In a deal that will "create a new, well-capitalized, high netback, light oil, North American producer focused on delivering strong organic growth to shareholders," Junex Inc. (TSX-V: JNX) is combining with privately-owned Cuda Energy, with the new company to be called Cuda Oil and Gas, Inc.
The plan was set in motion ahead of the agreement’s date of June 8. Concurrent to the agreement with Cuda, Junex entered into a definitive agreement in which it has agreed to pay $37 million U.S. to acquire a high growth light oil asset in the famed Powder River Basin in Wyoming. The payment is broken down into $6 million in Cuda Oil and Gas stock (~20.9 million shares) and $31 million in cash.
The project covers a 27.75% interest in 25,000 gross acres in an area where majors have licensed 5,000 horizontal wells. Upon developing the deeper zones, neighboring wells are consistently pumping out over 1,000 barrels per day of oil.
Junex and Cuda have already identified 70 infill drill targets at the project. At $1.0 million U.S. per well, the company estimates recovery of about 150 mbbl per well, generate an internal rate of return of at least 200% and payout in less than eight months.
Per the merger plan, each Cuda shareholder will receive 3.5856 common shares and 0.4167 or an arrangement warrant of Cuda Oil and Gas for each share of Cuda owned. This means that about 86.0 million common shares of the merged company are being issued along with 10 million arrangement warrants. In connection with the merger, New Cuda will perform a one-for-10 reverse split.
When all is said and done (merger, property acquisition and share consolidation), the new company will have 19.8 million shares outstanding. Total proved and probable reserves for Cuda Oil and Gas are set at 3.6 million barrels of oil equivalent with 2018 exit production estimated to be 2,000 boe/d (60% oil and liquids).
The existing Cuda management team, including CEO and president R. Glenn Dawson will head up Cuda Oil and Gas. A seven-person board will include five current Cuda people and two from Junex.
JNX investors are cheering the agreement, sending shares of the stock up 26.3% to 48 cents with about 90 minutes left in Monday’s trading session. Earlier in the day, shares set a new 52-week high by touching 55 cents.
