Oil and gas company Petrobank Energy & Resources Ltd. is launching a corporate reorganization aimed at streamlining activities and boosting shareholder value.
The Calgary-based company says it plans to distribute its 57-per-cent interest in subsidiary PetroBakken Energy ltd. to its shareholders, followed by the creation of two new companies: New Petrobank and New PetroBakken.
Petrobank shareholders will get one share of New Petrobank for each current share of Petrobank.
PetroBakken shareholders will receive one share of New PetroBakken for each current share of PetroBakken.
Current Petrobank shareholders will also receive shares of New PetroBakken at an exchange ratio of between 1.06 and 1.10 shares of New PetroBakken shares for each Petrobank share.
"This reorganization is designed to enhance long-term value for Petrobank and PetroBakken shareholders and is consistent with our long-held corporate goal of enhancing shareholder value by creating strong, independent and focused companies," PetroBakken said in a news release.
"PetroBakken is anticipated to benefit from the reorganization through an increase in our publicly traded float, which should provide additional liquidity in the market, and the elimination of any share price trading discounts due to the perceived overhang of a control block owned by the parent company."
The proposed change requires approval of both Petrobank and PetroBakken shareholders, at meetings expected to be held in mid-December.
In a separate press release, Petrobank said its shareholders will receive direct ownership in the shares of New PetroBakken plus freely tradable shares in New Petrobank which will own the heavy oil business.
The restructuring should remove the recent negative market valuation of the heavy oil business, says Petrobank.
Cannacord Capital analyst Brian Kristjansen said in a research note that the move appears to be a positive one for PetroBakken.
"We had previously cited this event as a positive near-term catalyst for the stock as it materially increases the company's float and liquidity while removing the perceived overhang of a control block owned by the parent company."