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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Obsidian Energy Ltd | TSX:OBE | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.01 | 0.10% | 10.13 | 10.12 | 10.13 | 10.21 | 10.03 | 10.08 | 57,854 | 20:50:04 |
Bonterra shareholders will benefit from being part of a stronger, more efficient Cardium Champion
The combined entity has many positive attributes that lead to a clear path to significant share price appreciation
Bonterra has no standalone plan to create shareholder value; only to add more leverage and hope for better commodity prices which is clearly inferior to our Offer
Bonterra's Board is conflicted and not working in the best interest of its shareholders
Obsidian Energy is encouraged by initial discussions with Bonterra shareholders since making the Offer
Proposed Bonterra EDC and BDC financings will restrict Bonterra's ability to pay cash dividends for up to four years
CALGARY, AB, Oct. 14, 2020 /PRNewswire/ - OBSIDIAN ENERGY LTD. (TSX: OBE) (OTCQX: OBELF) ("Obsidian Energy", "we", or "our") today wrote the following letter to Bonterra Energy Corp. ("Bonterra") shareholders to ensure they had a clear understanding of the benefits of being part of the Cardium Champion, they were aware of the actions of the Bonterra Board of Directors and that they were able to make their own, fully-informed decision on Obsidian Energy's offer (the "Offer") to purchase all of the outstanding Bonterra common shares ("Bonterra Shares") in consideration for two Obsidian Energy common shares ("Obsidian Shares") for each Bonterra Share tendered to the Offer.
October 14, 2020
Dear Bonterra Shareholders,
Last week, Bonterra Energy Corp.'s Board of Directors (the "Bonterra Board") made an ill-informed recommendation that you reject our offer (the "Offer") to purchase all of Bonterra's issued and outstanding shares for consideration of two common shares of Obsidian Energy Ltd. for each Bonterra share. Despite having destroyed approximately $1 billion in shareholder value over the last four years in no small part due to the mismanagement of Bonterra's balance sheet, which has resulted in the elimination of the monthly dividend payment to Bonterra's shareholders, Bonterra's Board has failed to develop an alternative strategy to deliver improvements to their balance sheet and drive equity share price appreciation. Their only plan is to add more debt to an already over-leveraged balance sheet, in their attempt to preserve the status quo, all with obvious disregard to your best interests and the best interests of Bonterra.
We believe that our Offer provides a compelling opportunity for you to own a substantial stake in a stronger combined entity with an improved financial position, enhanced access to capital, greater scale and future growth opportunities. As we have previously disclosed in our Offer letter and corresponding shareholder presentation, we estimate the implied value of Bonterra shares could increase by over ~375% to $6.40 per Bonterra share by the end of 2021 and by over 670% to ~$10.40 per Bonterra share by the end of 2022, as our plan is executed and recognized by equity markets.1 Accordingly, we strongly believe that owning shares in the combined entity will provide far greater value – and significantly less risk – than you will face if Bonterra remains a standalone company. Our early discussions with Bonterra shareholders have strengthened our belief that informed shareholders see the merits of our Offer and we remain committed to completing this transaction.
Given the extensive discussions we've had with our lenders and noteholders, including sharing our detailed business plan with them, we remain confident in our ability to obtain formal approval for our Offer, though no formal approval has yet been requested. We offered to share our detailed financing plan with Bonterra and their financial advisor under the proviso that there was good faith intent on Bonterra's part to work towards a definitive transaction, but they refused to engage. As a result, given the Bonterra Board's unwillingness to consider a value-creating combination with Obsidian Energy or any other counterparty, and their lack of strategy to reduce leverage or improve per-share value for Bonterra shareholders in the future, we are providing further information below to explain why we believe our Offer is in your best interests.
THE OFFER IS IN THE BEST INTERESTS OF BONTERRA SHAREHOLDERS
Acceptance of our Offer will create "The Cardium Champion" with a far superior future than Bonterra could achieve on a standalone basis. You will benefit from being part of a combined entity with a lower cost structure, improved capital efficiency and the ability to generate substantially more free cash flow allowing for accelerated debt repayment, an improved financial position, and a clear path to significant share price appreciation. Our Offer provides Bonterra shareholders with an outcome that is both accretive and de-leveraging – a rare combination for share exchange transactions.
