Crew Energy Inc. (TSX: CR; OTCQB: CWEGF) ("
Crew"
or the "
Company") is pleased to announce that,
with the unanimous support of its Board of Directors (the
"
Crew Board") and endorsement
from Crew’s largest institutional shareholder, the Company has
entered into a definitive arrangement agreement (the
"
Agreement") with Tourmaline Oil Corp.
("
Tourmaline") (TSX: TOU) pursuant to which
Tourmaline has agreed to acquire all of the issued and outstanding
common shares of Crew ("
Crew Shares") in an
all-stock transaction (the "
Transaction"). The
Transaction is valued at approximately $6.69 per Crew Share (the
"
Purchase Price") or $1.3 billion, including
Crew's net debt, which is estimated to be $240 million (including
closing costs) as at the targeted closing date of October 1, 2024.
Based on the closing prices of common shares of Tourmaline
(“
Tourmaline Shares”) and Crew Shares at the close
of markets on August 9, 2024, the Purchase Price represents a
premium of approximately 72%.
Under the terms of the Agreement, holders of
Crew Shares ("Crew Shareholders") will receive
0.114802 of a Tourmaline Share in exchange for each one (1) Crew
Share held (the "Exchange Ratio"). The proposed
Transaction is to be completed by way of a plan of arrangement (the
"Arrangement") under the Business Corporations Act
(Alberta) and, subject to satisfaction of conditions typical for a
transaction of this nature, is expected to close on or about
October 1, 2024.
“We are excited about this transformative
transaction with Tourmaline, which reflects the successful
culmination of Crew’s focused efforts to delineate and grow our
high-quality Montney asset base, while providing Crew Shareholders
continued exposure to the assets, participation in a dividend and
the ability to benefit from future growth and value creation,” said
Dale Shwed, President and CEO of Crew. “As Canada’s leading natural
gas producer and a well-capitalized, investment-grade organization,
Tourmaline has a proven track record of developing large-scale and
impactful resource projects which will now include Crew’s assets in
Groundbirch and the Greater Septimus area, with the financial
capacity to do so on an accelerated timeframe.”
STRATEGIC BENEFITS FOR CREW
SHAREHOLDERS
Crew has assembled a high-quality asset base in
the B.C. Montney fairway, characterized by a deep inventory of
economic drilling locations spanning across the oil, liquids-rich
natural gas and dry natural gas windows with connectivity to ample
pipeline egress capacity, enabling delivery of significant growth
and long-term free cash flow under a supportive natural gas pricing
environment. Navigating the weak short-term natural gas price
landscape, the Company established a plan to grow condensate
production and expand its infrastructure capacity, while preserving
the upside potential of its resource base until the expected
strengthening of gas prices could materialize.
Crew initiated an internal strategic review in
May 2024 and after evaluating several options, including continuing
with Crew’s previously announced strategic plan on a stand-alone
basis, commenced a confidential process to explore potential
strategic opportunities to accelerate and maximize shareholder
value (the "Process"). The Process was approved by
the Crew Board and supervised by a special committee comprised
solely of independent members of the Crew Board (the
"Special Committee"). Following a comprehensive
review of Crew’s current position and proposals received in
connection with the Process, the Crew Board, upon recommendation of
the Special Committee, has determined that the Transaction is in
the best interests of Crew and the Crew Shareholders. Highlights of
the Transaction, and the anticipated benefits to Crew Shareholders
associated with the Transaction, include, but are not limited to,
the following:
-
Significant Premium and Attractive Value:
- The Exchange Ratio
implies a value of approximately $6.73 per Crew Share based on the
20-day volume weighted average trading price of Tourmaline Shares
of $58.66 on August 9, 2024, resulting in a premium of
approximately 70% to the 20-day volume weighted average trading
price of Crew Shares of $3.96 on August 9, 2024.
- The Purchase Price
aligns closely with the highest closing price achieved on Crew
Shares in the last seven years.
- The meaningful
premium attributes immediate value for Crew's significant inventory
of future drilling locations and the inherent value in the
Company’s underlying Montney resource, which were not being
reflected in Crew’s existing market valuation.
