(MENAFN- ProactiveInvestors - Australia) Strzelecki Metals (ASX: STZ) merger with unlisted private company Wolf Petroleum has received the unanimous support of Wolf's independent directors in the absence of a superior offer.
Wolf's directors, excluding Matthew Wood who is also an executive director of Strzelecki, said the merger offer represented an appropriate price for shareholders' Wolf shares and would grant them greater liquidity in a combined company with greater financing capability.
The directors added the company's advisors had indicated that further capital raisings as an unlisted company would potentially be unsuccessful and that the best way to add value to the company's assets was to list on a recognised stock exchange through a backdoor listing.
This would be achieved through a merger with Strzelecki, which will grant the combined company greater financing capability and focus this solely on unlocking Wolf's Mongolian shallow low cost oil and gas prospects.
It will also lead to a strengthening and simplification of the current management arrangements and should achieve cost savings by reducing corporate overheads as well as allowing shareholders access to capital gains tax relief.
Merger details
Strzelecki is offering a 2.5 of its own shares, following a 10 for 1 share consolidation, for every Wolf share, valuing the oil and gas player at about A$33.1 million based on Strzelecki's current share price of A$0.016 (A$0.16 post consolidation).
With the issue of 206.9 million post consolidation Strzelecki shares, Wolf shareholders will hold the majority of the combined company, which will have 248.3 million shares on issue.
Strzelecki will be renamed as Wolf Petroleum following the acquisition and the combined company will retain Matthew Wood, who is also an executive director of Strzelecki as its executive chairman.
Mongolian assets
Wolf is currently conducting successful work programs across three blocks in Mongolia, an emerging petroleum province.
Wolf currently holds joint survey exploration block contracts at Jinst and Baruun Urt and has been recently been awarded a third block at Sukhbaatar with a product sharing contract to be awarded.
Early exploration success and production have been delivered close to Wolf's assets, which have shallow targets ranging in depths from 500 metres and 3,000 metres.
Any discoveries will also find ready buyers both in Mongolia and China, providing the combined company with a clear path to cashflow.
Baruun Urt in Eastern Mongolia is Wolf's flagship project. The 10,287 square kilometre block is located in a region with operating oil fields and estimated resources of up to 4 billion barrels of oil.
The block contains oil shales, bitumen occurences and brown coal.
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