HOUSTON, Dec. 20, 2016 /PRNewswire/ -- KLR Energy
Acquisition Corp. ("KLR Energy") (NASDAQ: KLRE, KLREU, KLREW), an
oil and gas exploration and production focused special purpose
acquisition entity, today announced that it has entered into a
Business Combination Agreement with Tema Oil and Gas Company
("Tema"), a private company with assets in the core of the
Delaware Basin in Loving County, Texas. The transaction was
unanimously approved by the respective boards of directors of the
companies and is expected to close in the first half of 2017,
subject to certain closing conditions, including receipt of KLR
Energy shareholder approval. Upon completion of the business
combination, KLR Energy will change its name to Rosehill Resources
Inc. ("Rosehill Resources") and will apply to continue to trade on
The NASDAQ Capital Market under the new ticker symbols ROSE, ROSEU,
ROSEW. Rosehill Resources intends to significantly accelerate
drilling on Tema's high-quality operated acreage position and
pursue strategic acquisitions.
In connection with the business combination, certain
institutional investors will purchase $75 million of
Rosehill Resources Series A Preferred Stock at $1,000 per
share and warrants (the "Private Placements"). In addition,
Tema's parent, Rosemore, Inc. ("Rosemore") and KLR Energy's sponsor
have agreed to purchase up to $20
million of Series A Preferred Stock or Class A Common Stock
in certain circumstances to backstop redemptions. Together,
the proceeds of the Private Placements and backstop by Rosemore and
KLR Energy's sponsor will be used to fund a portion of the cash
consideration required to effect the business combination and for
general corporate purposes. Following the closing of the
transaction, Rosemore and its affiliates will collectively be the
single largest stockholder of Rosehill Resources. KLR Energy is
expected to retain a significant equity stake in Rosehill Resources
and will have two representatives on Rosehill Resources' Board of
Directors.
"This transaction represents exactly the type of business
combination target we were seeking to provide to our investors when
we took KLR Energy public earlier this year. Upon completion of the
business combination, Rosehill Resources will be a pure-play,
Delaware Basin focused exploration
and production company with a strong balance sheet and outstanding
growth potential. The management team of Rosehill Resources has a
robust track record of value creation, a long history of
successful energy investing and demonstrated financial
discipline," said Gary Hanna, Chief
Executive Officer of KLR Energy, who will serve as chairman of the
board of directors of Rosehill Resources following the business
combination. Tema's management team will run Rosehill
Resources post-transaction, led by J. A. (Alan)
Townsend, President of Tema, who will serve as Chief Executive
Officer of Rosehill Resources. "Rosehill Resources will have
an excellent existing production base, a strong balance sheet with
significant liquidity and a deep bench of technical, land and
operations expertise," said Townsend. "Tema has approximately 200
potential drilling locations on its existing acreage. That is about
nine years of inventory assuming a 2-rig drilling program and
doesn't include significant upside potential through a downspacing
program. Following the business combination, we will
immediately begin to accelerate development of the Tema assets
while also pursuing focused acquisitions."
The anticipated pro forma enterprise value of the combined
company is approximately $445 million, implying a projected
adjusted EBITDA multiple of 9.8x and 5.8x for calendar 2017 and
2018, respectively, and post-closing equity and preferred
capitalization of $507 million at $10.40 per
share (the foregoing assuming no stockholder redemptions). Rosehill
Resources expects to have $117 million of projected
liquidity to fund its development plan.
Rosehill Resources Operating Highlights
- 4,771 net acres in the core of the Delaware Basin, greater than 80% held by
production and 99% operated
- Net production expected to be greater than 6,000 barrels of oil
equivalent per day in January, 2017
- 70.1 million net barrels of oil equivalent of total 3P reserves
as of June 2016, based on
Ryder Scott reserve report
- Approximately 200 potential drilling locations on current
leaseholds, includes stacked pay consisting of 10 benches totaling
3000 ft. of reservoir thickness
- Expected 9 years of inventory (using a 2-rig program) with
significant upside through downspacing program
- Aligned veteran leadership, averaging 30+ years E&P
operating experience, deep technical knowledge of the Delaware Basin and a 10+ year track record of
drilling horizontal shale wells
Business Combination
Pursuant to the Business Combination
Agreement, Tema will contribute oil and gas properties and related
assets to Rosehill Operating and KLR Energy will acquire 39% of the
equity on a fully diluted basis of Rosehill Operating for
$35 million in cash, and the
assumption of $55 million in debt and
the contribution of remaining cash proceedsadditional cash
resulting from KLR Energy's initial public offering and the Private
Placement. Including which, including the $310 million in equity of Rosehill Operating
retained by Tema, this assumes an enterprise value of Rosehill
Operating of $400 million.