- Continued
Ownership Stake in Sizeable Producer with Successful Track Record
of Value Creation:
- As a
share-for-share exchange, the Transaction provides Crew
Shareholders with ownership in Tourmaline, Canada’s largest natural
gas producer offering an attractive total return to shareholders
through a return of capital plus growth model.
- Ownership in
Tourmaline offers enhanced scale, asset diversification, financial
market liquidity and a long-term sustainable return of capital
framework that is underpinned by an existing deep portfolio of
high-quality drilling inventory, along with a low-cost owned and
operated infrastructure platform.
- Tourmaline has a
demonstrated track record of successfully delivering significant
free cash flow from its operations through the commodity cycle,
maintaining balance sheet flexibility while delivering organic
growth and returning capital to shareholders. Crew's assets are
expected to further bolster Tourmaline’s ability to deliver strong
free cash flow over the long-term.
- The Transaction is
structured on a tax-efficient basis for Crew Shareholders.
-
Introduction of an Attractive Dividend:
- In addition to
receiving a current annualized base dividend of $1.32 per
Tourmaline Share, Crew Shareholders are anticipated to also
participate in any special dividends paid by Tourmaline, should
they be declared.
- To date, Tourmaline
has declared total special dividends of $14.75 per share, inclusive
of the inaugural special dividend paid in October 2020.
Tourmaline's dividend per share has grown consistently since its
initiation in 2018 at a compound annual growth rate of
approximately 23% and has never been reduced.
- Continued
Upside Participation with Ongoing Exposure to Gas Price
Tailwinds:
- Crew Shareholders
will retain exposure to the Company’s deep asset inventory and
benefit from the potential acceleration of the identified growth
opportunities in its assets through Tourmaline’s Shares.
- In addition to
prudently pursuing its own highly attractive internal development
opportunities, Tourmaline has the scale and financial capacity to
expedite resource development of Crew's growth opportunities at
Groundbirch and Greater Septimus, and upon completion of the
Transaction, Crew Shareholders will continue to benefit from these
assets over the long-term.
- Ownership in
Tourmaline offers Crew Shareholders immediate exposure to premium
priced gas markets, including California and offshore LNG, through
Tourmaline's active gas marketing strategy and investment grade
credit rating. Crew Shareholders also continue to benefit from the
positive outlook on gas pricing driven by near-term start-up of
west coast LNG export projects in addition to other macro tailwinds
for natural gas pricing in North America.
- Top Tier
Management Team and Board with a Proven Track Record of
Success:
- Tourmaline's
management team have proven to be strong stewards of capital,
providing shareholders with a total return of over 300% since its
initial public offering in 2010, which translates into a compound
annual total return of over 10%.
- In addition,
Tourmaline's management and its board of directors are highly
aligned with all Tourmaline shareholders through their significant
equity ownership.
RECOMMENDATION OF THE CREW BOARD OF
DIRECTORS
The Crew Board, based in part upon the unanimous
recommendation of the Special Committee and after seeking and
carefully considering advice from financial and legal advisors, has
unanimously determined that the Transaction is in the best
interests of Crew and the Crew Shareholders, the consideration to
be received by Crew Shareholders pursuant to the Arrangement is
fair, from a financial point of view, to the Crew Shareholders and
has unanimously recommended that Crew Shareholders vote in favour
of the resolutions approving the Transaction and related matters at
the Crew Meeting (as defined below).
TRANSACTION DETAILS AND CREW SHAREHOLDER
SUPPORT
Crew and Tourmaline have entered into the
Agreement to effect the Transaction by way of a plan of arrangement
under the Business Corporations Act (Alberta). Under the terms of
the Transaction, Tourmaline will acquire all of the issued and
outstanding Crew Shares in exchange for Tourmaline Shares. Crew
Shareholders will receive 0.114802 of a Tourmaline Share for each
one (1) Crew Share held.
