Molopo sells Canadian oil assets to Legacy for C$189MM

Source: Molopo Energy Limited

Molopo Energy Limited (Molopo) has accepted an offer from Legacy Oil & Gas Inc (Legacy) to purchase its Spearfish oil asset, located in Manitoba, Canada (Spearfish).

The consideration for the asset sale is approximately C$188 million (US$188 million at current exchange rates and subject to customary closing adjustments) comprising C$93 million in cash and 6,180,000 Legacy common shares (representing approximately 4.9% of Legacy’s current issued capital). The purchase price equates to approximately US$0.75 per Molopo share.

The sale is expected to be completed by mid March, 2011 subject to regulatory approvals and other customary conditions. The Legacy common shares received as partial consideration for the transaction will have a 180 day escrow period from settlement.

Legacy is a company based in Calgary, Canada and listed on the Toronto Stock Exchange (TSX: LEG). With a market capitalization of approximately C$2.0 billion, Legacy produces approximately 13,000 barrels of oil equivalent per day. Through the ownership of Legacy shares, Molopo shareholders will participate in the upside associated with Legacy’s diversified portfolio of oil resource plays including the Spearfish assets.

Commenting on the sale, Molopo’s Managing Director, Mr. Stephen Mitchell, stated:

“This transaction is an excellent result for Molopo shareholders. We have spent approximately A$75m on acquiring, appraising and developing this asset over the last 16 months. With an extremely focused and aggressive work program we have created substantial value for shareholders in a very short space of time.”

“The sale proceeds will place Molopo in a strong position to focus its financial, technical and managerial resources on its extensive remaining portfolio of oil assets in North America (Bakken and Wolfcamp) and its gas assets in Australia, Quebec and South Africa – all of which offer significant value generation potential for shareholders. Molopo is also considering other options in relation to the application of sale proceeds and will make a further announcement on this issue after further evaluation has been undertaken”.

Molopo’s Chairman, Mr. Geoff Phillips, added:

“This is a good example of the value being generated for shareholders from Molopo’s portfolio. To deliver such significant value in such a short time demonstrates a board and management team with a strong focus on shareholder value, significant commercial acumen and an ability to deliver value via focused and prioritized work programs.”

“This agreement, once complete, is expected to bring total proceeds from asset sales to approximately US$313 million in a little over two years from assets that had a cost base of approximately US$95 million. It again illustrates the successful implementation of Molopo's business plan”.

Molopo previously announced its intention to conduct an initial public offering (IPO) of its wholly-owned subsidiary, Molopo Energy Canada Ltd. in North America, comprising its interests in the Spearfish and Bakken oil projects. As a consequence of the agreement with Legacy, the proposed IPO of Molopo Energy Canada Ltd will not be undertaken at this time. Subject to tax and audit confirmation, Molopo Energy Canada Ltd. has approximately C$100 million of tax pools that are expected to be available as a tax deduction against the proceeds of the sale.

For the purposes of Canadian disclosure requirements, Macquarie Capital did not advise Molopo in relation to this transaction.



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