Creates Leading, Diversified Mid-Cap Oil
Producer with Top-Tier Industry Margins and
Strong Production Growth Trajectory
Denbury Resources Inc. (NYSE: DNR) (“Denbury”) and Penn Virginia
Corporation (NASDAQ: PVAC) (“Penn Virginia”) today announced that
they have entered into a definitive merger agreement pursuant to
which Denbury will acquire Penn Virginia in a transaction valued at
approximately $1.7 billion, including the assumption of debt.
The consideration to be paid to Penn Virginia shareholders will
consist of 12.4 shares of Denbury common stock and $25.86 of cash
for each share of Penn Virginia common stock. Penn Virginia
shareholders will be permitted to elect all cash, all stock or a
mix of stock and cash, subject to proration, which will result in
the aggregate issuance of approximately 191.6 million Denbury
shares and payment of $400 million in cash. The transaction
was unanimously approved by the board of directors of each company,
and Penn Virginia shareholders holding 15% of the outstanding
shares signed a voting agreement to vote “for” the transaction.
Chris Kendall, Denbury’s President and CEO,
commented, “This transaction marks a defining moment for Denbury,
meeting multiple strategic objectives to create a balanced,
resilient, and growing business with significant scale, while
reinforcing our position as the highest oil-weighted producer in
our peer group. Penn Virginia’s Eagle Ford assets will add
many years of high value, low breakeven development to our
portfolio, complementing Denbury’s long-lived, high-margin
assets.
“The combination is accretive to key per-share
metrics and will immediately improve the Company’s leverage
profile. The combined company will have a stronger balance
sheet, enhanced by its growth trajectory and scale. We expect
the combined company will generate positive free cash flow
immediately, while growing at a meaningful and sustainable
pace.
“Through this combination, we plan to focus
Denbury’s significant enhanced oil recovery expertise on the
prolific Eagle Ford shale, positioning us at the forefront of this
exciting new arena for EOR. Denbury’s passion for improved
oil recovery and our deep technical knowledge give us a strong
advantage on this new frontier.”
John A. Brooks, President and Chief Executive
Officer of Penn Virginia, stated, “Following the comprehensive
strategic review process, we believe a merger with Denbury
Resources maximizes value for our shareholders and represents an
ideal outcome for our company and all of our stakeholders.
The premium offered to Penn Virginia shareholders reflects our
quality assets and the steps we have taken to enhance our
business. Both companies share complementary attributes,
including high-quality oil-weighted assets, peer-leading margins
and the ability to generate significant free cash flow.
Applying Denbury’s demonstrated expertise in enhanced oil recovery
to the oil-rich resources of our large, contiguous Eagle Ford
acreage provides our shareholders the opportunity to maximize value
acceleration of Penn Virginia’s South Texas unconventional oil
shale assets. As a result, the transaction will result in a
combined company that is uniquely positioned for long-term success,
and provides Penn Virginia’s shareholders with excellent
value and significant upside.”
Mr. Brooks added, “As we embark on this unique
and exciting combination with Denbury, I also want to take this
opportunity to recognize Penn Virginia’s most important asset, our
employees. I believe they are one of the best teams in the
business, and this transaction recognizes the value created by
their efforts.”
STRATEGIC RATIONALE
- Provides a new core position in the oil window of the Eagle
Ford in close proximity to Denbury’s existing Gulf Coast
operations
- Enhances investment diversity by adding a significant inventory
of short cycle unconventional development opportunities to
Denbury’s medium cycle EOR project portfolio
- Provides the opportunity to leverage Denbury’s EOR expertise in
the emerging Eagle Ford Shale EOR play
- Reinforces Denbury’s leading oil weighting among its peer
group
- Strong combined free cash flow profile provides capital
utilization optionality
- Immediately accretive to cash flow per share and other key
per-share metrics
- Enhanced size and scale and reduced pro forma leverage create a
strong credit profile that should result in a lower long-term cost
of capital
COMBINED PRO FORMA COMPANY
HIGHLIGHTS
- Forms a leading, diversified mid-cap oil producer with top-tier
industry margins, strong production growth trajectory and ability
to generate significant free cash flow
- $6.0 billion enterprise value as of October 26, 2018
- 343 MMBOE(1) of proved oil, natural gas liquids and natural gas
reserves at December 31, 2017
- 84 MBOE/d second quarter 2018 production
- Industry leading oil weighting with 94% liquids production and
90% oil production
- $915 million second quarter 2018 annualized EBITDAX ($1.2
billion excluding second quarter hedge settlements)
- 70% of production tied to LLS pricing, which has historically
attracted strong premiums to WTI NYMEX pricing
TRANSACTION DETAILS
Under the terms of the definitive merger
agreement, shareholders of Penn Virginia will receive, subject to
proration, a combination of 12.4 shares of Denbury common stock and
$25.86 of cash for each share of Penn Virginia common stock,
representing consideration to each Penn Virginia shareholder of
$79.80 per share based on the closing price of Denbury common stock
on October 26, 2018. Penn Virginia shareholders will have the
option to receive all stock or all cash, subject to proration such
that the overall mix of consideration does not result in more or
less than $400 million in cash being paid. The overall mix of
consideration will be 68% Denbury common stock and 32% cash.
