CELTIC EXPLORATION LTD. 
By
October 17, 2012
Calgary, Alberta
Companies agree to $3.1 Billion Acquisition plus Spinout of Assets
CALGARY, October 17, 2012 - Exxon Mobil Corporation
("ExxonMobil") (NYSE: XOM) and Celtic Exploration Ltd.
("Celtic") (TSX: CLT) today announced that Canadian
affiliates of ExxonMobil, including Exxon Mobil Canada Ltd.
("ExxonMobil Canada"), and Celtic have entered into an
agreement for the purchase by a subsidiary of ExxonMobil
Canada of all of Celtic's outstanding common shares at a cash
price of C$24.50 per share. Additionally, Celtic shareholders
will receive 0.5 of a share of a new company, 1705972 Alberta
Ltd. ("Spinco"), for each Celtic common share.
Including the amount to be paid for Celtic's outstanding
convertible debentures and including Celtic's bank debt and
working capital obligations, the transaction is valued at
approximately C$3.1 billion (excluding the estimated value of
Spinco shares). The transaction is to be completed by way of
an arrangement under the Business Corporations Act (Alberta).
Highlights
• Cash price is C$24.50 per Celtic share
• Celtic shareholders also receive 0.5 of a share of a new company to be led by Celtic's current management team
• Transaction has received the unanimous approval of Celtic's Board of Directors
Based on the cash consideration (not including the value of Spinco shares), the transaction price represents a premium of 35% over Celtic's closing share price on the Toronto Stock Exchange of C$18.12 on October 16, 2012, and 34% over Celtic's 30-trading day volume weighted average trading price of C$18.28 per share ending on October 16, 2012.
Information regarding the Transaction
Following an extensive review and analysis of the proposed
transaction and consideration of other available
alternatives, the Board of Directors of Celtic has
unanimously determined that
the arrangement is in the best interests of Celtic and is
fair to Celtic's securityholders. The Board of Directors of
Celtic has unanimously approved the transaction and
determined to recommend that Celtic's shareholders and
debentureholders vote in favour of the arrangement. Each of
the officers and directors of Celtic, representing in
aggregate
approximately 17.5% of the outstanding common shares (on a
fully diluted basis), have entered into lock-up agreements
with ExxonMobil Canada supporting the transaction, pursuant
to
which they have agreed to vote their common shares and
convertible debentures held in favour of the approval of the
arrangement.
The Board of Directors of Celtic has received from each of
FirstEnergy Capital Corp. and RBC Capital Markets, opinions
that, as of the date of the arrangement agreement, the
consideration to be paid to Celtic's shareholders and
debentureholders is fair from a financial point of view to
Celtic's securityholders.
The agreement between ExxonMobil Canada and Celtic provides
for, among other things, a
non-solicitation covenant on the part of Celtic, subject to
"fiduciary out" provisions that entitle Celtic to consider
and accept a superior proposal and a right in favour of
ExxonMobil Canada to match any superior proposal. The
arrangement agreement provides for a C$90.0 million
termination fee payable by Celtic in certain circumstances if
the transaction is not completed.
Completion of the transaction is subject to customary closing
conditions, including receipt of court, shareholder and
regulatory approvals, including under the Investment Canada
Act and Competition Act. Celtic's securityholders will be
asked to vote on the transaction at a special securityholders
meeting and the completion of the transaction will require
the approval of two- thirds of the votes cast by shareholders
in person or by proxy at the meeting.
Under the proposed transaction, the holders of the Celtic
convertible unsecured subordinated debentures outstanding
will receive Celtic common shares, including shares pursuant
to the make whole payments provided under the terms of the
debentures in total equal to the amount they would otherwise
receive, following the completion of the arrangement if they
were not acquired under the arrangement, plus accrued
interest to the closing date, plus additional interest for 32
days. The Celtic common shares received by debentureholders
under the arrangement will be exchanged, as part of the
arrangement, for the same $24.50 in cash and 0.5 of a Spinco
share to be received by other holders of Celtic common
shares.
Celtic's debentureholders will be asked to vote on the
arrangement; however, completion of the arrangement is not
conditional on their approval. If debentureholder approval is
not obtained, the debentures will be excluded from the
arrangement and will remain outstanding following completion
of the arrangement and continue to be governed by the terms
of their indenture.
An information circular regarding the arrangement is expected
to be mailed to securityholders in late November for a
special meeting of the holders of common shares and
debentures to
take place in late December, with closing expected to occur
as soon as reasonably practicable following the
securityholder vote and regulatory approval.
A copy of the arrangement agreement and the information
circular and related documents will be filed with Canadian
securities regulators and will be available at www.sedar.com.
