CALGARY, ALBERTA--(Marketwire - Oct. 13,
2009) - NAL Oil & Gas Trust (the "Trust" or "NAL") (TSX:NAE.UN) and
Breaker Energy Ltd. ("Breaker") (TSX:WAV) jointly announce that they
have entered into an arrangement agreement (the "Arrangement Agreement")
pursuant to which NAL will acquire all of the issued and outstanding
common shares of Breaker (the "Transaction") by way of Plan of
Arrangement under the Business Corporations Act (Alberta) (the
"Arrangement"). The total consideration for the Transaction is
approximately $403 million which will be paid through the issuance of
approximately 24.7 million trust units of the Trust representing $310
million at a deemed price of $12.54 per trust unit and the assumption of
an estimated $93 million in Breaker net debt. Based on an exchange
ratio of 0.475 NAL trust units for each Breaker common share, the
consideration represents a price of approximately $5.96 per Breaker
common share and a 12% premium over the preceding 20-day volume weighted
average trading prices for Breaker common shares and NAL units. This
transaction is expected to close on or about December 10, 2009.
NAL's President and CEO, Mr. Andrew Wiswell commented: "The
acquisition of Breaker represents another significant step in the
repositioning of NAL to convert to a corporation in 2011. Our game plan
has been to add quality assets with upside opportunity through internal
investment and acquisitions, and Breaker certainly fits this direction.
Upon completing the acquisition of Breaker, NAL will have finalized four
significant transactions in 2009, all of which have enhanced NAL's
portfolio. Other transactions this year include the Cardium oil joint
venture, the acquisition of Alberta Clipper, and the acquisition of
Spearpoint Energy."
Mr. Dan O'Neil, President and CEO of Breaker Energy, commented
"Breaker has achieved significant growth over the past five years,
assembling a high quality, long life asset base which is over 90%
operated and has tremendous upside potential. Our asset base, which is
currently weighted 45% to oil, is a great fit to NAL's current asset
base. Our assets under the financial position of NAL will allow the
combined entity to high-grade its opportunities and fully develop and
expand Breaker's potential in a timely manner." The Board of Directors
of Breaker unanimously supports the Transaction.
A presentation containing corporate maps and transaction highlights is available on NAL's website at: www.nal.ca.
PROFORMA SUMMARY
BREAKER(1) NAL PROFORMA
-----------------------------------
2009 Avg. Production (boe/d) 6,700 23,500(2) 30,200
Production Weighting (%)
Oil / NGL 45 52 50
Natural Gas 55 48 50
Reserves (MMboe)
Proved 12 51 63
Probable 11 22 33
-----------------------------------
Proved plus Probable 23 73 96
Net Undeveloped Land ('000) 140 410 550
Tax Pools ($MM) 270(3) 936 1,206
Notes: (1) NAL internal estimates; (2) Mid-point of 2009 full year guidance;
(3) As at June 30, 2009.
KEY ACQUISITION BENEFITS
- Broadens NAL's opportunity base by adding two new core areas at
oil-focused Irricana in central Alberta and the Fireweed natural gas
property in northeast British Columbia which, together, represent 60-65%
of Breaker's current production. Breaker also has production and
attractive opportunities at Girouxville, East Prairie and Provost.
- Provides a significant inventory of low risk development
opportunities which are complementary to NAL's horizontal drilling
experience in Saskatchewan and with the multi-stage frac applications in
the Cardium play in central Alberta. Breaker's assets are characterized
by significant resources in place with low current recovery factors and
the opportunity to increase recovery factors over time.
- Operated production (over 90%) with high working interest.
- Production of 6,700 boe/d, 45% weighted toward oil and liquids.
- Adds 23 million boe of proved plus probable reserves - a 32%
increase over NAL's current reserve base with future potential to add
incremental reserves in all areas.
- Contributes approximately 140,000 net undeveloped acres - a 34% increase over NAL's current undeveloped land inventory.
- Maintains NAL's balance sheet strength and flexibility to pursue future acquisitions.
- The Transaction is accretive to cash flow, production, reserves
and net asset value on a per unit basis while increasing the Trust's
proved and probable reserve life index ("RLI").
