(Energy Analytics Institute, 16.Dec.2024) — The Board of Directors of Frontera Energy Corporation approved the commencement of a second substantial issuer bid pursuant to which the company will offer to purchase from holders of common shares of the company up to 3,500,000 Shares for cancellation at a purchase price of CAD$12.00 per share, for an aggregate purchase price not exceeding CAD$42,000,000 (equivalent to US$30,000,000).
The offer is expected to commence on 19 Dec. 2024, and remain open for acceptance until 5:00 p.m. (Eastern time) on 24 Jan. 2025, unless extended, varied or withdrawn by the company, Calgary-based Frontera revealed 16 Dec. 2024 in an official statement.
Pursuant to the offer, tendering shareholders will have the right to elect to tender a specified number of shares.
Frontera plans to fund the share repurchases through available cash on hand. The offer is denominated in Canadian dollars, and shareholders will have the option to elect to receive payment in either Canadian or US dollars.
Purpose of the offer
As part of its efforts to maximize value for shareholders and following the highly participated substantial issuer bid announced in Sep. 2024 and completed in Oc. 2024, Frontera identified this offer as an attractive and efficient means to return further capital to shareholders. Upon successful completion of the offer, Frontera will have returned over $83mn of capital to its shareholders this year, including $30mn from the Oct. 2024 substantial issuer bid, $15.2mn in declared dividends and $7.8mn of share repurchases through the company’s normal course issuer bid program.
On 5 Nov. 2024, the last full trading day prior to the date of announcement of the company’s intention to make the offer, the closing price of the shares on the Toronto Stock Exchange was CAD$7.71 per share.
Assuming full and pro-rata shareholder participation, the offer represents a CAD$0.52 per share distribution equivalent to a 6.7% yield on the company’s stock price prior to the announcement of the offer in the company’s third quarter 2024 results. Including all dividends declared this year, the year-to-date distribution total to shareholders would be CAD$1.27 per share (equivalent to a 16.5% yield).
The board shall continue to consider future investor initiatives in the remainder of 2024 and beyond, including potential additional dividends, share buybacks, bond buybacks or other initiatives, based on the overall results of the business, oil prices and the company’s strategic goals.
Frontera intends to file with the Toronto Stock Exchange a notice of intention to commence a normal course issuer bid for its Shares subsequent to the completion of the offer (the “NCIB”). If accepted by the TSX, the company would be permitted under the NCIB to purchase for cancellation, during a 12-month period, up to that number of Shares equal to the greater of (i) 5% of the company’s issued and outstanding Shares and (ii) 10% of the company’s “public float”.
Purchase price
Frontera will pay the purchase price of CAD$12.00 per share for each validly deposited share taken up by the company up to a maximum of 3,500,000 shares, for an aggregate purchase price not exceeding CAD$42,000,000 (equivalent to US$30,000,000).
Each shareholder who has properly deposited shares and who has not withdrawn such shares will receive the purchase price, payable in cash (subject to applicable withholding taxes, if any), for all shares taken up by the company upon the terms and subject to the conditions of the offer.
If more than 3,500,000 shares are tendered for purchase, the company will purchase the shares on a pro rata basis. In that case, shares that are tendered but not purchased, will be returned to shareholders.
Manner of tender
Pursuant to the terms and subject to the conditions of the offer, shareholders wishing to tender to the offer may do so by making an election to tender a specified number of shares (representing, in the shareholders’ discretion, all or a portion of the shareholders’ shares) at the purchase price.
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By Editors at Energy Analytics Institute. © Energy Analytics Institute (EAI). All Rights Reserved.
