C&C Energia Ltd. ("C&C Energia" or the "Corporation")
(TSX:CZE) is pleased to announce that it has entered into an
agreement with Pacific Rubiales Energy Corp. ("Pacific Rubiales")
(TSX:PRE)(BVC:PREC)(BOVESPA:PREB) under which Pacific Rubiales will
acquire all of the issued and outstanding shares of C&C Energia
by way of a plan of arrangement under the Business Corporations Act
(Alberta) (the "Arrangement Agreement"). Under the terms of the
Arrangement Agreement, each common share of C&C Energia will be
exchanged for 0.3528 common shares of Pacific Rubiales, cash
consideration of $0.001 and one common share of a new Colombia
focused junior exploration company ("Newco") based in Calgary,
Alberta (the "Proposed Arrangement"). Additionally, Pacific
Rubiales will acquire a 5% shareholding interest in Newco in the
Proposed Arrangement.
In connection with the Proposed Arrangement, C&C Energia
will transfer to Newco its Colombian exploration assets in the
Putumayo and Middle Magdalena Basins and approximately US$80
million in cash, subject to working capital adjustments. The
exploration assets comprise C&C Energia's participating
interests in the Coati, Andaquies, Putumayo-8 and Morpho blocks.
Newco will have a prospective acreage position with several
drill-ready prospects in 2013, a well-funded balance sheet combined
with an experienced exploration and management team.
Based on the closing price of Pacific Rubiales' shares on the
Toronto Stock Exchange ("TSX") on November 16, 2012, the value of
the portion of a Pacific Rubiales share to be received by each
C&C Energia shareholder is approximately C$7.81. In addition,
as described in more detail below, management of C&C Energia
estimates the net asset value of each share of Newco to be
approximately C$2.00. The combined consideration of approximately
C$9.81 represents an approximately 52% premium to C&C Energia's
twenty-day, volume-weighted average trading price of approximately
C$6.47.
C&C Energia's management views the Proposed Arrangement as
beneficial for C&C Energia and its shareholders. "This
transaction not only crystalizes the value of the producing assets
that we have developed over the last five years at very attractive
metrics, but also retains our shareholders' exposure to some
exciting high potential exploration opportunities" said Randy
McLeod, President and CEO of C&C Energia. "We plan to move
forward with our existing drilling plans for 2013 and the new
company's balance sheet remains strong enough to be opportunistic
in capturing additional exploration and production assets. In
addition, C&C Energia's shareholders, through their ownership
in Pacific Rubiales, will have access to a larger exploration and
production portfolio and increased share liquidity."
The board of directors of C&C Energia has approved the
transaction, after consultation with its financial and legal
advisors, and has determined that the transaction is fair to
C&C Energia's shareholders and is in the best interests of
C&C Energia and its shareholders. Directors, executive officers
and certain shareholders of C&C Energia who collectively hold
approximately 42.7% of the common shares of C&C Energia on a
fully diluted basis have entered into support agreements under
which they have agreed to retain their shares of C&C Energia
and to vote in favor of the Arrangement at the shareholder meeting.
The C&C Energia board of directors recommends that C&C
Energia shareholders vote in favor of the Proposed Arrangement.
C&C Energia's financial advisor, FirstEnergy Capital Corp., has
provided an opinion to the Board of Directors of C&C Energia,
that the consideration to be received by C&C shareholders under
the Proposed Arrangement is fair, from a financial point of view,
to C&C shareholders. A copy of the opinion will be included in
the information circular to be sent to C&C shareholders for the
special meeting to be called to consider the Proposed Arrangement.
Legal counsel for C&C Energia in Canada has been provided by
Blake, Cassels & Graydon LLP and in Colombia by Posse Herrera
& Ruiz. Pacific Rubiales' financial advisor is GMP Securities
L.P.; its legal advisor is Norton Rose Canada LLP in Canada and
Colombia.
The Arrangement Agreement contemplates, that under certain
circumstances, a dual non-completion fee of C$15 million by the
non-completing party. The Arrangement Agreement also provides for
customary non-solicitation covenants, subject to customary
"fiduciary out" provisions, entitling C&C Energia to consider
and accept a superior proposal and a right in favor of Pacific
Rubiales to match any superior proposal.
The closing of the Proposed Arrangement is subject to the
receipt of certain approvals by Pacific Rubiales and C&C
Energia. These approvals include: all stock exchange and other
regulatory approvals, receipt of the requisite shareholder and
court approval for C&C Energia, no material adverse change
having occurred in C&C Energia or Pacific Rubiales and a number
of other matters customary in transactions of this nature. Full
details of the transaction will be included in an information
circular to be mailed to C&C Energia shareholders in accordance
with applicable securities laws. The transaction is expected to
close early in 2013.
The Proposed Arrangement
Management estimates that the value of the consideration to be received by
C&C Energia shareholders will be:
Estimates
-----------------------
1.0 common share of Newco C$2.00/share
0.3528 common shares of Pacific Rubiales C$7.81/share(1)
-----------------------
Estimated Value C$9.81/share
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-----------------------
(1)Based on the closing price of Pacific Rubiales' shares on the TSX on
November 16, 2012.
Estimated Newco Net Asset Value January 2013:
Estimates
-----------------------
Cash(1) C$80 million
Estimated Undeveloped Land Value(2) C$55 million
-----------------------
Estimated Net Asset Value C$135 million
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-----------------------
Basic shares(3) 68 million
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-----------------------
Estimated Net Asset Value per share C$2.00/share
-----------------------
-----------------------
(1) Assumes US$80 million cash transferred from existing C&C cash
balances at US/CDN exchange rate of $1.00 on closing.
