CALGARY, Nov. 19, 2015 /CNW/ - Ironhorse Oil & Gas
Inc. ("Ironhorse" or the "Company") (TSX-V:IOG), announces that its
board of directors (the "Board") has unanimously recommended that
Ironhorse shareholders REJECT the unsolicited offer from
1927297 Alberta Ltd. (the "Offeror"), a corporation wholly-owned by
Timmerman Trust, commenced on November 4,
2015 to acquire the issued and outstanding common shares of
Ironhorse ("Common Shares") at $0.17
per share in cash (the "Offer").
Reasons to Reject the Offer
The Board has carefully reviewed and considered the Offer with
the benefit of advice from its financial and legal advisors. The
following is a summary of the principal reasons for the unanimous
recommendation of the Board to shareholders that they REJECT
the Offer and NOT TENDER their Common Shares to the
Offer.
1. The Offer is not
supported by Ironhorse's largest shareholders or its directors and
officers holding approximately 45% of the outstanding Common
Shares.
- The directors and officers of Ironhorse, together with a number
of shareholders (including certain of Ironhorse's largest
shareholders) have indicated to the Company that they intend to
reject the Offer. Such persons hold approximately 45% of the
outstanding Common Shares. According, management believes that the
Offer is unlikely to succeed under its current conditions.
2. The Offer is highly
conditional and has substantial completion risk.
- The Offer is highly conditional and has substantial completion
risk. In total, 12 conditions, several containing extensive
sub-conditions, must be satisfied or waived before the Offeror is
obligated to take-up and pay for any Common Shares deposited under
the Offer. The conditions are for the exclusive benefit of the
Offeror and may be asserted by the Offeror at any time regardless
of the circumstances giving rise to any such assertion. The Board
is concerned that, under the Offer, shareholders are being asked to
tender their Common Shares into a highly conditional transaction
without additional compensation for such risk. There are several
conditions which are not subject to objective criteria, which
effectively gives the Offeror sole and complete discretion as to
whether or not to proceed with its Offer.
- Among the conditions to the Offer is the condition that,
together with Common Shares held by the Offeror and its affiliates,
at least 66⅔% of the outstanding Common Shares shall have been
deposited pursuant to the Offer. As stated in reason 1 above,
shareholders holding approximately 45% of the outstanding Common
Shares have indicated that they intend to reject the Offer.
Accordingly, the Offer is subject to substantial completion risk as
it is unlikely that all of the conditions to the Offer will be
satisfied.
3. The Offer
significantly undervalues Ironhorse's assets and growth
potential.
- The Board believes that the unsolicited hostile Offer fails to
adequately compensate shareholders for the value of Ironhorse's
assets and growth potential and, if successful, would deprive
shareholders of Ironhorse's upside potential. The Board of
Directors has determined that the Offer is financially inadequate
at current oil prices and is an opportunistic attempt by the
Offeror to acquire Ironhorse, effectively using Ironhorse's own
cash, at a low point in the energy cycle when Ironhorse has no debt
and significant value appreciation with any oil price recovery.
As at June 30, 2015, Ironhorse had
$3.0 million of net working capital
on its balance sheet with no debt. Based on the offer price of
$0.17 per Common Share, the Offer
attributes only $1.7 million in value
to the Company's oil and gas assets, notwithstanding average daily
production (Company's share) of 215 bbl/d light oil and natural gas
liquids and 233 mcf/d natural gas in the quarter ended June 30, 2015. This not only significantly
undervalues the intrinsic production and reserves value of
Ironhorse's high quality oil and gas assets but deprives
shareholders of the opportunity to participate in the upside
potential of Ironhorse's assets upon a recovery in commodity
prices.
As at December 31, 2014, Ironhorse's
aggregate petroleum and natural gas reserves and before tax net
present value of future net revenue from those reserves discounted
at 10% ("NPV10") as evaluated by the Company's independent reserves
evaluators were as follows:
- Proved developed producing (PDP) reserves of 556 Mboe with an
NPV10 of $12.65 million;
- Proved (1P) reserves of 624 Mboe with an NPV10 of
$13.12 million; and
- Proved plus probable (2P) reserves of 799 Mboe with an NPV10 of
$18.38 million.
