PKN ORLEN S.A. (“PKN ORLEN”, the “Company”), through its subsidiary ORLEN Upstream Sp. z o.o. (“ORLEN Upstream”) has entered into an arrangement agreement with TriOil Resources Ltd. (“TriOil”), a Canadian company listed on the TSX Venture Exchange, which will initiate the acquisition of TriOil. PKN ORLEN has agreed with TriOil to acquire 100% of the shares of the company for CAD 2.85 per share, representing total cash consideration of approximately CAD 183.7m. The offer has been accepted by the Board of Directors of TriOil, and will be considered by the shareholders of TriOil at the meeting of shareholders in November 2013.
The proposed transaction fits into PKN ORLEN’s strategy and accelerates the development of its hydrocarbon exploration and production segment. The arrangement is the first step in the acquisition process. The closing of the transaction will require approval by the TriOil shareholders, who will make the relevant decision at the meeting of shareholders planned for November 2013. Prior to making the offer, PKN ORLEN, supported by its advisers, performed a detailed due diligence examination of TriOil’s assets and its financial, tax, legal, technical, and environmental situation.
“In our view, TriOil is an optimal acquisition target. If the transaction is successfully completed, we will gain access to producing fields and will diversify our asset portfolio geographically. It also offers an opportunity for the transfer of know-how from the mature and technologically advanced Canadian market,” Jacek Krawiec, PKN ORLEN’s CEO, said. “Further, we continue to retain our strong commitment to shale gas exploration projects in Poland. We have just completed our eighth well and are preparing for another hydraulic fracturing operation at Berejów in the Lublin region,” Mr. Krawiec added.
TriOil has built its asset portfolio in areas with many years’ history of production activity, mainly in the Canadian province of Alberta where it has three developments: Cardium development at Lochend, Dunvegan development at Kaybob, and Montney development at Pouce Coupe. Using horizontal drilling and new multi-stage fracturing technologies, TriOil gained access to new resources, and commenced production from these fields in 2010. TriOil’s total production capacity is approximately 20m boe (2P, proven and probable reserves).
The past few years have been a period of intense growth for TriOil. In 2012, its hydrocarbon production increased by 65% year over year. In the first two quarters of 2013, its average daily production doubled over the corresponding period of 2012, reaching approximately 4,000 boe. Over the past few years TriOil has taken steps to expand the areas in which it has working interests, with TriOil’s principal operations now spanning some 3,500 square kilometres, including 1,100 square kilometres of hydrocarbon formations from which it produces both oil and natural gas.
“The acquisition of TriOil Resources will position PKN ORLEN as an oil and gas producer. It will expand our upstream project execution capabilities and give us a chance to operate on international markets. TriOil represents not only attractive assets, but also a team of professionals with unique expertise, which will be essential to achieving synergies as part of our current projects as well as search for further growth opportunities,” commented Wiesław Prugar, ORLEN Upstream’s CEO.