Compton
Announces Take-Over Bid, Private Placement & Extension of Cure Period for
Credit Facility Repayment
Compton Petroleum Corporation (TSX - CMT)
("Compton" or the Corporation") is pleased to announce that it
has entered into a support agreement (the "Support Agreement") with
MFC Industrial Ltd. ("MFC") pursuant to which MFC has agreed to offer
to acquire all of the issued and outstanding shares ("Common Shares")
of the Corporation. Concurrent with the Support Agreement, Compton has also
entered into an equity private placement agreement (the "Warrant Agreement")
with MFC for gross proceeds of approximately $8.2 million. To facilitate this
take-over bid and private placement, Compton has received a long-term extension
to the cure period for the repayment of its borrowing base shortfall under its
credit facility ("Credit Facility").
RBC Capital Markets is the financial advisor and Stikeman Elliott LLP is legal counsel to Compton, on these
transactions.
Pursuant to the Support Agreement, MFC has agreed to
offer to acquire all of the issued and outstanding Common Shares of Compton for
$1.25 per Common Share, in cash, by way of a take-over bid (the
"Offer"). Based on the Corporation's 26,358,528 outstanding
Common Shares, the aggregate value for the Common Shares to be acquired under
the Offer is approximately $33.0 million.
After reviewing the various options available and in
consultation with its legal and financial advisors, Compton's board of
directors (the "Board") has concluded that the Offer is in the best
interest of shareholders, and unanimously recommends to shareholders that they
tender their Common Shares to the Offer. The Offer is subject to certain
conditions, including the deposit of at least 662/3% of the Common Shares on a fully-diluted basis, the receipt of all
required regulatory approvals, the approval by Compton's lenders of a
continuation of the Credit Facility on terms satisfactory to MFC (the
"Lenders' Consent"), the agreement to continue the arrangement by the
providers of Compton's MPP term financing, and certain other closing conditions
customary in transactions of this nature.
The Offer is based upon customary terms and conditions
set forth in the Support Agreement including the payment, in certain
circumstances, of a $4.0 million break fee to MFC.
MFC has entered into lock-up agreements (the
"Lock-up Agreements") with certain shareholders of Compton which hold
an aggregate of approximately 54% of the issued and outstanding Common Shares
of Compton. The Lock-up Agreements provide that the locked-up
shareholders may not terminate the Lock-up Agreements and tender their Common
Shares to a higher offer, unless the higher offer is a cash offer of at least
$1.55 per Common Share and MFC has not exercised its right to match that offer.
The details of the Offer will be contained in the
take-over bid circular prepared by MFC. MFC has advised Compton that it intends
to commence the Offer and mail its take-over bid circular as soon as
practicable. Compton's Board has agreed that its directors' circular
recommending the Offer will be mailed to shareholders together with the
take-over bid circular. All shareholders are urged to read the circular once it
becomes available as it will contain additional important information
concerning the Offer. The Offer, once mailed, will be open for acceptance for a
period of not less than 35 days. The Offer is expected to close by early
September 2012.
Pursuant to the Warrant Agreement, Compton will issue
to MFC 6,548,498 special warrants (the "Warrants") at a price of
$1.25 per Warrant for gross proceeds of $8.2 million. The net proceeds from the
Warrants will be placed in escrow, pending receipt of the Lenders' Consent or
prior exercise of the Warrants, and upon release will be used by Compton, along
with the proceeds from the recently announced sale of its Bigoray assets, for
the partial repayment of the $30.0 million drawn on its Credit Facility over
the available amount of $110.0 million.
The Warrant Agreement governing the Warrants provides
that the Warrants are exercisable for Common Shares ("Warrant
Shares") on a one-for-one basis without further payment. The Warrant
Agreement contains standard anti-dilution provisions, does not contain penalty
provisions and provides that the Warrants are redeemable in certain events,
including if Compton is unable to meet certain conditions in respect of its
Credit Facility. If not exercised, the Warrants shall be automatically
converted for Common Shares on the earlier to occur of (i) receipt by Compton
of the consent of its lenders waiving the application of any change of control
or event of default under the Credit Facility in connection with the Private
Placement and the Offer and (ii) the later of (A) the close of business on the
third business day following the day on which the Offer expires and (B) September
30, 2012. The Corporation currently has 26,358,528 Common Shares issued and
outstanding. Upon completion of the issuance of the Warrant Shares to MFC on
the exercise of the Warrants, Compton will have 32,907,026 Common Shares issued
and outstanding, resulting in MFC holding Common Shares equal to 19.9% of the
then issued and outstanding Common Shares on a undiluted basis. The Placement
represents a 24.8% dilution of the currently outstanding number of Common
Shares.