The Transaction requires approval by at least 66
2/3% of the votes cast by Crew Shareholders present in person or
represented by proxy at a special meeting of Crew Shareholders to
be called to consider the Transaction (the "Crew
Meeting") and a majority of the votes cast by Crew
Shareholders after excluding the votes cast by those persons whose
votes may not be included under Multilateral Instrument 61-101 -
Protection of Minority Security Holders in Special Transactions.
The Crew Meeting is expected to be held on or about October 1,
2024.
The completion of the Transaction is subject to
customary closing conditions including, without limitation, receipt
of court approval and customary regulatory and stock exchange
approvals, including under the Competition Act (Canada).
All of the directors and executive officers of
Crew, as well as Crew's largest institutional shareholder, Equinox
Partners, have entered into voting agreements pursuant to which
they have agreed, subject to the terms thereof, to vote their Crew
Shares, representing in aggregate 32% of the issued and outstanding
Crew Shares, in favour of the Transaction.
The Agreement includes representations and
warranties, conditions and covenants of the parties typical for
transactions of this nature including a non-solicitation covenant
on the part of Crew, a right of Tourmaline to match any superior
proposal and a fee payable by Crew if the Arrangement Agreement is
terminated in certain circumstances.
Further details with respect to the Arrangement
will be included in the information circular to be mailed to the
Crew Shareholders in connection with the Crew Meeting. A copy of
the Agreement and the information circular will be filed on Crew's
SEDAR+ profile and will be available for viewing in due course at
www.sedarplus.ca.
FINANCIAL ADVISORS AND FAIRNESS OPINIONS
TD Securities Inc. ("TD") is
acting as Exclusive Financial Advisor to the Company and the Crew
Board. TD has provided a verbal opinion ("TD Fairness
Opinion") to the Crew Board to the effect that, as of the
date of such opinion and based upon and subject to the assumptions,
limitations and qualifications set forth therein, the consideration
to be received by Crew Shareholders pursuant to the Arrangement is
fair, from a financial point of view, to Crew Shareholders.
ATB Securities Inc. ("ATB") is
acting as Financial Advisor to the Special Committee of the Crew
Board. ATB has provided a verbal opinion to the Special Committee
("ATB Fairness Opinion") to the effect that, as of
the date of such opinion and based upon and subject to the
assumptions, limitations and qualifications set forth therein, the
consideration to be received by Crew Shareholders pursuant to the
Arrangement is fair, from a financial point of view, to Crew
Shareholders.
ABOUT CREW
Crew is a Canadian liquids-rich natural gas
producer committed to pursuing sustainable per share growth through
financially responsible resource development. The Company’s
operations are focused in northeast British Columbia and include a
large contiguous land base with a vast Montney resource. Crew's
liquids-rich natural gas areas of Septimus and West Septimus are
complemented by the inter-connected vast dry-gas resource at
Groundbirch, offering significant development potential over the
long-term. The Company has access to diversified markets with
operated infrastructure and access to multiple pipeline egress
options. Crew adheres to safe and environmentally responsible
operations while remaining committed to sound environmental, social
and governance practices which underpin the Company’s fundamental
business tenets. Crew’s common shares are listed for trading on the
Toronto Stock Exchange ("TSX") under the symbol
"CR" and on the OTCQB in the US under ticker
"CWEGF".
ABOUT TOURMALINE
Tourmaline is Canada's largest and most active
natural gas producer dedicated to producing the lowest emission and
lowest-cost natural gas in North America. Tourmaline is an
investment grade exploration and production company providing
strong and predictable operating and financial performance through
the development of three core areas in the Western Canadian
Sedimentary Basin. With its existing large reserve base,
decades-long drilling inventory, relentless focus on execution and
cost management, and industry-leading environmental performance,
Tourmaline provides shareholders an excellent return on capital,
and an attractive source of income through our base dividend and
surplus free cash flow distribution strategies. Tourmaline’s common
shares are listed for trading on the Toronto Stock Exchange ("TSX")
under the symbol "TOU".
FOR DETAILED
INFORMATION, PLEASE
CONTACT:
Dale Shwed, President and CEO |
Phone: (403) 266-2088 |
John Leach, Executive Vice President and CFO |
Email: investor@crewenergy.com |
|
|
Currency
All amounts in this press release are stated in Canadian dollars
(C$) unless otherwise specified.
