Sterling Energy PLC, the AIM listed independent oil & gas exploration and production company operating in the Gulf of Mexico and Africa, has entered into a merger agreement to acquire Whittier Energy Corporation, a NASDAQ listed onshore US Gulf Coast exploration and production company (the “Acquisition”).
Highlights
• The terms of the merger agreement value the entire issued and to be issued share capital of Whittier at US$145 million (approximately £74 million), plus the assumption of an estimated US$43 million (approximately £22 million) of net liabilities.
• The Acquisition represents:
– A 26.0% premium to the closing price of Whittier on 18 January 2007
– A value of US$15.8 per boe (US$2.6 per mcfge) of proven plus probable reserves
• The Acquisition is expected to complete in late April 2007, subject to receipt of Whittier shareholder approval.
• The Acquisition is to be financed from approximately equal amounts of existing cash plus new equity and debt. For these purposes, £26.12 million (approximately US$50 million) gross has been raised through an institutional placing of 163,250,000 new ordinary shares at 16p and a new US$100 million bank debt facility has been arranged with Natixis.
The acquisition significantly strengthens Sterling’s production business and will allow it to fund a greater level of exploration activity. In particular, following the Acquisition, Sterling’s enlarged group will have:
• A near doubling of reserves, production and cash flow:
- 2P reserves estimated to increase from 12.9 mmboe to 24.8 mmboe
- Current production estimated to increase from 3,400 boepd to 6,500 boepd
- Annualised cash flow from operations is estimated to increase from US$35 million to US$80 million
• A material and balanced US business with significant upside:
- Combined US net production over 28 mmcfged (4,700 boepd)
- Over 50% reserves operated
- Strengthened management and technical team
• A portfolio of near term exploration projects with substantial upside:
- Over 40 low risk wells planned, complementing Sterling’s 2007 exploration programme, which together with Whittier is targeting 60 mmboe of net unrisked reserves
• A stronger platform from which to pursue additional high impact opportunities:
- Increased US activities
- Africa / Middle East
- Sector consolidation
Commenting today, Harry Wilson, Chief Executive of Sterling Energy Plc, said:
“The acquisition of Whittier materially strengthens Sterling’s position in the sector and creates new opportunities for us to grow. Adding significant onshore US production and development assets to our existing offshore Gulf of Mexico assets, Whittier both de-risks and significantly increases the scale of our cash generation. This will allow us to build on our existing portfolio of exploration projects and provide us with greater flexibility to pursue new opportunities on a bigger scale.”
Bryce Rhodes, President and Chief Executive Officer of Whittier said:
"This transaction allows Whittier Energy stockholders to realize substantial value at an attractive premium. It is keeping with our stated strategy from the outset of creating value for our stockholders by monetizing at the appropriate time. This has all been made possible by the very talented team of Whittier directors and employees. Their hard work and dedication has made the rapid growth of the Company possible and has resulted in significant value for all the Whittier stockholders and I'd like to take this opportunity to say thanks to each of them."