Bonterra shareholders will benefit more from the combined entity than Bonterra remaining a standalone company
The Offer is a fair, compelling opportunity to create a stronger, well positioned company
IN CONTRAST, BONTERRA HAS NO PLAN TO REDUCE DEBT OR CREATE SHAREHOLDER VALUE
Adding more debt is not a sustainable business strategy
Bonterra's claims of $104 million of new credit availability is highly misleading and significantly overstates Bonterra's potential incremental liquidity
Restrictions on Bonterra's proposed EDC and BDC funding prevent it from paying cash dividends or buying back shares for up to four years
Obsidian Energy's operational performance is superior to Bonterra's
BONTERRA'S BOARD IS ENTRENCHED AND NOT WORKING IN THE BEST INTERESTS OF SHAREHOLDERS
We acknowledge that George Fink, Bonterra's Chairman and CEO, founded Bonterra and has led Bonterra since its inception. We respect the high-quality asset position that Mr. Fink has assembled for Bonterra shareholders. However, Bonterra is a public company owned by its shareholders, and consistent with their fiduciary obligations, Mr. Fink and the Bonterra Board have a responsibility in the face of a bona fide offer, such as ours, to consider all alternatives to maximize value for Bonterra and its stakeholders. They are failing to do so. We strongly believe that a merger between Obsidian Energy and Bonterra is in your best interest.
The Bonterra Board is entrenched and not willing to engage to understand the merits of our Offer
The Bonterra Board is conflicted and has put their own self interests ahead of shareholders
THE OPINION FROM BONTERRA'S FINANCIAL ADVISOR IS INADEQUATE
The reasons provided by the Bonterra Board primarily center on the fact that Bonterra's financial advisor has provided an opinion that the consideration offered pursuant to the Offer is inadequate, from a financial point of view, to Bonterra shareholders. However, the financial opinion is inadequate for the following reasons:
***
Our Offer is open for acceptance until 5:00 p.m. (Mountain Standard Time) on January 4, 2021, unless it is extended, accelerated or withdrawn.
For full information regarding the Offer, please read our Offer to Purchase and Take-Over Bid Circular dated September 21, 2020 that has been filed on www.SEDAR.com and on our website at https://www.obsidianenergy.com/letter-to-bne-shareholders/circular/.
If you have questions, you can contact Kingsdale Advisors, our information agent and depositary for the Offer, at 1-888-564-7333 (North American Toll-Free Number) or +1-416-867-2272 (Outside North America) or via email at contactus@kingsdaleadvisors.com.
Sincerely yours,
(signed) "Stephen E. Loukas"
Stephen E. Loukas
Interim President and Chief Executive Officer
Obsidian Energy Ltd.
ADDITIONAL READER ADVISORIES
NO OFFER OR SOLICITATION
This news release does not constitute an offer to buy or sell, or an invitation or a solicitation of an offer to buy or sell, any securities of Obsidian Energy or Bonterra. The Offer is made exclusively by means of, and subject to the terms and conditions set out in, the offer to purchase and take-over bid circular and related offer documents (the "Offer Documents"). The Offer Documents have been mailed to Bonterra shareholders and have also been filed with the Canadian and United States securities regulators and are available under Obsidian Energy's SEDAR profile at www.sedar.com, in the United States on EDGAR at www.sec.gov and on Obsidian Energy's website at www.obsidianenergy.com. The Offer is not made or directed to, nor will deposits of Bonterra Shares be accepted from or on behalf of, holders of Bonterra Shares in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction.
ABOUT THE OFFER
The Offer is open for acceptance until 5:00 p.m. (Mountain Standard Time) on January 4, 2021, unless extended, accelerated or withdrawn by Obsidian Energy.
As set out in further detail in the Offer Documents, the Offer is subject to certain conditions, including: that the Bonterra Shares validly deposited to the Offer, and not withdrawn, represent at least 66 2/3% of the then outstanding Bonterra Shares (on a fully-diluted basis) and certain regulatory and third party approvals (as outlined in the Offer Documents) shall have been obtained, including Obsidian Energy shareholders approving, as required by the rules of the Toronto Stock Exchange, the issuance of the Obsidian Shares to be distributed by Obsidian Energy in connection with the Offer, and other customary conditions. Subject to applicable law, Obsidian Energy reserves the right to withdraw, accelerate or extend the Offer and to not take up and pay for any Bonterra Shares deposited under the Offer unless each of the conditions of the Offer is satisfied or waived by Obsidian Energy at or prior to the expiry of the Offer. Bonterra shareholders are strongly encouraged to read the Offer Documents carefully and in their entirety since they contain additional important information regarding Obsidian Energy and the terms and conditions of the Offer as well as detailed instructions on how Bonterra shareholders can tender their Bonterra Shares to the Offer.
