Calgary, Alberta-based Provident Energy Trust has plans to separate its upstream and midstream business segements and will move forward with a new CEO.
Midnight merger
The company will combine its upstream business with Midnight Oil Exploration Ltd. in a C$460 million transaction (C$1.74 per unit) and will consist of C$120 million in cash and 324 million shares of Midnight valued at C$340 million, based on the 20 day weighted average trading price of Midnight shares on the Toronto Stock Exchange of $1.05. Midnight will acquire all outstanding shares of Provident Energy Resources Inc., a wholly-owned subsidiary of Provident Energy Trust which holds all of the oil and gas properties and reserves associated with Provident’s Upstream business.
Proceeds received by Provident, net of transaction costs, will be retained by Provident and directed towards repayment of long term debt under Provident’s revolving term credit facility.
Once approved, the transaction form a new growth oriented, intermediate sized oil and gas producer and enable Provident Midstream to continue as a pure play, cash-distributing natural gas liquids (NGL) infrastructure and services business.
Management changes
Going forward, Provident will be led by Douglas Haughey, who has been appointed to the position of president and CEO, and director succeeding Tom Buchanan who has decided to step down from his position as president, CEO, and director, effective April 28, 2010.
Buchanan co-founded and has led Provident Energy Trust, and its predecessor Founder's Energy, since 1993.
Haughey has over 30 years of diverse energy experience. He held various executive roles with large North American energy infrastructure and commercial services businesses. Most recently he was responsible for Spectra Energy's Canadian midstream business and was president and CEO of Spectra Energy Income Fund.
Additionally, Cameron Vouri, president of the upstream business unit, will step down April 30, 2010 and Daniel O'Byrne, executive vice president and COO will assume full responsibility for the upstream business unit until the closing of the arrangement with Midnight, and will retire at that time.
“The separation of Provident’s businesses is intended to improve overall focus, competitiveness and enhance the growth profile of each business unit in order to realize the full potential of our assets and maximize long term unitholder returns,” said Buchanan. “Furthermore, the combination of Provident’s Upstream business with Midnight will allow Midnight’s strong technical team to exploit and develop the high impact resource potential of the combined asset base.”
Swaps buyout
Provident has completed the buyout of all fixed price crude oil and natural gas swaps associated with its midstream business unit for a total cost of $196 million. Based on the current forward price strip, the buyout of the existing fixed price swaps will result in an increase in funds flow from operations, excluding the one-time cost of the hedge buyout in the second quarter of 2010. The Board will continue to set the distribution on a monthly basis and based on current forward commodity prices, Provident Midstream plans to maintain its cash distribution at $0.06 per month for the remainder of 2010.
Provident Energy Trust is a diversified energy enterprise with high quality upstream oil and gas assets as well as midstream assets that include NGL extraction, fractionation, storage, transportation and marketing with access to markets across North America.