Resaca Exploitation, Inc. (AIM: RSX and RSOX) and Cano
Petroleum, Inc. (NYSE Amex: CFW) today announced the boards of
directors of both companies have unanimously approved a definitive
plan to merge the two companies in a tax-free, stock-for-stock
exchange. Cano shareholders will receive 2.1 shares of Resaca
common stock for every share of Cano common stock and will own
approximately 50 percent of the combined company. Based on the
closing price of Resaca common stock on September 28, 2009, the
transaction implies total consideration to Cano shareholders of
$76.0 million or $1.67 per Cano share and $3.34 per proved barrel
of oil equivalent.
The newly combined company will have an estimated 63.2 million
barrels oil equivalent of proved reserves (81% oil) with a PV10
value of approximately $652.9 million based on crude oil and
natural gas prices in effect on July 1, 2009. The net production
for the combined company is estimated at 1,960 net barrels of oil
equivalent per day at July 1, 2009.
The exchange ratio is calculated as a 32 percent premium over
the 30-day volume weighted average price of Cano shares for the
period ending September 28, 2009, relative to the 30-day volume
weighted average price of Resaca shares during the same time
period.
The combined company will retain the Resaca name, will be
headquartered in Houston, Texas, and will be led by current Resaca
Chairman, J.P. Bryan, who will become CEO upon completion of the
transaction. The combined company’s board will consist of four
directors from Resaca and three from Cano. The company will
continue to trade on the AIM Market of the London Stock Exchange
(the “AIM”). Resaca’s shares that trade on the AIM under current
ticker RSOX will be traded under ticker symbol RSX following the
filing and effectiveness of a registration statement with the
Securities and Exchange Commission. Resaca will also obtain a NYSE
Amex listing as a condition to closing.
Key strengths of the newly combined company include:
- Complimentary oil-focused
properties with balanced growth opportunities (Resaca’s proved
developed non-producing reserves with Cano’s proved undeveloped
reserves)
- Near-term low-risk identified
production enhancement opportunities
- Accelerated exploitation
strategy with focus on long-life reserves
- Significant cost savings
currently estimated to be $4.5-5.0 million per year
- Increased critical mass to more
efficiently develop projects
- Expanded institutional investor
interest and capital market access via dual listing on NYSE Amex
and AIM
J.P. Bryan, Resaca’s Chairman, stated “Through this transaction,
the newly combined company will enjoy the benefits of tremendous
synergies and strengths. This is clearly a case of one plus one
equals so much more than two going forward. Both companies share a
common growth strategy of acquiring and exploiting mature
properties and implementing secondary and tertiary recovery
techniques. The combined assets are most complementary
geographically and combine the near-term production upside from
Resaca’s recompletion portfolio with long-term upside from Cano’s
proved undeveloped waterflood reserves. The fields we both possess
are prime candidates for CO2 tertiary recovery. This will become
the next great global initiative for recovering substantial
quantities of oil from mature fields. We will strive to lead, not
follow, in that effort. Our combined staffs bring together some
extraordinarily talented individuals to help ensure our success.
This is an exciting long-term value story for the shareholders of
both companies.”
Jeff Johnson, Cano’s Chairman and CEO, added “Today’s
announcement will provide our shareholders with a solid foundation
to grow this business. Resaca’s near-term production growth
potential and synergies will add the cash flows needed for all
shareholders to realize the long-term upside of both companies’
assets. The significant financial advantages of this combination
will benefit our shareholders and employees. Cano shareholders will
not only receive a significant premium to its current share price,
but they will also be able to participate in the upside of the
stronger combined entity.”
The transaction is subject to the following closing conditions:
(i) shareholder approval by both companies, (ii) Resaca becoming
listed on the NYSE Amex, (iii) refinancing of existing bank debt
and (iv) other customary closing conditions. Both companies will
continue to operate their businesses independently until the close
of the transaction. The transaction is expected to be completed
within three to five months.
Resaca is being advised by SMH Capital Inc. and its legal
counsel is Haynes and Boone, LLP. Cano is being advised by RBC
Capital Markets Corporation and its legal counsel is Thompson &
Knight LLP.
Corporate Structure and Management
In addition to J.P. Bryan remaining as Chairman and becoming CEO
of the combined company upon completion of the transaction, John J.
“Jay” Lendrum, III, currently Resaca’s CEO, will become Resaca’s
Vice Chairman. Dennis Hammond, currently Resaca's President and
COO, will remain President. Chris Work, currently Resaca's CFO,
will remain CFO. Pat McKinney, currently Cano’s SVP of Engineering
and Operations, will become Resaca’s EVP of Engineering and
Operations. Mike Ricketts, currently Cano’s VP and Principal
Accounting Officer, will become Resaca’s VP and Chief Accounting
Officer. Phillip Feiner, currently Cano’s VP and General Counsel,
will become Resaca’s VP and General Counsel.
