UTS directors OK plan of arrangement with Total E&P

2010-07-07 05:51 ET - News Release

Dr. William Roach reports

UTS ENERGY CORPORATION ANNOUNCES A PLAN OF ARRANGEMENT WITH TOTAL E&P CANADA LTD. AND THE CREATION OF A NEW EXPLORATION AND DEVELOPMENT COMPANY

UTS Energy Corp.'s board of directors has unanimously approved a plan of arrangement, whereby Total E&P Canada Ltd. will acquire all of the issued and outstanding common shares of UTS, and, pursuant to the plan, shareholders of UTS will receive cash consideration of $1.5-billion, or $3.08 per UTS share, and shares in a new, publicly traded exploration and development company, SilverBirch Energy Corp.

The Cash Consideration to be received by UTS shareholders represents a 46% premium to UTS' closing price on July 6, 2010 of $2.11 per UTS share and a 36% premium to UTS' 30-day volume weighted-average trading price of $2.26 per UTS share.

UTS shareholders will also receive shares in SilverBirch whose assets will include a 50% interest in both the Frontier and Equinox Projects, interests in exploration oil sands leases and undeveloped lands as well as approximately $50 million in working capital (subject to adjustment). Upon completion of the transaction (which includes a planned 10:1 consolidation of SilverBirch shares), UTS' existing shareholders will own 100% of the SilverBirch shares outstanding.

As a result, the full proceeds that UTS shareholders will receive under the Plan include:

• Cash consideration of $3.08 per UTS share;
• Proportionate ownership in SilverBirch representing approximately $0.10 of working capital and 1.8 bbls of Contingent Resources (Best Estimate) per UTS share.

"This transaction allows UTS shareholders to realize an immediate cash premium to UTS' current share price while also participating in the significant growth potential of SilverBirch", said John Watson, Chair of the UTS Board of Directors.

The Board of Directors of UTS, after receiving the recommendation of the Special Committee and fairness opinions from its financial advisors, has unanimously approved the Plan and recommends that UTS shareholders vote in favour of it. In addition, UTS' major shareholder (West Face Capital), management and directors, who collectively own approximately 15% of UTS' diluted shares outstanding, have signed agreements in support of the transaction.

SilverBirch Offers High Growth Opportunity

SilverBirch provides UTS shareholders with the opportunity to participate directly in a high growth exploration and development company to be led by Dr. William J. F. Roach and members of the UTS management team.

The primary assets of SilverBirch will initially be as follows:

• 50% working interest in each of the Frontier and Equinox Projects;
• 50% working interest in an additional 83,712 hectares (209,280 acres) of exploration oil sands leases;
• 100% working interest in 23,040 acres of undeveloped lands also in the Athabasca Oil sands region with in-situ oil sands potential;
• Approximately $50 million in working capital to provide forward funding of all planned activities for the next 18 months.

    -------------------------------------------------------------------------
                              Contingent Bitumen Resources(1)(2)
                                     (millions of bbls)
    Project   ---------------------------------------------------------------
                            Gross                    Net to SilverBirch
              ---------------------------------------------------------------
                 Low(3)      Best     High(3)     Low(3)     Best     High(3)
    -------------------------------------------------------------------------
    Frontier       930      1,450      2,550        465       725      1,275
    -------------------------------------------------------------------------
    Equinox        230        330        380        114       166        189
    -------------------------------------------------------------------------
                            1,780                             891
    -------------------------------------------------------------------------
    (1) Contingent bitumen resources signifies that these are recoverable
        resources and that have been independently evaluated by Sproule
        Unconventional Limited. Best Estimate assumes a 12:1 TV:BIP cut-off
        and High Estimate assumes a 16:1 TV:BIP cut-off.
    (2) Resources as at December 31, 2009.
    (3) Low and High estimates are not additive.

The Frontier and Equinox Projects, with a combined 891 million barrels of mineable Contingent Resources (Best Estimate) net to SilverBirch, collectively provide a solid foundation for SilverBirch. UTS currently expects regulatory applications to be filed for both of these Projects in 2011, and that the mine plans included in those applications will be at a 16:1 TV:BIP cut off (representing an additional 573 million barrels of resources net to SilverBirch). The value associated with both of these Projects is expected to increase as they are progressed towards regulatory approvals, expected in the 2013/2014 timeframe.

SilverBirch's 50% owned exploration portfolio of 209,280 acres of land provides further upside for future drilling programs. In addition SilverBirch will also have 100% ownership in 23,040 acres of recently acquired land with in-situ oil sands potential.

"The creation of SilverBirch provides a platform to unlock the intrinsic value of its existing assets and undeveloped lands through organic growth. SilverBirch also offers significant leverage to a proven management team with a demonstrated track record of making large resource discoveries, raising equity and creating shareholder value", said SilverBirch CEO, Dr. Roach.

Other Transaction Terms

The transaction will be completed by way of statutory Plan of Arrangement under the Canada Business Corporations Act. The Plan is subject to court approval and must be approved by two-thirds of the votes cast by UTS shareholders at a special meeting expected to be held in September 2010.

The Plan provides that UTS will pay Total a non-completion fee of $40 million in certain circumstances if the transaction is not completed. The Plan also includes customary non-solicitation and right to match provisions. Full details of the Plan will be included in an information circular, which will be mailed to UTS shareholders.

The closing of the transaction is subject to the receipt by Total and UTS of all court, stock exchange and other regulatory approvals, receipt of the requisite shareholder approvals of UTS, no material adverse change having occurred in UTS and a number of other matters customary in transactions of this nature.

RBC Capital Markets and TD Securities Inc. are acting as financial advisors to UTS with respect to the transaction and have provided the Board of Directors of UTS with opinions indicating that the consideration to be received under the Plan is fair, from a financial point of view, to the holders of UTS shares. Blake, Cassels and Graydon LLP are acting as legal counsel to UTS. Macleod Dixon LLP are acting as tax counsel to UTS.

Conference Call and Webcast Notice:

UTS will host a conference call and webcast today, July 7, 2010, at 7:00 a.m. (Mountain)/9:00 a.m. (Eastern) to discuss this transaction.

From North America, please call: 888-231-8191

International and local: 647-427-7450

Please register at least 10 minutes before the start of the conference call.

A live audio webcast of the conference call will be available via http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3134780 or by going to UTS' website at www.uts.ca.

Recorded call playback is available until August 6, 2010 at (800) 642-1687, (passcode: 86470724 followed by the number sign) and replay of the webcast is available for 90 days at http://www.uts.ca

We seek Safe Harbor.