Perth ASX-listed oil company, 88 Energy, has upped its off-market, all-scrip bid it made for fellow ASX-listed Alaskan oil chaser, XCD Energy last week and has now secured the unanimous support of XCD’s board. Assuming the deal is accepted by shareholders, the newly combined group will control a significantly larger gross lease foot print on Alaska’s North Slope that is famous for its oil endowment.
The offer remains the subject of a formal bidders statement, the absence of a superior offer, an independent experts report judging the offer as fair and reasonable, or at least reasonable and at least 90 per cent acceptances from both XCD Energy shareholders and listed option holders.
The David Wall-led company last week offered 1.67 new 88 Energy shares for every existing XCD Energy share held and 0.5 new 88 Energy shares for every XCD Energy listed option held. It would appear that both boards have bunkered down since then to thrash out an improved offer which has resulted in a revised offer from 88 Energy.
The revised, XCD-board-endorsed offer now sits at 2.4 new 88 Energy shares for every XCD Energy share held, plus 0.7 new 88 Energy shares for every XCD Energy listed option held. 88 Energy said the new share offer values XCD shares at 1.2 cents each, representing a 71 per cent premium to XCD’s closing share price yesterday of 0.7 cents and a 140 per cent premium to the closing price of XCD shares on April 24th.
The increased offer also represents a 143 per-cent premium to XCD’s volume weighted average share price over the last 30 days. 88 Energy said that XCD shareholders would now hold up to 20 per cent of the newly-combined group if the offer was successful.
88 Energy’s improved offer of 0.7 new 88 Energy shares for every listed XCD Energy option held, values the listed options at 0.35 cents per option. The revised offer represents a 116 per cent premium to the volume-weighted average price of all options traded since the options were listed on February 25th, up to and and including trades on May 6th.
With the takeover now looking more likely, the combined group will have a material working interest in around 680,000 gross acres, or over 2,700 square kilometres under lease in one of the world’s super basins, with the giant, multi-billion barrel Prudhoe Bay oil field just up the road.
The deal represents a significant 60 per cent increase in net land holdings for 88 Energy under the control of the combined companies, across three complimentary project areas.
XCD Energy has a 100 per cent working interest in 195,373 acres of leases in its Peregrine project that lay about 40 kilometres south of the giant Willow oil field that boasts 750 million barrels of oil reserves. This lease position is also approximately 40km west of and along on trend from 88 Energy’s Icewine project where it has control of 480,000 gross acres, some of which even straddle the trans-Alaskan pipeline. 88 Energy also has its Yukon project to the east of Icewine to include in the mix.
Whilst XCD Energy’s leases are 100% owned by the company, some of 88 Energy’s leases have other working interest partners, so the total number of net acres currently held by 88 Energy is closer to 330,000 across its portfolio.
ConocoPhillips recently reported a new oil discovery at its Harpoon prospect within its own lease position on Alaska’s North Slope. XCD Energy said that Harpoon is located only 15km northwest of XCD’s Harrier prospect within the Peregrine project. The prolific Nanushuk sequence is also the target of Oil Search’s drilling campaign at its nearby lease position.
88 Energy said the take over offer was well supported by major shareholders of XCD Energy with a number of entities controlling almost 18.5% of the shares on issue and 6.8% of listed options already entering into a pre-bid acceptance agreement with 88 Energy.
In fact, 88 Energy’s MD, David Wall already holds 4.2 per cent of XCD Energy shares, whilst 88 Energy’s non-executive Chairman, Michael Evens holds another 0.57 per cent of XCD.
88 Energy Managing Director, Dave Wall said: “In a combined company, XCD Energy shareholders and listed option holders will be able to leverage from 88 Energy’s geological and operational expertise, specific to the North Slope of Alaska, where we have drilled four wells as Operator, safely and within budget and acquired several 2D and 3D seismic surveys over the last five years.”
“88 Energy’s Board is confident that merging the assets of 88 Energy and XCD Energy, combined with the potential upside offered, places the combined group in a strong position to fill the growing investment void in the ASX / AIM listed oil and gas sector.”
XCD Energy Chairman, Mr Peter Stickland said: “The transaction is compelling for XCD Energy shareholders. In addition to a significant premium, the transaction provides XCD Energy shareholders with the opportunity to become shareholders of a company with significantly increased scale and demonstrated operational capability that is focussed on the world class oil potential of the North Slope of Alaska.”
“It allows our shareholders to continue to have a material interest in the upside associated with the Brookian oil plays, while mitigating and diversifying the subsurface and execution exploration risks.”
“The XCD Energy Board believes that this transaction is in the best interests of XCD Energy and unanimously recommends it to our shareholders, in the absence of a superior proposal and subject to the independent expert concluding that the offer is fair and reasonable, or not fair but reasonable.”
88 Energy’s strategy to create something of an oil exploration powerhouse in the lucrative North Slope of Alaska now looks closer to being delivered. Size does matter in North American oil deals and this merger will deliver that in spades.
Almost 700,000 gross acres of land in the uber-oily region across three projects. Project Icewine, the Yukon leases and the Peregrine project may even end up looking enticing to some of the oil majors that are active in the region.
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