ASSET DESCRIPTION
Breaker has identified approximately 400 (350 net) low risk
development prospects including 190 horizontal resource style locations.
More specifically, production in NAL's central Alberta region will
be increased by approximately 2,900 boe/d with the addition of Breaker's
Irricana and Millard properties. At Irricana, the 38 degree API Wabamun
oil pool has a current recovery factor of approximately 6% with
potential upside of 5-8 mmboe of recoverable oil (NAL internal estimate)
through already approved reduced spacing and waterflood application.
In northeast British Columbia ("NEBC"), the Fireweed area will add
approximately 1,600 boe/d of current production and offer long-term gas
opportunities with 50-100 bcf (NAL internal estimate) of remaining
recoverable gas and associated liquids upside in the Doig. During 2009,
Breaker has drilled two prolific horizontal multi-frac wells that have
further proven up the viability of the play. The Fireweed asset is
highly complementary to the Trutch and Beg assets acquired by NAL from
Alberta Clipper in May 2009, which together with Sukunka will form a
4,500 boe/d core area in NEBC.
MAP OF CORE AREAS
To view a map of core areas, please visit the following link:
http://media3.marketwire.com/docs/map_of_core_areas.pdf
RESERVES
Consistent with the Trust's conservative reserve booking
methodology, NAL's internal evaluation of Breaker's reserves effective
October 1, 2009 recognizes 23 MMboe of proved plus probable reserves,
52% of which are classified as proved. The reserves are weighted 59%
toward natural gas.
Going forward, NAL has identified opportunities for reserves
additions through incremental drilling and increased recovery factors.
RESERVE LIFE INDEX
It is anticipated that NAL's P+P RLI will increase as a result of the Transaction.
NAL Breaker NAL Pro forma
Proved RLI (years) 5.9 4.9 5.7
Proved and Probable RLI (years) 8.5 9.4 8.7
UNDEVELOPED LAND
The Transaction will add approximately 140,000 net undeveloped acres
(average WI of 80%) to the Trust, an increase of 34% over NAL's current
undeveloped land position.
ACQUISITION METRICS
The Transaction is accretive to production, reserves and net asset
value on a per trust unit basis in 2010. After adjusting for undeveloped
land internally valued at $14 million, the acquisition metrics are as
follows:
Production (6,700 boe/d):
- $58,000 per boe/d
Reserves:
- $32.42 per proved boe
- $16.91 per proved plus probable boe
2010 OUTLOOK
NAL's full year 2009 production is expected to average between
23,500 - 24,000 boe/d. With an expected closing date of December 10,
2009 the impact of the Transaction to NAL's average annual production is
likely to be minimal. NAL's 2009 pro forma production in 2009 exit rate
is expected to be in the 31,000 boe/d range. As is customary, NAL will
provide its complete 2010 guidance in mid-January 2010.
BOARD RECOMMENDATIONS
The Board of Directors of NAL Energy Ltd. ("NAL Energy") has
unanimously approved the Transaction. The Board of Directors of Breaker
has also unanimously approved the Transaction and, based in part on the
fairness opinion from Breaker's financial advisor discussed below,
determined that the Transaction is in the best interests of Breaker and
the holders of its common shares and is fair from a financial point of
view to such holders. The Board of Directors of Breaker has resolved to
recommend that Breaker shareholders vote their common shares in favour
of the Transaction. All of the directors and officers of Breaker,
collectively holding approximately 7% of the outstanding common shares
of Breaker, have entered into agreements to vote their Breaker common
shares in favour of the Transaction. The Arrangement Agreement provides
for a non-completion fee of $12 million to be payable by Breaker to NAL
in certain circumstances.
Closing of the Transaction is expected to occur on or about December
10, 2009, subject to the satisfaction of certain conditions including
approval of the Transaction by Breaker's shareholders and the Court of
Queen's Bench of Alberta. A special meeting of Breaker shareholders to
vote on the proposed Arrangement Agreement will be held on or about
December 8, 2009. Upon closing of the Transaction, shareholders of
Breaker will be eligible to receive the NAL distribution for December
2009 that is expected to be payable on January 15, 2010.
