Deal to strengthen Aussie muscle in US

TEXAS-focussed Sundance Energy has agreed to merge with Texon Petroleum.
The all-scrip deal was backed by both companies’ boards and will see one Sundance share issued for every two Texon share, giving Texon shareholders a 30.7 per cent holding in Sundance.
Whether or not the deal goes through, all current non-Eagle Ford Shale (EFS) assets will be separated from Texon and form part of a newly-listed company named Talon Petroleum.
All current Texon shareholders will have an equal amount of shares in Talon. Texon’s board members have agreed to resign and form the board of the new company.
The transaction will see Sundance’s proved and probable US oil and gas reserves grow to 15.9 million barrels of oil equivalent with an estimated value of $246.9 million.
The company’s cash position will also grow to $163 million with undrawn debt facilities of $85 million.
Sundance managing director Eric McCrady said the union of the two Australian companies would see the creation of a well-funded player in the Bakken and Eagle Ford Shales.
“The combined company will have production, cash flow and reserve growth potential with highly-attractive, risk-adjusted return potential,” he said.
“Importantly, the combined company will have the funding capacity to unlock significant value for shareholders.”
Texon chief executive Cliff Foss said the deal was beneficial for all parties involved. “A transaction with Sundance provides asset diversity and the required capital to fully exploit Texon’s attractive low-risk development EFS assets, which is expected to enhance shareholder value,” he said.
Mr Foss said the deal allowed shareholders the option to continue involvement in EFS exploration while also participating in an exciting new company. “Talon provides an exploration and appraisal vehicle that will hold Texon’s current non-EFS assets including the Olmos and recently-leased prospects in East Texas,” he said.
“Recent improvements in horizontal drilling techniques and fracture stimulation have opened up a number of lower-risk opportunities in mature, well-serviced areas and these opportunities will be a focus for Talon.”
The two companies have agreed a mutual break fee of $1 million if the deal does not proceed.

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