Ironhorse's well and facility capabilities are 390 boe/d. The
cost per flowing barrel of the Offer, based on capability is
therefore only approximately $4,350,
which is significantly lower than comparable transactional
values.
4. The Offer is predatory
and opportunistic.
- The Offer has been opportunistically made at a time when the
Common Share price has been materially adversely affected by the
significant and prolonged decline in the price of oil and gas. The
Offer exploits this recent period of decline in the Common Share
price, making the Offer premium as advertised by the Offeror to the
Shareholders inadequate. The Common Shares were trading near their
three year low immediately prior to the announcement of the Offer
and, in any event, the trading price is not representative of the
en bloc value of the Common Shares in these circumstances. Further,
the Offer takes advantage of the current climate of regulatory and
political uncertainty impacting oil and gas companies with
operations in Alberta, including
in relation to the Government of Alberta's anticipated changes to the
Province's oil and gas royalty regime, with the recommendations of
the Royalty Review Panel expected to be announced in December 2015.
- The Offeror suggests that a reduction in the stated value of
Ironhorse's reserves to be filed for the year ended December 31, 2015 as a result of the decline in
oil prices could be expected to cause a decrease in the price of
the Common Shares. However, the impact of the drop in oil and gas
prices has already been reflected in the Common Share price and the
Offeror's insinuation that the Common Share price will decline
following release of the Company's December
31, 2015 reserves figures is simply predatory unfounded
speculation. The Board believes that the Offer is significantly
undervalued at current oil prices having considered any potential
decrease in the net present value of reserves as at December 31, 2015.
5. Superior proposals or
other alternatives may emerge.
- A special committee of the Board of Directors (the "Special
Committee") is currently working, together with Ironhorse's
management, directors and advisors to evaluate a range of strategic
alternatives that may enhance Shareholder value. The Board of
Directors believes that Ironhorse and its assets are potentially
attractive to other parties in addition to the Offeror.
Alternatives may include, among other things, a sale of the Company
for cash and/or shares, asset sales(s), a merger, a reorganization
or partnering with a financial or strategic investor. As of the
date of this Directors' Circular, it is premature to predict
whether any transaction will emerge from these efforts.
- Tendering Common Shares into the Offer before the Special
Committee has had an opportunity to fully explore all available
alternatives to the Offer may preclude the possibility of a
financially superior alternative transaction emerging.
6. Ironhorse's financial
advisor has delivered a written opinion that the Offer is
inadequate.
- Peters & Co. Limited, the financial advisor to Ironhorse,
has delivered a written opinion to the Board that the consideration
offered under the Offer is inadequate, from a financial point of
view, to shareholders.
7. The Offer provides
insufficient time to properly consider any take-over bid made for
Ironhorse.
- The Offer provides insufficient time to properly consider any
take-over bid made for Ironhorse and to allow time for competing
bids and alternative transactions to emerge from potential
buyers.
- Since the Offer is only open for acceptance for 44 days, it is
not a "Permitted Bid" under the Shareholder Rights Plan adopted by
the Company, and the Offeror has chosen not to amend its bid to
become a Permitted Bid since Ironhorse announced its Shareholder
Rights Plan. The Shareholder Rights Plan is consistent with
amendments to the Canadian take-over bid rules proposed by the
Canadian securities regulators to increase the minimum amount of
time that a take-over bid must remain open to 120 days.
Directors' Circular
A directors' circular of Ironhorse dated November 19, 2015 (the "Directors' Circular") in
response to the Offer has been mailed to each of Ironhorse's
shareholders in compliance with applicable securities laws and
filed with Canadian securities regulatory authorities. The
Directors' Circular is available on SEDAR at www.sedar.com.
Shareholders are advised to read the Directors' Circular carefully
and in its entirety, as it contains important information regarding
Ironhorse and the Offer.
If shareholders of Ironhorse have any questions or require more
information, they are encouraged to contact D.F. King Canada ("D.F. King"), a division of
CST Investor Services Inc., the information agent retained by
Ironhorse, by telephone at 1-800-294-3174 (Toll Free in
North America) or 1-201-806-7301
(Banks, Brokers and Collect Calls), or by email at
inquiries@dfking.com.
