ARC’s Steelhead Petroleum to buy Toro Oil & Gas for $44.1 mln

Steelhead Petroleum Ltd has agreed to acquire Toro Oil & Gas Ltd (TSX-V: TOO), a Calgary junior energy company focused on opportunities in the Alberta-Saskatchewan Viking light oil fairway. Steelhead will acquire all of Toro’s outstanding common shares and purchase warrants for a total purchase price of $44.1 million. Toro senior officers and directors holding about 21 percent of shares have agreed to vote in favour of the deal. It is expected to close in early 2017. Calgary oil and gas company Steelhead was launched last year with initial funding from ARC Financial Corp, a Canadian energy private equity firm.

PRESS RELEASE

Steelhead Petroleum Ltd. to Acquire Toro Oil & Gas Ltd. for All Cash Consideration

CALGARY, Dec. 13, 2016 /CNW/ – Toro Oil & Gas Ltd. (TSXV: TOO) (“Toro”) announces that they have entered into a definitive agreement (the “Arrangement Agreement”) with Steelhead Petroleum Ltd. (“Steelhead”), a private ARC Financial Corp. sponsored company, pursuant to which Steelhead will acquire all of the outstanding common shares of Toro for $0.37 per share in cash and the common share purchase warrants of Toro for $0.0001 per warrant in cash. The transaction is to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) (the “Arrangement”).

The consideration payable pursuant to the Arrangement represents a 64% premium to the most recent closing price of Toro’s common shares on the TSX Venture Exchange and a 69% premium to the 10-day volume weighted average trading price of Toro’s common shares for the period ended December 13, 2016, representing a total equity purchase price of $44.1 million. The total transaction value, including the assumption of Toro’s current positive working capital after adjusting for transaction costs, severance and amounts to be paid under the Arrangement to retire in-the-money Toro stock options, is approximately $39.5 million.

“This transaction marks the culmination of over two years of perseverance and hard work by the Toro team through a challenging industry environment,” commented Barry Olson, President and Chief Executive Officer. “Toro prudently assembled one of the few remaining large independently-owned Alberta Viking light oil portfolios at competitive industry metrics. In an increasingly competitive area with several recently announced asset and corporate transactions, Toro has remained focused on shareholder value and capital discipline. This competitive environment led Toro to conclude that a corporate divestiture at attractive and accretive metrics is in the best interests of shareholders. The offer price represents a substantial return to Toro’s last equity financing and average trading price over the year while providing a liquidity event for all shareholders.”

Transaction Metrics (see financial information and notes here.)

The Arrangement

The Arrangement will be subject to approval by at least 66 2/3% of the votes cast at a special meeting of Toro’s shareholders and warrantholders that is expected to be held in late January 2017 and approval by a majority of the votes cast by Toro shareholders and warrantholders, after excluding the votes cast by those persons whose votes may not be included in determining minority approval of a business combination pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. Pursuant to the Arrangement Agreement, the transaction is also subject to the approval of the Court of Queen’s Bench of Alberta, applicable regulatory approvals and the satisfaction of certain closing conditions customary in transactions of this nature. The Arrangement Agreement also provides for, among other things, customary board support and non-solicitation covenants (subject to a “fiduciary out” for unsolicited “superior proposals” in favour of the Toro Board of Directors and a “right to match” in favour of Steelhead) as well as the payment to Steelhead of a break fee in the amount of $1.6 million and reimbursement of expenses to a cap of $400,000 if the proposed transaction is not completed in certain specified circumstances.

Recommendation of the Toro Board of Directors

Toro’s Board of Directors, after consultation with its financial and legal advisors, has determined that the Arrangement is in the best interest of Toro and is fair to Toro shareholders and warrantholders and recommends that Toro’s shareholders and warrantholders vote in favour of the Arrangement. Mr. Chris Seasons, independent director of Toro, abstained from voting as Mr. Seasons is Steelhead’s Chairman of the Board. AltaCorp Capital Inc., acting as exclusive financial advisor to the Special Committee of the Board of Directors of Toro, has provided a verbal opinion to the effect that the consideration to be received by Toro shareholders is fair, from a financial point of view, to Toro shareholders. All of the senior officers and directors of Toro, holding approximately 21% of Toro’s fully diluted common shares outstanding have entered into customary lock-up and support agreements, pursuant to which, among other things, they have agreed to vote in favour of the Arrangement.

The terms and conditions of the proposed transaction will be summarized in Toro’s information circular, which will be filed and mailed to Toro shareholders and warrantholders in early January 2017. The transaction is expected to close in early February 2017.

Advisors and Legal Counsel

AltaCorp Capital Inc. is acting as exclusive financial advisor and Torys LLP is acting as legal counsel to Toro.

About Steelhead Petroleum Ltd.

Established in October 2015, Steelhead has been focused on acquiring conventional oil weighted assets in the Western Canadian Sedimentary Basin. The team is focused on best in class operating practices, achieving strong financial results, and environmental leadership. The team has significant industry expertise and is led by Bruce Beveridge, President and CEO, who has over 30 years of industry experience including senior leadership positions at Barrick Energy, Bankers Petroleum, Apache Canada and Shell Canada. For more information about Steelhead visit the website at www.steelheadpetroleum.com.

About Toro Oil & Gas Ltd.

Toro is a junior oil and gas energy company listed on the TSX Venture Exchange. Toro is focused on acquiring, developing and exploiting large oil in place pools within the Alberta-Saskatchewan Viking light oil fairway.

For further information: Barry Olson, President and Chief Executive Officer; Greg Phaneuf, Vice President, Finance and Chief Financial Officer, Telephone: (403) 237-9996

Photo courtesy of Toro Oil & Gas Ltd