(2) Estimated undeveloped land value is based on management's risked
economic view assuming certain capital, reserves, operating cost,
realized pricing and other assumptions for the prospects on the four
blocks. This is management's estimate and is not based on a third
party valuation or reserves evaluation. There is no guarantee that
this amount will reflect the value of Newco or that this amount will
be reflected in the value of Newco's shares. Although management
believes its evaluation and assumptions are reasonable, there is no
guarantee that such assumptions will be realized and actual value of
the undeveloped land could be significantly lower.
(3) Included in this calculation are the 64.6 million Newco shares issued
to C&C Energia shareholders and 3.4 million Newco shares to be
retained indirectly by Pacific Rubiales in connection with the
Proposed Arrangement. The balance of the securities is comprised of
the "in the money" dilutive securities including options and warrants
of C&C Energia that are assumed to be exercised prior to closing of
the Proposed Arrangement. The exercise of all or any of the C&C
Energia options and warrants referred to in this news release cannot
be assured and assumptions made in this respect are solely for the
purposes of the calculations set forth herein.
Strategic Rationale
The Proposed Arrangement is a culmination of C&C Energia's
exploration and development success, during which production grew
from approximately 4,400 bopd to current production of
approximately 11,500 bopd. Management views the Proposed
Arrangement as an opportunity for C&C Energia shareholders to
realize value for a large portion of the Corporation's assets while
continuing to participate directly in the upside of the exploration
acreage in the Putumayo and Middle Magdalena basins in Colombia.
Through ownership in Pacific Rubiales, the Proposed Arrangement
allows shareholders to participate in the continued exploration
development of the Llanos basin plays and gain exposure to a large,
highly liquid, premium oil and gas company with a significant
position in Colombia and emerging exploration potential in Papua
New Guinea and Peru.
The Proposed Arrangement also allows Newco management to
immediately apply its expertise at creating value in junior oil and
gas entities following completion of the transaction. Newco will be
well-capitalized at inception with significant cash, no debt, and a
focused portfolio of exploration assets. Management believes the
four blocks in Newco have upside potential for shareholders with
firm plans to drill at least three to four exploration wells in the
next 12 months on the over 212,470 net acres of undeveloped land.
In addition, management believes its strong balance sheet will
provide it with the ability to proactively seek out and target
attractive acquisitions to complement existing assets. The C&C
Energia management team has a solid track record of building
shareholder value in Colombia.
Newco
If the Proposed Arrangement is completed, Newco will be a
growth-oriented junior exploration and production company led by
Randy McLeod, current President and CEO of C&C Energia. Tomas
Villamil, original founder of C&C Energia and current executive
with the Corporation, is expected to join Newco in an executive
capacity. The remainder of the executive and management team
positions will be filled prior to deal closing. The board of
directors of Newco will consist of certain existing members of
C&C Energia's current board of directors and new members to be
selected in connection with the Proposed Agreement. Newco will
continue with C&C Energia's approach of increasing shareholder
value through a combination of exploration, strategic acquisitions
and subsequent exploitation while maintaining a conservative
approach to balance sheet management.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws (collectively, the "forward-looking statements").
More particularly, this press release contains statements and
information concerning: the terms of the Proposed Arrangement;
expectations regarding the timing of steps to complete the Proposed
Arrangement; C&C Energia's and Newco's drilling plans, future
growth plans, potential of assets, reserves and values attributable
thereto and per share growth; the anticipated value of the
consideration to be received by the shareholders of C&C
Energia; the capitalization and debt levels of Newco; the transfer
of certain assets to Newco; the intention of Newco to seek out and
target acquisitions; the estimated value of Newco's undeveloped
land and the estimated net asset value of Newco; Pacific Rubiales
share ownership in Newco; the net asset value per share for Newco;
the treatment of C&C Energia's outstanding options and
warrants; the effects of the Proposed Arrangement; C&C
Energia's and Newco's growth strategy; and the nature of their
assets. In addition, the use of any of the words "guidance",
"initial, "scheduled", "can", "will", "prior to", "estimate",
"anticipate", "believe", "potential", "should", "unaudited",
"forecast", "future", "continue", "may", "expect", "project", and
similar expressions are intended to identify forward-looking
statements. The forward-looking statements contained herein are
based on certain key expectations and assumptions made by the
Corporation including expectations and assumptions concerning:
shareholder and regulatory approvals for the Proposed Arrangement
and the receipt of those approvals; assumptions regarding success
of optimization and efficiency improvement projects; the
availability of capital; current legislation; and general economic
conditions.
Although the Corporation 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 the Corporation can give no
assurance that they will prove to be correct. Since forward-looking
statements 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: risks that all necessary regulatory and third party
approvals will not be forthcoming; risks that C&C Energia or
Pacific Rubiales will not be satisfied with their respective due
diligence procedures; risks that the parties will not be able to
identify appropriate risks associated with the oil and gas industry
in general; commodity price and exchange rate fluctuations; changes
in legislation affecting the oil and gas industry 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 the
Corporation's annual information form, which has been filed on
SEDAR and can be accessed at www.sedar.com or its website
www.ccenergialtd.com.
The forward-looking statements contained in this press release
are made as of the date hereof and the Corporation 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.
This press release shall not constitute an offer to sell, nor
the solicitation of an offer to buy, any securities in the United
States, nor shall there be any sale of securities mentioned in this
press release in any state in the United States in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
Contacts: C&C Energia Ltd. Ken Hillier Chief Financial
Officer 403-262-6046 C&C Energia Ltd. Tyler Rimbey Vice
President, Business Development 403-262-6046
www.ccenergialtd.com