Osum Provides Update on Steps to Maximize Value and Addresses Waterous Press Release

• Gap between the hostile bid and the value of Osum’s shares has widened
• Independent valuation underway
• Corporate sale process shows promise for a superior offer to the hostile bid
• WEF threatens to deprive shareholders of the right to realize a higher price
• WEF has not met its minimum tender condition
• Shareholders should NOT tender their shares

CALGARY, AB, Feb. 1, 2021 /CNW/ – Osum Oil Sands Corp. (“Osum” or the “Company”) wishes to update shareholders on matters related to the hostile bid for the Company announced by Waterous Energy Fund (“Waterous” or “WEF”) on November 2, 2020 (the “Hostile Bid” or “WEF Offer”), as well as address misleading statements in a recent press release issued by WEF.

Gap Between the Hostile Bid and the Value of Osum’s Shares has Widened

As set out in the Directors’ Circular dated November 18, 2020, Osum’s special committee of independent board members (the “Special Committee”) unanimously determined that the Hostile Bid significantly undervalued Osum’s shares. That disparity has increased as the price of oil has strengthened, the Company’s cash flow has increased, and its net debt has declined. In the three months that have passed since the announcement of the WEF Offer of $2.40 per share until the close of business on January 29, 2021 (the “Calculation Time”):

• The price of WTI oil has increased by 42% to US$52.20/bbl;
• The price of Western Canadian Select oil has increased 42% to US$39.08/bbl;
• The TSX Energy Capped Index has risen by 38%; and
• The Company’s net debt has fallen by 45% to $36 million.

Based on forward strip pricing as of the Calculation Time and assuming average production in line with previous guidance of 19,000 to 20,000 barrels per day, Osum expects to generate earnings before interest, taxes, depreciation and amortization (“EBITDA”), excluding hedging gains and losses, of between $160 and $170 million in 2021 and will be on track to achieve zero net debt by early in the third quarter of this year.

At that level, the WEF Offer values Osum at 2.4 to 2.5 times projected 2021 EBITDA or about half of the average multiple for a list of recent comparable transactions which includes WEF’s acquisition of Pengrowth Energy Corporation (“Pengrowth”). Pengrowth was the owner of the Lindbergh SAGD project; a project that is similar in size and scope to the Company’s Orion project. For further information, see the “Reject the WEF Offer” presentation posted to Osum’s website: osumcorp.com/rejectWEF

Independent Valuation Underway

Given the view of the Special Committee, with the benefit of the advice from its Advisors, that the Hostile Bid significantly undervalues Osum shares, and the Special Committee’s continued belief that Waterous’ access to detailed information concerning the Company’s operations and future prospects gives it an advantage over the Company’s more than 850 other shareholders in assessing the value of Osum shares, the Special Committee has engaged an investment bank to provide a formal independent valuation of Osum shares (the “Valuation”). The intent is to communicate the result of the Valuation to shareholders prior to the expiry of the Hostile Bid so that they may better assess the adequacy of the WEF Offer.

Corporate Sale Process Shows Promise for a Superior Offer to the Hostile Bid

The Special Committee is committed to identifying alternatives that will provide liquidity to shareholders at a price that better reflects the Company’s true value and initiated the ongoing Sale Process last December to ensure maximum value is achieved for Osum’s shareholders.

“We are encouraged by the activity in the data room and the interest we are seeing from potential purchasers,” said William Friley, Chairman of Osum’s Board of Directors. “Osum’s quality thermal assets, stable production, solid financial position and future growth potential are attractive to strategic buyers. We are hopeful that this process will result in a superior offer to the hostile bid.”

WEF Threatens to Deprive Shareholders of the Right to Realize a Higher Price

In its recent press release, Waterous asserted that any alternative transaction resulting in a change of control will require its consent and that Osum is attempting to thwart the Hostile Bid and deprive the Company’s shareholders of the right to tender to the WEF Offer.

Osum believes in a shareholder’s right to choose and is acting in the best interest of its shareholders by seeking a higher price in response to an opportunistic bid that grossly undervalues the Company. In the event that WEF has a consent right in respect of a particular transaction, such consent cannot be unreasonably withheld. If WEF’s consent right applies to a superior offer, Osum is of the view that it would be unreasonable for WEF to withhold its consent to such offer, and a breach of Waterous’ Investor Rights Agreements, as Waterous’ sole purpose for withholding such consent would be to force shareholders to accept its Hostile Bid and deprive them of the opportunity to realize a higher price for their shares.

WEF Has Not Met its Minimum Tender Condition

In response to the Hostile Bid, Osum retained Laurel Hill Advisory Group to act as its information agent (the “Information Agent”).

