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AEE Anatolia Energy Corp

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Share Name Share Symbol Market Type
Anatolia Energy Corp TSXV:AEE TSX Venture Common Stock
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Cub Energy Inc. and Anatolia Energy Corp. Announce Strategic Arrangement

26/04/2013 3:12pm

Marketwired Canada


Cub Energy Inc. ("Cub") (TSX VENTURE:KUB) and Anatolia Energy Corp. ("Anatolia")
(TSX VENTURE:AEE) are pleased to announce that they have entered into an
arrangement agreement (the "Arrangement Agreement") providing for the
acquisition (the "Transaction") by Cub of all the issued and outstanding common
shares of Anatolia ("Anatolia Shares") in exchange for common shares of Cub
("Cub Shares") pursuant to a plan of arrangement under the Business Corporations
Act (Alberta) (the "ABCA"). 


Pursuant to the terms of the Transaction, shareholders of Anatolia will receive
0.106 of a Cub Share for each Anatolia Share held (the "Exchange Ratio"). The
Exchange Ratio represents a market-to-market exchange ratio based on the 10 day
volume weighted average trading prices of the shares of each of Cub and Anatolia
on the TSX Venture Exchange (the "TSXV") as at April 24, 2013. The board of
directors of each company has approved the Transaction. 


The exchange ratio of 0.106 represents a value of $0.025 for each Anatolia
Share. Anatolia shareholders will receive approximately 13.9 million Cub Shares.
After giving effect to the Arrangement Agreement, Cub will have approximately
311.7 million Cub Shares outstanding (pro-forma the private company acquisition
announced March 8, 2013). Upon closing, it is anticipated that 4.5% of the
issued and outstanding Cub Shares will be held by existing Anatolia
shareholders.


The Arrangement Agreement requires the approval of Anatolia shareholders and
contemplates that Anatolia will hold a meeting of its shareholders on or prior
to June 30, 2013 to permit shareholders to vote on the Arrangement.


Pro-Forma Transaction Highlights

The Transaction creates a stronger, more diversified combined company expanding
upon Cub's existing assets:




--  The addition of 1,162,856 gross acres (581,429 net) of land in Turkey
    which is highly prospective for both conventional and unconventional
    resources which compliments Cub's existing land position of 244,000
    gross (180,000 net) acres in two productive Ukrainian basins pro-forma
    Cub's private company acquisition announced March 8, 2013. 
--  Cub's producing Ukraine assets (current production net to Cub is
    approximately 1,550 boe/d) will now be underpinned by a larger portfolio
    of exploration opportunities and a significant potential shale oil
    resource play: 
    --  Steady cash flow and production growth via current operations with
        significant development upside in recently acquired neighboring
        blocks; and 
    --  Significant shale potential in Turkey offers the opportunity to
        increase Cub's potential reserves and production 
--  Assumption of approximately $2.5 million of cash, restricted cash and
    inventory to fund a portion of the go forward work program in Turkey. 
--  Both Ukraine and Turkey offer strong gas prices and compelling netbacks
    - currently the local gas price received in the Ukraine is in excess of
    $8.09 per mcfe while in Turkey it is in excess of $9.50 per mcfe. Oil
    prices in both countries are based on Brent pricing. 
--  Well-established local joint venture partner in Turkey on eleven
    licences through Anatolia's joint venture agreement with Calik Petrol
    Arama Uretim Sanayi ve Ticaret A.S., the wholly-owned oil and gas
    subsidiary of the large Turkish conglomerate Calik Holding A.S. 
--  Turkey is a natural extension for Cub's business plan of establishing a
    meaningful position in a neighboring country prospective for large
    resource-in-place assets: 
    --  The Anatolia assets hold 94 MMbbl (47 MMbbl net)(1)   of
        prospective, unrisked unconventional resources; and 
    --  Anatolia estimates the gross, unrisked, conventional resources to be
        37 MMbbl (17.25 MMbbl net)(2).
--  Pro forma the Transaction, Cub will have net proved plus probable
    reserves of approximately 4.26 MMboe(2) and estimated gross, unrisked
    resource exposure in excess of 131 MMbbl (64.25 MMbbl net)(2).



(1) Ryder Scott resource report effective June 8, 2012, which has been adjusted
to reflect the results of the Guvernir well drilled on the Antep license in 2012

(2) Estimates provided by management of Anatolia and Cub

Strategic Rationale

The Transaction represents a continuation of Cub's vision to build a diversified
geographically-focused exploration and production asset portfolio through
sustainable organic growth and accretive transactions. Turkey is a natural
extension into a neighboring country with a history of oil and gas production
and the necessary infrastructure in place to support ongoing exploration and
development activities. Cub takes a very proactive approach in assessing all
regional opportunities for the quality of asset base, geological similarities,
the political/economic landscape and the ability to compliment an already strong
portfolio in terms of measured risked upside. 


