By Ian Gilson, PhD, CFA
On Jan. 07. 2014 New Western Energy (NWTR) announced that it has entered a non-binding letter of intent (LOI) to acquire all of the issued and outstanding stock of Legend Oil and Gas Ltd. (LOGL), $0.06 a share.
The terms are based on a price of $0.09 a share for LOGL and no less than $0.21 or more than $0.29 for NWTR ($0.21 at the close on 01/07/2014). There are 103.44 million shares of LOGL outstanding (Yahoo Finance 01/07/14). Management and the largest shareholder own over 51% of the outstanding stock so a shareholder vote would be a formality.
Legend Oil owns a number of properties in Canada and in Kansas, USA. (see table below). All of them are producing oil or gas. The company's revenue for the first three quarters was $1.74 million with an operating loss of $3.00 million.
Legend Oil has published potential production data for its properties and these are substantially higher than the current rates. The acquisition will have a significant impact on New Western Energy.
Since a number of transactions have occurred since the 10Q for the 3Q13 was released we do not have relevant date for the balance sheet. We are not including Legend Oil's financials into our forecasts at this time. Some properties may be sold before consummation of the acquisition.
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