PETRONAS to Acquire Progress Energy

Jun 28, 2012

Companies agree to $5.5 Billion Acquisition

CALGARY, June 28, 2012 /CNW/ – PETRONAS, the Malaysian national oil and
gas company, and Progress Energy Resources Corp. (Progress) (TSX:PRQ)
today announced that PETRONAS’ Canadian subsidiary, PETRONAS Carigali
Canada Ltd (PETRONAS Canada), and Progress have entered into an
agreement for the purchase by PETRONAS Canada of all of Progress’
outstanding common shares at a cash price of C$20.45 per share.
Including the amount to be paid for Progress’ outstanding convertible
debentures, the transaction is valued at approximately C$5.5 billion.
The transaction is to be completed by way of an arrangement under the
Business Corporations Act (Alberta).

Highlights

  • Cash price of C$20.45 per Progress share
  • Transaction has received the unanimous approval of Progress’ Board of
    Directors
  • PETRONAS brings substantial investments in LNG infrastructure and access
    to world markets through established channels
  • Canadian operations to remain based in Calgary for upstream with
    commercial office in Vancouver for LNG

The transaction price represents a premium of 77% over Progress’ closing
share price on the Toronto Stock Exchange of C$11.55 on June 27, 2012,
and 83% over Progress’ 30-trading day volume weighted average trading
price of C$11.18 per share ending on June 27, 2012.

The acquisition of Progress is consistent with PETRONAS’ strategy of
strengthening its position as one of the global leaders in Liquefied
Natural Gas (LNG). The transaction follows a joint venture established
between the two companies last year to develop a portion of Progress’
Montney shale assets in the Foothills of northeast British Columbia
which reflected the desire by both parties to explore additional
opportunities to develop LNG export capacity on the west coast of
British Columbia.

Net Benefit to Canada
“The proposed transaction will combine PETRONAS’ significant global
expertise and leadership in developing LNG infrastructure with
Progress’ extensive experience in unconventional resource development
to build a strong and growing world class energy business based in
Canada,” said Datuk Anuar Ahmad, Executive Vice President of the gas
and power business for PETRONAS. “This development will generate
substantial economic benefits for the provinces and local communities,
as PETRONAS’ access to capital will help to bring Canada’s abundant and
clean-burning natural gas resources to global markets, leveraging our
well-established and extensive network of customers worldwide.”

“We are pleased to announce that the joint venture has selected a site
in Prince Rupert, British Columbia for our planned LNG export facility
on the west coast of British Columbia. A Feasibility Assessment
Agreement has been signed with the Prince Rupert Port Authority (PRPA)
giving our project the exclusive right to conduct further feasibility
and investigative studies on Lelu Island. We have begun engagement with
relevant authorities and First Nations, as well as community groups,
and we look forward to working closely with them in the course of our
site investigation. A key consideration in our investigation will be
understanding the environmental and social impacts as well as
ascertaining technical feasibility.”

Following a successful transaction, PETRONAS plans to combine its
Canadian business with that of Progress and intends to retain all the
employees of Progress to capitalize on the experience and depth of the
Progress team. PETRONAS plans to work in partnership with Progress’
employees in realizing the joint vision of both companies to grow the
business with ongoing investment in its Canadian operations.

In addition to its desire to grow its Canadian operations, PETRONAS is
committed to fostering strong community relations. PETRONAS intends to
continue with and build upon Progress’ existing community and
charitable commitments.

“Our relationship with PETRONAS has been very productive and they have
clearly demonstrated a commitment to the local communities, both
economically and environmentally,” said Michael Culbert, President and
CEO of Progress Energy. “Our asset base requires extensive capital to
develop its large potential and ultimately access international LNG
markets. PETRONAS offers the size and scale that will enable our
company to continue to grow and not be limited by the same cash flow
challenges faced by many producers in the North American natural gas
market today.”

Information on the Transaction
Following an extensive review and analysis of the proposed transaction
and consideration of other available alternatives, the Board of
Directors of Progress has unanimously determined that the arrangement
is in the best interests of Progress and is fair to Progress’
shareholders and debenture holders. The Board of Progress has
unanimously approved the transaction and determined to recommend that
Progress’ shareholders and debenture holders vote in favour of the
arrangement.  Each of the senior officers and directors of Progress,
and Canada Pension Plan Investment Board, representing in aggregate
approximately 25% of the outstanding common shares (on a fully diluted
basis), have entered into support agreements with PETRONAS Canada
supporting the transaction, pursuant to which they have agreed to vote
in favour of the approval of the arrangement. The Board of Directors of
Progress has received from its financial advisor, and from an
independent advisor, opinions that, as of the date of the agreement,
the consideration proposed to be paid to Progress’ shareholders and
debenture holders is fair from a financial point of view.

In accordance with the terms of the arrangement agreement, the Board of
Progress has determined that no Progress common shares will be made
available for issuance from treasury nor will additional Progress
common shares be purchased on the market in connection with Progress’
dividend reinvestment plan effective immediately.  As a result, no
Progress common shares will be available under the dividend
reinvestment plan in connection with the dividend announced on May 1,
2012, which will be paid on July 16, 2012 to shareholders of record on
June 30, 2012 and will be the last dividend paid prior to the closing
of the transaction.

