merger ann, page-35

Pretty good summary and commentary:

Monday, August 02, 2010

Verus Investments to merge with Pass Petroleum, up stake in Fausse Point

Verus Investments (ASX :VIL) has executed a term sheet with Pass Petroleum Pty Ltd to merge Pass into Verus which increases its working interest in Fausse Point oil and gas project in Louisiana from 45% to 72%.

The share only deal, includes a cash component from Pass and immediate cash flow from Bullseye Miogyp production (WI of 10%). There is undeveloped oil potential in the Camerina and Marg Varg formations at Bullseye and additional Bullseye prospects (Miogyp, Camerina and Marg Varg) are ready to drill.

The deal includes a potential high-impact project, Bowtie West (WI of 18%), which has minimal capital requirements and also a right to acquire Silverwood (WI of 30%) which is currently being drilled.

The company said the merger marks a significant step forward for Verus with a substantial increased interest in the exciting Fausse Point project, the addition of an existing cash flow stream from Bullseye, which includes the undeveloped oil potential in the Camerina Formation, as well as exposure to other high quality and impactful projects such as Bowtie West.

Andrew McIlwain, chairman, said we are fortunate to have secured this acquisition which both increases our participation in the Fausse Point project and brings a number of development properties that require only relatively minor capital commitments into our investment portfolio."

The Pass Petroleum team has a successful track record and have been responsible for introducing the Fausse Point project to Verus."

As new Verus shareholders, the Pass team has committed to continue to assist in further developing the VIL petroleum portfolio.

McIlwain said at the conclusion of the transaction, Pass cash balance would also be transferred to Verus.

Additionally, the currently producing Bullseye project provides approximately $35,000 per month cashflow which alleviates some capital requirements going forward, he said.

At this stage, the Silverwood prospect has been excluded from the transaction valuation. Together with Pass we recognise that estimating a fair value for Silverwoood, with drilling currently underway, is almost impossible."

Accordingly, we have elected to have the right of first refusal to negotiate the acquisition of Silverwood once results of the drilling of the well are available.

The company said this transaction, as a scrip only deal, delivers diversification and breadth to Verus existing investments as well as proven reserves and an immediate cash flow stream from production at Bullseye which has potential to deliver additional reserves and production upside.

The terms of the merger are:

- Verus will issue approximately 370 million shares to Pass shareholders based on a merger ratio of 65%/35% (VIL:PPPL) at final closing;
- Pass may nominate one director to the Board of Verus;
- The merger is subject to the approval of shareholders of both Verus and Pass;
- A break fee of $500,0000 is payable (in shares) if either party fails to complete the transaction; and
- Subject to satisfactory final due diligence investigations.

Verus considers that this acquisition opportunity provides a significant expansion and diversification of investments with the potential to secure future revenue streams and provide uplift in the share price.

Due diligence work has commenced and a merger agreement is currently being drafted.

The Project is located onshore, approximately 140 kms west of New Orleans, in an existing established oil and gas province of Louisiana where the salt dome complex has previously produced more than 44 million barrels of oil and 141 billion cubic feet of gas.

Local market, production facilities and experienced service companies are readily available in the area ensuring that any discovery can be quickly brought into production.

FROM HERE: http://www.proactiveinvestors.com.au/companies/news/9062/verus-investments-to-merge-with-pass-petroleum-up-stake-in-fausse-point-9062.html