Sea Dragon Energy Inc. to acquire Madison PetroGas Ltd. including its assets in Egypt

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Sea Dragon Energy Inc. and Madison PetroGas Ltd. Announce Strategic Business Combination and Creation of SDX Energy Inc.

Sea Dragon Energy Inc. (“Sea Dragon”) (TSX VENTURE: SDX) and Madison PetroGas Ltd. (“Madison”), a private, arm’s length, Canadian company incorporated under the Business Corporations Act (Alberta) (“ABCA”) (Sea Dragon and Madison, together, the “Parties”), are pleased to announce that they have entered into an arrangement agreement dated August 18, 2015 (the “Arrangement Agreement”) pursuant to which Sea Dragon will, subject to certain conditions, acquire all of the issued and outstanding Madison common shares (“Madison Shares”) by way of a statutory plan of arrangement under the ABCA (the “Transaction”). The combined entity is to be renamed “SDX Energy Inc.”.

Strategic Rationale for the Business Combination
The Transaction would create a larger company with stronger balance sheet and a greater ability to achieve economies of scale through operational efficiencies. The company would be poised for strong growth in oil production and reserves from development in its onshore core Egypt basins and high impact exploration in both Egypt and Cameroon.
•    Oil Production – Pro forma current oil production of 1,565 boe/d (company working interest) and 2P reserves base of 5.1 MMboe (company working interest) from operated and non- operated assets in Egypt, which includes 2.2 MMboe of reserves at Meseda (100% oil) and approximately 2.9 MMboe of reserves at North West Gemsa (2.481 MMboe of oil and natural gas liquids and 0.487 MMboe of natural gas).
•    Near and Mid Term Production Growth – Average production target of 1,810 boe/d (company working interest) for 2015 with an estimate 2015 exit rate of 1,850 boe/d.
•    Impactful Exploration Program – The company expects to shoot 300 km2 of 3D seismic at South Disouq, as well as continue to prepare for the first exploration well in the shallow water of Cameroon on the company’s West Bakassi block. The company holds a 55% working interest at South Disouq and reasonably expects to produce natural gas and natural gas liquids and a 35% working interest in the West Bakassi block, where it reasonably expects to produce oil and natural gas.
•    Improved Financial Position – the combined company business plans are fully funded through 2016 with a pro forma working capital position of US$16.5 MM as of closing and a solid cash flow profile.
Paul M. Welch, CEO of Sea Dragon said:
“I am very excited about the combination of these two companies. We have complimentary assets and business objectives and by combining, we significantly increase our ability to achieve our goals. The challenging market we are currently in means new strategies need to be employed to create value. Bycombining, we can build upon our individual strengths, using a more efficient organization, to capture opportunities that individually we could not attain. I am looking forward to working with the new team.”
David Mitchell, CEO of Madison said:
“The combined entity will offer enhanced growth potential and we are excited by the possibilities. Size matters in our business and particularly in the current business environment. With similar Egypt portfolios and strategies, a business combination will improve our ability to transact and grow shareholder value. A London, UK base will also improve our operational efficiencies and place us in the premier business and capital markets centre for the Middle East and Africa region.”

