88 Energy and XCD to merge and create larger North Slope Alaskan oil play
88 Energy’s takeover offer values XCD at $0.012 per share – a 71% premium to yesterday’s closing price of $0.007.
Following 88 Energy’s (ASX: 88E) unsolicited takeover bid a few weeks ago, XCD Energy (ASX: XCD) and 88 Energy revealed this morning they have agreed to a merger to create an Alaska focused oil company.
Via an unanimously recommended off-market takeover offer, 88 Energy will issue 2.4 shares for every XCD share held, plus 0.7 88 Energy shares for every XCD listed option.
The offer values XCD at $0.012, which is a 71% premium to the company’s closing price yesterday of $0.007. It also is 140% higher than XCD’s closing price on 24 April of $0.005.
Once the merger has been completed, XCD shareholders will own 20% of the new entity.
Already 18.5% of XCD’s shareholders have entered into pre-bid acceptance agreements in addition to 6.8% of listed option holders.
Merger rationale
According to the duo, the merged entity will have a diversified portfolio of exploration projects on Alaska’s North Slope.
The three key projects include Project Icewine, Yukon leases and Project Peregrine with the assets at various stages of advancement.
The combined company will have increased scale, market presence along with higher funding capability and trading liquidity across the ASX and London AIM.
Additionally, the company will possess a board, management and technical team with proven capabilities and a track record for delivering project objectives.
The combined entity will also have an extensive network of global and Alaskan relationships both business and technical.
“In a combined company XCD shareholders and listed option holders will be able to leverage from 88 Energy’s geological and operational expertise, specific to the North Slope of Alaska, where we have drilled four wells at Operator, safely and within budget, and acquired several 2D and 3D seismic surveys over the last five years,” 88 Energy managing director David Wall said.
“This includes extensive technical knowledge of the regionally successful Brookian oil plays, in which 88 Energy retains significant upside exposure via its highly prospective portfolio of exploration/appraisal projects covering 330,000 net acres (480,000 gross) co-located on the North Slope.”
Commenting on the merger XCD chairman Peter Stickland said the deal was “compelling” for XCD shareholders.
“In addition to a significant premium, the transaction provides XCD shareholders with the opportunity to become shareholders of a company with significantly increased scale and demonstrated operational capability that is focused on the world class potential of the North Slope of Alaska.”
He added the XCD board “unanimously recommends” 88 Energy’s takeover offer to shareholders.
North Slope assets
XCD wholly-owns 195,373 acres of land on Alaska’s North Slope.
The company noted last week that oil major ConocoPhillips’ Harpoon discovery was directly on trend and analogous to its Harrier prospect.
ConocoPhillips’ discovery is also 15km from XCD’s Project Peregrine acreage.
Meanwhile, 88 Energy’s key project Icewine which hosts the recently drilled Charlie-1 exploration well.
88 Energy’s leases on the slope total 250,000 acres.