Anatolia's Strategic Rationale for the Transaction

The board of directors of Anatolia believes that the Transaction provides a
number of benefits to its shareholders, including: 




--  Value equal to or greater than the value that might have been realized
    from the execution of Anatolia's business plan given the challenges,
    risks, capital and dilution that would be required to implement the
    current plan. 
--  Access to Cub's portfolio of producing assets in Ukraine. Over 1,550
    boe/d of current production with potential exit target rate of over
    2,000 boe/d by the end of 2013(3). 
--  Exposure to conventional natural gas targets in an attractive fiscal
    regime with attractive well economics. 
--  Access to over 244,000 gross (180,000 net) acres across the major
    producing, Pannonian Sedimentary Basin and the Dnieper-Donets
    Sedimentary Basin in Ukraine. 
--  Exposure to a diversified asset base and resulting balanced portfolio of
    developmental and high impact exploration prospects in Ukraine with
    multiple play types.



(3) Estimates provided by management of Cub

Cub's Strategic Rationale for the Transaction

The board of directors of Cub believes that the transaction provides a number of
benefits to its shareholders, including: 




--  Exposure to Turkey's Silurian Dadas Shale resource oil play, which has
    been progressed by Anatolia. The Dadas Shale is a proven source rock
    throughout the Middle East and North Africa. 
--  Access to a diversified asset base and resulting balanced portfolio of
    developmental and high impact exploration prospects in Turkey and
    Ukraine with multiple play types. 
--  Leverage to 581,429 net acres of Anatolia's undeveloped land base that
    has only had a relatively small percentage fully evaluated to date. 
--  Exposure to Turkey's attractive oil and gas fiscal terms (e.g. 12.5%
    flat royalty, 20% corporate tax and Brent crude pricing) and growing
    economy which requires approximately 90% of its energy demand to be
    imported. 



Mikhail Afendikov, Chief Executive of Cub, commented:

"This is an exciting and important development for Cub as we continue to expand
and diversify our operations within the Black Sea region. We are very excited at
the prospect of acquiring Anatolia. We believe the benefits of the combined
entity provide existing Cub shareholders exposure to a strategic partnership
with a suite of assets in Turkey. We believe that the Anatolia team have
progressed the Dadas Shale resource oil play and we are thrilled to be able to
participate in the further development and de-risking of this project. 


Robert Spring, Chief Executive Officer of Anatolia, commented:

"The Transaction provides Anatolia shareholders with the upside of the portfolio
of producing and exploration assets that Cub has accumulated in the Ukraine. In
addition, the Transaction will provide Anatolia shareholders with a greater and
more efficient capital base given Cub's production and cash flow from which to
help further develop our Turkish assets."


Benefits of Operating in Turkey

Turkey offers an attractive fiscal and royalty regime with a flat royalty rate
of 12.5% and a flat corporate tax rate of 20%. It is a democratic, secular,
constitutional republic, a G-20 major economy and a long-standing member of
NATO. Turkey offers a transparent regulatory environment and under-explored
hydrocarbon basins with conventional and unconventional targets. While Turkey is
currently a producer of oil and gas, it is heavily reliant on imported oil and
gas, importing nearly 90% of its oil demand for a population of more than 78
million people. As a result, there is domestic demand for oil and gas production
at world market prices. Additionally, there is an extensive network of oil and
gas transportation infrastructure in place in Turkey, which results in time
efficient and cost effective tie-ins to market. Furthermore, seismic, drilling
and other oilfield equipment is available at competitive prices. 


Acquisition Work Plan 



---------------------------------------------------------------------------
License Area       No. of Licenses    Working Interest   Resource Type     
Bismil             2                  25%                Conventional      
                                      Up to 50%          Unconventional    
Sinan              1                  50%                Unconventional    
Antep              7                  50%                Conventional      
Besni              1                  50%                Conventional      
---------------------------------------------------------------------------

--  Cub will own an interest in and jointly operate 11 licenses in four
    primary project areas in Turkey (Bismil, Sinan, Antep and Besni). 
--  Capital expenditures required for the Turkish work program in 2013 is
    currently being reviewed by Cub 
--  The 2013 work program is fully financed



Asset Overview

Bismil 

Cub will acquire a 25% W.I. in the Bismil licence that includes two adjacent
licenses totalling 245,699 gross acres and the option to increase its
unconventional Dadas Shale W.I. to 50% in the licence. The onshore licence is
located in the Sirt District of the southeastern Anatolia region of Turkey. The
licence contains seven Bedinan oil prospects with estimated gross resources of 2
to 5 MMbbl and Garzan reef with estimated gross resources of 1 to 9 MMbbl
prospects. 


