CALGARY,
March 18, 2016 /CNW/ - ArPetrol Ltd.
("ArPetrol" or the "Company") is pleased to announce the signing of
a share and debt purchase agreement (the "Agreement") with Empresa
Nacional Del Petróleo ("ENAP"), the state owned oil and gas company
of Chile, and its subsidiary ENAP
Sipetrol Argentina S.A. (the "Purchaser") that provides for the
sale of substantially all of the assets of the Company (the
"Transaction"). Pursuant to the Agreement, the Purchaser will
acquire all of the shares of ArPetrol International Financial
Company Inc. ("AIFC"), the wholly owned subsidiary of the Company
which indirectly holds the shares of ArPetrol Argentina S.A.
("AASA"). AASA holds all of the Company's operating assets in
Argentina. In consideration, the Purchaser will pay the
Company an aggregate cash purchase price of US$9.0 million (CAN$11.7 million converted at the
March 17, 2016 exchange rate reported
by the Bank of Canada) plus an
estimated amount of CAN$3.0 million for AASA net working
capital at closing, for an estimated total purchase price of
approximately CAN$14.7 million (see working capital assumptions in
"Forward Looking Information" below).
The estimated total purchase price of CAN$14.7 million, would
represent approximate proceeds of CAN$0.65 for each issued and
outstanding common share of ArPetrol, most of which the Company
intends to distribute to the shareholders of the Company (the
"Shareholders") as a return of capital. The Transaction is
expected to close in May 2016.
Key Benefits of the Transaction
The Transaction provides Shareholders of ArPetrol with a
significant premium over the Company's current share price.
Current market conditions for international junior oil and gas
companies, and the ability to raise capital in this environment to
further develop and expand the Company's assets in Argentina, are very uncertain. It is difficult
to predict whether ArPetrol's share price could return to this
Transaction valuation or when it could do so. Accordingly, the
management and board of directors of the Company determined that
this was a unique opportunity to realize such a premium in a very
uncertain market.
In the event that the Transaction is ultimately approved and
completed according to the terms of the Agreement, the Company will
not have any active business operations or assets other than
cash. The Company expects to be delisted from the TSX Venture
Exchange and to proceed with a voluntary windup and dissolution
process following completion of the Transaction. In connection
therewith, the Company intends to distribute the available portion
of the net proceeds of the Transaction (after payment of
Transaction costs and payment of all liabilities and obligations of
the Company) to Shareholders in multiple installments as a return
of capital. Based on the Transaction terms, it is expected
that the initial distribution of approximately 65-70% of the
net proceeds of the Transaction will be made to Shareholders
shortly after the 90-day purchase price adjustment period for
working capital following closing, and a final distribution of the
remaining funds will be made after settling all liabilities and
expenses of the Company and deducting all Transaction and
dissolution costs.
There are many unknown variables that cannot be accurately
predicted as this time, along with known items that are difficult
to quantify, all of which will impact the ultimate amount of the
distribution payable to Shareholders and the distributions may
ultimately be materially lower than currently anticipated.
However, based on the best available information at the current
time (including assumptions regarding currency exchange rates and
working capital assumptions in "Forward Looking Information"
below), it is anticipated that the cumulative distributions to be
paid to Shareholders subsequent to completion of the Transaction
are likely to be in the range of approximately CAN$0.59 to
$0.62 per common share.
Completion of the Transaction and Windup of the
Company
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 by not
less than 66 2/3% of the votes cast by Shareholders represented in
person or by proxy at a meeting of Shareholders to be called to
consider and approve the Transaction in accordance with the
Business Corporations Act (Alberta). The outside date under the
Agreement to satisfy all conditions and close the Transaction is
December 31, 2016.
The Agreement includes customary non-solicitation covenants by
ArPetrol and provides ArPetrol with the ability to respond to
unsolicited proposals considered superior to the Transaction in
accordance with the terms of the Agreement. In the event
ArPetrol accepts a superior proposal, ArPetrol will be required to
pay a break fee of $US500,000 to
ENAP. ENAP has a right to match any superior proposal. An
escrowed holdback amount of $US2,250,000 will be withheld from the
Transaction proceeds at closing. Subject to any post-closing
adjustments or indemnity claims that may arise under the Agreement,
this escrowed amount will be released to ArPetrol approximately six
months after closing.
The board of directors of ArPetrol has unanimously determined
that the Transaction is in the best interests of the Corporation
and is fair to the Shareholders and is unanimously recommending
that the Shareholders vote in favour of the Transaction.
Raymond James 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 viewpoint, to the
Shareholders.
The windup and dissolution of the Company are also subject to
requisite Shareholder approval by not less than 66 2/3% of the
votes cast by the Shareholders represented in person or by proxy at
the meeting of Shareholders.