“While Waterous may believe that it has received shareholder support in excess of the minimum tender requirement for its hostile bid, the data collected by our Information Agent indicates that with the exception of those that have entered into lockup agreements, shareholders holding only approximately 1.5% of outstanding shares have tendered to the hostile bid,” commented Friley. “That is insufficient to meet the minimum tender condition and is hardly evidence of ‘overwhelming support.'”

Shareholders Should NOT Tender Their Shares

“We want to thank Osum’s shareholders for their support and patience as we explore liquidity options that will maximize value,” said Friley. “We strongly recommend that shareholders await the outcome of the corporate sale process and the independent valuation, in order to make an informed decision regarding the hostile bid. The Waterous offer is set to expire on February 24^th so shareholders should feel no pressure to tender at this time.”

The Special Committee reaffirms its recommendation for shareholders to REJECT the Hostile Bid and NOT tender their shares.

The Directors’ Circular which provides important information for Osum shareholders, including the background to the Hostile Bid, a review of the Company’s operational and financial performance and prospects, and a summary of the Special Committee’s deliberations and recommendations is available at osumcorp.com/hostilebid.

NO ACTION is required for Osum shareholders at this time unless an Osum shareholder has already deposited their shares under the Hostile Bid.

Withdrawing Your Shares

If shareholders have already deposited their common shares to the Hostile Bid, they can withdraw them by contacting their broker, following the withdrawal instructions set out in the Directors’ Circular or by contacting Laurel Hill Advisory Group toll free at 1.877.452.7184 (416.304.0211 outside North America) or by email at assistance@laurelhill.com.

Cautionary Information and Forward-Looking Statements

Certain information included in this press release, including, without limitation, statements with respect to the outcome of the Sale Process and expectations with respect to EBITDA and net debt levels, constitute ‘forward-looking statements’ within the meaning of applicable Canadian securities laws. Forward-looking statements are necessarily based upon a number of estimates, assumptions, expectations and projections that, while considered reasonable by Osum, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Generally, forward-looking information can be identified by use of words such as “outlook”, “objective”, “may”, “could”, “would”, “will”, “expect”, “intend”, “estimate”, “forecasts”, “project”, “seek”, “anticipate”, “believes”, “should”, “plans”, “promise” “hopeful” or “continue”, and other similar terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual financial results, performance or achievements to be materially different from the estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. The risks and other factors that may impact the forward-looking information contained herein include, but are not limited to, general economic conditions, industry conditions, including fluctuations in commodity prices, the ability to generate sufficient cash flow from operations to meet current and future obligations, including costs of projects and repayment of debt, expected cash flows, production levels or conditions and expected economic life of the Orion project, government regulation, fluctuations in foreign exchange and interest rates, weather conditions, unanticipated operating events, uncertainty of reserve and resource estimates, risks relating to the COVID-19 pandemic and the ability of management to execute its business plan, retaining a high quality, experienced management and operating team, production delays, changing environmental and other regulations, the ability to attract and retain business partners, the ability to exploit hydrocarbon resources with available technology, the need to obtain and maintain proprietary rights over aspects of the technology, competition from other technologies, the ability to access the capital for project development, research, technology development, operations and marketing, financial position, predictions of future actions or plans or strategies, and changes in energy prices. Except as required by law, Osum disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise. Readers are cautioned not to put undue reliance on these forward-looking statements. Historical statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In particular, historical results should not be taken as a representation that such trends will be replicated in the future. Certain information in this press release, including expectations with respect to future EBITDA and net debt levels, may constitute “future-oriented financial information” or “financial outlooks” within the meaning of applicable Canadian securities laws. Readers are cautioned to not place undue reliance on such future-oriented financial information and financial outlooks. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out herein. Such information is presented for illustrative purposes only and may not be an indication of Osum’s actual results.

Advisors

Osum has retained TD Securities and RBC Capital Markets as its financial advisors, and McCarthy Tétrault LLP as legal counsel to Osum and the Osum Board and Norton Rose Fulbright Canada LLP as legal counsel to the Special Committee. Laurel Hill Advisory Group is acting as Osum’s shareholder communications advisor and information agent.

About Osum

Established in Alberta in 2005, Osum Oil Sands Corp. is a private oil sands producer focused on the responsible application of in situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the Company is available at osumcorp.com.

Shareholder Questions

Shareholders with questions are encouraged to contact Laurel Hill Advisory Group 1.877.452.7184 (416.304.0211 outside North America) or email assistance@laurelhill.com.

SOURCE Osum Oil Sands Corp.

Renseignements: Media Contact: Christi Clouter, Communications Manager, cclouter@osumcorp.com

Liens connexes

www.osumcorp.com