In order to facilitate the transaction, Rosemore and KLR
Energy's sponsor have agreed to backstop redemptions by the public
stockholders of KLRE in excess of 30% of the outstanding shares of
Class A Common Stock by purchasing Class A Common Stock or Series
A Preferred Stock in an amount up to $20 million.
The closing of the transaction is subject to approval of KLR
Energy stockholders and the satisfaction of customary conditions.
The transaction is expected to close in the first half of 2017.
The description of the transaction contained herein is only a
summary and is qualified in its entirety by reference to the
combination, contribution and subscription agreements relating to
the transaction.
Private Placement
In connection with the business combination, KLR Energy also
announced that it has entered into Subscription Agreements with
certain institutional investors to issue and sell in private
placements a total of 75,000 shares of Series A Preferred
Stock and 5,000,000 warrants (each entitling the holder to purchase
one share of Class A Common Stock for $11.50) for gross proceeds of $75 million. The Series A Preferred Stock is
entitled to 8.0% annual dividends, payable in cash or in-kind, and
is convertible into shares of Rosehill
Resources' Class A Common Stock based on a conversion price
of $11.50 per share. The
proceeds of the private placement will be used to fund the cash
portion of the consideration required to effect the combination and
for general corporate purposes, including to finance development
and potential acquisition activities following completion of the
business combination. The private placement is conditioned
upon, and is expected to close concurrently with, the business
combination.
Advisors
BMO Capital Markets and KLR Group, LLC ("KLR Group") acted as
capital market advisors and private placement agents to KLR Energy.
Vinson & Elkins LLP acted as legal counsel to KLR Energy and
KLR Group. Petrie Partners, LLC acted as financial advisor
and Norton Rose Fulbright US LLP acted as legal counsel
to Rosemore and Tema.
Investor Webcast and Presentation Information
A webcast discussing the transaction can be accessed at
http://www.netroadshow.com/nrs/wp/default.html?show=40Da26.
Interested investors and other parties may also view the
accompanying investor presentation filed today with the Securities
and Exchange Commission (the "SEC"), which can be viewed on the SEC
website at www.sec.gov or on KLR Energy's website at
www.KLRgroup.com.
About KLR Energy Acquisition Corp.
KLR Energy is a blank check company, also commonly referred to
as a Special Purpose Acquisition Company, or SPAC, formed for the
purpose of entering into a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business
combination with one or more businesses or entities. KLR Energy is
sponsored by KLR Energy Sponsor, LLC, an affiliate of KLR Group
Holdings, LLC and KLR Group.
About Tema Oil and Gas Company
Tema is a rapidly growing, privately held, exploration and
production company with producing assets in Texas and New
Mexico. Current investment activity is focused in the
Permian Basin and other high-potential proven basins. Tema's
strategy for growth is building a portfolio of high-quality acreage
in proven resource play basins to provide a foundation of
predictable production growth. Through active acquisition,
exploitation and exploration across portions of Texas and New
Mexico, the staff at Tema has continued the growth and
success of the company since its formation in 1999. Tema is a
wholly owned subsidiary of Baltimore,
MD-based Rosemore, Inc., founded by descendants of
Louis Blaustein, the 1910 founder of
the American Oil Company.
About KLR Group
KLR Group is a full-service boutique investment bank focused on
the energy industry founded in 2012 and led by Edward Kovalik, Stephen
Lee and Reid Rubinstein.
With offices in Houston and
New York, KLR Group is committed
to providing clients access to a broad range of financial services,
advice and solutions typically available only to the largest public
companies. These solutions include public and private,
corporate and asset-level financings across the capital spectrum,
advisory services, equity research, sales and trading, and merchant
banking. To learn more about KLR Group, please visit
www.KLRGroup.com.
