|
Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day and welcome to the RAM Energy Resources conference call to discuss the acquisition of Ascent Energy.
(OPERATOR INSTRUCTIONS)
At this time I will turn the conference over to Mr. Robert Phaneuf. Please go ahead, sir.
ROBERT PHANEUF, VP, CORPORATE DEVELOPMENT, RAM ENERGY RESOURCES: Thank you, moderator, and thanks very much for all of you taking the time out of your afternoon to join us today. With us today from RAM is Larry Lee, our CEO, John Longmire, our Senior VP and CFO, Larry Rampey, our Senior VP of Operations, Drake Smiley, our Senior VP of Land and myself, Bob Phaneuf, Vice President of Corporate Development.
Just before we begin today I'd like to make you aware that some statements that we may make today are other than historical fact. Information in the presentation that you'll see if you go to our website and all such statements that refer to the management plans or expectations, including liquidity, estimates of timing of the possible closing of the transaction, industry conditions and the like are forward-looking statements within the meaning of the Securities and Exchange Act of 1934. The company cautions that such forward-looking statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today. So for further information on the risk factors, please look to the company filings with the SEC as well as at the beginning of our slide presentation today. The management of RAM encourages you to review these disclosures in both documents.
Now our agenda today is pretty straightforward, we have a few prepared remarks on the acquisition and then basically we'll follow that with a Q&A. So without further ado I'll turn it over to Larry Lee, our CEO.
LARRY LEE, CHAIRMAN, PRESIDENT & CEO, RAM ENERGY RESOURCES: Thank you, Bob, and I do welcome everyone joining us on the call today. We're pleased to announce that we have signed a merger agreement with Ascent Energy of Plano, Texas. This opportunity presents us, we believe, with an attractive upside in several of the fields and leases that we're acquiring and that we're also acquiring the proved reserve portion of this company at an attractive price of $15.58 per BOE or $2.60 per Mcfe.
The reserves that we are acquiring are in areas that we have worked in the past. One of the things that created this opportunity for us is Ascent, unfortunately for them, had balance sheet and liquidity constraints that really limited the pace of development of the assets that they previous had. And with our liquidity and combined operations we think that we'll be able to accelerate the drilling on the assets that we will be acquiring from Ascent, as well as to continue to pace of development on our existing assets.
One of the things that we are getting in this transaction, Ascent has almost 83,000 net acres of undeveloped conventional and unconventional leasehold and they have a very attractive position in the Devonian Shale acreage in West Virginia that certainly offers company-making potential for us. Early drilling results have been promising out there and we will continue to accelerate the appraisal and development of that Devonian opportunity.
Strategic advantages, we think, for us is that we do believe it takes us to the next level size wise. It will improve and increase our equity market capitalization. It should improve institutional suitability and increase common outstanding as well as our public float. It clearly deepens our drilling inventory of proved and probable opportunities and proved developed producing reserves of the combined company will account for more than one-half of both total production and PV-10. This will continue to provide us with a substantial cash flow base to fund these drilling and potential opportunities that we have identified.
The transaction, as summarized in our press release, we will be issuing between 20 million and 20.5 million shares of common stock. The determining number will be dividing the price of RAM ten days prior to three days prior to the closing divided into 107 million and that will determine how many shares of common will be issued. But a minimum of 20 million and only a maximum of 20.5 million.
The closing is subject to typical adjustments in a transaction like this. We will also be issuing 6.2 million warrants at a $5 exercise price that will expire in May of 2008, on the same expiration date as our current warrants that are outstanding. We have agreed to some registration obligations in the merger and those will be more fully disclosed and dealt with in the informational memo that we'll be filing shortly.
We'll be issuing $185 million of cash to the Ascent shareholders, which will go to pay off their existing obligations, settle up their hedge position and adjust for their working capital. We will finance the cash portion of the transaction with an increase in our existing credit facility, which is currently denominated at $300 million with $150 million of current availability. And we'll be increasing that facility to $500 million with $375 million of availability to us. This financing is in place with our existing lenders, subject to completion of documentation.
The approval, Ascent's Board of Directors has approved this and recommended it to their both common and preferred shareholders. And indications are that their shareholders will approve the transaction. The transaction was unanimously approved by the RAM Board. NASDAQ rules require RAM shareholder vote as a result of how many shares we'll be issuing in this transaction. We think that the record base for that vote (technical difficulty) assuming we work our way through the SEC in a reasonably timely fashion, should be about November 7th and we would be closing sometime between November 27th and November 30th. Management and 63% of the existing RAM shareholders have indicated that they intend to vote in favor of this transaction and the issuance of the securities that we'll be offering.
If you look at the website, hopefully this is up and you have access to it, but if you look at the RAM and Ascent area of operations, we think the overlap is quite complementary. These are certainly areas that are areas that we've worked in and we currently have operations in. It does nearly double our reserve base, provides us with a nice diversification...
|
