Osum Updates Corporate Sale Process, Agrees to Hearing Date for Application to Cease Trade Waterous' Hostile Bid, and Announces Waterous' Withdrawal of its Requisition for a Special Meeting of Sha...

CALGARY, AB, Dec. 17, 2020 /CNW/ - Osum Oil Sands Corp. ("Osum" or the "Company") announces today that the planned corporate sale process (the "Sale Process") for the sale of approximately 55% or 100% of the outstanding common shares of Osum (the "Common Shares") is underway. The Sale Process was initiated on December 8, 2020, following a hostile bid for the Company (the "Hostile Bid") launched by an affiliate of Waterous Energy Fund and entities controlled by it ("Waterous") on November 4, 2020. Subsequently, a special committee of independent board members (the "Special Committee") and Osum's Board of Directors (excluding Directors who are or may be conflicted) unanimously determined that the Hostile Bid significantly undervalues the Common Shares of Osum and is NOT in the best interests of Osum or its shareholders, and accordingly, recommended that shareholders REJECT the Hostile Bid and NOT tender their shares.

"Defining a clear path to near-term liquidity at a fair value for Osum's shareholders has been a priority of the Board and management for more than a year," said William Friley, Chairman of Osum's Board of Directors. "We were weeks away from formally launching a broad public strategic process in March when the pandemic hit and market conditions rapidly deteriorated forcing us to put that plan on hold. However, in light of the significantly undervalued and partial offer from Waterous, the Special Committee determined that it is in the best interest of all shareholders to initiate that process now to ensure maximum value is achieved."

Company Highlights

• Demonstrated success in SAGD operations and project execution
• One of the strongest balance sheets amongst oil sands and oil-weighted peers
• Tremendous free cash flow generation with substantial torque to higher oil prices
• Established, ultra-long life, low-decline production base
• Significant ongoing reserve growth underpinned by improving well performance
• Declining cost structure driven by production growth and optimization
• Top-decile realized pricing and netbacks competitive with best-in-class operators
• Substantial, highly economic growth opportunities
• Track record of GHG emissions intensity reductions

"We believe that the combination of stable production, high netbacks, low sustaining capital, an under-levered balance sheet and a portfolio of robust growth opportunities will be attractive to many strategic buyers," commented Friley. "While there is no guarantee that the process will result in an alternative transaction to the hostile bid, we are optimistic that the early interest we've seen will result in an improved offer being made to the company's shareholders."

Osum has engaged TD Securities and RBC Capital Markets as its financial advisors to manage the Sale Process. Given the nature of the Sale Process, the Company does not intend to provide updates until such time as the Board of Directors approves a definitive transaction or strategic alternative, or otherwise determines that future disclosure is necessary or appropriate.

Alberta Securities Commission (ASC) Hearing Set for Late January

Osum also announces that a hearing date has been set by the ASC for January 26, 2021 to consider its application contesting the validity of the Hostile Bid on grounds that include that Waterous has not provided an independent valuation as is required under Canadian securities law.

"Our board takes its fiduciary responsibility to all shareholders very seriously. We filed the application to protect the rights of the over 850 Osum shareholders that have not had access to the same detailed information concerning the company's current operations and future prospects that Waterous had prior to launching its hostile bid," stated Friley. "That's why we strongly believe that a valuation conducted by an independent third party should be provided as part of the hostile bid."

Withdrawal of Requisition for a Special Meeting

Finally, Osum announces that Waterous has withdrawn its requisition for a special meeting of shareholders. Commenting on the development, Friley said, "The voluntary resignation of directors is a customary method of ensuring an orderly and timely transition of control after a bid is successful. However, Waterous' original expectation, as expressed in its hostile bid circular, that two directors resign so that Waterous' directors would constitute the majority of the Board prior to the successful completion of the offer was inconsistent with sound corporate governance and presumptuous given the hostile nature of the bid. Given the unreasonableness of that position, Waterous subsequently proposed a compromise, which we accepted and have now documented, that it withdraw the requisition in exchange for undertakings from two directors to resign in the event that the ASC allows the hostile bid to proceed and the bid is successful."

Background

• On November 4, 2020, the Hostile Bid was launched by Waterous.
• On November 19, 2020, Osum issued a press release stating the Special Committee unanimously determined that the Hostile Bid significantly undervalues the Common Shares of Osum and is NOT in the best interests of Osum or its shareholders. The Special Committee and Osum's Board of Directors (excluding directors who are or may be conflicted) unanimously recommended that shareholder REJECT the Hostile Bid and NOT tender their common shares.
• On December 3, 2020, Osum filed an application with the ASC contesting the validity of the Hostile Bid and asked the ASC to cease trade the Hostile Bid on the grounds that the conditions to Waterous' acquisition financing cannot be satisfied by the time payment for the shares is due, and that Waterous has not provided an independent valuation as is required under Canadian securities law. A hearing date has been set for January 26, 2021.
• On December 8, 2020, Osum initiated a Sale Process in order to generate value-enhancing and maximizing alternatives for Osum shareholders.
• The Directors' Circular which provides important information for Osum shareholders, including 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 by Osum shareholders at this time unless an Osum shareholder has already deposited their shares under the Hostile Bid.
• 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 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" 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. 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.

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.