Osum’s Special Committee Recommends Shareholders Reject Waterous Energy Fund’s Hostile Bid

Hostile bid is highly conditional, offers only partial liquidity, includes no control premium, and undervalues Osum’s top quality assets and pristine balance sheet

Take no action to REJECT the Hostile Bid

For shareholder questions, please contact Laurel Hill Advisory Group at 1.877.452.7184 (416.304.0211 outside North America) or email assistance@laurelhill.com

Calgary, AB, November 19, 2020 – In response to the unsolicited offer to purchase up to 52,500,000 common shares of Osum Oil Sands Corp. (“Osum” or the “Company”) launched by Waterous Energy Fund (“WEF”) on November 4, 2020 (the “WEF Offer” or the “Hostile Bid”), Osum today announced that a special committee of independent board members (“Special Committee”) and its Board of Directors (excluding conflicted directors) have unanimously determined that the Hostile Bid is INADEQUATE as it significantly undervalues the common shares of Osum and it is NOT in the best interests of Osum or its shareholders. Accordingly, the Special Committee and Osum’s Board of Directors (excluding conflicted directors) unanimously recommend that shareholders REJECT the hostile bid and NOT tender their common shares to the WEF Offer.

The Special Committee and Board of Directors (the “Board”) have carefully reviewed and considered the Hostile Bid, with the benefit of advice from financial and legal advisors. The Board today mailed its Directors’ Circular, which provides important information for Osum shareholders including background to the WEF Offer, a review of the Company’s operational and financial performance and prospects, and a summary of the Special Committee’s deliberations and recommendations. The Directors’ Circular is available at osumcorp.com/hostilebid.

“The WEF Offer significantly undervalues Osum’s strengths as a top tier oil sands operator, financial position, high-quality people and assets, and potential for growth,” said William Friley, Chairman of Osum’s Board. “Over the last few years, there has been a substantial transformation of the business. The Company has successfully tripled production capacity, continuously driven down operating costs and significantly reduced debt. With the lowest net debt to cash flow ratio among publicly traded oil sands and oil-weighted peers and a clear path to zero net debt in the near term, there is no pressure to sell.”

In its Directors’ Circular, the Special Committee describes the reasons for its rejection of the Hostile Bid:

  • The Hostile Bid is a highly opportunistic bid taking advantage of a global pandemic.
  • The Hostile Bid is an insider bid with no control premium for a top tier oil sands operator.
  • The Hostile Bid is highly conditional and not a firm offer, providing WEF with the option to decline to proceed at any time up to and including the expiry of the Hostile Bid.
  • A corporate sale process has not been undertaken, eliminating the opportunity for potential strategic purchasers to negotiate a fair corporate sale transaction.
  • The Hostile Bid is a partial bid that only offers partial liquidity for Osum Shareholders.
  • The Hostile Bid has significantly lower implied valuation metrics than those paid by Cona Resources Ltd., a portfolio company of WEF, for Pengrowth Energy Corporation in November 2019.
  • Osum has a pristine balance sheet with no pressure to sell and the lowest net debt to cash flow ratio among its Canadian oil sands and oil-weighted publicly traded peers. Osum is on a clear path to zero net debt in the near term.
  • The Hostile Bid provides insufficient value for Osum’s top quality assets, which generate “best in class” realized prices and netbacks among Alberta SAGD projects.
    The Hostile Bid undervalues Osum’s pipeline of highly economic planned expansions, such as growth projects at both Orion and Taiga, which offer highly attractive capital intensities and returns at recent strip pricing.
  • The Hostile Bid undervalues Osum’s history of successful operatorship and expansions, including continuously and significantly driving down operating costs at Orion.
  • The Hostile Bid undervalues Osum’s top performing management and operations team.
  • TD Securities Inc. and RBC Dominion Securities Inc. have provided written opinions that the consideration offered by WEF pursuant to the Hostile Bid is inadequate, from a financial point of view, to Osum shareholders, other than WEF and related Waterous Entities.
  • A prior valuation by KPMG LLP assessed the fair market value of Osum’s common shares at between $4.00 to $4.80 per share.
  • The Hostile Bid is exploitive and does not provide Osum shareholders with adequate information to make an informed decision.
  • The price at which previous Osum shareholders have sold or have agreed to sell is not determinative of the fair value for the Osum shares.

“The Special Committee and Board of Directors are committed to exploring liquidity options for Osum shareholders in order to generate value-enhancing and maximizing alternatives for Osum shareholders,” said Friley. “All of my fellow directors, except for those nominated by WEF, and the senior officers of Osum are rejecting the WEF Offer and we strongly recommend shareholders join us in rejecting this undervalued, opportunistic and exploitive Hostile Bid.”

The Hostile Bid is scheduled to expire at 5:00 pm MT on February 24, 2021, unless extended, varied or withdrawn by WEF in accordance with the terms of the offer.

NO ACTION is required to reject the Hostile Bid.

If a shareholder has already tendered 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.

Advisors

Osum has retained TD Securities Inc. and RBC Dominion Securities Inc. 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.

Cautionary Information and Forward-Looking Statements

Certain information included in this press release, including, without limitation, expectations with respect to net debt levels and liquidity for shareholders, 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.

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.

Media Contact

Christi Clouter
Communications Manager
cclouter@osumcorp.com

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