Vanguard to Purchase Remaining Encore Assets for $998MM

- Vanguard to Purchase Remaining Encore Assets for $998MM

Monday, July 11, 2011
Encore Energy Partners LP

Vanguard Natural Resources and Encore Energy announced the execution of a definitive agreement that would result in a merger whereby Encore would become a wholly-owned subsidiary of Vanguard's operating company, Vanguard Natural Gas, LLC, through a unit-for-unit exchange. Under the terms of the definitive agreement, Encore's public unitholders would receive 0.75 Vanguard common units in exchange for each Encore common unit they own at closing, representing a premium of approximately 4.4% based on the closing prices of Encore common units and Vanguard common units on March 24, 2011, the last trading day before Vanguard announced its initial proposal to acquire all of the common units of Encore owned by the public and an approximately 51% premium over the December 31, 2010 purchase price paid to Denbury for 45.6% of the Encore common units. The transaction would result in approximately 18.4 million additional common units being issued by Vanguard. The deal is valued at an approx. $998 million. The terms of the definitive agreement were unanimously approved by the members of the Encore Conflicts Committee, who negotiated the terms on behalf of Encore and is comprised solely of independent directors. In addition, Jefferies & Company, Inc., has issued a fairness opinion to the Encore Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to the unaffiliated unitholders of Encore. The members of the Vanguard Conflicts Committee, which is also comprised solely of independent directors, negotiated the terms on behalf of Vanguard and also voted unanimously in favor of the merger. In addition, RBC Capital Markets has issued a fairness opinion to the Vanguard Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to Vanguard.

"We are pleased to announce our agreement to combine these two companies in a transaction that would simplify our commercial activities and organizational structure as well as lower our overall cost of capital," said Scott W. Smith, president and chief executive officer of Vanguard.

The merger is expected to provide benefits to current Vanguard unitholders by, among other things:

• streamlining Vanguard's organizational structure, which enhances transparency for investors, while also reducing operating complexity and the company's overall cost of capital;
• creating an enterprise of significantly increased size and scale, improved overall operating reach and greater cash flow stability;
• realizing meaningful cost synergies primarily from eliminating public company expenses associated with Encore;
• expanding geographic reach and diversification from an operational and employee perspective, which should improve Vanguard's ability to compete more aggressively for future acquisitions; and
• maintaining Vanguard's strong credit profile and liquidity position by completing the merger on the basis of an all-equity, unit-for-unit exchange.

"We fully support the combination of these two successful companies," said John Jackson, chairman of the Encore Conflicts Committee. "We believe Encore's public unitholders will benefit from Vanguard's future growth potential."

The merger is expected to benefit Encore's public unitholders by, among other things:

• providing Encore unitholders with a premium of approximately 4.4% through the exchange of 0.75 Vanguard common units for each Encore common unit based on the closing prices of Encore and Vanguard common units on March 24, 2011, the last trading day before Vanguard announced its initial proposal to acquire all of the common units of Encore owned by the public and an approximately 51% premium over the December 31, 2010 purchase price Vanguard paid to Denbury Resources, Inc. for 45.6% of the Encore common units;
• eliminating the administrative services agreement, which currently requires Encore to pay an annual fee of approximately $6.5 million to its general partner in connection with providing certain administrative services;
• providing Encore unitholders with ownership in a much larger and more diverse entity with an enterprise value of approximately $2.0 billion that has a stronger balance sheet and is capable of pursuing significantly larger and more meaningful growth opportunities; and
• providing Encore unitholders with an opportunity to benefit from potential future unit price appreciation and increased cash distributions through ownership of Vanguard common units.

The completion of the merger is subject to approval by a majority of the outstanding Encore common units. Vanguard's operating company, Vanguard Natural Gas, LLC, already owns Encore's general partner and approximately 45.6% of the Encore outstanding common units and has also executed the definitive agreement between Vanguard and Encore. The completion of the merger is also subject to the approval of the issuance of additional Vanguard common units in connection with the merger by the affirmative vote of a majority of the votes cast by Vanguard unitholders. Completion of the merger, assuming the requisite unitholder votes are obtained and subject to other customary terms and conditions, is expected to occur during the fourth quarter of 2011. Distributions will continue to be paid by each company pursuant to their own cash distribution policies while the merger is pending.