The agreement between PETRONAS Canada and Progress provides for, among
other things, a non-solicitation covenant on the part of Progress,
subject to “fiduciary out” provisions that entitle Progress to consider
and accept a superior proposal and a right in favour of PETRONAS Canada
to match any superior proposal. If the arrangement agreement is
terminated in certain circumstances, including if Progress enters into
an agreement with respect to a superior proposal or if the Board of
Directors withdraws or modifies its recommendation with respect to the
proposed transaction, PETRONAS is entitled to a termination payment of
C$150 million.

Completion of the transaction is subject to customary closing
conditions, including receipt of court, shareholder and regulatory
approvals, including under the Investment Canada Act and Competition
Act. Progress’ shareholders will be asked to vote on the transaction at
a special shareholders meeting and the completion of the transaction
will require the approval of two-thirds of the votes cast by
shareholders in person or by proxy at the meeting.

Under the proposed transaction, the holders of the two series of
Progress convertible subordinated debentures outstanding will receive a
cash amount, including the make whole payments provided under the terms
of the debentures, equal to the amount that they would otherwise
receive upon conversion of the debentures following the completion of
the arrangement if they were not acquired under the arrangement, plus
accrued interest to the closing date. Based on an estimated closing
date of September 25, 2012, the cash consideration for each C$1,000
principal amount, excluding accrued interest, would be approximately
C$1,202 for the 5.25% debentures maturing in 2014 and C$1,162 for the
5.75% debentures maturing in 2016.

The holders of the two series of debentures will be asked to vote on the
arrangement, each as separate classes. However, completion of the
arrangement is not conditional on such approvals. If the requisite
debenture holder approval is not obtained, the applicable series of
debentures will be excluded from the arrangement and will remain
outstanding following completion of the arrangement.

An information circular regarding the arrangement is expected to be
mailed to security holders in late July for a special meeting of the
holders of common shares and debentures to take place in late August,
with closing expected to occur in late September.

A copy of the arrangement agreement and the information circular and
related documents will be filed with Canadian securities regulators and
will be available at www.sedar.com.

PETRONAS’ exclusive financial advisor for the transaction is Bank of
America Merrill Lynch.  Norton Rose Canada LLP is acting as legal
counsel to PETRONAS.

BMO Capital Markets is acting as exclusive financial advisor to Progress
for the transaction and has provided the Board of Directors of Progress
with a fairness opinion regarding the proposed transaction for the
shareholders and the holders of each series of debentures.  Scotia
Waterous has also provided the Board of Directors of Progress with an
independent fairness opinion regarding the proposed transaction for the
shareholders and the holders of each series of debentures.  A copy of
each opinion will be included in the information circular to be sent to
Progress securityholders for the special meeting to be called to
consider the arrangement.  Burnet, Duckworth and Palmer LLP is acting
as legal counsel to Progress.

About PETRONAS
PETRONAS is the national oil and gas company of Malaysia. Incorporated
in 1974 the company, ranked among the most profitable among the Fortune
Global 500 entities, is engaged in the oil, gas and petrochemicals
industries with strategic business assets and interests in more than 30
countries. It is one of the world’s leading LNG companies and is fully
involved in every value chain of the LNG business, from liquefaction
and shipping to re-gasification and trading. Apart from its Malaysian
production facility, currently one of the world’s largest, PETRONAS
also owns interests in LNG assets in Australia and Egypt.

About Progress Energy
Progress is a Calgary, Canada-based Energy Company focused on
exploration, development and production of large, unconventional
natural gas resources in northeast British Columbia and northwest
Alberta. Progress holds the largest acreage position in the Montney
shale gas play. Throughout its history, Progress has a solid track
record of growing reserves, production and the underlying value of the
Company for its shareholders. Common shares of Progress are listed on
the Toronto Stock Exchange under the symbol PRQ.

Cautionary Statement on Forward-Looking Information
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws. The use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”,
“believe”, “plans”, “intends” and similar expressions are intended to
identify forward-looking information or statements.  In particular,
forward looking statements in this press release include, but are not
limited to, statements  regarding the expected benefits of the
transaction; considerations in respect of the LNG export facility;
PETRONAS’s plans for the Company, including, but not limited to, its
plans for employee retention, following successful completion of the
transaction; the anticipated timing of the meeting of securityholders
and of closing of the transaction; and the estimated consideration
payable to holders of the debentures.

The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress and PETRONAS, including,
but not limited to, expectations and assumptions concerning the ability
of Progress and PETRONAS to obtain all required regulatory approvals
for the transaction, including, but not limited to, shareholder, Court
and regulatory approvals. Although Progress and PETRONAS believes that
the expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward looking statements and information
because there can be no assurance that they will prove to be correct.

Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risk that the transaction may not
close when planned or at all or on the terms and conditions set forth
in the arrangement agreement; the failure of Progress and PETRONAS to
obtain the necessary shareholder, Court, regulatory and other third
party approvals required in order to proceed with the transaction;
operational risks in development, exploration and production for
natural gas; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
reserve and resource estimates; health, safety and environmental risks;
commodity price and exchange rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; ability to access
sufficient capital from internal and external sources; and changes in
legislation, including but not limited to tax laws, royalties and
environmental regulations. Readers are cautioned that the foregoing
list of factors is not exhaustive.

Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide securityholders with a more complete perspective on
the proposed transaction and such information may not be appropriate
for other purposes.  Actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be given
that any of the events anticipated by the forward-looking statements
will transpire or occur, or if any of them do so, what benefits that
Progress and PETRONAS will derive there from.

The forward-looking statements and information contained in this press
release are made as of the date hereof and Progress and PETRONAS
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events, or results or otherwise, other than as
required by applicable securities laws.