Gran Tierra Energy Inc has entered into agreements whereby Madalena Energy Inc has agreed to acquire Gran Tierra Energy's Argentina business unit for an aggregate consideration of approximately US$69 million, comprised of US$49 million in cash, US$14 million in Madalena shares, and expected working capital adjustments of approximately US$6 million. Gran Tierra Energy has received a deposit of US$12.6 million and Madalena is expected to raise the remainder of the cash required to complete the transaction pursuant to a subscription receipt offering on a bought deal basis.
"The board of directors and management team of Gran Tierra Energy are committed to continuously managing its portfolio of opportunities in South America to enhance value for our shareholders," said Dana Coffield, Gran Tierra Energy President and Chief Executive Officer. "As a result of our recent significant exploration success in Peru, ongoing success in Colombia and ongoing evaluations in Brazil, we are focusing Gran Tierra Energy's human and capital resources in areas that we believe will provide the greatest return for our shareholders and drive growth in the future."
In 2013, the Argentina business unit contributed average annual production of 3,028 barrels of oil equivalent per day, net after royalty and spent US$6.5 million of its 2014 planned Argentina capital program of US$48 million in the first quarter of 2014.
"With the April 30, 2014 effective date of the transaction, Gran Tierra Energy plans to reduce its 2014 corporate capital spending program by an amount comparable to the planned Argentina capital program of US$48 million, less the amount spent up to the closing date of the transaction. This reduction in corporate capital spending, in addition to the approximate US$69 million aggregate consideration, will further strengthen the balance sheet for future capital spending requirements and allow us to dedicate our resources to where they will have maximum impact and to focus on our more profitable operations," concluded Coffield.
The Madalena board of directors has unanimously approved the Agreements. The closing date is expected to be on or before June 30, 2014 and it is subject to TSX Venture Exchange approval.
J.P. Morgan Securities LLC is acting as exclusive financial advisor to Gran Tierra Energy in connection with this transaction.