The stock portion of the consideration received by Penn Virginia’s
shareholders is expected to be tax-free. Upon closing of the
transaction, Denbury stockholders will own approximately 71% of the
combined company, and Penn Virginia shareholders will own
approximately 29%.
Denbury intends to finance the transaction with
a combination of equity (issued to Penn Virginia shareholders),
debt and cash on hand. Denbury has received a financing
commitment letter from JPMorgan Chase Bank, N.A. for a new $1.2
billion senior secured bank credit facility, replacing its current
facility under which no amounts are currently outstanding, and a
$400 million senior secured second lien bridge financing. The
two new debt financings will be used to fully or partially fund the
$400 million cash portion of the consideration, potentially retire
and replace Penn Virginia’s $200 million second lien term loan,
replace Penn Virginia’s existing bank credit facility, which had
$283 million drawn and outstanding as of September 30, 2018, and
pay fees and expenses.
The transaction, which is expected to close in
the first quarter of 2019, is subject to the approval of Penn
Virginia shareholders and is subject to approval by Denbury’s
stockholders of the issuance of common stock and an amendment to
Denbury’s charter to increase its authorized shares. The
transaction is also conditioned on clearance under the Hart-Scott
Rodino Act and other customary closing conditions.
The merger agreement contains a covenant that
upon its closing, Denbury’s board of directors will be expanded
from eight directors to ten directors, to include two independent
members of Penn Virginia’s board of directors who are mutually
agreed upon by Denbury and Penn Virginia.
ADVISORS
Guggenheim Securities, LLC acted as lead
financial advisor to Denbury. J.P. Morgan Securities LLC also
provided financial advice to Denbury with respect to capital
structure and financial aspects of the transaction and
provided a financing commitment letter for a new $1.2 billion bank
revolving credit facility and a $400 million senior secured second
lien bridge loan. Jefferies LLC acted as financial advisor to
Penn Virginia. Vinson & Elkins LLP acted as legal counsel
to Denbury. Skadden, Arps, Slate, Meagher & Flom LLP and
Gibson, Dunn & Crutcher LLP acted as legal counsel to Penn
Virginia.
INVESTOR AND ANALYST CALL
Denbury will host a conference call for
investors and analysts at 7:30 AM CDT on Monday, October 29, 2018
to discuss this transaction. Additionally, Denbury will post
presentation materials on its website, which will be referenced
during the conference call. Individuals who would like to
participate should dial 800.230.1092 or 612.234.9960 ten minutes
before the scheduled start time. To access a live webcast of
the conference call and accompanying slide presentation, please
visit the investor relations section of Denbury’s website at
www.denbury.com. The webcast will be archived on the website,
and a telephonic replay will be accessible for at least one month
after the call by dialing 800.475.6701 or 320.365.3844 and entering
confirmation number 456361.
DENBURY RESOURCES INC.
Denbury is an independent oil and natural gas
company with operations focused in two key operating areas: the
Gulf Coast and Rocky Mountain regions. Denbury’s goal is to
increase the value of its properties through a combination of
exploitation, drilling and proven engineering extraction practices,
with the most significant emphasis relating to CO2 enhanced oil
recovery operations. For more information about Denbury,
please visit www.denbury.com. The information on Denbury’s
website is not part of this release.
PENN VIRGINIA CORPORATION
Penn Virginia is a pure-play independent oil and
gas company engaged in the development and production of oil, NGLs
and natural gas, operating in the Eagle Ford shale in south
Texas. For more information, please visit
www.pennvirginia.com. The information on Penn Virginia’s
website is not part of this release.
NO OFFER OR SOLICITATION
This communication relates to a proposed
business combination transaction (the “Transaction”) between
Denbury and Penn Virginia. This communication is for
informational purposes only and does not constitute an offer to
sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval, in any jurisdiction, of the
Transaction or otherwise, nor shall there be any sale, issuance,
exchange or transfer of the securities referred to in this document
in any jurisdiction in contravention of applicable law. No
offer of securities will be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of
1933, as amended (the “Securities Act”).
ADDITIONAL INFORMATION AND WHERE TO FIND
IT
In connection with the Transaction, Denbury and
Penn Virginia will file a joint proxy statement/prospectus and
other documents with the Securities and Exchange Commission (the
“SEC”). Investors and security holders are urged to carefully
read the definitive joint proxy statement/prospectus when it
becomes available because it will contain important information
regarding Denbury, Penn Virginia and the Transaction.
