PE-backed Davis Petroleum Acquisition and Yuma Energy to merge

Private equity-backed Davis Petroleum Acquisition Corp, an oil and gas company, and publicly traded Yuma Energy Inc agreed to merge in an all-stock transaction. Upon completion of the merger, Davis will become a wholly owned subsidiary of Yuma. Houston-based Davis is backed by Evercore Capital Partners, Red Mountain Capital Partners, and Sankaty Advisors.

PRESS RELEASE

HOUSTON, TX–(Marketwired – Feb 12, 2016) – Yuma Energy, Inc. (NYSE MKT: YUMA) (NYSE MKT: YUMA-PA) (“Yuma”) and privately held Davis Petroleum Acquisition Corp. (“Davis”) jointly announced today that they have entered into a definitive merger agreement for an all-stock transaction. Upon completion of the transaction, which is subject to the approval of stockholders of both companies, Davis will become a wholly owned subsidiary of Yuma.

“We believe the combination of these two companies is a compelling value transaction for each company’s owners and look forward to working with Davis and its Board of Directors to complete the merger,” said Sam L. Banks, Chairman and Chief Executive Officer of Yuma. “This transaction truly represents a scenario where the whole is greater than the sum of its parts, and is anticipated to increase our proved reserves by approximately 4.8 million barrels of oil equivalent at year end 2015, and to substantially increase our net daily production by approximately 1,500 barrels of oil equivalent per day based on Davis’ fourth quarter 2015 production rates. Once the transaction is complete, Yuma expects significant G&A synergies associated with the merger and will be well positioned to take advantage of the collective portfolios of the combined companies, as well as to capitalize on the current environment, which we believe will provide opportunities to grow primarily through further consolidations and acquisitions.”

“We are excited about the combination and the resulting synergies that this merger will bring, creating value for both companies. The Davis properties complement Yuma’s existing portfolio from a geographic and strategic standpoint, while also strengthening its position in resource plays. We believe that Davis brings near term liquidity and long term optionality for the Pro Forma Company,” said Michael Reddin, Chairman, President and Chief Executive Officer of Davis. “Our major stockholders are all committed to the deal, and look forward to becoming part of a larger, more diverse, publicly-traded enterprise.”

Key attributes of Davis include:

No bank debt and approximately $4.1 million of cash as of December 31, 2015;
1,533 average barrels of oil equivalent per day (BOE/d) of production for the fourth quarter of 2015;
4.8 million barrels of oil equivalent (BOE) of proved reserves (64% proved developed) as estimated by Netherland, Sewell & Associates, Inc. effective December 31, 2015.
Material Terms and Conditions

Under the terms of the definitive agreement, Yuma will reincorporate in Delaware, implement a one for ten reverse split of its common stock, and convert each share of its existing Series A preferred stock into 35 shares of common stock prior to giving effect for the reverse split (3.5 shares post reverse split). Following these actions, Yuma will issue additional shares of common stock in an amount sufficient to result in approximately 61.1% of the common stock being owned by the current common stockholders of Davis. In addition, Yuma will issue approximately 3.3 million shares of a new Series D preferred stock to existing Davis preferred stockholders, which is estimated to have a conversion price of approximately $5.70 per share, after giving effect for the reverse split. The Series D preferred stock is estimated to have a liquidation preference of approximately $18.7 million at closing, and will be paid dividends in the form of additional Series D preferred stock at a rate of 7% per annum.

The Boards of Directors of both companies have approved the merger agreement and believe that it is in the best interest of both companies’ stockholders. The transaction is subject to stockholder approval of both companies, including the holders of preferred stock, as well as other customary approvals, including authorization to list the newly issued shares of common stock on the NYSE MKT. The transaction is expected to qualify as a tax-deferred reorganization under Section 368(a) of the Internal Revenue Code. The companies anticipate completing the transaction around mid-year 2016.

Upon closing, four of the five current Yuma Board members will continue to serve on the combined company Board. Richard K. Stoneburner will serve as Non-Executive Chairman, and Sam L. Banks will continue to serve as Director, President and Chief Executive Officer. James W. Christmas and Frank A. Lodzinski will also continue to serve. Three additional Directors will be nominated by Davis, bringing the size of the new Board to seven, and the Board will meet the director independence requirements of the NYSE MKT. All current officers of Yuma will serve in their same capacity in the combined company.

Among other conditions to closing, the transaction is conditioned upon the negotiation of a reserve-based credit facility with existing Yuma lenders and/or others, with a borrowing base of at least $44.0 million and other terms and conditions acceptable to both parties.

Legal counsel to Yuma in the transaction is Jones & Keller, P.C., Denver, Colorado. Legal counsel to Davis in the transaction is Porter & Hedges, LLP, Houston, Texas.

Roth Capital Partners acted as financial advisor to Yuma Energy, Inc. Northland Capital Markets and Euro Pacific Capital have been retained by Yuma to assist with the preparation of stockholder materials and closing the transaction.

About Yuma Energy, Inc.

Yuma Energy, Inc. is a Houston-based oil and gas company focused on the exploration for, and development of, conventional and unconventional oil and gas prospects. Established in 1983, Yuma has employed a 3-D seismic-based strategy to build a multi-year inventory of development and exploration prospects. Yuma’s current operations are focused on onshore central Louisiana, where Yuma is targeting the Austin Chalk, Tuscaloosa, Wilcox, Frio, Marg Tex and Hackberry formations. In addition, Yuma has a non-operated position in the Bakken Shale in North Dakota and has operated positions in Kern and Santa Barbara Counties, California.

About Davis

Davis Petroleum Acquisition Corp. is a Houston-based oil and gas company focused on acquisition, exploration and development of domestic oil and gas properties. Over 90% of the common stock of Davis is owned by entities controlled by or co-investing with Evercore Capital Partners, Red Mountain Capital Partners, and Sankaty Advisors. These major stockholders purchased the predecessor company from the family of Marvin Davis in 2006. Davis’ company-operated properties are conventional fields located onshore in south Louisiana and the upper Texas Gulf Coast, and its non-operated properties include Eagle Ford and Eaglebine properties in east Texas.