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HRT Transaction Presentation

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HRT Transaction Presentation

  1. 1. April 2011 1
  2. 2. Disclaimer This document contains forward-looking information and statements. All information and statements other than statements of historical fact contained in this document are forward-looking information and statements, including, without limitation, statements regarding the transaction, future financial position, business strategy, proposed acquisitions or dispositions, budgets, litigation, projected costs and plans and objectives of or involving UNX or HRT. Securityholders can identify many of these statements by looking for words such as “believe”, “expects”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words suggesting future outcomes or statements regarding an outlook or the negative thereof. These forward-looking statements may include, but are not limited to, statements with respect to: the transaction, sources of capital, capital expenditures, business strategy and objectives, resource quantities and the discounted present value of future net cash flows from such resources, net revenue, future production levels, exploration plans, development plans, acquisition and disposition plans and the timing thereof, operating and other costs, royalty rates and crude oil and natural gas prices, production rates, the timing of various steps in the transaction, and the satisfaction of listing conditions. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking information and statements are subject to risks, uncertainties and assumptions, including those discussed in the Management Information Circular of UNX dated April 1, 2011 (the “Circular”), which readers of this document are urged to read in its entirety. Although UNX believes that the expectations represented in such forward-looking information and statements are reasonable, there can be no assurance that such expectations will prove to be correct. Some of the risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking information and statements contained herein include: the impact of general economic conditions, industry conditions, governmental regulation including the timely receipt of required regulatory approval, applicable royalty rates and tax laws, volatility of commodity prices, currency exchange and interest rate fluctuations, imprecision of resource estimates, environmental risks, competition from other industry participants, the ability of HRT to obtain equipment, services and supplies in a timely manner, the ability to market oil and natural gas successfully to current and new customers, the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate production transportation, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources, the failure to realize the anticipated benefits of the transaction, fluctuation in foreign exchange or interest rates and the risk that actual results will vary from the results forecasted and such variations may be material. Readers are cautioned that the foregoing list is not exhaustive. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by UNX and described in the forward-looking statements or information. See “Information Concerning HRT Post Arrangement - Risk Factors” in the Circular. The reader is further cautioned that the preparation of financial statements, including pro forma financial statements, in accordance with Canadian Generally Accepted Accounting Principles and International Financial Reporting Standards requires management to make certain judgements and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating resources is also critical to several accounting estimates and requires judgements and decisions based on available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes. The information contained in the Circular, including documents incorporated by reference herein, identifies additional factors that could affect the operating results and performance of UNX and HRT. We urge you to carefully consider those factors. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements included in this Document are made as of the date of this Document and UNX and HRT undertake no obligation to publicly update such forward looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws. 2
  3. 3. Transaction SummaryThis summary is qualified in its entirety by reference toUNX Management Information Circular dated April 1st, 2011 UNX has entered into an agreement pursuant to which HRT will acquire, subject to certain conditions, all UNX shares by way of a plan of arrangement Pursuant to the agreement, UNX shares will be paid for with Global Depositary Shares representing HRT shares at an effective pre-tax exchange ratio of 0.005579 of an HRT share per UNX share (approximately 0.005495 of an HRT share net of applicable Brazilian Taxes). In accordance with Brazilian corporate laws, the issuance of HRT shares in connection with the transaction triggers certain pre- emptive rights held by existing HRT shareholders to maintain their pro rata ownership position in HRT Certain existing HRT shareholders have committed to assign their pre-emptive rights in favour of current UNX shareholders to facilitate the transaction Private Capital Increase Post-transaction (1) UNX Common Existing UNX Shares shareholders shareholders UNX ~88% ~12% shareholders GDR Cash (if any) 100.0% Existing shareholders HRT common shares (if any) 1. Basic shares outstanding Source: HRT 3
