Press release from CNW Group
Bronco announces sale to Legacy Oil + Gas Inc.
Tuesday, September 07, 2010
Bronco announces sale to Legacy Oil + Gas Inc.19:47 EDT Tuesday, September 07, 2010/THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH US NEWSWIRE SERVICES/CALGARY, Sept. 7 /CNW/ - Bronco Energy Ltd. ("Bronco") (TSX: BCF) today announces that it has entered into an arrangement agreement ("Arrangement") with Legacy Oil + Gas Inc. ("Legacy") (TSX:LEG). Pursuant to the Arrangement, Legacy will acquire all of the issued and outstanding common shares of Bronco and the Bronco shareholders will receive 0.0182 of a Legacy common share for each Bronco common share held.Also pursuant to the Arrangement, Legacy will acquire all of the 6.0% Convertible Secured Subordinated Debentures of Bronco ("Debentures"). The holders of the Debentures will receive a cash payment of $1,100.00 per $1,000.00 principal amount of Debentures, which represents a 1% premium to face value plus interest that would have been payable to maturity. As closing of the Arrangement is expected to occur subsequent to the next scheduled interest payment on October 31, 2010, Bronco intends to exercise its option to make such payment in common shares, which will be eligible for exchange into Legacy shares in the same manner as currently outstanding Bronco common shares. Bronco's outstanding share purchase warrants will be cancelled for no consideration pursuant to the Arrangement.Bronco's assets include: << - approximately 67,000 (61,763 net) acres of land in the Athabasca Oil Sands region; - approximately 700 boed of production from the Wabaskaw development and a facility currently capable of processing 3,000 Bbl/d of oil; which is scalable to 10,000 Bbl/d with minor modifications - a potential SAGD thermal project in the Grand Rapids formation; and - in excess of $190 million in tax pools, including approximately $122 million in non-capital losses. >> The near term capital requirements for these assets are not significant with approximately $1.75 million to be spent in the next 18 months, including the drilling of three vertical wells to maintain the acreage which contains the Grand Rapids formation.On March 11, 2010 the Board of Directors of Bronco appointed a committee of its independent directors to identify, examine and consider strategic alternatives and retained the services of RBC Capital Markets, to assist with this process. An extensive process was conducted and discussions were held with numerous interested parties. On the advice of the independent committee, the Board concluded that a sale to Legacy provides shareholders with the greatest value.Although Bronco currently has positive working capital, it does not have access to the capital necessary to properly develop its acreage. Additionally, production has declined and will continue to decline due to the inability of Bronco to invest the funds necessary to maintain its current operations. As a result of the declining production and a recent widening in the differentials between heavy and light oil, Bronco is currently not generating sufficient cash flow to sustain its operations. This situation is expected to continue, and may deteriorate, which raises substantial doubt about Bronco's ability to continue as a going concern if this Arrangement is not completed.RBC Capital Markets has provided its opinions that, as at September 7, 2010, the consideration under the Arrangement is fair from a financial point of view to the Bronco shareholders and the Bronco debenture holders, respectively.The Board of Directors of Bronco has unanimously determined that the Arrangement is fair to and in the best interests of Bronco, the Bronco shareholders and the Bronco debenture holders. The Arrangement is subject to the approval of 66 2/3 % of the voting debenture holders, shareholders and warrant holders. The Board recommends that Bronco shareholders, debenture holders and warrant holders vote to approve the Arrangement at the security holders' meeting that will be scheduled to approve the Arrangement. Certain Bronco shareholders, debenture holders and warrant holders, including all officers and directors, who collectively beneficially own 19% of the Bronco's shares, 76% of the Debentures and 76% of the warrants have entered into agreements with Legacy to vote in favour of the Arrangement.The Arrangement Agreement includes customary non-solicitation covenants and right-to-match provisions and provides for a non-completion fee of $3 million to be paid by Bronco to Legacy if the transaction is not completed under certain circumstances. A non completion fee of $1 million is payable by Legacy to Bronco in the event that the Arrangement is not completed due to a material breach of the Arrangement by Legacy. An information circular regarding the Arrangement is expected to be mailed to security holders in early October 2010, with a special meeting scheduled to be held in early November 2010 and closing shortly thereafter.In addition to the approval of the securityholders of Bronco, the Arrangement is subject to the approval of the Court of Queen's Bench of Alberta, the receipt of all necessary regulatory and stock exchange approvals, and certain closing conditions that are customary for a transaction of this nature.The Board of Directors of Bronco would like to express their personal thanks to the Bigstone Cree for their support and patience as Bronco sought a suitable steward of the Wabasca operation.This press release is not an offer to sell securities in the United States. Securities may not be offered or sold in the United States in the absence of registration or an exemption from registration.Forward-Looking StatementsCertain statements contained in this news release concerning Bronco, including: its ability to close the Arrangement; satisfaction of the conditions thereto; well performance; anticipated or expected production rates; the performance characteristics of its reserves; its capital program; and the prospects for future financing or strategic alternatives for Bronco constitute forward-looking statements. Although Bronco believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.In making the forward-looking statements, Bronco has made assumptions regarding, among other things: its ability to close the Arrangement and satisfaction of the conditions thereto; the future performance and production of our wells; our financial resources and condition; and our ability to obtain financing on acceptable terms as required.Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: conditions to the Arrangement not being satisfied; and the other factors described in our public filings including our Annual Information Form dated March 25, 2010 and our management discussion and analysis of financial conditions for the year ended December 31, 2009, available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking statements to conform such statement to actual results or to changes in our expectations except as otherwise required by applicable securities legislation.%SEDAR: 00023400EFor further information: Bronco Energy Ltd., Peter J. Pelensky, President and CEO, Paul E. Belliveau, VP Finance and CFO, Phone: (403) 699-8383, WWW.BRONCOENERGY.CA; OR Legacy Oil + Gas Inc., Trent Yanko, President and CEO, Matt Janisch, VP Finance and CFO, Phone: (403) 441-2300, WWW.LEGACYOILANDGAS.COM