How to REJECT the Offer and Withdraw Tendered Shares
To reject the Offer, you should do nothing. The Offer is open
for acceptance until December 18,
2015, unless extended. Shareholders who have already
tendered their Common Shares to the Offer can withdraw them at any
time before they have been taken up by the Offeror and in certain
other circumstances as further described under the heading "How to
Withdrawn Your Deposited Common Shares" in the Directors' Circular.
Shareholders holding shares through a dealer, broker or other
nominee should contact such dealer, broker or nominee to withdraw
their Common Shares. Shareholders may also contact D.F. King by telephone at 1-800-294-3174 (Toll
Free in North America) or
1-201-806-7301 (Banks, Brokers and Collect Calls), or by email at
inquiries@dfking.com.
If you have already tendered Common Shares to the Offer and you
decide to withdraw these Common Shares from the Offer, you must
allow sufficient time to complete the withdrawal process prior to
the expiry of the Offer.
Advisories
Forward-Looking Statements
This news release, including the discussion of the reasons
for the Board's unanimous recommendation that shareholders reject
the Offer and not tender their Common Shares, contains
forward-looking information (as defined in the Securities Act
(Alberta)) and statements
(collectively, "forward-looking statements") that are based on
expectations, estimates and projections as of the date of this news
release. These forward-looking statements can often, but not
always, be identified by the use of forward-looking terminology
such as "plans", "predicts", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases, or statements that certain
actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved. Examples of such
forward-looking statements in this news release include, but are
not limited to, the quantity of reserves; future trading prices of
the Common Shares; future commodity prices; and whether or not an
alternative transaction superior to the Offer may emerge.
Statements relating to "reserves" are deemed to be forward-looking
statements, as they involve the implied assessment, based on
certain estimates and assumptions that the reserves described can
be profitably produced in the future. Actual results and
developments are likely to differ, and may differ materially, from
those expressed or implied by the forward-looking statements
contained in this news release. Forward-looking statements
contained in this news release are based on a number of assumptions
that may prove to be incorrect, including, but not limited to
assumptions as to production, operating expenses, capital
expenditures and oil prices; competitive conditions in the oil and
gas industry; general economic conditions; changes in laws, rules
and regulations applicable to Ironhorse; estimates of reserves; and
whether or not an alternative transaction superior to the Offer may
emerge. In addition to being subject to a number of assumptions,
forward-looking statements in this news release involve known and
unknown risks, uncertainties and other factors that may cause
actual results and developments to be materially different from
those expressed or implied by such forward-looking statements,
including, but not limited to: volatility of crude oil and natural
gas prices; the impacts of legislative and regulatory changes
especially those which relate to royalties, taxation and the
environment; various events which could disrupt operations;
operational issues and contractual issues; uncertainty of estimates
with respect to reserves; the supply and demand metrics for oil and
natural gas; the variances of stock market activities generally;
currency and interest rate fluctuations; Ironhorse's inability to
either generate sufficient cash flow from operations to meet its
current and future obligations or obtain external sources of debt
and equity capital; general economic, business and market
conditions; and such other risks and uncertainties identified in
the filings by Ironhorse with the Canadian provincial securities
regulatory authorities. The Board believes that the expectations
reflected in the forward-looking statements contained in this news
release are reasonable as at the date hereof, but no assurance can
be given that these expectations will prove to be correct. In
addition, although Ironhorse and the Board have attempted to
identify important factors that could cause actual actions, events
or results to differ materially from those described in
forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or
intended. Accordingly, you should not place undue reliance on any
forward-looking statements contained in this news release. Except
as required by law, neither the Board nor Ironhorse undertakes any
obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. The forward-looking statements contained in this news
release are expressly qualified by this cautionary
statement.
Oil and Gas Advisories
Readers are cautioned that estimated values of future net
revenue contained in this news release do not represent the fair
market value of reserves. This news release makes reference to
barrels of oil equivalent (boe). Boe's may be misleading,
particularly if used in isolation. A boe conversion ratio of 1 boe
for 6 mcf of natural gas is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
SOURCE Ironhorse Oil & Gas Inc.