  4. 4. Transaction SummaryKey Terms of TransactionConsideration  HRT will acquire each UNX share for 0.5579 of a Global Depositary Share (pre-tax)  Each Global Depositary Share represents 1/100th of an HRT share  Equates to an effective exchange ratio of 0.005579 of an HRT share per UNX share (pre-tax)  Net of certain Brazilian taxes, UNX shareholders will receive ~0.5495 of a Global Depositary Share per UNX share  HRT has applied to list GDRs representing the Global Depositary Shares on the TSX-V (no assurance can be given that the listing will be completed)Offer Price & Premium  C$6.17 per UNX share (based on HRT closing price and R$/C$ Fx rate immediately preceding announcement)  29% to UNX closing price immediately preceding announcement (C$4.80)  39% to UNX 20-day “VWAP” immediately preceding announcement (C$4.45)Structure & Conditions  Plan of Arrangement under Alberta law subject to UNX shareholder and court approval  HRT shareholders must approve capital increase and transaction (at least 50.1% of votes cast at HRT shareholder meeting)  UNX securityholder approval requires at least 66 2/3% and “majority of minority” of votes cast at UNX securityholder meeting  Other customary conditionsOther Terms  Boards of directors of HRT and UNX have approved the transaction and unanimously recommended it to shareholders  UNX officers & directors (~12% of UNX shares) have agreed to vote in favor of the transaction  HRT officers & directors (~12% of HRT shares) have agreed to vote in favor of the transaction  C$20 million break fee payable by each party in certain specified circumstancesHRT Equity Issuance  In accordance with Brazilian corporate laws, the issuance of HRT shares in connection with the transaction triggers certain pre- emptive rights held by existing HRT shareholders to maintain their pro rata ownership position in HRT  A sufficient number of existing HRT shareholders have committed to assign, without receiving any payment as consideration, their pre-emptive rights in favour of current UNX shareholders to facilitate the transaction  The subscription price per HRT shares pursuant to pre-emptive rights not assigned by existing HRT shareholders will be equal to the greater of R$1,950 or HRT’s 5-day “VWAP” immediately preceding the HRT shareholder meetingTimetable  UNX Meeting materials have been mailed  Securityholders vote on April 27th, 2011  Closing expected in second quarter of 2011 4
  5. 5. Overview of Global Depositary Shares • HRT common shares are listed on Brazil’s Bovespa exchange under ticker HRTP3 • Consideration to be paid to UNX shareholders will be indirect ownership of HRT common shares via Global Depositary Shares of HRT • HRT Global Depositary Shares are convertible into HRT common shares at any time • Each HRT Global Depositary Share will represent 1/100 HRT common shares • On February 23, 2011, the HRT common shares closed at R$1,900 per common share (C$1,126) on the Bovespa • Receipts, called Global Depositary Receipts (GDRs), will be issued to UNX shareholders evidencing ownership of Global Depositary Shares • Each UNX share will be exchanged for ~ 0.5495 of a Global Depositary Share (net of certain Brazilian taxes) • Global Depositary Share program administered by a financial institution called a Depositary • HRT has applied to list GDRs on the TSX Venture Exchange (no assurance can be given that the listing will be granted) • GDRs are very common in the United States, where they are referred to as “ADRs” • Royal Dutch Shell, Banco Santander, Credit Suisse, Vodafone, Rio Tinto, etc. 5
  6. 6. Overview of Global Depositary Shares • For many North American investors, the simplest way to own HRT will be via Global Depositary Shares (with ownership evidenced by GDRs) and not via direct ownership of common shares • HRT GDRs will trade on a Canadian stock exchange exactly like the shares of a Canadian public company • HRT Global Depositary Shares will have voting, dividend, and other rights that are as close as is practicable to the HRT common shares • Certain modest and customary ongoing fees are payable by holders of the Global Depositary Shares to the Depositary, as well as Brazilian taxes described in the Management Information Circular of UNX dated April 1, 2011 • Investors may elect to convert their Global Depositary Shares into HRT common shares at any time • Conversion mechanics are set out in the UNX Management Information Circular dated April 1, 2011 6
  7. 7. UNX Company OverviewAssets located in prospective Offshore Namibia UNX Highlights  Large Offshore Namibia acreage position  90% working interest percentage on over half of asset base  Strong working relationship with the Namibian government  Extensive seismic library on acreage identifying numerous potential drilling locations UNX O&G Assets Certified by D&M1 Certified Risked Resources (MMboe)2 Gross Resources Net Resources Oil Gas Equivalent Oil Gas Equivalent (MMbbl) (Bcf) (Mmboe) (MMbbl) (Bcf) (Mmboe) P90 (Low est.) 5,133 18,745 8,257 3,753 16,780 6,549 P50 (Best est.) 12,977 43,861 20,2087 9,687 39,137 16,209 P10 (High est.) 32,062 106,235 49,768 24,379 94,260 40,089 Mean estimate 16,508 55,298 25,724 12,413 49,168 20,608 Pg(3) adjusted mean 3,387 11,438 5,293 2,812 10,238 4,519 (1) NI 51-101 Compliant, BOE calculations done by UNX (2) BOE calculations provided by UNX based on a conversion ratio of 6:1 (mcf/bbl) (3) Probability of geological success 7
  8. 8. HRT Company Overview Assets located in Two Potential Petroleum Systems HRT Highlights One of the largest independent Brazilian Oil & Gas companies Over 230 professional and technical staff with extensive knowledge and experience Solimões Basin 1 Portfolio of 75,400 km2 North Africa 3 Petroleum Systems Operator in 21 blocks in the Solimões Basin and 5 blocks in Namibia HRT O&G Assets Certified by D&M (3) Certified Risked Resources Net to HRT (MMboe) Prospective Resources South Atlantic Pre Salt Risked 2 Petroleum System Asset Mean 1 Oil 1,367 Namíbia 2 Gas (MMboe) 155 Total 1,522 -1. Mean estimate of prospective resources adjusted for economic success2. Natural gas has been converted at a rate of 1BOE = 6.0 Mcf, HRT reported numbers are converted at 1BOE=5.6Mcf3. NI 51-101 compliant 8
