can give no
assurance that any of the events anticipated will transpire or
occur, or if any of them do, what benefits we will derive from
them.
Since forward-looking statements and information address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and
risks. These include, but are not limited to the risks associated
with the PrairieSky's business including the impact of general
economic conditions, industry conditions, volatility of commodity
prices, lack of pipeline capacity, currency fluctuations,
imprecision of reserve estimates, crown royalty rates and
incentives, environmental risks, taxation, regulation, changes in
tax or other legislation, competition from other industry
participants, the lack of availability of qualified personnel or
management, stock market volatility, our ability to access
sufficient capital from internal and external sources, failure to
realize the anticipated benefits of the Arrangement and to
successfully integrate Range. Risks and uncertainties inherent in
the nature of the Arrangement include the failure of Range or
PrairieSky to obtain necessary securityholder, regulatory, court
and other third party approvals, or to otherwise satisfy the
conditions to the Arrangement, in a timely manner, or at all.
Failure to so obtain such approvals, or the failure of Range or
PrairieSky to otherwise satisfy the conditions to the Arrangement,
may result in the Arrangement not being completed on the proposed
terms or at the anticipated time, or at all. Readers are cautioned
that the foregoing list of factors is not exhaustive. Additional
information on other factors that could affect the operations or
financial results of PrairieSky, and the combined company following
completion of the Arrangement, are included in reports on file with
applicable securities regulatory authorities, including but not
limited to PrairieSky's final prospectus dated May 22, 2014 under "Risk Factors" and in
PrairieSky's MD&A for the period ended September 30, 2014 under the heading "Risk
Management", each of which is available at www.sedar.com.
Further, any forward-looking statement is made only as of the
date of this press release, and PrairieSky undertakes no obligation
to update or revise any forward-looking statement or statements to
reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated
events, except as required by applicable securities laws. New
factors emerge from time to time, and it is not possible for
PrairieSky to predict all of these factors or to assess in advance
the impact of each such factor on PrairieSky's business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements. The forward-looking information
contained in this document is expressly qualified by this
cautionary statement.
Conversions of Natural Gas to BOE
To provide a single unit of production for analytical purposes,
natural gas production and reserves volumes are converted
mathematically to equivalent barrels of oil (BOE). We use the
industry-accepted standard conversion of six thousand cubic feet of
natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio
is based on an energy equivalency conversion method primarily
applicable at the burner tip. It does not represent a value
equivalency at the wellhead and is not based on either energy
content or current prices. While the BOE ratio is useful for
comparative measures and observing trends, it does not accurately
reflect individual product values and might be misleading,
particularly if used in isolation. As well, given that the value
ratio, based on the current price of crude oil to natural gas, is
significantly different from the 6:1 energy equivalency ratio,
using a 6:1 conversion ratio may be misleading as an indication of
value.
About PrairieSky Royalty Ltd.
PrairieSky is a royalty-focused company, generating royalty
revenues as petroleum and natural gas are produced from its
properties. PrairieSky has a diverse portfolio of properties that
have a long history of generating stable free cash flow and that
represent one of the largest and most concentrated
independently-owned fee simple mineral title positions in
Canada. PrairieSky common shares
trade on the Toronto Stock Exchange under the symbol PSK.
SOURCE PrairieSky Royalty Ltd.