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Gulfsands Discovers Oil at Syrian Wells

- Gulfsands Discovers Oil at Syrian Wells

Monday, July 11, 2011
Gulfsands Petroleum plc

Gulfsands Petroleum provided an update on its operations in Syria.

Khurbet East 19 and Khurbet East 19 Sidetrack

Rig-based operations have recently concluded on the Khurbet East 19 ("KHE-19") and Khurbet East 19 Sidetrack ("KHE-19 ST1") utilizing the Crosco E-401 rig. The KHE-19 ST1 well has been completed as a potential future oil production well and awaits a flow testing trial which will be conducted shortly via a rig-less operation. The productive section of this well is located in a horizontal side-track drilled in a south-southeasterly direction from the original KHE-19 vertical hole, which is interpreted to have encountered the primary reservoir section outside of the limits of the Khurbet East Field.

The KHE-19 vertical well encountered the Massive Formation at 1967 meters Measured Depth ("m MD") or 1561 meters True Vertical Depth sub-sea ("m TVD ss"). The well encountered a gross vertical oil column of approximately 4 meters, however formation pressure data obtained via wireline sampling in the KHE-19 well-bore indicates that the Massive section in this well is not in communication with the Khurbet East field. A flow test was not undertaken on the vertical section and the well was plugged back in order to proceed with a sidetrack contingency operation that was included in the pre-drill plan as part of the field delineation strategy.

The KHE-19 ST1 encountered the Cretaceous Massive Formation of the Khurbet East field at 2206 m MD (1545m TVD ss). A complete loss of drilling fluids was experienced soon after drilling into the Massive formation, indicating that the excellent quality vuggy reservoir of the producing Khurbet East Massive Formation had been encountered. A gross horizontal reservoir section of 67 meters was drilled before reaching a total depth of 2273m MD (1545m TVD ss). The well has since been completed with a 3.5 inch production string. Production flow testing trials will commence shortly, the results of which will be the subject of a future news release.

The Crosco-401 rig will now move to the Yousefieh East exploration well location.

Yousefieh 7

The Yousefieh 7 ("Yous-7") vertical well located on the northern flank of the Yousefieh field was spudded on the May 19, 2011 utilizing the Crosco E-501 rig. The Yous-7 well location was selected in order to gain information on reservoir extent and quality in the undrilled northern flank of the Yousefieh field.

The Yous-7 well encountered the Massive Formation at 1972 m MD (1554 m TVD ss), 18 meters deep to prognosis. The well encountered a gross reservoir pay interval of approximately 34 meters and a net oil column thickness of approximately 27 meters with average porosity of 17%. Pressure data obtained via wireline sampling in the Yous-7 well-bore indicates that the oil bearing Massive section in this well is in good pressure communication with the main producing area of the Yousefieh field with reservoir pressure showing depletion of between 30-40 psi, which is in line with expectations.

A production liner was cemented over the reservoir section of the well and following perforation of a 15 meter oil bearing reservoir section and an acid wash operation, a flow test was conducted. The well flowed at an average rate of 528 barrels of oil per day ("bopd") of 22 degree API oil on a 2" choke at an average wellhead pressure of 25 psi utilizing nitrogen lift over a period of 7 hours. It is likely that this well will require the installation of artificial lift facilities in order to produce at the planned rate of 500 bopd on a continuous basis, and discussions are underway with vendors for procurement of the equipment. Further perforation and acid stimulation operations are also planned for this well in order to improve well performance.

The results of the KHE-19 and Yous-7 wells will be considered, along with the results of the other development and exploration wells in the 2011 drilling program, in the year end re-assessment of the Khurbet East and Yousefieh field's recoverable reserves.