Details of the Transaction and the planned dissolution and
windup of the Company, and the risks and procedures associated
therewith, will be disclosed in greater detail in the information
circular of the Company for the Shareholder meeting which the
Company currently anticipates will be mailed to the Shareholders in
April 2016 for an annual and special
meeting of Shareholders to take place in May
2016, with closing expected to occur shortly thereafter.
Certain directors and/or senior officers of the Company, who
collectively own approximately 16% of the outstanding ArPetrol
common shares have agreed to vote their shares in favour of the
Transaction. A copy the Raymond James fairness opinion will
be included in the information circular sent to the
Shareholders.
A copy of the Agreement will be made available under the
Company's profile on SEDAR at www.sedar.com.
About ArPetrol Ltd.
ArPetrol is a Calgary-based
publicly traded company engaged in oil and natural gas exploration,
development and production and third-party natural gas processing
in Argentina, where it owns and
operates a gas processing facility with capacity of 85 mmcf/d. The
Company's common shares are listed on the TSX Venture Exchange
("TSXV") under the symbol "RPT".
Forward-Looking Information
Certain information provided in this press release constitutes
forward-looking statements and information within the meaning of
applicable securities laws. Specifically, and without
limitation, this press release contains forward-looking statements
and information relating to: the anticipated benefits of the
Transaction and windup of the Company, estimated working capital,
the anticipated timing of the mailing of the information circular
and the Shareholder meeting, the anticipated timing for the closing
of the Transaction, the amount and timing of distributions to
Shareholders and completion of the delisting, dissolution and
windup of the Company. Forward‐looking information typically
contains statements with words such as "anticipate", "believe",
"forecast", expect", "plan", "intend", "estimate", "propose",
"project", or similar words suggesting future outcomes. The
Company cautions readers and prospective investors in the Company's
securities not to place undue reliance on forward‐looking
information as, by its nature, it is based on current expectations
regarding future events that involve a number of assumptions,
inherent risks and uncertainties, which could cause actual results
to differ materially from those anticipated by the Company.
In respect of the forward-looking statements and information set
out in this press release, the Company has provided such in
reliance on certain assumptions that it believes are reasonable at
this time, including assumptions as to currency exchange rates,
estimated working capital based on AASA operations and revenue
continuing in the normal course, the time required to prepare and
mail Shareholder meeting materials, the ability of the Company to
receive, in a timely manner, the necessary Shareholder and stock
exchange approvals, the ability of the Company to satisfy, in a
timely manner, the other conditions to the closing of the
Transaction, the process and timing for winding up the Company, the
number of shares outstanding at the time of the distributions to
Shareholders, the estimated amount of the Transaction costs and the
liabilities and obligations of the Company and the estimated amount
of the net proceeds remaining for distribution to
Shareholders.
In addition to the assumptions above, the estimated net working
capital at closing is based on the following assumptions: an
internal forecasted exchange rate of 11.72 Argentina Pesos to CAN$1
(the actual rate of which will vary each month), the current
United States dollar to Canadian
dollar exchange rate reported by the Bank of Canada and anticipated revenue and working
capital until the closing of the Transaction based on operating at
full capacity and normal course operations without any disruptions,
unanticipated costs or inflation.
There are many risk factors associated with the completion of
the Transaction and the amount of working capital of AASA, the
dissolution of the Company and the amount and timing of
distributions payable to Shareholders. A number of factors could
cause actual results to differ materially from those anticipated by
the Company, including but not limited to risks and uncertainties
inherent in the nature of the Transaction including the failure of
the Company to obtain necessary Shareholder and stock exchange
approval, or to otherwise satisfy the conditions to the
Transaction, in a timely manner by the outside date or at all,
risks of a material adverse change to the Company's assets or
revenue, risks of indemnity claims under the Agreement or other
unknown liabilities that may arise, uncertainties regarding
Transaction and dissolution costs and obligations and liabilities
of the Company, natural disasters, union activities or workforce
disruptions which may impact operations and revenue, change in
government policies, currency fluctuations and controls, risks of
high inflation and increased costs, the risk of disruptions at the
gas plant, changes in currency exchange rates, and other risks
associated with international activity and Argentina. AASA operates outside of
Canada and as such, is subject to
a number of political risks over which it has no control. The
forward‐looking information included herein is expressly qualified
in its entirety by this cautionary statement. The forward‐looking
information included herein is made as of the date hereof and the
Company assumes no obligation to update or revise any
forward‐looking information to reflect new events or circumstances,
except as required by law.
Additional information relating to the Company is also available
on SEDAR at www.sedar.com.
Neither the TSXV nor its Regulation Services Provider (as
defined in the policies of the TSXV) accepts responsibility for the
adequacy or accuracy of this release.
SOURCE ArPetrol Ltd.