FINANCIAL ADVISORS
BMO Capital Markets acted as exclusive financial advisor to NAL with respect to the Transaction.
FirstEnergy Capital Corp. acted as financial advisor to Breaker in
respect of the Transaction and has advised the Board of Directors of
Breaker that it is of the opinion, as of the date hereof, that the
consideration to be received by Breaker shareholders pursuant to the
Arrangement is fair, from a financial point of view, to Breaker
shareholders. National Bank Financial Inc. and GMP Securities L.P. acted
as strategic advisors to Breaker in respect of the Transaction.
FORWARD LOOKING STATEMENTS
This press release contains statements that constitute
"forward-looking information" or "forward-looking" statements"
(collectively "forward-looking information") within the meaning of
applicable securities legislation. This forward-looking information
includes, among others, statements regarding: the Transaction, the
completion of the Transaction and the outcome of the Transaction,
including regarding transaction values and accretion; estimates of
recovery factors, reserves and reserve life index; plans for drilling;
estimates of production; and other expectations, beliefs, plans, goals,
objectives, assumptions, information and statements about possible
future events, conditions, results of operations or performance.
Various assumptions were used in drawing the conclusions or making
the forecasts and projections contained in the forward-looking
information contained in this press release. Forward-looking information
is based on current expectations, estimates and projections that
involve a number of risks, which could cause actual results to vary and
in some instances to differ materially from those anticipated by NAL and
described in the forward-looking information contained in this press
release. Undue reliance should not be placed on forward-looking
information. The material risk factors include, but are not limited to:
failure to receive approval of the Transaction from Breaker
shareholders, the Court of Queen's Bench of Alberta or applicable
regulatory authorities, failure to realize anticipated synergies, the
uncertainty of estimates and projections relating to production,
recovery factors and reserves; commodity price volatility; the
possibility that government policies or laws may change or governmental
approvals may be delayed or withheld; changes in tax laws; changes in
royalty rates; and the results of NAL's risk mitigation strategies; and
NAL's ability to implement its business strategy. Readers are cautioned
that the foregoing list of risk factors is not exhaustive.
Forward-looking information is based on the estimates and opinions of NAL's management at the time the information is released.
BOE CONVERSION
Throughout this press release, the calculation of barrels of oil
equivalent (boe) is calculated at a conversion rate of six thousand
cubic feet (mcf) of natural gas for one barrel of oil and is based on an
energy equivalence conversion method. Boes may be misleading,
particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl
is based on an energy equivalence conversion method primarily
applicable at the burner tip and does not represent a value equivalence
at the wellhead.
ABOUT NAL
NAL Oil & Gas Trust provides investors with a yield-oriented
opportunity to participate in the Canadian Upstream Conventional Oil and
Gas Industry. The Trust generates monthly cash distributions for its
Unitholders by pursuing a strategy of acquiring, developing, producing
and selling crude oil, natural gas and natural gas liquids from pools in
southeastern Saskatchewan, central Alberta, northeastern British
Columbia and Lake Erie, Ontario. Trust units trade on the Toronto Stock
Exchange under the symbol "NAE.UN".
ABOUT BREAKER
Breaker Energy Ltd. is an aggressive junior exploration and
production company led by a proven team of top-tier oil and natural gas
professionals. The management team of Breaker Energy has experience in
all key disciplines and across the Western Canada Sedimentary Basin.
Breaker's common shares trade on the Toronto Stock Exchange under the
symbol "WAV".
Contact Information:
NAL Oil & Gas Trust
Mr. Andrew Wiswell
President & CEO
403.294.3636
or
NAL Oil & Gas Trust
Mr. Clayton Paradis
Manager, Investor Relations
403.294.3620 or Toll Free: 888.223.8792
403.515.3407 (FAX)
Email: investor.relations@nal.ca
Website: www.nal.ca
or
Breaker Energy Ltd.
Mr. P. Dan O'Neil
President & CEO
403.215.5257
or
Breaker Energy Ltd.
Mr. Max Lof
CFO
403.215.5257
Email: info@breakerenergy.com
Website: www.breakerenergy.com