TIDMVLU
RNS Number : 5381C
Valeura Energy Inc.
20 October 2020
AGREEMENT TO SELL SHALLOW CONVENTIONAL ASSETS
FOR UP TO US$18 MILLION
Calgary, October 20, 2020: Valeura Energy Inc. (TSX:VLE,
LSE:VLU) ("Valeura" or the "Company"), an upstream natural gas
company with assets in the Thrace Basin of Turkey, is pleased to
announce that it has executed a Share Purchase Agreement (the
"Agreement") to sell its producing shallow conventional gas
business to TBNG Limited (the "Buyer") for a cash consideration of
US$15.5 million, plus royalty payments of up to an additional
US$2.5 million.
Proceeds from the deal will add to Valeura's strong net cash
position, which as of September 30, 2020 was approximately US$31
million. Upon completion of this transaction, the incremental cash
will bolster the Company's ability to execute its growth strategy
through mergers and acquisitions and further appraisal of its deep
gas play. This value-driven M&A strategy aims to add
near-term/mid-term production growth and cash flow by focusing on
cash flow-generating opportunities, with follow-on growth
potential. Valeura remains debt free and in a strong position to
negotiate future opportunities.
The Company's interest in its 20 Tcfe unrisked mean prospective
resource deep, tight gas play in the Thrace Basin will be
unaffected by this transaction, and Valeura will remain the
operator of record for all subject leases and licences. Valeura
will also retain access to local gas markets via the existing gas
transportation and processing infrastructure under the Agreement,
for use in its ongoing deep gas appraisal activities.
Sean Guest, President and CEO commented:
"I am pleased to announce the pending sale of our mature,
conventional gas business as a way to strengthen our balance sheet
and increase our cash to pursue higher-value growth opportunities.
Our objective has been to maximise the value of these mature
assets, and today's monetisation agreement is a key step towards
accomplishing that goal. We have re-tooled Valeura into a lean,
shrewd, debt-free machine, focused on value growth. To that end,
the other pillars of our strategy remain unchanged. We are pursuing
near/mid-term opportunities through the mergers and acquisition
market intended to add significant growth potential and at the same
time, we are continuing in our commitment to Turkey, as we appraise
our 20 Tcfe unrisked mean prospective resource deep tight gas play.
In all instances, our priority is to add cash-flow generation to
the portfolio, along with opportunities for smart re-investment to
generate incremental value for shareholders."
Overview of the Transaction
The Agreement includes headline cash consideration of US$15.5
million, to be paid to Valeura upon closing, subject to normal
closing adjustments and based on an economic effective date of July
1, 2020. In addition, Valeura will be entitled to royalty payments
over a five-year period, tied to local gas prices, and ranging in
total from a minimum of US$1.0 million and capped at US$2.5
million.
The transaction is structured as a sale of the shares of Thrace
Basin Natural Gas (Turkiye) Corporation and Corporate Resources
B.V., both wholly owned subsidiaries of Valeura which, following a
recent internal re-organisation, are the entities which
collectively hold the Company's conventional, gas producing
business. Deal completion is subject to customary termination
rights and a number of closing conditions including, but not
limited to, regulatory approvals and other governmental
authorisations. Valeura anticipates closing the deal in Q1
2021.
The sale price, including royalty payment ranges represents a
multiple of 1.1x to 1.2x the assets' proved developed reserves
value, as evaluated at December 31, 2019, and based on the higher
gas prices prevailing at that time. Valeura also anticipates
forward general and administrative cost savings of at least US$1.0
million per year as a result of this sale. In accordance with
Turkish regulations, all decommissioning and abandonment
liabilities associated with the conventional gas business will be
assumed by the Buyer.
Valeura remains committed to its ongoing business in Turkey and
continues to hold its long-standing relationships with Turkish
authorities in the highest regard. This transaction is another
example of Valeura bringing new foreign investment into Turkey's
upstream sector and places the conventional producing assets in
capable hands, while maintaining its position within the country.
The Buyer, TBNG Limited, is a private UK registered company whose
shareholders are Mr. Ian Hannam and its management team. Mr. Hannam
is the founder of Hannam & Partners, a leading investment bank
with extensive expertise in the global natural resource sector,
including Turkey. He is financing TBNG Limited through a UK holding
company.
Conference Call
The management team will host an investor and analyst call and
question session later today, at 09:00 Calgary / 11:00 Toronto /
16:00 London, Tuesday, October 20, 2020 to discuss the transaction.
A live audio feed of the call will be available via the webcast
link below, and those interested in participating in the question
session should use the dial-in numbers below. Please register
approximately 15 minutes prior to the start of the call.