Sinan 

Cub will acquire up to a 50% W.I. in the Sinan licence that includes one license
totalling 17,833 gross acres. The onshore licence is located in the Sirt
District of the south eastern Anatolia region of Turkey and offers both
unconventional Dadas shale potential as well as conventional upside. The licence
contains three Bedinan oil prospects with estimated gross resources of 2 to 5
MMbbl prospects and Mardin carbonate fault traps with estimated gross resources
of 1 to 4 MMbbl prospects.


Antep 

Cub will acquire up to a 50% W.I. in the Antep licence that includes seven
adjacent licenses totalling 845,418 gross acres. The onshore licences are
located in the Gaziantep District of the south-eastern Anatolia region of Turkey
and offers conventional upside in a very large contiguous land base with year
round access. There are seven Mardin fault and reef prospects identified with an
estimated gross resource base of 1 to 6 MMbbl and several Paleozoic structural
leads.


Besni 

Cub will acquire up to a 50% W.I. in the Besni licence that includes one license
totalling 53,906 gross acres. The onshore block is located in the Gaziantep
District of the southeastern Anatolia region of Turkey. The license contains
four Mardin oil prospects with estimated gross resources of 1 to 8 MMbbl.


Arrangement Agreement

Cub and Anatolia have entered into an Arrangement Agreement pursuant to which
Cub and Anatolia have agreed that the Transaction will be undertaken by way of a
plan of arrangement under the ABCA. Under the terms of the Transaction, Cub has
agreed to acquire all of the issued and outstanding Anatolia Shares at an
exchange ratio of 0.106 of a Cub Share for each Anatolia Share.


Pursuant to the Arrangement Agreement, following the Transaction Anatolia
warrants will cease to represent the right to acquire Anatolia Shares and will
convert, according to their terms, and will represent the right to acquire such
number of Cub Shares at such exercise price as determined in accordance with
their terms and the Exchange Ratio. In addition, all of Anatolia's outstanding
options will be surrendered or otherwise terminated prior to the closing of the
Transaction.


The board of directors of Anatolia unanimously (other than one director who
abstained from voting because he is also a director of Cub) supports the
Transaction, has determined that the Transaction is in the best interest of
Anatolia and recommends that the shareholders of Anatolia vote in favour of the
Transaction. All senior officers and directors of Anatolia, who collectively
hold 6.5% of the issued and outstanding Anatolia Shares, have entered into
agreements with Cub pursuant to which they have agreed to vote their shares in
favor of the Transaction at the Anatolia shareholders meeting. Salida Capital
L.P., which holds 7.7% of the total number of issued and outstanding shares of
Anatolia, has agreed to vote its shares in favour of the Transaction at the
Anatolia shareholders meeting.


The Arrangement Agreement provides for non-solicitation covenants, subject to
fiduciary obligations of the board of directors of Anatolia, and the right of
Cub to match any Superior Proposal (as defined in the Arrangement Agreement).
The Arrangement Agreement, among other things, provides for non-completion fees
of $200,000 payable by Cub and $400,000 payable by Anatolia in the event the
Transaction is not completed or is terminated by either party in certain
circumstances. The Arrangement Agreement provides that completion of the
Transaction is subject to certain conditions, including the receipt of all
required regulatory approvals, including the approval of the TSXV, the approval
of the shareholders of Anatolia and Turkish and Ukrainian regulatory approvals.
The Transaction is expected to close on or before June 30, 2013. 


Full details of the Transaction will be included in an information circular to
be mailed to Anatolia shareholders in accordance with applicable securities
laws. A copy of the information circular and related documents will be filed
under Anatolia's issuer profile on SEDAR at www.sedar.com. A copy of the
Arrangement Agreement will also be filed under each of Cub's and Anatolia's
issuer profiles at www.sedar.com. 


Financial Advisors and Fairness Opinion

Canaccord Genuity Corp. is acting as financial advisor to Cub with respect to
the Transaction. 


Cormark Securities Inc. is acting as financial advisor to Anatolia with respect
to the Transaction, and has provided the board of directors of Anatolia with its
verbal opinion that, subject to its review of the final form of documents
effecting the Transaction, the consideration payable pursuant to the Arrangement
Agreement is fair, from a financial point of view, to the shareholders of
Anatolia.