Terms of the Proposed Transaction
Under the terms of the Arrangement Agreement, Sea Dragon will acquire all of the issued and outstanding Madison Shares on the basis of an exchange ratio of 16.7 Sea Dragon common shares (“Sea Dragon Shares”) for each Madison Share (on a pre-Sea Dragon Consolidation (as defined below) basis). Prior to the closing of the Transaction, Sea Dragon will affect a share consolidation (the “Sea Dragon Consolidation”) on the basis of one (1) post-consolidation Sea Dragon Share for thirty- five (35) pre-consolidation Sea Dragon Shares. Upon closing the Transaction, it is anticipated that the existing Madison Shareholders will hold approximately 71% of the combined entity, to be renamed “SDX Energy Inc.”, with the holders of Sea Dragon Shares (the “Sea Dragon Shareholders”) holding approximately 29% of the combined entity.
The Arrangement Agreement provides that upon closing of the Transaction, the board of directors of Sea Dragon will be comprised of four nominees of Madison (namely, Michael Doyle, David Mitchell, David Richards and Barrie Wright), two nominees of Sea Dragon (namely, Paul Welch, and Paul Moase) and one independent nominee jointly appointed by Sea Dragon and Madison. Paul Welch will remain as President and CEO and Olivier Serra will remain as CFO of the combined entity which will be based in London, UK.
The Transaction is subject to a number of conditions including, among other things:
•    approval of the Transaction from at least two-thirds of the votes cast by the Madison Shareholders at a meeting expected to be held on September 28, 2015 (the “Madison Meeting”);
•    approval of the Sea Dragon Consolidation from at least two-thirds of the votes cast by the Sea Dragon Shareholders at a meeting expected to be held on September 28, 2015 (the “Sea Dragon Meeting”);
•    approval from the TSX Venture Exchange (“TSXV”) of the Transaction and the Sea Dragon Consolidation; and
•    other customary closing conditions, including approval from the Court of Queen’s Bench of Alberta.
The Arrangement Agreement provides for non-solicitation covenants, subject to the fiduciary obligations of the board of directors of each Party and the right of each Party to match any Superior Proposal (as defined in the Arrangement Agreement). The Arrangement Agreement also provides for reciprocal non- completion fees and reciprocal expense reimbursement payments, each of which is payable in certain circumstances if the Transaction is not completed.
Further information regarding the Transaction will be available in due course in the disclosure materials to be prepared and publicly filed by Sea Dragon and in the Madison management information circular that will be prepared and mailed by Madison to the Madison Shareholders in connection with the Madison Meeting.
Closing of the Transaction is expected to occur in early October.

Recommendations of the Board of Directors
Based upon, among other things, a fairness opinion of FirstEnergy Capital Corp. (“FirstEnergy”), the Madison board of directors has determined that the Transaction is in the best interests of Madison and is fair to Madison Shareholders, has approved the Transaction and the entering into of the Arrangement Agreement and has resolved to recommend that Madison Shareholders vote in favour of the Transaction. Each of the directors and executive officers of Madison, representing in aggregate approximately 27% of the issued and outstanding Madison Shares (on a non-diluted basis), have entered into lock-up agreements and agreed to vote their Madison Shares in favour of the Transaction.
Based upon, among other things, the fairness opinion of BDO LLP (“BDO”), the Sea Dragon board of directors has determined that the Transaction is in the best interests of Sea Dragon and is fair to Sea Dragon Shareholders and has approved the Transaction and the entering into of the Arrangement Agreement. Each of the directors and executive officers of Sea Dragon, representing in aggregate approximately 8% of the issued and outstanding Sea Dragon Shares (on a non-diluted basis), have entered into lock-up agreements and agreed to vote their Sea Dragon Shares in favour of the Sea Dragon Consolidation and name change.

About Sea Dragon
Sea Dragon is an international exploration and development oil company, headquartered in London, England, UK, with a focus on North Africa and the Middle East. Activities are currently concentrated in Egypt, with interest in three concessions: NW Gemsa, a producing asset in the Eastern desert; South Ramadan, a development asset in the Gulf of Suez; and South Disouq, an exploration asset in the Nile Delta.

About Madison
Madison is an independent private Alberta company, headquartered in Calgary, Alberta, Canada, engaged in the exploration, acquisition and development of oil and gas reserves in Africa and the Middle East. Madison conducts its activities through subsidiaries located in Barbados and Egypt. Currently it has operations in Egypt and Cameroon. In Egypt, Madison has an interest in Block H in the onshore West Gharib area of the Gulf of Suez, where oil production commenced in late 2011, one year after entering into the block. In Cameroon, Madison has an interest in a Production Sharing Contract on the high potential West Bakassi exploration block in the prolific Niger Delta Basin. The first exploration well on the block is due to commence in the second quarter of 2016.

(Sea Dragon Energy Inc. & Madison PetroGas Ltd. Joint Press Release)

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