A definitive joint proxy statement/prospectus
will be sent to stockholders of Denbury (to approve issuance of
Denbury common stock in the Transaction and to amend Denbury’s
certificate of incorporation to increase its authorized shares) and
sent to Penn Virginia shareholders seeking their approval of the
transaction. This document is not a substitute for any
prospectus, proxy statement or any other document which Denbury or
Penn Virginia may file with the SEC in connection with the proposed
Transaction. INVESTORS AND SECURITY HOLDERS OF DENBURY AND
PENN VIRGINIA ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE
FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders may
obtain a free copy of the definitive joint proxy
statement/prospectus (when available) and other documents filed by
Denbury and Penn Virginia with the SEC at the SEC’s website,
www.sec.gov. The definitive joint proxy statement/prospectus
(when available) and such other documents relating to Denbury may
also be obtained free-of-charge by directing a request to Denbury,
Attn: Investor Relations, 5320 Legacy Drive, Plano, Texas 75024, or
from Denbury’s website, www.denbury.com. The definitive joint
proxy statement/prospectus (when available) and such other
documents relating to Penn Virginia may also be obtained
free-of-charge by directing a request to Penn Virginia, Attn: Clay
Jeansonne, 16285 Park Ten Place, Suite 500, Houston, TX 77084, or
from Penn Virginia’s website, www.pennvirginia.com.
Denbury, Penn Virginia and certain of their
respective directors, executive officers and other members of
management and employees may, under the rules of the SEC, be deemed
to be “participants” in the solicitation of proxies in connection
with the proposed transaction. Information concerning the
interests of the persons who may be “participants” in the
solicitation will be set forth in the joint proxy
statement/prospectus when it is filed with the SEC. You can
find more detailed information about Denbury’s executive officers
and directors in its definitive proxy statement filed with the SEC
on April 12, 2018. You can find more detailed information
about Penn Virginia’s executive officers and directors in its
definitive proxy statement filed with the SEC on March 28, 2018 and
Form 8-K filed with the SEC on September 12, 2018. Additional
information about Denbury’s executive officers and directors and
Penn Virginia’s executive officers and directors can be found in
the above-referenced joint proxy statement/prospectus when it
becomes available.
FORWARD LOOKING STATEMENTS
The foregoing contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical
fact, included in this communication that address activities,
events or developments that Denbury or Penn Virginia expects,
believes or anticipates will or may occur in the future are
forward-looking statements. Words such as “estimate,”
“project,” “predict,” “believe,” “expect,” “anticipate,”
“potential,” “create,” “intend,” “could,” “may,” “foresee,” “plan,”
“will,” “guidance,” “look,” “outlook,” “goal,” “future,” “assume,”
“forecast,” “build,” “focus,” “work,” “continue” or the negative of
such terms or other variations thereof and words and terms of
similar substance used in connection with any discussion of future
plans, actions, or events identify forward-looking
statements. However, the absence of these words does not mean
that the statements are not forward-looking. These
forward-looking statements include, but are not limited to,
statements regarding the Transaction, pro forma descriptions of the
combined company and its operations, integration and transition
plans, synergies, opportunities and anticipated future
performance. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication.
These include the expected timing and likelihood of completion of
the Transaction, including the timing, receipt and terms and
conditions of any required governmental and regulatory approvals of
the Transaction that could reduce anticipated benefits or cause the
parties to abandon the Transaction, the ability to successfully
integrate the businesses, the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement, the possibility that stockholders of Denbury may
not approve the issuance of new shares of common stock in the
Transaction or the amendment of Denbury’s charter or that
shareholders of Penn Virginia may not approve the merger agreement,
the risk that the parties may not be able to satisfy the conditions
to the Transaction in a timely manner or at all, the risk that any
announcements relating to the Transaction could have adverse
effects on the market price of Denbury’s common stock or Penn
Virginia’s common stock, the risk that the Transaction and its
announcement could have an adverse effect on the ability of Denbury
and Penn Virginia to retain customers and retain and hire key
personnel and maintain relationships with their suppliers and
customers and on their operating results and businesses generally,
the risk the pending Transaction could distract management of both
entities from ongoing business operations or cause them to incur
substantial costs, the risk that problems may arise in successfully
integrating the businesses of the companies, which may result in
the combined company not operating as effectively and efficiently
as expected, the risk that the combined company may be unable to
achieve synergies or it may take longer than expected to achieve
those synergies and other important factors that could cause actual
results to differ materially from those projected. All such
factors are difficult to predict and are beyond Denbury’s or Penn
Virginia’s control, including those detailed in Denbury’s annual
reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K that are available on its website at
www.denbury.com and on the SEC’s website at www.sec.gov. and
those detailed in Penn Virginia’s annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K that
are available on Penn Virginia’s website at
www.pennvirginia.com and on the SEC’s website at
www.sec.gov. All forward-looking statements are based on
assumptions that Denbury or Penn Virginia believe to be reasonable
but that may not prove to be accurate. Any forward-looking
statement speaks only as of the date on which such statement is
made, and Denbury and Penn Virginia undertake no obligation to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by applicable law. Readers are cautioned not to
place undue reliance on these forward-looking statements that speak
only as of the date hereof.
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
PENN VIRGINIA CONTACTS:
Steve Hartman, Senior Vice President and Chief Financial Officer, 713.722.6500
Clay Jeansonne, Investor Relations, 713.722.6540
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