  9. 9. HRT Land Holdings, Solimões Basin, Brazil Solimões blocks Manaus Rio de JaneiroThe Solimões Basin is the third largest producing basin in Brazil (~119,000 Boe/day) 9
  10. 10. Offshore Namibia Asset Profile for combinedHRT/UNX companyHRT’s Pro Forma Namibia Acreage 1711A 1711B NAMIBIA 2112B 2212A 2713 2713 B A Kudu Gas Field HRT Operated Block 2813 A 2815 UNX Operated Block Acarus Investments 2814 2816 B UNX Non-operating interest 2915 2914A 10
  11. 11. HRT’s/UNX’s Acreage Position in NamibiaHRT/UNX will be the largest private sector leaseholder in Offshore Namibia UNX’s blocks are contiguous with HRT’s Orange Basin blocks and surround the Kudu discovery HRT has extensive working knowledge of the UNX acreage UNX shareholders get additional Namibian exposure through HRT’s 100% owned 2112A & 2112B blocks Selected Operator Namibia Net Acreage (km2) 75,000 66,749 + 62,500 50,000 47,842 37,500 30,682 30,504 25,000 19,521 17,160 12,500 3,445 – Namcor Pro-forma HRT UNX Energy Chariot Arcadia Petroleum HRT Tower ResourcesSource: HRT 11
  12. 12. Benefits for UNX Shareholders Significant Premium  29% premium to UNXs closing price immediately preceding announcement (C$4.80)  39% premium to UNXs 20-day “VWAP” immediately preceding announcement (C$4.45) Asset Diversification and Consolidation  Exposure to Brazilian oil & gas prospects with near-term drilling  Creation of the second largest land position in Namibia in two highly prospective areas Continued Exposure to an Attractive Suite of Assets  Ongoing exposure to future exploration discoveries on UNX prospects  Opportunity to participate in upside potential in HRT prospects Leading Technical and Operational Capabilities  Access to world-class technical team with proven exploration and operational capabilities Increased Financial Resources  Fully funded for E&P commitments on all blocks having completed an IPO on October 27, 2010 for R2,481 million (approximately USD 1,445 million) 12
  13. 13. Summary Transaction delivers an immediate and significant premium to UNX shareholders Transaction is with a well funded, world-class exploration company with industry-leading technical expertise Global Depositary Shares as consideration ensures UNX shareholders can participate in the potential of combined prospects in two prospective areas through ownership of HRT equity  Global Depositary Shares will have voting, dividend, and other rights that are as close as is practicable to HRT common shares HRT’s cash balance ensures capital programs will be well funded  Wells forecast to spud in Brazil in 2011 HRT has extensive expertise and technical understanding of Namibian basins  In addition to operating all five of the blocks they have an interest in in Namibia, HRT has carried out detailed consulting geological and geophysical work for both Chariot and UNX UNX shareholders gain exposure to exploration prospects in Brazil’s Solimões Basin  HRT will have four rigs active by year end 2011  Over one billion barrels of unrisked resource potential in Brazil 13
  14. 14. UNX ContactLaurel Hill Advisory GroupNorth American Toll Free Number: 1-877-304-0211e-mail: assistance@laurelhill.com 14
  15. 15. Resources Disclaimer The prospective resources estimates for UNX contained in this presentation have been prepared in accordance with Canadian National Instrument 51-101 based on a report of D&M dated effective January 31, 2011. The D&M prospective resources report of UNX is available on UNXs website at www.unxenergy.com and is filed on SEDAR at www.sedar.com. Readers should refer to the prospective resources report of UNX in its entirety as it details the process for determining the prospective resources estimates, the assumptions underpinning the modeling, and defines all of the technical terms used. The prospective resources estimates of UNX described in the report and in this presentation are “undiscovered resources” as defined in the Canadian Oil and Gas Evaluation (“COGE”) Handbook. Undiscovered resources are defined as those quantities of oil and gas estimates on a given date to be contained in accumulations yet to be discovered. The estimate of the potentially recoverable portions of undiscovered resources are classified as prospective resources. Prospective resources are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The prospective resources estimates for HRT contained in this presentation have been prepared in accordance with Canadian National Instrument 51-101 based on a report of D&M dated effective August 31, 2010. The prospective resources estimates of HRT described in the report and in this presentation are “undiscovered resources” as defined in the Canadian Oil and Gas Evaluation (“COGE”) Handbook. Undiscovered resources are defined as those quantities of oil and gas estimates on a given date to be contained in accumulations yet to be discovered. The estimate of the potentially recoverable portions of undiscovered resources are classified as prospective resources. Prospective resources are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The term “BOE” as used herein may be misleading, particularly if used in isolation. A BOE conversion ratio of approximately 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 15

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