Forward Looking Information and Statements
Certain information contained herein may
constitute forward-looking statements and information
(collectively, "forward-looking statements") within the meaning of
applicable securities legislation, that involve known and unknown
risks, assumptions, uncertainties and other factors. Undue reliance
should not be placed on any forward-looking statements.
Forward-looking statements may be identified by words like
"anticipates", "estimates", "expects", "indicates", "forecast",
"intends", "may", "believes", "could", "should", "would", "plans",
"proposed", "potential", "will", "target", "approximate",
"continue", "might", "possible", "predicts", "projects" and similar
expressions, but the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements in
this press release include but are not limited to: statements about
the implied value of the Transaction and the Purchase Price which
are subject to change with the trading values of each of the Crew
Shares and Tourmaline Shares prior to closing of the Transaction;
Crew's net debt estimated to be $240 million (including closing
costs) as of October 1, 2024; the strategic rationale for, and
anticipated benefits from, the Transaction, all as more
particularly set forth under the heading "Strategic Benefits for
Crew Shareholders" in this press release; Tourmaline's ability to
continue its attractive return of capital framework combining
modest production growth with meaningful base and special
dividends; Tourmaline's ability to potentially accelerate the
timeframe for developing Crew's resource projects including within
the Groundbirch and greater Septimus areas; Tourmaline's ability to
deliver strong free cash flow over the longer term; that the
Transaction is anticipated to close on or about October 1,
2024; the timing of the Crew Meeting; and all statements about
strategy, plans, objectives, priorities, dividends, free cash-flow
and commodity prices.
This press release also contains forward-looking
statements concerning the anticipated completion of the Transaction
and the anticipated timing thereof. Crew has provided these
anticipated times in reliance on certain assumptions that it
believes are reasonable, including assumptions as to time required
to prepare meeting materials for mailing, the timing of receipt of
the necessary regulatory, Crew Shareholder and Court approvals and
the satisfaction of, and the time necessary to satisfy, the
conditions to the closing of the Transaction. These dates may
change for a number of reasons, including unforeseen delays in
preparing meeting materials, inability to secure necessary
regulatory, Crew Shareholder or Court approvals in the time assumed
or the need for additional time to satisfy the conditions to the
completion of the Transaction. In addition, there are no assurances
the Transaction will be completed. Accordingly, readers should not
put undue reliance on the forward-looking statements contained in
this press release concerning the completion of the Transaction or
the timing thereof.
Such statements reflect the current views of
Crew, with respect to future events and are subject to certain
risks, uncertainties and assumptions that could cause results to
differ materially from those expressed in the forward-looking
statements. These risks and uncertainties include but are not
limited to: that the Transaction is not completed on the timing
anticipated or at all; the occurrence of any event, change or other
circumstances that could give rise to the termination of the
Agreement; the inability to complete the Transaction due to the
failure to obtain approval of Crew Shareholders, the court,
regulatory bodies or stock exchanges, as required; the risk that
Tourmaline may not be able to realize the anticipated benefits of
the Transaction; risks related to capital market liquidity and
Tourmaline’s long-term return of capital framework; risks related
to the retention or recruitment, or changes required in, officers,
key employees or directors following completion of the Transaction;
geopolitical risks and changes in applicable laws or regulations;
the possibility that Crew and/or Tourmaline may be adversely
affected by other economic, business, and/or competitive factors;
the impact of general economic conditions; volatility in market
prices for crude oil and natural gas; industry conditions; currency
fluctuations; imprecision of reserve estimates; liabilities
inherent in crude oil and natural gas operations; environmental
risks; incorrect assessments of the value of acquisitions and
exploration and development programs; the lack of availability of
qualified personnel, drilling rigs or other services; changes in
income tax laws or changes in royalty rates and incentive programs
relating to the oil and gas industry including abandonment and
reclamation programs; hazards such as fire, explosion, blowouts,
and spills, each of which could result in substantial damage to
wells, production facilities, other property and the environment or
in personal injury; ability to access sufficient capital from
internal and external sources; litigation and regulatory
enforcement risks, including the diversion of management time and
attention and the additional costs and demands on resources;
general economic and business conditions; risks related to the oil
and natural gas industry, such as operational risks in exploring
for, developing and producing crude oil and natural gas and market
demand; pricing pressures and supply and demand in the oil and gas
industry; fluctuations in currency and interest rates; risks
related to debt agreements and access to capital; inflation; risks
of war, hostilities, civil insurrection, pandemics and epidemics,
and general political and economic instability; severe weather
conditions including wildfires and risks related to climate change;
terrorist threats; risks associated with technology; changes in
laws and regulations, including environmental, regulatory and
taxation laws, and the application of such changes to Crew and/or
Tourmaline's future business; availability of adequate levels of
insurance; and difficulty in obtaining necessary regulatory
approvals and the maintenance of such approvals. Readers are
cautioned that the foregoing list is not exhaustive of all possible
risks and uncertainties.
