NGAS Resources, Inc. (Nasdaq:NGAS) a leader in horizontal drilling
and completion technology in the southern Appalachian Basin, today
announced a definitive agreement with Magnum Hunter Resources
Corporation (NYSE Amex:MHR), providing for NGAS Resources to be
acquired by Magnum Hunter in an all-stock transaction. NGAS
Resources is a British Columbia corporation, and the transaction
will be implemented as an arrangement under British Columbia law.
Under the terms of the definitive agreement (the "Arrangement
Agreement"), each common share of the Company will be transferred
to Magnum Hunter for the right to receive 0.0846 of a share of
Magnum Hunter common stock. The exchange ratio for the
transaction, which will not be adjusted for subsequent changes in
market prices, was established based on an intra-day price of $6.50
for Magnum Hunter stock, representing a value to NGAS shareholders
of $0.55 per share, a 41% premium to the NGAS closing price on
December 23, 2010. The value of the transaction on an
enterprise basis as of the anticipated closing date is estimated to
be approximately $98 million, based on NGAS Resources'
approximately 78.4 million fully diluted shares and total
indebtedness estimated to be outstanding at closing.
A Special Committee of the NGAS Resources board of directors,
comprised of five independent directors, and advised by independent
financial and legal advisors, recommended the transaction to the
full board. The boards of directors of Magnum Hunter and NGAS
Resources have approved the transaction, which will require the
approval of NGAS shareholders and the Supreme Court of British
Columbia. The consummation of the transaction is subject to
certain closing conditions, including the full payment by Magnum
Hunter of all remaining NGAS amortizing convertible notes due
May 1, 2012 and all outstanding borrowings under NGAS
Resources' credit agreement, as well as the reduction in change of
control severance benefits by NGAS executive officers. The
transaction is also conditioned on the restructuring of NGAS
Resources gas transportation agreements with Seminole Energy
Services, LLC on substantially the terms set forth in a letter of
intent between Magnum Hunter, a subsidiary of NGAS and Seminole,
including the payment of $10 million in cash or Magnum Hunter
restricted stock, the cancellation of approximately $7 million
in remaining note installments from Seminole's purchase of the NGAS
Appalachian gathering system in August 2009 and the right to
acquire a 50% interest in Magnum Hunter's Marcellus gas processing
plant.
The transactions contemplated by the Arrangement Agreement are
expected to close by March 31, 2011 or as soon as practicable
thereafter. Magnum Hunter Resources has secured committed
financing from BMO Capital Markets Corp.
On completion of the arrangement transaction, NGAS Resources
will become a wholly-owned subsidiary of Magnum Hunter. The
transaction will combine NGAS Resources' acreage and expertise in
the southern Appalachian Basin with Magnum Hunter's stronger
financial resources. In addition to the Company's plays in the
Illinois and Arkoma Basins, the transaction will increase Magnum
Hunter's position in the Appalachian Basin by approximately
300,000 acres, leverage its nearby infrastructure and provide
operational synergies. At year-end 2009, NGAS' proved reserves
totaled 78.4 billion cubic feet equivalents.
William S. Daugherty, President and CEO of NGAS Resources,
commented, "I am pleased to announce this agreement, as it delivers
value to our shareholders. Magnum Hunter's substantial
financial resources, coupled with its existing Appalachian
operations, will enable the combined operations to accelerate
growth for all of its shareholder constituencies."
In connection with the transaction, NGAS was advised by
independent financial and legal advisors, KeyBanc Capital Markets,
Inc. and Skadden, Arps, Slate, Meagher & Flom LLP,
respectively.
About NGAS Resources
NGAS Resources is an independent exploration and production
company focused on unconventional natural gas plays in the eastern
United States, principally in the southern Appalachian
Basin. Core assets include over 345,000 acres with interests
in approximately 1,400 wells and an extensive inventory of
horizontal drilling locations. NGAS also operates the gas
gathering facilities for its core Appalachian properties, providing
deliverability directly from the wellhead to the interstate
pipeline.
The NGAS Resources, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7617
Additional Information about the Proposed Transaction
and Where to Find It
In connection with the proposed transaction, NGAS Resources,
Inc. will file a proxy statement and NGAS Resources, Inc. and
Magnum Hunter Resources Corporation will file other relevant
materials with the SEC. Investors and security holders
of NGAS Resources, Inc. are urged to read the proxy statement and
the other relevant materials when they become available before
making any voting or investment decision with respect to the
proposed transaction because they will contain important
information about the transaction and the parties to the
transaction.
Investors and security holders may obtain a free copy of the
proxy statement and other relevant materials when they become
available and any other documents filed by NGAS Resources, Inc.
with the SEC, at the SEC's web site at www.sec.gov. The proxy
statement and such other documents may also be obtained for free
from NGAS Resources, Inc. by contacting NGAS Resources, Inc. at:
859-263-3948 or 120 Prosperous Place, Suite 201, Lexington,
Kentucky 40509-1844 or visiting the company's website at
www.ngas.com.