Questions? Bonterra shareholders should contact Kingsdale Advisors, the information agent and depositary for the Offer, at 1-888-564-7333 (North American Toll-Free Number) or +1-416-867-2272 (Outside North America) or via email at contactus@kingsdaleadvisors.com.
The offer and sale of Obsidian Shares pursuant to the Offer is subject to a registration statement (the "Registration Statement") filed with the United States Securities and Exchange Commission (the "SEC") under the U.S. Securities Act of 1933, as amended. The Registration Statement includes various documents related to such offer and sale. OBSIDIAN ENERGY URGES INVESTORS AND SHAREHOLDERS OF BONTERRA TO READ THE REGISTRATION STATEMENT AND ANY AND ALL OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE OFFER AND SALE OF OBSIDIAN SHARES AS THOSE DOCUMENTS BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain a free copy of such registration statement, as well as other relevant filings regarding Obsidian Energy or the Offer, at the SEC's website (www.sec.gov) under the issuer profile for Obsidian Energy, or on request without charge from the Corporate Secretary of Obsidian Energy at Suite 200, 207 – 9th Avenue, SW, Calgary, Alberta T2P 1K3.
Copies of the Offer Documents may also be obtained free of charge upon request from the Corporate Secretary of Obsidian Energy at Suite 200, 207 – 9th Avenue, SW, Calgary, Alberta T2P 1K3. The Offer Documents are also available in Canada on SEDAR at www.sedar.com, in the United States on EDGAR at www.sec.com and on Obsidian Energy's website at www.obsidianenergy.com.
OIL AND GAS INFORMATION ADVISORY
Boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.
NON-GAAP MEASURES
This news release contains references to the terms EBITDA, Enterprise Value (or EV), Net Debt, Debt, funds flow, cash flow, free cash flow, and netbacks which do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore are considered non-GAAP measures; accordingly, they may not be comparable to similar measures provided by other issuers. EBITDA is net earnings (loss) plus finance expenses (income), provisions for (recovery of) income taxes, and depletion, depreciation and amortization. Enterprise Value is a measure of total value of the applicable company calculated by aggregating the market value of its common shares at a specific date, adding its total Debt and subtracting its cash and cash and cash equivalents. Debt is bank debt, notes and, solely in respect of Bonterra, subordinated debt (including the subordinated note(s) issued by Bonterra to private related party investors). Net Debt is bank debt or long-term debt, plus net working capital (surplus)/deficit, and is a measure of leverage and liquidity. Funds flow is cash flow from operating activities before changes in non-cash working capital, decommissioning expenditures, onerous office lease settlements, the effects of financing related transactions from foreign exchange contracts and debt repayments, restructuring charges and certain other expenses and is representative of cash related to continuing operations. Funds flow is used to assess the combined entity's ability to fund planned capital programs. Cash flow is funds flow from operations before changes in any non-cash working capital changes and decommissioning expenditures. Free cash flow is funds flow from operations less capital and decommissioning expenditures. Netback is the per unit of production amount of revenue less royalties, operating expenses, transportation expenses and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects.
ABBREVIATIONS | |
AECO | Alberta Energy Company |
Bbl/d | barrels per day |
boe | barrel of oil equivalent |
boe/d | barrel of oil equivalent per day |
LTM | last twelve months |
MMBtu | million British Thermal Units |
WTI | West Texas Intermediate |
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document constitute forward-looking statements or information (collectively "forward-looking statements"). Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "budget", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "objective", "aim", "potential", "target" and similar words suggesting future events or future performance. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: the timing for acceptance of the Offer; the satisfaction of the conditions to the Offer; the anticipated strategic, operational and financial benefits and synergies that may result from the proposed combination between Obsidian Energy and Bonterra, including as to expected cost synergies, accretion, and expectations for each of the entities on a stand-alone basis; the resulting benefits of the Offer to Obsidian Energy and Bonterra shareholders; that the Offer is the better option compared to adding more debt to an already over-levered balance sheet for Bonterra shareholders; that Bonterra has no plan to create shareholder value; what the credit commitments announced by Bonterra can and cannot be used for and the restrictions to be imposed on Bonterra pursuant to the credit commitments; and that we are confident in gaining lender and noteholder approval for the Offer. In addition, all other statements and other information that address the Offer (including satisfaction of the Offer conditions) are forward-looking statements.
