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CREDO Petroleum Corporation (NASDAQ: CRED), an independent oil and gas
company, reported today that the company and certain of its directors
have entered into agreements with RCH Energy Opportunity Fund II, LP (“RCH”
or the “Fund”) a
private investment fund based in Houston, Texas, whereby RCH will
acquire approximately 17.5% of CREDO’s
outstanding stock. Closing under the agreements is subject to certain
customary closing conditions.
RCH will acquire a total of 1,837,000 shares of the company’s
stock at a price of $14.50 per share, representing a 13% premium to the
stock’s 30-day moving average. CREDO will sell
1,150,000 newly issued common shares, or approximately 11% of the company’s
total outstanding shares on a proforma basis. Directors Huffman, Stevens
and Skewes will sell 425,000, 192,000 and 70,000 shares, respectively,
or about 40% of the CREDO shares held by Mr. Huffman and his family and
approximately 50% of the shares held by Messrs. Stevens and Skewes. CREDO’s
Board will be expanded from six to seven members and RCH will nominate
two directors, one to fill a current vacancy on the Board and another to
fill the newly created Board seat.
All of the shares acquired by RCH will initially be restricted and not
freely tradable in the open market, however, RCH will have certain
future registration rights. The company agreement contains a standstill
provision providing that RCH will not purchase additional CREDO stock
for a period of two years from the date of the agreement without the
consent of the Board of Directors.
James T. Huffman, CREDO’s Chief Executive
Officer and Chairman of the Board of Directors, stated, “We
are very pleased to have RCH as an investor and strategic partner. RCH
is a successful and highly regarded investor in oil and gas companies,
both public and private. We are excited about the knowledge and
experience they will bring to our business.”
Mark Meyer, President of RR Advisors, LLC, the General Partner of the
Fund, said, “We look forward to entering into
a long-term partnership with CREDO and its shareholders. Jim Huffman and
his team have built a solid asset base and a company which is uniquely
positioned in the industry. We intend to help the company further
exploit its existing opportunity set, accelerate growth through the
capture of new opportunities, and enhance value for all of its
shareholders.”
This transaction represents the culmination of an extensive evaluation
process started last year whereby the company’s
management and directors, in consultation with Merrill Lynch & Co., have
thoroughly reviewed and explored strategic options and alternatives
available to CREDO. In addition to new capital, this transaction brings
directors to CREDO’s Board who have extensive
technical engineering, financial and capital market experience in the
oil and gas industry.
“CREDO has a strong asset base with excellent
growth potential in both its conventional oil and gas and intellectual
property assets,” Huffman said. “The
RCH transaction will allow us to accelerate development of our oil and
gas properties and to consolidate our Calliope ownership. In addition,
both CREDO and RCH expect this relationship to substantially increase
CREDO’s opportunities to monetize Calliope.”
Merrill Lynch & CO. represented CREDO in the transaction and Davis
Graham & Stubbs LLP acted as legal counsel to CREDO.
Proceeds from the RCH investment totaling $16,675,000 will be used,
among other things, to fund increased exploration and development of
properties where the company currently has unbooked reserves. In
addition, the company will consolidate ownership in its Calliope Gas
Recovery System by purchasing the Calliope patents together with the
13.75% ownership in Calliope and related intellectual property that the
company does not already own.
CREDO and RCH previously entered into a Calliope joint venture agreement
in January of this year. Subsequent discussions ultimately culminated in
RCH purchasing a significant stake in the company and becoming part of
CREDO’s policy and direction-setting team.
The new relationship with RCH as an equity owner and decision making
partner is intended to meaningfully expand the existing relationship,
creating an enhanced opportunity for CREDO to present, promote and
implement Calliope as a growth opportunity to a larger universe of
private and public oil and gas companies.
About CREDO Petroleum Corporation —
CREDO Petroleum Corporation is a publicly traded independent energy
company headquartered in Denver, Colorado. The company is engaged in the
exploration for and the acquisition, development and marketing of
natural gas and crude oil and in application of its patented Calliope
Gas Recovery System. CREDO owns working and royalty interests in
approximately 1,445 wells. The company’s
stock is traded on the NASDAQ System under the symbol “CRED”
and is quoted daily in the “NASDAQ Global
Market” section of The Wall Street Journal.
About RCH Energy Opportunity Fund II, LLP - RCH Energy
Opportunity Fund II, L.P. is a private investment fund headquartered in
Houston, Texas that focuses exclusively on the oil and gas sector. The
Fund’s investment in CREDO Petroleum
Corporation is managed by John Rigas and Mark Meyer, both of whom have
extensive operating, technical and financial experience in the oil and
gas industry.
For more information about the company, visit http://www.credopetroleum.com.
This press release includes certain statements that may be deemed to
be “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements included in this press release, other
than statements of historical facts, address matters that the company
reasonably expects, believes or anticipates will or may occur in the
future. Such statements are subject to various assumptions, risks
and uncertainties, many of which are beyond the control of the company.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may differ
materially from those described in the forward-looking statements. Investors
are encouraged to read the “Forward-Looking
Statements” and “Risk
Factors” sections included in the company’s
2007 Annual Report on Form 10-K for more information. Although
the company may from time to time voluntarily update its prior forward
looking statements, it disclaims any commitment to do so except as
required by securities laws.