Participants in Solicitation
NGAS Resources, Inc., Magnum Hunter Resources Corporation and
their respective directors, executive officers and other members of
management and employees, under SEC rules, may be deemed to be
participants in the solicitation of proxies of NGAS Resources, Inc.
shareholders in connection with the proposed transaction. Investors
and security holders may obtain more detailed information regarding
the names, affiliations and interests of certain of Magnum Hunter
Resources Corporation's executive officers and directors in the
solicitation by reading the proxy statement for Magnum Hunter
Resources Corporation's 2010 Annual Meeting of Shareholders, which
was filed with the SEC on September 3, 2010, and the proxy
statement relating to the transaction and other relevant materials
filed with the SEC when they become available. Investors
and security holders may obtain more detailed information regarding
the names, affiliations and interests of NGAS Resources, Inc.'s
executive officers and directors in the solicitation by reading the
proxy statement for NGAS Resources, Inc.'s 2009 Annual Meeting of
Shareholders, which was filed with the SEC on April 29, 2010, and
the NGAS Resources, Inc. proxy statement relating to the
transaction and other relevant materials to be filed with the SEC
when they become available. Certain executives and
directors of NGAS Resources, Inc. have interests in the proposed
transaction that may differ from the interests of shareholders
generally, including benefits conferred under severance, retention
and change of control arrangements and continuation of director and
officer insurance and indemnification. These interests
and any additional benefits in connection with the proposed
transaction will be described in the proxy statement when it
becomes available.
Safe Harbor Statement
Except for historical information contained herein, the
statements in this release are forward-looking and made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and may involve a number of risks and
uncertainties. Forward-looking statements are based on information
available to management at the time, and such forward-looking
statements involve judgments. Such forward-looking statements
include, but are not limited to, statements regarding the expected
timing of the completion of the transaction; the ability to
complete the transaction considering the various closing
conditions; the benefits of such transaction and its impact on NGAS
Resources' business; the oversupply of, or lack of demand for, NGAS
Resources' production; various events which could disrupt NGAS
Resources' drilling schedule or operations; any projections of
economic prospects, earnings, revenues or other financial items;
any statements of the plans, strategies and objectives of
management for future operations; any statements of expectation or
belief; any statements regarding general industry conditions and
competition; any statements regarding economic conditions, such as
interest rate, commodity prices and currency exchange rate
fluctuations; any statements regarding timing of development or
potential expansion or improvements; any statements regarding
quantity or magnitude of oil and gas reserves; and any statements
of assumptions underlying any of the foregoing.
In addition, if and when the transaction is consummated, there
will be risks and uncertainties related to Magnum Hunter's ability
to successfully integrate the operations and employees of Magnum
Hunter and NGAS Resources as well as the ability to ensure
continued production or market demand for NGAS Resources' oil and
natural gas reserves.
Forward-looking statements include expressions such as
"believe," "anticipate," "expect," "estimate," "intend," "may,"
"plan," "predict," "will," and similar terms and expressions. These
forward-looking statements are made based on expectations and
beliefs concerning future events affecting the company and are
subject to various risks, uncertainties and other factors relating
to its operations and business environment, all of which are
difficult to predict and many of which are beyond management
control, and that could cause actual results to differ materially
from estimated results expressed in or implied by these
forward-looking statements. Such risks and uncertainties include,
but are not limited to, the risks to both companies that the
acquisition of NGAS Resources will not be consummated; market
demand for oil and natural gas as well as changes in pricing and
costs; the availability of labor, equipment and transportation;
changes in weather, geologic conditions or oil or natural gas
deposits; changes in economic conditions or financial markets;
changes in prices for the company's production or increases in
input or extraction costs; changes in pricing and assumptions and
projections concerning reserves in drilling operations; changes in
plans with respect to exploration, development projects or capital
expenditures; litigation, legislative, health, environmental and
other judicial, regulatory, political and competitive developments;
changes in customer demand; pricing actions by competitors,
customers, suppliers and contractors; availability and costs of
credit, surety bonds and letters of credit; technological and
operational difficulties or inability to obtain permits encountered
in connection with exploration and development activities; labor
relations matters; and changing foreign exchange rates, all of
which are described more fully in the company's filings with the
Securities and Exchange Commission and on EDGAR and SEDAR.
Forward-looking statements made in this release, or elsewhere,
speak only as of the date on which the statements were made. New
risks and uncertainties arise from time to time, and it is
impossible for management to predict these events or how they
may affect the company or anticipated results. All
forward-looking statements are qualified in their entirety by this
cautionary statement. In light of these risks and uncertainties,
readers should keep in mind that any forward-looking statement made
in this release may not occur. The company has no duty or
obligation to, and does not intend to, update or otherwise revise
any forward-looking statements, whether as a result of new
information, future events or other factors, except as may be
required by law. Readers are cautioned not to place undue reliance
on forward-looking statements.
NGAS - G
CONTACT: NGAS Resources, Inc.
Investor Relations
(646) 912-3844
Fax: (859) 263-4228
ngas@ngas.com
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