Forward-Looking Statements
This communication includes certain statements that may
constitute "forward-looking statements" for purposes of the federal
securities laws. Forward-looking statements include, but are not
limited to, statements that refer to projections, forecasts or
other characterizations of future events or circumstances,
including any underlying assumptions. The words "anticipate,"
"believe," "continue," "could," "estimate," "expect," "intends,"
"may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and similar expressions may identify
forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking
statements may include, for example, statements about: KLR Energy's
ability to consummate the business combination and related private
placement; the benefits of the business combination; the future
financial performance of KLR Energy following the business
combination; changes in Tema's reserves and future operating
results; and expansion plans and opportunities. These
forward-looking statements are based on information available as of
the date of this communication, and current expectations, forecasts
and assumptions, and involve a number of judgments, risks and
uncertainties. Accordingly, forward-looking statements should not
be relied upon as representing KLR Energy's views as of any
subsequent date, and KLR Energy does not undertake any obligation
to update forward-looking statements to reflect events or
circumstances after the date they were made, whether as a result of
new information, future events or otherwise, except as may be
required under applicable securities laws. You should not
place undue reliance on these forward-looking statements. As a
result of a number of known and unknown risks and uncertainties,
KLR Energy's actual results or performance may be materially
different from those expressed or implied by these forward-looking
statements. Some factors that could cause actual results to differ
include: (i) the occurrence of any event, change or other
circumstances that could delay the business combination or give
rise to the termination of the contribution agreement; (ii) the
outcome of any legal proceedings that may be instituted against KLR
Energy following announcement of the proposed business combination
and transactions contemplated thereby; (iii) the inability to
complete the business combination due to the failure to obtain
approval of the stockholders of KLR Energy, or other
conditions to closing in the contribution agreement; (iv) the risk
that the proposed business combination disrupts current plans and
operations of KLR Energy or Tema as a result of the announcement
and consummation of the transactions described herein; (v) KLR
Energy's ability to recognize the anticipated benefits of the
business combination, which may be affected by, among other things,
competition and the ability of KLR Energy to grow and manage growth
profitably following the business combination; (vi) costs related
to the business combination; (vii) changes in applicable laws or
regulations; (viii) the possibility that KLR Energy or Tema may be
adversely affected by other economic, business, and/or competitive
factors , including, but not limited to, future trends in energy
markets and commodity prices; and (ix) other risks and
uncertainties described herein, as well as those risks and
uncertainties discussed from time to time in other reports and
other public filings with the Securities and Exchange Commission
(the "SEC") by KLR Energy.
Additional information concerning these and other factors that
may impact our expectations and projections can be found in our
periodic filings with the SEC, including our Annual Report on Form
10-K for the fiscal year ended December 31,
2015, and in the proxy statement to be filed by KLR Energy
with the SEC when available. Our SEC filings are available publicly
on the SEC's website at www.sec.gov. KLR Energy and Tema disclaim
any obligation to update the forward-looking statements, whether as
a result of new information, future events or otherwise, except as
may be required under applicable securities laws.
Disclaimer
This communication shall neither constitute an offer to sell or
the solicitation of an offer to buy any securities, nor shall there
be any sale of securities in any jurisdiction in which the offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such
jurisdiction.
Additional Information about the Transaction and Where to
Find It
In connection with the proposed business combination, KLR Energy
will file a preliminary proxy statement with the SEC and will mail
a definitive proxy statement and other relevant documents to its
stockholders. Investors and security holders of KLR Energy are
advised to read, when available, the preliminary proxy statement,
and amendments thereto, and the definitive proxy statement in
connection with KLR Energy's solicitation of proxies for its
stockholders' meeting to be held to approve the business
combination and related transactions because the proxy statement
will contain important information about the transactions, the
parties thereto and risk factors that may affect investors. The
definitive proxy statement will be mailed to stockholders of KLR
Energy as of a record date to be established for voting on the
business combination. Stockholders will also be able to obtain
copies of the proxy statement, without charge, once available, at
the SEC's website at www.sec.gov or by directing a request to: KLR
Energy Acquisition Corp., 811 Main Street,
18th Floor, Houston,
Texas 77002, Attn: Gary C.
Hanna.
Participants in Solicitation
KLR Energy, Tema, and their respective directors, executive
officers and other members of their management and employees, under
SEC rules, may be deemed to be participants in the solicitation of
proxies of KLR Energy stockholders in connection with the proposed
business combination. Investors and security holders may obtain
more detailed information regarding the names, affiliations and
interests in KLR Energy of directors and officers of KLR Energy in
KLR Energy's Registration Statement on Form S-1, as amended, which
was initially filed with the SEC on January
19, 2016. Information regarding the persons who may, under
SEC rules, be deemed participants in the solicitation of proxies to
KLR Energy's stockholders in connection with the proposed business
combination will be set forth in the proxy statement for the
proposed business combination when available. Information
concerning the interests of KLR Energy's and Tema's participants in
the solicitation, which may, in some cases, be different than those
of KLR Energy's and Tema's stockholders generally, will be set
forth in the proxy statement relating to the business combination
when it becomes available.
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SOURCE KLR Energy Acquisition Corp.