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Filed by: Key Production Company, Inc.
This communication is filed pursuant to
Rules 165 and 425, as promulgated under
the Securities Act of 1933, as amended.
Subject Company: Columbus Energy Corp.
Commission File No. 001-9872
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CONTACT: Paul Korus FOR RELEASE AT 6:00 A.M. (MST)
(303) 295-3995 Tuesday, August 29, 2000
KEY AGREES TO ACQUIRE COLUMBUS ENERGY
DENVER, August 29, 2000 -- Key Production Company, Inc. (NYSE: KP) and Columbus
Energy Corp. (AMEX: EGY) today jointly announced that Key has agreed to acquire
all of the outstanding common stock of Columbus in exchange for 1.3 million
shares of Key common stock. As a result, the shareholders of Columbus would own
approximately ten percent of the combined company, with Key's shareholders
owning the balance.
Under the terms of the proposed merger agreement, Columbus shareholders will
receive 0.355 of a share of Key common stock for each Columbus share in a
tax-free reorganization. Because the merger is subject to a favorable Columbus
shareholder vote, Columbus plans to hold a special shareholder's meeting in
October or November following completion of the SEC's review of the proxy
statement/prospectus. The boards of directors of both companies have unanimously
approved the transaction.
Commenting on the deal, Key's Chairman and Chief Executive Officer, F.H. (Mick)
Merelli stated, "While combining the operations of Key and Columbus under one
roof should be additive to cash flow per share, we have also enhanced our
ability to grow net asset value. The combined company will have a stronger
balance sheet and a larger base of cash flow from which to fund drilling,
acquisitions, or debt reduction."
According to information contained in Columbus Energy's latest 10-Q filed with
the SEC on July 14, 2000, its long-term debt has been reduced to $4.9 million
and working capital at May 31, 2000 approximated $1.3 million. The company also
reported that its discretionary cash flow for the first six months of fiscal
2000 was $3.235 million. Columbus presently has 3.75 million common shares
outstanding, plus employee and director options of 0.6 million.
In connection with the proposed merger, Columbus' proved oil and gas reserves
have been updated to June 30, 2000. Estimates by an outside engineering firm
show that total proved reserves approximated 21 billion cubic feet (Bcf)
equivalent, including 2.4 Bcf equivalent classified as proved undeveloped.
Based on its economic evaluation parameters, Key estimates that as of June 30,
2000, Columbus Energy's total proved reserves approximated 16 Bcf equivalent, of
which 98 percent are proved developed. About two-thirds of the proved reserves
are natural gas, with the balance consisting of crude oil and condensate. Key
also estimates that average daily production during 2001 from the proved
reserves should approximate six million cubic feet of gas and 350 barrels of
oil.
Pursuant to the terms of the proposed merger, Key and Columbus have granted each
other the right to receive a $1 million termination fee, subject to certain
conditions. Arthur Andersen LLP Global Energy Corporate Finance Group acted as
financial advisor to Columbus and provided a fairness opinion to the Board of
Directors of Columbus.
Key Production Company is an independent oil and gas exploration and production
company with operations in the United States.
Columbus Energy Corp. is a U.S. independent energy company involved in the
exploration, development and production of crude oil and natural gas.
INVESTOR NOTICES
This news release includes "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995. Such statements are those
concerning the companies' merger and strategic plans, expectations and
objectives for future operations. All statements, other than statements of
historical facts, included in this press release address activities, events or
developments that the companies expect, believe or anticipate will or may occur
in the future, are forward-looking statements. This includes completion of the
proposed merger, reserve estimates, future financial performance, future equity
issuance and other matters. These statements are based on certain assumptions
made by the companies based on their experience and perception of historical
trends, current conditions, expected future developments and other factors they
believe are appropriate in the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are beyond the
control of the companies. Statements regarding proved reserves and future
production are subject to all of the risks and uncertainties normally incident
to the exploration for and development and production of oil and gas. These
risks include, but are not limited to, inflation or lack of availability of
goods and services, environmental risks, drilling risks and regulatory changes.
Investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward-looking statements. Readers are referred to the
documents filed by Key and Columbus with the SEC, specifically the most recent
reports on Form 10-K, 8-K, and 10-Q, including amendments thereto, which
identify important risk factors that could cause actual results to differ from
those contained in the forward-looking statements.
INVESTORS AND SECURITY HOLDERS ARE ALSO ADVISED TO READ THE PROXY
STATEMENT/PROSPECTUS THAT WILL BE INCLUDED IN THE REGISTRATION STATEMENT ON FORM
S-4 TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. KEY AND COLUMBUS WILL FILE THE PROXY
STATEMENT/PROSPECTUS WITH THE SEC. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A
FREE COPY OF THE PROXY STATEMENT/PROSPECTUS (WHEN AVAILABLE) AND OTHER DOCUMENTS
FILED BY KEY AND COLUMBUS WITH THE SEC AT THE SEC's WEB SITE AT WWW.SEC.GOV. THE
PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS (RELATING TO KEY) MAY ALSO
BE OBTAINED FOR FREE FROM KEY BY DIRECTING SUCH REQUESTS TO KEY PRODUCTION
COMPANY, 707 SEVENTEENTH STREET, SUITE 3300, DENVER, COLORADO 80202, ATTENTION:
SHARON M. POPE, ASSISTANT CORPORATE SECRETARY; TELEPHONE 303-295-3995. THE PROXY
STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS (RELATING TO COLUMBUS) MAY ALSO BE
OBTAINED FOR FREE FROM COLUMBUS BY DIRECTING SUCH REQUEST TO COLUMBUS ENERGY
CORP., 1660 LINCOLN STREET, SUITE 2400, DENVER COLORADO 80264; ATTENTION:
MICHAEL M. LOGAN, VICE PRESIDENT AND CORPORATE SECRETARY; TELEPHONE
303-861-5252.
Columbus, its directors, executive officers and certain members of management
and employees may be considered "participants in the solicitation" of proxies
from Columbus's shareholders in connection with the merger. Information
regarding such persons and a description of their interests in the merger will
be contained in the Registration Statement on Form S-4 when it is filed.