About Cub Energy Inc.

Cub is an upstream oil and gas company with 180,000 net acres in twelve
exploration and production licences within the two major producing basins of
Ukraine. Cub's strategy is to implement western technology and capital, combined
with local expertise and ownership, to increase value in its undeveloped land
base, creating and further building a portfolio of producing oil and gas assets
within a high pricing environment.


For further information on Cub please contact us or visit our website:
www.cubenergyinc.com.


About Anatolia Energy Corp.

Anatolia is an international oil and gas company engaged in the exploration and
development of oil and gas assets in Turkey. Anatolia has the right, pursuant to
its joint venture agreements with Calik Enerji San. ve Tic. AS., the
wholly-owned oil and gas subsidiary of the large Turkish conglomerate Calik
Holding A.S., to earn working interests between 25% and 50% in two development
licences and working interests of 50% in nine exploration licences covering
1,162,856 gross acres of land in Turkey's proven Southeastern oil basin.
Anatolia is focused on four play types in Turkey namely the Silurian Dadas shale
oil trend, Paleozoic Bedinan sand trend, Cretaceous Mardin strike slip trend and
Garzan reef trend. The Dadas formation in southeast Turkey is an extension of
the prolific Silurian source rocks of the Middle East.


For further information on Anatolia please contact us or visit our website:
www.anatoliaenergy.com.


Reader Advisory

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. There is no
certainty that it will be commercially viable to produce any portion of the
prospective resources.


This news release contains certain "forward-looking information" within the
meaning of applicable securities law. All statements other than statements of
historical fact are considered forward-looking statements. Forward-looking
information is frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other similar
words, or statements that certain events or conditions "may" or "will" occur.
Cub and Anatolia believe that the expectations reflected in the forward-looking
information are reasonable; however there can be no assurance those expectations
will prove to be correct. Cub and Anatolia cannot guarantee future results,
performance or achievements. Consequently, there is no representation that the
actual results achieved will be the same, in whole or in part, as those set out
in the forward-looking information.


Forward-looking information is based on the opinions and estimates of management
at the date the statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or results to
differ materially from those anticipated in the forward-looking information.
Some of the risks and other factors that could cause the results to differ
materially from those expressed in the forward-looking information include, but
are not limited to: general economic conditions in Ukraine and Turkey and
globally; industry conditions, including fluctuations in the prices of natural
gas; governmental regulation of the natural gas industry, including
environmental regulation; unanticipated operating events or performance which
can reduce production or cause production to be shut in or delayed; failure to
obtain approval of the Transaction from Anatolia shareholders; failure to obtain
industry partner and other third party consents and approvals, if and when
required; competition for and/or inability to retain drilling rigs and other
services; the availability of capital on acceptable terms; failure to obtain
approvals from regulatory authorities; stock market volatility; volatility in
market prices for natural gas; liabilities inherent in natural gas operations;
competition for, among other things, capital, acquisitions of reserves,
undeveloped lands, skilled personnel and supplies; incorrect assessments of the
value of acquisitions; geological, technical, drilling, processing and
transportation problems; changes in tax laws and incentive programs relating to
the natural gas industry; failure to realize the anticipated benefits of
acquisitions and dispositions; and the other factors. Readers are cautioned that
this list of risk factors should not be construed as exhaustive.


This cautionary statement expressly qualifies the forward-looking information
contained in this news release. Cub and Anatolia undertake no duty to update any
of the forward-looking information to conform such information to actual results
or to changes in Cub's or Anatolia's respective expectations except as otherwise
required by applicable securities legislation. Readers are cautioned not to
place undue reliance on forward-looking information.


To view the fact sheet associated with this press release, please visit the
following link:
http://media3.marketwire.com/docs/CubEnergyAnatoliafactsheet.pdf.


FOR FURTHER INFORMATION PLEASE CONTACT: 
Cub Energy Inc.
Lionel C. McBee
Director of Investor Relations
(713) 677-0439
lionel.mcbee@cubenergyinc.com


Cub Energy Inc.
Mikhail Afendikov
Chairman and Chief Executive Officer
(713) 677-0439
mikhail.afendikov@cubenergyinc.com
www.cubenergyinc.com


Anatolia Energy Corp.
Bob Spring
Chief Executive Officer
(403) 802-0770 ext. 224
bspring@anatoliaenergy.com


Anatolia Energy Corp.
Peter Argiris
Vice-President, Business Development
(403) 802-0770 ext. 225
pargiris@anatoliaenergy.com
www.anatoliaenergy.com

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