Yousefieh East Exploration Well (Yous-8)

The Yousefieh East exploration well ("Yous-8") will target an untested structure in Cretaceous age carbonates located approximately 3 kilometers to the east of the Yousefieh field discovery well with estimated mean unrisked oil resources of approximately 14 million barrels. The Yousefieh East well is located within the Yousefieh field Development License Area and, in the success case, could be quickly tied back and produced into the existing Yousefieh field production facilities.

Safa Exploration Well

The Crosco E-501 rig has been moved to the Safa exploration well location. This well will target

a prospect with fault bound dip closure potentially containing a Cretaceous age reservoir on trend with the Khurbet East Field. The pre-drill Mean unrisked resource estimate for the Safa area is calculated to be 27 million barrels of oil. The well will test the potential for a wider distribution of the high quality Massive karst reservoir encountered in Khurbet East.

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned and have continued without interruption during recent months. Drilling operations on the Yousefieh East and Safa exploration prospects will be the subject of a future news release.

Block 26 Oil Production

Oil production and revenue receipts from the Khurbet East and Yousefieh fields continue without interruption. Both fields demonstrate continued strong performance with limited reservoir pressure loss and minimal production of formation water. Daily average oil production from both fields combined during June 2011 was in excess of 21,000 bopd. Cumulative gross oil production from the Yousefieh field now exceeds 1 million barrels and cumulative production from the Khurbet East field exceeds 15 million barrels.

Gulfsands expects that combined production from these fields will be increased to approximately 24,000 bopd by the end of 2011 with the drilling and tie-in of additional development and delineation wells and via minor upgrades and de-bottle necking of existing surface facilities.

Ric Malcolm, Gulfsands CEO, said, "We are pleased to have encountered high quality, oil bearing reservoirs in both the Yous-7 and KHE-19st wells and expect that these wells will soon add incremental volumes to the production capacity of the Khurbet East and Yousefieh fields.

We also look forward to the resumption of our exploration drilling program with the drilling of the Safa and Yousefieh East prospects. If successful, these prospects are ideal candidates for rapid development due to their proximity to existing Gulfsands operated infrastructure."

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Ithaca Updates North Sea Ops

- Ithaca Updates North Sea Ops

Monday, July 11, 2011
Ithaca Energy Inc.

Ithaca announced progress on Athena and Stella Development projects.

Athena Project - Completions Update

Operations to prepare the Athena field development well 14/18b-A2Z ("the well" or "A2") for production have been successfully concluded. A 7" production liner and a dual electrical submersible pump system have been successfully installed above the horizontal section of the well and the subsea xmas tree and flowbase are ready for hook-up of flowlines by the subsea installation contractor. The Sedco 704 drilling unit, will stay on location to undertake further completion work for the project and is currently preparing to complete 14/18b-16 (to be renamed 14/18b-A3 or "A3"). This is the second of a five well program of completions (four production and one water injection) to be carried out before hook-up to the Floating Production Storage and Offloading vessel, BW Athena.

Athena Joint Venture Partners are Ithaca (operator, 22.5%), Dyas UK Ltd (47.5%), EWE Aktiengesellschaft (20%) and Zeus Petroleum Limited (10%).

Stella Project - Subsea Trees and Control Systems Contract Awarded

The development of the Stella field has moved a step forward through the placement of a contract with GE Oil & Gas to manufacture and supply subsea trees and controls systems. The initial phase of detailed engineering work has commenced and will focus on the procurement of forgings and materials for the systems. The systems will be delivered as an integrated package and are designed for installation using a heavy duty jackup drilling unit. The supply of the trees and control systems will be managed and delivered from GE Oil & Gas's Aberdeen facility.

The Company also confirms that a geotechnical program is currently ongoing to determine the suitability of certain jackup drilling units at four potential development drilling locations on the Stella and Harrier fields and incorporating test boreholes in advance of the planned Hurricane appraisal well. Two drill centers will be selected.

Stella Joint Venture Partners are Ithaca (operator, 50.33%), Dyas UK Limited (31.67%), Challenger Minerals (North Sea) Limited (18%).

