Recommended Acquisition Of Stratic Energy Corporation

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03 AUGUST 2010

Independent oil and gas production & development company, EnQuest PLC (“EnQuest”, the “Group” or the “Company”) is pleased to announce that it has entered into an Arrangement Agreement (the “Arrangement Agreement”) to acquire the entire issued share capital of Stratic Energy Corporation (“Stratic”) (the “Acquisition”).


EnQuest set to acquire Stratic, in a transaction recommended by Stratic’s Board the acquisition increases EnQuest’s North Sea 2P reserves by 7.27MMboe the purchase price equates, adjusted for tax, to paying US$11.2 per barrel of 2P reserves the acquisition consolidates EnQuest’s 27.7% position in West Don with an additional 17.25% working interest, estimated to increase EnQuest’s production by approximately a net 900 bopd it provides EnQuest with a substantial 19% interest in the Crawford field development

Stratic shareholders shall be entitled to receive 0.089626 EnQuest shares per Stratic share. Based on EnQuest’s average closing price on the London Stock Exchange between 28 July to 2 August 2010, this equates to an offer of 17.00 Canadian cents (the “Offer Price”) for each existing Stratic share, valuing the issued and to be issued share capital of Stratic at approximately US$45.7 million (the “Offer Value”). The Offer Price represents a 70% premium to Stratic’s closing price on Friday 30 July (the Toronto Stock Exchange was closed on Monday 2 August) and a 9% premium to Stratic’s three month volume weighted average price of 15.56 Canadian cents. This purchase price is the equivalent, adjusted for tax, to paying approximately US$11.2 per barrel for 2P reserves. All amounts are in US dollars, unless otherwise stated.

As part of the transaction EnQuest will refinance Stratic’s US$74.7 million net debt (as at 30 June), consisting of bank debt of US$18.9 million, convertible bonds of US$66.7 million and cash of US$10.9 million. EnQuest has agreed with the providers of its existing $280 million committed banking facility to increase the facility size by $70 million.

EnQuest Chief Executive Amjad Bseisu said:
“I am delighted to announce EnQuest’s first acquisition since our listing in April. The acquisition of Stratic is in line with our strategy to deliver sustainable growth in shareholder value through the exploitation of existing reserves and pursuit of selective acquisitions. The acquisition of Stratic provides a meaningful 7.27MMboe increase in our 2P reserves in the North Sea. It immediately enhances our production profile, it consolidates EnQuest’s working interest in West Don and it adds a working interest in the Crawford development to our asset base.”

The Acquisition has been unanimously recommended by the Stratic Board of directors and shall be effected by means of a Plan of Arrangement (the “Plan of Arrangement”). A Plan of Arrangement is a Canadian court process used for the acquisition of a company and an Arrangement Agreement is a binding contract entered into by both parties following mutual due diligence. Completion of the Acquisition is subject to court and Stratic shareholder approval and other customary closing conditions being satisfied. The proposed transaction will require Stratic to publish an information circular and to hold a special meeting for its shareholders to consider and vote on the Plan of Arrangement – the resolution requires a majority of not less than two thirds of the votes cast. It is anticipated that this process should take 8 to 10 weeks. An application for the listing of additional EnQuest shares will occur following completion of the Plan of Arrangement.

The Board and management of EnQuest believe that the acquisition of Stratic enhances EnQuest’s portfolio delivering further opportunities for development and growth. Key features of this acquisition include:
further enhancement of EnQuest’s position in the North Sea
addition of 7.27MMboe of proved and probable (“2P”) reserves
an increase in EnQuest’s annualised production levels. In its Interim Management Statement in May 2010, EnQuest indicated its full year 2010 production target was 18,000 bopd. Through its additional 17.25% working interest in West Don, EnQuest estimates that this transaction will provide an increase in production of approximately 900 net bopd from the date of deal completion. Further additional production will be provided when the Crawford field starts production, estimated by EnQuest to be in 2013
provision of a substantial 19% working interest in the Crawford field and associated prospects. Crawford provides 4.93MMbbl of 2P reserves and a proposed field development focusing on the deeper Triassic and shallower Tertiary (Sele) reserves. A field development plan is expected to be submitted around the end of this year
the consolidation of EnQuest’s operated working interest in the West Don field from 27.7% to 44.95%; providing EnQuest with an additional 2.34MMbbl of 2P reserves
benefits from tax losses of US$100.0m and US$15.0m of capital allowances, both figures are approximate
a purchase price equivalent to approximately $11.2 per barrel of 2P reserves, adjusted for the tax losses and allowances above
other potential opportunities arising from Stratic’s contingent resources in the UK and Netherlands
Overview of Stratic
Stratic is a Canadian incorporated oil and gas company currently focused primarily on the UK North Sea. Its shares are currently listed on the TSX Venture Exchange (ticker “SE”) and the AIM market of the London Stock Exchange (ticker “SE”). At 30 July 2010, Stratic had 272,635,224 shares in issue, with an additional 2,205,102 shares to be issued as a result of the transaction, giving a total of 274,840,326.

Stratic has a 19% interest in licence P.209 covering Block 9/28a which contains the Crawford field (4.93MMBoe net 2P reserves) and 17.25% interest in the West Don oil field (2.34MMBoe net 2P reserves), which EnQuest operates and in which it already has a 27.7% working interest.

Stratic also has interests in other parts of the UK North Sea (including the Cairngorm and Bowmore discoveries), in the Dutch sector of the North Sea (Horizon West) and in its smaller residual interests in Slovenia and Morocco.

Over the last year Stratic has been implementing a disposal programme of its non-core assets outside the UKCS. In April 2010, it completed the sale of its Italian business for a cash consideration of €33.0 million. On May 7 2010, Stratic announced that it had reached agreement for the sale of its Turkish business for a cash consideration of $3.45 million.

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