NSRL Directors Back Sale of Company
N.S. RESOURCES LTD -NSRL Directors Back Sale of Company
An agreement to sell Nova Scotia Resources Limited for $420 million is being backed by the company's board of directors.
Board Chair Steve Parker said the directors recommended the deal to the provincial government because it represents the highest bid and a fair market price.
The deal, signed Monday in Halifax, is with Emera Inc., Pengrowth Energy Trust and PanCanadian Petroleum Ltd. They would pay a total of $420 million for the assets and shares of NSRL and its affiliates.
The sale of certain assets must now be offered to two NSRL partners in the Sable Offshore Energy Project. Completion of the deal also requires agreement with certain other Sable-related parties.
The sale does not include the two per cent gross overriding royalty in the proposed Deep Panuke project. This royalty will be transferred to the Province to enable taxpayers to maintain a risk-free economic interest in this project. The arrangement does not require the province to make any further capital spending commitments on Deep Panuke.
In addition to the $420 million purchase price, the sale includes a commitment by Emera and Pengrowth to contribute a total of $1.5 million over the next five years into offshore technical training for Nova Scotians. Pengrowth also expects to open an office in Nova Scotia in support of its new investment and future developments.
PanCanadian already has a strong Nova Scotia presence with a commitment to spend $105 million in offshore exploration this year. Emera has a majority of its activities in Nova Scotia and has its headquarters in Halifax.
Nova Scotia Resources Ltd. retained Scotia Capital Inc., a major Canadian investment dealer, to act as financial advisor to the sale processes, Parker said.
"The high bid is a direct result of the professional commercial sale process run by Scotia Capital," he said. "In the end, a number of aggressive bidders competed with each other to buy the assets, and that helped us achieve a fair market price for the company and the best price for the taxpayers of Nova Scotia." The value of the bid was also influenced by strong natural gas prices and widespread international interest in Nova Scotia's growing offshore energy sector.
As part of this sale process, the NSRL board obtained an opinion from Scotia Capital stating that the transaction is fair from a financial point of view.
The first step in the sale process would have Emera purchase NSRL's physical assets associated with Sable Offshore Energy Project. Emera would then sell to Pengrowth the benefit of NSRL's 8.4 per cent share of the SOEP gas reserves. Pengrowth would pay Emera a processing fee for this gas. Once the assets associated with SOEP have been transferred out of the company, PanCanadian would purchase the shares of NSRL and its affiliates. It would then own the remaining assets, including interests in a variety of production and significant discovery licences.
The end result is that Pengrowth would effectively gain an 8.4 per cent share of SOEP natural gas and gas liquids, Emera would have a similar share of the processing infrastructure and earn fees for gas processed while PanCanadian would gain ownership of the company itself and the remaining non-SOEP assets.
Closing of the this transaction is subject to a number of normal and special conditions. The next step in the process is to offer the same deal on the asset sale to SOEP partners Shell Canada Limited and Exxon/Mobil Canada Properties. If the Right of First Refusal is exercised by either Shell, Exxon/Mobil or both, the province is obligated to pay Emera and Pengrowth approximately $4.2 million to cover their costs related to entering into the transaction.
Should Exxon/Mobil or Shell Canada decline to exercise their rights, this deal is also subject to certain agreements with other SOEP-related partners. Should these agreements not be obtained, the province reserves the right to terminate these Purchase and Sale Agreements in full. In this instance, the province would have the option to either retain NSRL or continue the sale process, depending on market conditions. It is anticipated that the sale process will be completed or terminated later this spring.
The net proceeds from the sale will be reduced by the expenses associated with the sale. Those expenses will be approximately $4.5 million. This amount includes legal, accounting and other professional fees, investment banking fees and administrative expenses. Parker said the fees are low for a commercial transaction of this size and complexity. The net proceeds would be further reduced if the break fee payment is required to be paid to Emera/Pengrowth.
In order to facilitate, the province and NSRL entered into a settlement agreement with TransCanada Pipelines Ltd. This agreement concludes all outstanding litigation claims between the parties in exchange for a payment of approximately $5.5 million to TransCanada. This is roughly equal to the estimated legal costs associated with defending the province against the litigation. A provision for this settlement has already been reflected in the books of the company and is included in the forecast loss reported by the province in the December Year-End Forecast Update.
Background documents on this transaction and agreement are also available.
The chairman of Nova Scotia Resources Limited says his board
of directors approves of the deal by which the provincial Crown
corporation will be sold to private companies.
Steve Parker says the directors recommended the deal to the
provincial government because it represents the highest bid and a
fair market price.
The three private companies Emera Incorporated, Pengrowth
Energy Trust, and PanCanadian Petroleum Limited will pay a
total of 420-million dollars for the assets and shares of Nova
Scotia Resources Limited and its affiliates.