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SapuraCrest, Kencana Petroleum to Merge in $3.95B Deal

- SapuraCrest, Kencana Petroleum to Merge in $3.95B Deal

Monday, July 11, 2011
Dow Jones Newswires
KUALA LUMPUR
by Ankur Relia

Malaysia's SapuraCrest Petroleum and Kencana Petroleum said Monday they have received separate takeover offers from an unlisted company which plans to merge them in a MYR11.85 billion ($3.95 billion) combined deal that could create the country's second largest oil and gas services provider in terms of market capitalization.

Integral Key Sdn Bhd, a shell vehicle wholly owned by Malayan Banking's private equity unit Maybank Ventures Sdn Bhd, has made takeover offers for both SapuraCrest and Kencana, the companies, as well as Integral Key, said in statements Monday. Maybank Investment Bank and CIMB Investment Bank are the joint advisors to the shell company.

"The principal shareholders of SapuraCrest and Kencana are keen to consider the merger," E. Sreesanthan, Integral Key's legal adviser, told reporters at a press conference.

Integral Key plans to acquire all the assets and liabilities of Kencana and SapuraCrest and merge them into an integrated oil and gas service provider, the two companies said in separate exchange filings.

If successful, the merged entity will be the second-largest player in the country's oil and gas services sector after Malaysia Marine & Heavy Engineering Holdings, a unit of national oil company Petroliam Nasional Bhd (Petronas).

Both SapuraCrest and Kencana have been looking to move up the value chain and expand their offerings in order to take advantage of the robust oil and gas industry in the region amid higher global oil prices.

"The merged entity will be in a strong position to undertake larger and more complex projects, thus significantly improving business prospects," Integral said in its letter of offer to both companies. The tie-up will "create a full-fledged integrated oil and gas services provider with strong delivery capabilities across the value chain," it added.

The entity also stands to benefit from Petronas' MYR300 billion capital expenditure program over the next five years, analysts said. Petronas is planning to replace or refurbish its oil and gas production assets in Malaysia. A merged firm will also be in a better position to bid for contracts outside the country, they added.

The deal, which will be the fourth-largest domestic merger in the Southeast Asian nation and the largest this year, was planned by Malaysia's top two investment banks--Maybank and CIMB-- and has the support of the key shareholders of the two takeover targets.

Integral Key has the support of SapuraCrest's key shareholder Sapura Holdings, which holds 40.1% in SapuraCrest, and Kencana's major shareholder Khasera, which holds 32.4%, CIMB Group Deputy Chief Executive Officer, Corporate and Investment Banking, Charon Wardini Mokhzani said.

Once the merger is complete, Sapura Holdings will hold 20.0% and Khasera will hold 16.2% in the combined entity, according to the merger plan.

SapuraCrest Petroleum said Integral Key is offering to pay MYR5.87 billion, or MYR4.60 a share, through an issue of 2.50 million new shares in Integral Key and a cash payment of MYR875.1 million. The offer price for SapuraCrest represents a 2.4% premium over its Friday closing price of MYR4.49.

Kencana Petroleum said Integral Key is offering to pay MYR5.98 billion, or MYR3.00 a share, through an issue of 2.51 million new shares in Integral Key and a cash payment of MYR968.7 million. The offer price for Kencana represents a 7.1% premium over its Friday closing price of MYR2.80.

Maybank Investment Bank and CIMB Investment Bank expect the deal to be completed in within eight months, post which both SapuraCrest and Kencana will be delisted from the stock exchange, and the merged entity will be listed under a new name.

Kencana said it has hired AmInvestment Bank Bhd and Credit Suisse as the adviser and financial adviser, respectively for the offer; while SapuraCrest said the board will appoint relevant advisers in due course and deliberate the terms of the offer.

Integral Key has submitted the offers to the boards of SapuraCrest and Kencana on Monday and the two companies have until Aug. 15 to respond to the offers.

Copyright (c) 2011 Dow Jones & Company, Inc.

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