With respect to forward-looking statements contained in this document, Obsidian Energy has made assumptions regarding, among other things: that both Obsidian Energy and Bonterra, each of which are subject to short term extensions on their respective senior revolving credit facilities, continue to obtain extensions in respect of their thereof and otherwise continue to satisfy the applicable covenants under such facilities, including following the completion of the Offer and any subsequent second step transaction, the ability to complete the Offer and the proposed combination, integrate Obsidian Energy's and Bonterra's businesses and operations and realize financial, operational and other synergies from the proposed combination; that each of Obsidian Energy, Bonterra and, following the completion of the Offer, the combined entity will have the ability to continue as a going concern going forward and realize its assets and discharge its liabilities in the normal course of business; the impact of regional and/or global health related events, including the ongoing COVID-19 pandemic, on energy demand; that the combined entity's operations and production will not be disrupted by circumstances attributable to the COVID-19 pandemic and the responses of governments and the public to the pandemic; that Bonterra's publicly available information, including it public reports and securities filings as of October 13, 2020, are accurate and complete; global energy policies going forward, including the continued agreement of members of OPEC, Russia and other nations to adhere to existing production quotas or further reduce production quotas; Obsidian Energy's ability to execute on its plans as described herein and in its other disclosure documents and the impact that the successful execution of such plans will have on Obsidian Energy and, following the combination, the combined entity and the combined entities' respective stakeholders; that the current commodity price and foreign exchange environment will continue or improve; future capital expenditure levels; future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil and natural gas prices; future crude oil, natural gas liquids and natural gas production levels, including that we will not be required to shut-in additional production due to the continuation of low commodity prices or the further deterioration of commodity prices and our expectations regarding when commodity prices will improve such that shut-in properties can be returned to production; future exchange rates and interest rates; future debt levels; the ability to execute our capital programs as planned without significant adverse impacts from various factors beyond our control, including weather, wild fires, infrastructure access and delays in obtaining regulatory approvals and third party consents; the combined entity's ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; the combined entity's ability to market our oil and natural gas successfully to current and new customers; the combined entity's ability to obtain financing on acceptable terms; and the combined entity's ability to add production and reserves through our development and exploitation activities.
Although Obsidian Energy believes that the expectations reflected in the forward-looking statements contained in this document, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the forward-looking statements contained herein will not be correct, which may cause actual performance and financial results to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Such assumptions, risks and uncertainties are described in Obsidian Energy's Annual Information Form and other public filings, available in Canada on SEDAR at www.sedar.com and in the United States on EDGAR at www.sec.gov. Readers are cautioned that such assumptions, risks and uncertainties should not be construed as exhaustive.
The forward-looking statements contained in this document speak only as of the date of this document. Except as expressly required by applicable securities laws, we do not undertake any obligation to publicly update any forward-looking statements. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
All references to $ or C$ in this news release are to Canadian dollars and all references in this news release to US$ are to U.S. dollars.
1 Assumes US$50 WTI and $1.95/MMBtu AECO and 4.5x Enterprise Value to 2021 & 2022 EBITDA. |
2 Assumes US$50/bbl WTI and $1.95/MMBtu AECO 2021 – 2023. |
3 Assumes US$50/bbl WTI and $1.95/MMBtu AECO 2021 – 2024. |
4 Total cash costs include operating costs, transportation costs and G&A expenses, refers to Q2 2020 compared to Q3 2019. |
5 Source: Obsidian Energy and Bonterra Q2 2020 Management's Discussion and Analysis, refers to Q2 2020 compared to Q3 2019 and includes risk management gains and losses. |
6 Breakeven WTI price defined as US$ WTI/bbl price required to fund sustaining capital to maintain flat production within operating cash flow. WTI / bbl breakeven forecast assumes US$4.00/bbl Edmonton Par differentials, US$14.00/bbl WCS, US$1.00/MMBtu AECO differentials and 1.36x C$/US$ foreign exchange rate. |
7 For a full description of the background of the Offer, see the Offer to Purchase and Take-Over Bid Circular dated September 21, 2020. |
8 "I am not saying we don't want to do a deal, but we don't want to do a deal that they proposed at this point. It's too much in favour of their side," [Mr. Fink] said. "There are a lot of positives putting the two entitles together, but not the proposal that's in front of us right now." Calgary Herald, September 4, 2020. |
9 Source: Bonterra insider filings on www.SEDI.ca. |
10 Source: Bonterra's Management Information Circular dated April 9, 2020 and Bonterra news release dated March 11, 2020. |
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SOURCE Obsidian Energy Ltd.
Copyright 2020 PR Newswire
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