(B)(N) CLT Celtic Exploration Limited

Deal Book. Exxon Mobil Canada Limited and Celtic Exploration Limited have obtained the required approvals of its shareholders and debenture holders, its Board of Directors which has unanimously determined that the arrangement is in the best interests of Celtic and is fair to Celtic’s security holders, and the final order of its Plan of Arrangement under the Business Corporations Act (Alberta) by the Court of Queen’s Bench of Alberta, and a  “no action” letter confirming that the Commissioner of Competition does not intend to make an application to the Competition Tribunal under section 92 of the Competition Act (Canada) (the “Competition Act”) in respect of the Arrangement and accordingly, no further approval is required under the Competition Act (Marketwire, December 14, 2012, Celtic Exploration Security holders Approve Plan of Arrangement With Exxon Mobil).

All of this is good news and one would think that the Canadians who own its stock and debentures, and its employees, suppliers and customers have certainly received a “net economic benefit” that is more than the 35% premium over the languishing stock price of  $15 to $20 (and no dividends) prior to the announcement of this deal on October 14, 2012 three months ago (please see our Post, The New Mercantilism, October 2012) but we can’t be sure of that until we receive the further clarification and approval of the Government of Canada under the Investment Canada Act.

As investors, we might have done something else with our money during the last three months and we are minded that money that is not working is money that is lost. For example, PBN PetroBakken Energy Limited is paying a dividend that yields 9.6% at the present time and the stock of the whole company can be bought for a little more than half  ($1.8 billion) of the $3.1 billion Celtic deal. Please see our recent Post, (B)(N) PBN PetroBakken Energy Limited, January 2013, and an example of what can go wrong when companies falter in the stock market.

The current ambient stock prices of Celtic Exploration continue to be about $1.16 or one half share of the new company Kelt Exploration Limited (please see below) above the Risk Price (SF) which is almost exactly the deal price of $24.50 although the deal price – which could be anything that is required to close the deal – and the Risk Price (SF) are determined by completely different methods. Please see our Post, The Price of Risk, August 2012.

Exhibit 1: (B)(N) CLT Celtic Exploration Limited – Risk Price Chart

Celtic Exploration Limited is a Calgary, Alberta, Canada-based oil and gas company focused on exploration, development and production of crude oil and natural gas resources primarily in west central Alberta.

(Please Click on the Chart to make it larger if required.)

Celtic holds large acreage positions in the Montney and Duvernay resource gas plays and has a proven track record of growing reserves, production and the underlying value of the company for its shareholders.

Moreover, should the deal receive approval under the Investment Canada Act, Celtic shareholders will also receive an interest of 1/2 share pro rata in the new company Kelt Exploration Limited which is expected to be a publicly listed junior oil and gas exploration and production company led by Celtic’s current management team and 50% owned by Canada’s largest oil & gas exploration and development company, Imperial Oil Limited.

Postscript

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