With respect to forward-looking statements
contained in this press release, Crew has made assumptions
regarding, among other things: the satisfaction of the conditions
to completion of the Transaction, including the timely receipt of
required Crew Shareholder, court, regulatory and stock exchange
approvals, as required; the ability of Tourmaline to realize
benefits and efficiencies with respect to the Transaction; future
capital expenditure levels; future oil and natural gas prices;
future oil and natural gas production levels; future currency
exchange rates and interest rates; ability to obtain equipment and
services in a timely manner to carry out development activities;
ability to market oil and natural gas successfully to current and
new customers; the impact of competition; the general stability of
the economic and political environments in which Crew and
Tourmaline operate; the ability to obtain qualified staff,
equipment and services in a timely and cost efficient manner; that
Crew and/or Tourmaline will have sufficient cash flow, debt or
equity sources or other financial resources required to fund the
expenses in connection with the Transaction, capital and operating
expenditures and other requirements as needed; that Tourmaline's
conduct and results of operations will be consistent with Crew’s
expectations; that Tourmaline will have the ability to develop its
oil and gas properties in the manner currently contemplated; the
estimates of production volumes and the assumptions related thereto
(including commodity prices and development costs) are accurate in
all material respects; the ability to add production and reserves
through development and exploration activities; and other matters.
Although Crew believes that the expectations reflected in the
forward-looking statements contained in this press release, and the
assumptions on which such forward-looking statements are made, are
reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned that the foregoing list
is not an exhaustive list of all assumptions which have been
considered.
Management has included the above summary of
assumptions and risks related to forward-looking information
provided in this press release in order to provide Crew
Shareholders with a more complete perspective on Crew's and
Tourmaline's current and future operations and such information may
not be appropriate for other purposes. Actual results, performance
or achievement could differ materially from those expressed in, or
implied by, these forward-looking statements and, accordingly, no
assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of
them do, what benefits may be derived therefrom.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Crew's expectations
regarding Tourmaline's base and special dividends, free funds flow,
payout ratio, capital investments, all of which are subject to the
same assumptions, risk factors, limitations, and qualifications as
set forth in the above paragraphs. The actual results of operations
of Tourmaline and the resulting financial results will likely vary
from the amounts set forth in this presentation and such variation
may be material. Crew and its management believe that the FOFI has
been prepared on a reasonable basis, reflecting management's best
estimates and judgments. However, because this information is
subjective and subject to numerous risks, it should not be relied
on as necessarily indicative of future results. Except as required
by applicable securities laws, Crew Undertakes no obligation to
update such FOFI. FOFI contained in this press release was made as
of the date of this press release and was provided for the purpose
of providing further information about Tourmaline's anticipated
future business operations. Readers are cautioned that the FOFI
contained in this press release should not be used for purposes
other than for which it is disclosed herein.
The forward-looking statements contained in this
press release speak only as of the date of this press release.
Accordingly, forward-looking statements should not be relied upon
as representing Crew's views as of any subsequent date, and except
as expressly required by applicable securities laws, Crew does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
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