88 Energy and XCD Energy have agreed to merge and have entered into a Bid Implementation Agreement (“BIA”) by which 88 Energy will offer to acquire all of the fully paid ordinary shares and listed options on issue in XCD Energy via and off-market takeover offer.

The Board of Directors of XCD Energy unanimously recommend to XCD Energy shareholders and listed optionholders that they accept the Offers, in the absence of a superior proposal and subject to the independent expert concluding that the offer is fair and reasonable or not fair but reasonable. 

The Offers value the equity of XCD Energy at approximately $8.9 million and deliver a substantial premium to XCD Energy Shareholders and Optionholders, who will retain a ~20% ownership and participation in the future performance of the combined group.

Strategic Rationale for the Transaction

The transaction creates an Alaska-focused oil exploration and appraisal company with a diversified portfolio of three highly prospective project areas: Project Icewine, Yukon Leases and Project Peregrine and provides an attractive investment proposition for existing and new shareholders.

Key benefits of the transaction include:

• the creation of an established oil exploration and appraisal company with an attractive and complementary portfolio of exploration assets - at various stages of project maturity;
• enhanced strategic, commercial, technical and financial strength to optimise funding of operations, including an increased level of liquidity and exposure to a larger global investor base giving greater financing flexibility;
• the ability to optimise operational activity across the combined group’s highly prospective exploration / appraisal portfolio with potential synergies associated with future project development and infrastructure requirements; and
• a strong board, management and technical team with a proven track record for advancing projects and delivering on milestones, including two 3D and one 2D seismic survey, drilling of four exploration wells safely and on budget over a 5 year period as well as execution of farm-in/farm-out transactions.

88 Energy Managing Director, Mr David Wall, said the strategic merit for the combination is clear:
“In a combined company, XCD Energy shareholders and listed option holders will be able to leverage from 88 Energy’s geological and operational expertise, specific to the North Slope of Alaska, where we have drilled four wells as Operator, safely and within budget, and acquired several 2D and 3D seismic surveys over the last five years. This includes extensive technical knowledge of the regionally successful Brookian oil plays, in which 88 Energy retains significant upside exposure via its highly prospective portfolio of exploration/appraisal projects covering ~330,000 net acres (480,000 gross) co-located on the North Slope.”

“88 Energy’s Board is confident that merging the assets of 88 Energy and XCD Energy, combined with the potential upside offered, places the combined group in a strong position to fill the growing investment void in the ASX / AIM listed oil and gas sector.”

XCD Energy Chairman, Mr Peter Stickland, said the transaction is compelling for XCD Energy shareholders.

“In addition to a significant premium, the transaction provides XCD Energy shareholders with the opportunity to become shareholders of a company with significantly increased scale and demonstrated operational capability that is focussed on the world class oil potential of the North Slope of Alaska,” said Mr Stickland.

“It allows our shareholders to continue to have a material interest in the upside associated with the Brookian oil plays, while mitigating and diversifying the subsurface and execution exploration risks,” he said.

“The XCD Energy Board believes that this transaction is in the best interests of XCD Energy and unanimously recommends it to our shareholders, in the absence of a superior proposal and subject to the independent expert concluding that the offer is fair and reasonable, or not fair but reasonable.”

Timetable
It is expected that 88 Energy’s Bidder’s Statement and XCD Energy’s Target’s Statement, containing further information about the Offers, will be posted to XCD Energy Shareholders and Listed Optionholders in around lateMay 2020, with the Offers to open for acceptance around that time.

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