Enauta proposes combination with 3R Petroleum

Source: www.gulfoilandgas.com 4/1/2024, Location: South America

Enauta Participações S.A. ("Enauta") announces that its Board of Directors unanimously approved, in a meeting held today, the submission of a merger proposal to the Board of Directors and shareholders of 3R Petroleum Óleo e Gás S.A. ("3R").

A merger of Enauta and 3R establishes one of the largest and most diversified independent oil and gas companies in Latin America. The combination results in a balanced, five-year high organic growth portfolio with ability to add value in an environment of consolidation and resilience to commodity pricing cycles.

The new company offers substantial advantages at operational, commercial, financial, governance, and risk management levels. Production exceeds 100,000 barrels of oil equivalent, with 2P reserves over 700 million barrels among a highly complementary and diversified portfolio.

The resulting company will boast a solid balance sheet, eligibility for investment-grade rating, competitive access to capital, and significant leverage capacity. It will hold a strategic positioning in domestic and international capital and banking markets.

The combination creates large operational, commercial, and noteworthy capital allocation synergies. The transaction is expected to increase the combined company’s shares liquidity and its ADTV (average daily trading volume), leading to a position amongst top listed companies in B3 with potential for expansion to global indexes. The transaction leverages potential for rapid repricing of securities, surpassing the sum of the current individual market values of the two companies.

The transaction will lead to state-of-the-art governance, with diversified reference shareholders, a predominantly independent board of directors with an experienced executive team. There will be growth opportunities in offshore and onshore operations, mitigating operational, geological and regulatory risks, complementarity in teams, talent attraction and retention and strong adherence to ESG principles.

Given the two companies strategic assets, scale, and synergies, the combined company will have a competitive advantage in leading consolidation and development of new businesses across Latin America.

Enauta proposes to exchange shares, optimizing the transaction, with a simplified structure and execution, eliminating the need for any carve-outs, waiver fees, or restructuring in corporate guarantees. This proposal is subject to due diligence completion during an exclusivity period of up to 30 days.

The transaction is also subject to customary precedent conditions and any other conditions agreed by the companies, including (i) satisfactory negotiation of definitive transaction documents, which should include customary terms and conditions, (ii) transaction approval by shareholders of both companies at respective extraordinary general meetings, and (iii) legal and regulatory approvals, including approval from Brazil’s Administrative Council for Economic Defense – CADE.

An Enauta and 3R merger presents a superior transaction compared to that proposed by Maha in a public letter to 3R’s shareholders, in terms of strategic positioning, governance, tangible synergies and from a risk management perspective. Results will be promptly and objectively shared across shareholders of both companies, without hindering a future pursuit of operational synergies identified by Maha in optimizations with PetroRecôncavo and with other operators, in a model that minimize inefficiencies.

Deal completion does not preclude transactions with other companies in the sector capable of accelerating value creation to all shareholders. For more information, please refer to the letter sent by Enauta executive management to the board of directors and shareholders of 3R.


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