Event title: Valeura Energy Management Briefing
Webcast link:
https://produceredition.webcasts.com/starthere.jsp?ei=1388367&tp_key=09c7ff5fda
Calgary dial-in: +1 587 880 2171
Toronto dial-in: +1 416 764 8688
North America toll-free: +1 888 390 0546
UK toll-free: +44 0800 6522 435
For further information, please contact:
Valeura Energy Inc. (General and Investor Enquiries) +1 403 237 7102
Sean Guest, President and CEO
Heather Campbell, CFO
Robin Martin, Investor Relations Manager
Contact@valeuraenergy.com , IR@valeuraenergy.com
Canaccord Genuity Limited (Corporate Broker) +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor, James Asensio
CAMARCO (Public Relations, Media Adviser) +44 (0) 20 3757 4980
Owen Roberts, Monique Perks, Hugo Liddy, Billy Clegg
Valeura@camarco.co.uk
Reserves and Resources
Reserves disclosure in this announcement is based on an
independent reserves evaluation as at December 31, 2019 conducted
by DeGolyer and MacNaughton ("D&M") in its report dated
February 25, 2020, which was prepared using guidelines outlined in
the Canadian Oil and Gas Evaluation Handbook and in accordance with
National Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"). The forecast prices used to calculate
reserves value are US$7.53/Mcf for natural gas and US$65.77/bbl for
light and medium crude in 2020, and these prices both escalate at
2% per year going forward. This natural gas price forecast is for
the TBNG assets, and the realised price for the Banarli assets is
approximately 97% of this price. Additional reserves and pricing
information is included in the Company's annual information form
for the year ended December 31, 2019.
Resource disclosure in this announcement is based on an
independent resources evaluation as at December 31, 2018 conducted
by D&M in its report dated March 13, 2019, which was prepared
using guidelines outlined in the Canadian Oil and Gas Evaluation
Handbook and in accordance with NI 51-101, as adjusted to reflect
Equinor's withdrawal in Q1 2020. Prospective resources are those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective resources
have both an associated chance of discovery and a chance of
development. The unrisked estimates of prospective resources
referred to in this announcement have not been risked for either
the chance of discovery or the chance of development. There is no
certainty that any portion of the prospective resources will be
discovered. If a discovery is made, there is no certainty that it
will be developed or, if it is developed, there is no certainty as
to the timing of such development or that it will be commercially
viable to produce any portion of the prospective resources.
Additional resources information is included in the Company's
annual information form for the year ended December 31, 2018.
Advisory and Caution Regarding Forward-Looking Information
Certain information included in this new release constitutes
forward-looking information under applicable securities
legislation. Such forward-looking information is for the purpose of
explaining management's current expectations and plans relating to
the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes, such as making
investment decisions. Forward-looking information typically
contains statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", "project",
"target" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this new
release includes, but is not limited to: the completion of the
transaction, statements with respect to the Company's continued
access to local gas markets, the total headline cash consideration,
the Company's entitlement to contingent payments over a five-year
period, receipt of regulatory approvals and other governmental
authorisations relating to the transaction, anticipated timing to
close the transaction, anticipated general and administrative cost
savings from the transaction and the other anticipated benefits
from the transaction, statements with respect to the Company's
growth strategy, statements with respect to the Buyer, and the
timeline associated with the process to seek a partner in the deep
gas play.
In addition, statements related to "reserves" and "resources"
are deemed to be forward-looking information as they involve the
implied assessment, based on certain estimates and assumptions,
that the products can be produced profitably in the future.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things: the
ability to close the transaction on the terms described herein; the
resumption of operations following the COVID-19 pandemic; political
stability of the areas in which the Company is operating and
completing transactions; continued safety of operations and ability
to proceed in a timely manner; continued operations of and
approvals forthcoming from the Turkish government in a manner
consistent with past conduct; prospectivity of the Company's lands,
including the deep potential; the continued favourable pricing and
operating netbacks in Turkey; future production rates and
associated operating netbacks and cash flow; decline rates; future
sources of funding; future economic conditions; future currency
exchange rates; the ability to meet drilling deadlines and other
requirements under licences and leases; the ability to attract a
new partner in the deep play; the ability to identify attractive
merger and acquisition opportunities to support growth; and the
Company's continued ability to obtain and retain qualified staff
and equipment in a timely and cost efficient manner. In addition,
the Company's work programmes and budgets are in part based upon
expected agreement among joint venture partners and associated
exploration, development and marketing plans and anticipated costs
and sales prices, which are subject to change based on, among other
things, the actual results of drilling and related activity,
availability of drilling, high-pressure stimulation and other
specialised oilfield equipment and service providers, changes in
partners' plans and unexpected delays and changes in market
conditions. Although the Company believes the expectations and
assumptions reflected in such forward-looking information are
reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and
unknown risks and uncertainties. Exploration, appraisal, and
development of oil and natural gas reserves are speculative
activities and involve a degree of risk. A number of factors could
cause actual results to differ materially from those anticipated by
the Company including, but not limited to: the risks of further
disruptions from the COVID-19 pandemic; the risks of currency
fluctuations; changes in gas prices and netbacks in Turkey;
potential changes in joint venture partner strategies and
participation in work programmes; uncertainty regarding the
contemplated timelines and costs for the deep evaluation; the risks
of disruption to operations and access to worksites; potential
changes in laws and regulations, the uncertainty regarding
government and other approvals, including those required for the
transaction; counterparty risk; risks associated with weather
delays and natural disasters; and the risk associated with
international activity. The forward-looking information included in
this new release is expressly qualified in its entirety by this
cautionary statement. See the AIF for a detailed discussion of the
risk factors.
The forward-looking information contained in this new release is
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this new release is expressly qualified by
this cautionary statement.
Additional information relating to Valeura is also available on
SEDAR at www.sedar.com .
This Announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR"). Upon
the publication of this Announcement, this inside information is
now considered to be in the public domain.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction,
including where such offer would be unlawful. This announcement is
not for distribution or release, directly or indirectly, in or into
the United States, Ireland, the Republic of South Africa or Japan
or any other jurisdiction in which its publication or distribution
would be unlawful.
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