The Toronto Stock Exchange (the "TSX")
requires that shareholder approval be obtained for the issuance of the
Warrants. Compton has satisfied this requirement by obtaining consent and
authorization of the issuance of the Warrants from holders of more than 50% of
the issued and outstanding Common Shares. Compton has received conditional
approval of the issuance of the Warrants from the TSX. Completion of the
issuance of the Warrants is subject to, among other things, the satisfaction of
the conditions set forth in that approval, and the issuance is expected to take
place on or about July 16, 2012.
The Offer does not extend to the currently traded
Cashless Warrants (TSX:CMT.WT.A), distributed in
2011. The Offer will not result in the Cashless Warrants being
exercised. The warrant indenture setting forth the terms of the Cashless
Warrants provides that the holders of Cashless Warrants are entitled to a
payment in an amount determined in accordance with the indenture and calculated
by an investment dealer. That amount will be determined at a time closer
to the completion of the Offer; however, at this time, Compton believes the
amount will be nil.
Extension of Cure Period for Facility Repayment
The lenders under the Credit Facility have entered
into an extension agreement with Compton under which they have agreed to extend
the borrowing base cure period to the earliest of September 30, 2012 (which may
be extended in certain circumstances to as late as October 30, 2012), the date
on which the Offer is completed, and any date on which the lenders otherwise
terminate the extension agreement in accordance with its terms.
About Compton Petroleum Corporation
Compton Petroleum Corporation is a public corporation
actively engaged in the exploration, development and production of natural gas,
natural gas liquids, and crude oil in western Canada. The majority of our
operations are located in the Deep Basin fairway of the Western Canada
Sedimentary Basin, providing multi-zone potential for future development and
exploration opportunity.
As natural gas comprises approximately 84% of
Compton's production, the Corporation's 2012 program is impacted by the current
natural gas price outlook. When natural gas markets recover in the
future, Compton can focus on our highest-return, liquids-rich natural gas area
at Niton and balancing our portfolio through investment in emerging crude oil
opportunities. Compton is well positioned in emerging oil plays that target the
Bakken/Big Valley, Ellerslie and Glauconite Formations in the Southern Plains
area as well as future exploratory potential through the joint venture on its
Montana Bakken/Big Valley lands.
Through further improving operating efficiencies,
maximizing returns on capital invested and focusing on higher return assets,
Compton will create value by providing appropriate investment returns for
shareholders. Compton's Common Shares are listed on
the Toronto Stock Exchange under the symbol CMT.
Forward-Looking Statements
Certain information regarding the Corporation
contained herein constitutes forward-looking information and statements and
financial outlooks (collectively, "forward-looking statements") under
the meaning of applicable securities laws, including Canadian Securities
Administrators' National Instrument 51-102 Continuous Disclosure Obligations
and the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements include estimates, plans, expectations, opinions,
forecasts, projections, guidance, or other statements that are not statements
of fact, including statements regarding (i) cash flow
and capital and operating expenditures, (ii) exploration, drilling, completion,
and production matters, (iii) results of operations, (iv) financial position,
and (v) other risks and uncertainties described from time to time in the
reports and filings made by Compton with securities regulatory
authorities. Although Compton believes that the assumptions underlying,
and expectations reflected in, such forward-looking statements are reasonable,
it can give no assurance that such assumptions and expectations will prove to
have been correct. There are many factors that could cause
forward-looking statements not to be correct, including risks and uncertainties
inherent in the Corporation's business. These risks include, but are not
limited to: crude oil and natural gas price volatility, exchange rate
fluctuations, availability of services and supplies, operating hazards, access
difficulties and mechanical failures, weather related issues, uncertainties in
the estimates of reserves and in projection of future rates of production and
timing of development expenditures, general economic conditions, and the
actions or inactions of third-party operators, and other risks and
uncertainties described from time to time in the reports and filings made with
securities regulatory authorities by Compton. Statements relating to
"reserves" and "resources" are deemed to be forward-looking
statements, as they involve the implied assessment, based on estimates and
assumptions, that the reserves and resources described exist in the quantities
predicted or estimated, and can be profitably produced in the future.
The forward-looking statements contained herein are
made as of the date of this news release solely for the purpose of generally
disclosing Compton's views of the take-over bid offer and prospective
activities. Compton may, as considered necessary in the circumstances,
update or revise the forward-looking statements, whether as a result of new
information, future events, or otherwise, but Compton does not undertake to
update this information at any particular time, except as required by
law. Compton cautions readers that the forward-looking statements may not
be appropriate for purposes other than their intended purposes and that undue
reliance should not be placed on any forward-looking statement. The
Corporation's forward-looking statements are expressly qualified in their
entirety by this cautionary statement.