Combined Company Strategies and Properties
Both Resaca and Cano are focused on the exploitation and
production of known oil and gas reserves, including secondary and
tertiary recovery. Resaca’s properties are located in West Texas,
and Southeastern New Mexico. Cano’s properties are located in the
Texas panhandle, Central Texas, Southeastern New Mexico, and
Oklahoma. Both companies’ properties have long reserve lives,
stable production, and heavy concentrations of oil.
About Resaca
Resaca is an independent oil and gas development and production
company based in Houston, Texas. Resaca is focused on the
acquisition and exploitation of long-life oil and gas properties,
utilizing a variety of primary, secondary and tertiary recovery
techniques. Resaca’s current properties are located in the Permian
Basin of West Texas and Southeast New Mexico. Resaca trades on the
AIM under the ticker symbols RSOX and RSX. Additional information
is available at www.resacaexploitation.com.
About Cano
Cano Petroleum, Inc. is an independent Texas-based energy
producer with properties in the mid-continent region of the United
States. Led by an experienced management team, Cano’s primary focus
is on increasing domestic production from proven fields using
enhanced recovery methods. Cano trades on the NYSE Amex under the
ticker symbol CFW. Additional information is available at
www.canopetro.com.
Conference Call Information
Resaca and Cano management will host a conference call for
investors at 2:30 p.m. Eastern time, September 30, 2009, to discuss
the details of the transaction. Interested parties can participate
in the call by dialing 866-515-2909. For calls outside the U.S.,
parties may dial 617-399-5123. The passcode is 23249440. This call
is also being webcast by Thomson/CCBN which can be accessed at
Cano’s website at www.canopetro.com. The webcast will also be
archived on the Resaca and Cano websites.
Forward Looking Statements
Safe-Harbor Statement — Except for the historical information
contained herein, the matters set forth in this news release are
“forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Resaca and Cano
intend that all such statements be subject to the “safe-harbor”
provisions of those Acts. Many important risks, factors and
conditions may cause the actual results to differ materially from
those discussed in any such forward-looking statement. These risks
include, but are not limited to, estimates or forecasts of
reserves, estimates or forecasts of production, future commodity
prices, exchange rates, interest rates, geological and political
risks, drilling risks, product demand, transportation restrictions,
the ability of Resaca or Cano to obtain additional capital, and
other risks and uncertainties described in the Cano’s filings with
the Securities and Exchange Commission. The historical results
achieved by Resaca or Cano are not necessarily indicative of its
future prospects. Neither Resaca nor Cano undertakes any obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Additional Information and Where to Find It
This communication is being made in respect of the proposed
business combination involving Resaca and Cano. In connection with
the proposed transaction, Resaca and Cano plan to (a) file
documents with the SEC, including the filing by Resaca of a
Registration Statement on Form S-4 containing a Joint Proxy
Statement/Prospectus, (b) publish an admission document for the
purpose of admitting the issued common stock of the enlarged group
to trading on AIM and (c) file with AIM and the SEC other necessary
documents regarding the proposed transaction. Investors and
security holders of Resaca and Cano are urged to carefully read the
Joint Proxy Statement/Prospectus and AIM admission document (when
available) and other documents filed with AIM and the SEC by Resaca
and Cano because they will contain important information about the
proposed transaction. Investors and security holders may obtain
free copies of these documents (when they are available) and other
documents filed with the SEC by contacting Resaca Investor
Relations at (713) 753-1441 or Cano Investor Relations at (817)
698-0900. Investors and security holders may obtain free copies of
the documents filed with the SEC and published in connection with
the admission to AIM on Resaca’s website at
www.resacaexploitation.com or Cano’s website at www.canopetro.com.
Information filed with the SEC will be available on the SEC’s
website at www.sec.gov. Resaca, Cano and their respective directors
and executive officers may be deemed participants in the
solicitation of proxies with respect to the proposed transaction.
Information regarding the interests of these directors and
executive officers in the proposed transaction will be included in
the Joint Proxy Statement/Prospectus and AIM admission document
described above. Additional information regarding the directors and
executive officers of Resaca is also included in Resaca’s website.
Additional information regarding the directors and executive
officers of Cano is also included in Cano’s proxy statement for its
2008 Annual Meeting of Stockholders, which was filed with the SEC
on December 3, 2008.
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