FirstEnergy Capital Corp. and RBC Capital Markets have each
provided the Board of Directors of Celtic with a fairness
opinion regarding the proposed transaction for the
shareholders and debentureholders. A copy of each opinion
will be included in the information circular to be
sent to Celtic securityholders for the special meeting to be
called to consider the arrangement. Borden Ladner Gervais LLP
is acting as legal counsel to Celtic.
About Celtic Exploration
Celtic is a Calgary, Alberta, Canada-based oil and gas company focused on exploration, development and production of crude oil and natural gas resources primarily in west central Alberta. Celtic holds large acreage positions in the Montney and Duvernay resource gas plays. Throughout its history, Celtic has a proven track record of growing reserves, production and the underlying value of the company for its shareholders. Common shares of Celtic are listed on the Toronto Stock Exchange under the symbol CLT.
About Spinco
Spinco will be a new publicly listed junior oil and gas
exploration and production company led by Celtic's current
management team, including David J. Wilson and Sadiq H.
Lalani. Spinco will be a growth oriented company with
approximately 3,300 BOE per day of production, weighted
90% to gas and 10% to oil, with an initial land position
consisting of approximately 49,000 net
undeveloped acres. Spinco's assets will be made up of three
core areas: a gas property at Grand Cache, Alberta; a
liquids-rich natural gas property at Inga, BC; and an oil
prospect at Karr, Alberta. Spinco expects to complete a
non-brokered private placement equity financing concurrently
with the closing of the acquisition of Celtic by issuing up
to 6.0 million common shares of Spinco at a price equal to
the net asset value per Spinco share, primarily to officers,
directors and employees of Spinco. The net asset value per
Spinco share is estimated to be
$2.32 based on an independent engineering evaluation whereby
the net present value of proved plus probable reserves are
discounted at 10% before tax.
Cautionary Statement on Forward-Looking Information
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward-looking information or statements. In particular,
forward looking statements in this press release include, but
are not limited to the anticipated timing of the meeting of
securityholders and of closing of the
transaction; plans for Spinco and the estimated consideration
payable to holders of the debentures.
The forward-looking statements and information are based on
certain key expectations and assumptions made by Celtic,
including, but not limited to, expectations and assumptions
concerning the ability to obtain all required regulatory
approvals for the transaction, including, but not limited to,
shareholder, Court and regulatory approvals. Although Celtic
believes that the expectations and assumptions on which such
forward-looking statements and information are based are
reasonable, undue reliance should not be placed on the
forward looking statements and information because there can
be no assurance that they will prove to be correct.
Since forward-looking statements and information address
future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results
could differ materially from those currently anticipated due
to a number of factors and risks. These include, but are not
limited to, the risk that the transaction may not close when
planned or at all or on the terms and conditions set forth in
the arrangement agreement; the failure to obtain the
necessary shareholder, Court, regulatory and other third
party approvals required in order to proceed with the
transaction; operational risks in development, exploration
and production for oil and gas; delays or changes in plans
with respect to exploration or development projects or
capital expenditures; the uncertainty of reserve and resource
estimates; health, safety and environmental risks; commodity
price and exchange rate fluctuations; marketing and
transportation; loss of markets; environmental risks;
competition; incorrect assessment of the value of
acquisitions; ability to access sufficient capital from
internal and external sources; and changes in legislation,
including but not limited to tax laws, royalties and
environmental regulations. Readers are cautioned that the
foregoing list of factors is not exhaustive.
Management has included the above summary of assumptions and
risks related to forward- looking information provided in
this press release in order to provide securityholders with a
more complete perspective on the proposed transaction 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 so, what benefits may be derived there from.
The forward-looking statements and information contained in
this press release are made as of the date hereof and Celtic
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a
result of new information, future events, or results or
otherwise, other than as required by applicable securities
laws.
Measurements and Abbreviations
All dollar amounts are referenced in Canadian dollars, except
when noted otherwise. Where amounts are expressed on a barrel
of oil equivalent ("BOE") basis, natural gas volumes have
been converted to oil equivalence at six thousand cubic feet
per barrel and sulphur volumes have been converted to oil
equivalence at 0.6 long tons per barrel. The term BOE may be
misleading, particularly if used in isolation. A BOE
conversion ratio of six thousand cubic feet per barrel is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. References to "oil" in this
discussion include crude oil and natural gas liquids
("NGLs"). NGLs include condensate,
pentane, propane, butane and ethane. References to "gas" in
this discussion include natural gas and sulphur.
For further information, please contact:
Celtic Exploration Ltd., Suite 600, 321 - 6th
Avenue SW, Calgary, Alberta, Canada T2P 3H3
David J. Wilson, President and Chief Executive Officer,
403-201-5340, or
Sadiq H. Lalani, Vice President, Finance and Chief Financial
Officer, 403-215-5310.
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