New Brazil Holding ASA and Pan-Petroleum (Holding) Cyprus have entered into a business combination agreement. The business combination will create a strong South Atlantic oil & gas independent with a reserve and resource base in excess of 200 MMBOE, and establishes a solid foundation for further growth through additional M&A activities.

The combination of assets is based on a 50/50 equity valuation of Norse Energy do Brasil and Pan-Petroleum. The companies have secured funding for the new company through equity capital commitments of USD 65 million based on a pre-money equity valuation of USD 288 million. The transactions are contingent, inter alia, upon approval from an Extraordinary General Meeting in NEC to be held in April, 2010.

Pan-Petroleum is owned 94.5 percent by funds managed by Sector Omega ASA with the balance owned by Pan–Petroleum management. Sector is owner of a 30% minority interest in Norse Energy do Brasil, which will also be included in the transaction. Sector will control approximately 66 percent of the shares in the combined company, but understands the need for share liquidity and believes its shareholding is likely to be diluted as the combined company pursues its growth strategy.

Lars Tell, the CEO of Sector Asset Management, commented, "Sector has a long track record in building companies in the oil and gas arena, including E&P companies, and believes materiality is critical in this industry. We are keen to remain a significant and strategic long-term shareholder of the combined company and are committed to participate in creating value for all shareholders."

NEC has evaluated several strategic alternatives for its Brazilian division for the past two years. The previously announced demerger will facilitate independent growth. Company size is critical for attracting capital and human resources and to be a strong player when seeking additional assets. The merger with Pan Petroleum will thus establish a strong platform for further growth.

Kjetil Solbrække, CEO of Norse Energy do Brasil commented, "The creation of a stronger, focused, independent South Atlantic oil & gas company is an exciting milestone for us. The experienced management and organization have the capability to both manage the current portfolio and take advantage of new business opportunities in the South Atlantic. We are all very confident about the region and look forward to getting started."

Tags: Norse Energy Corp. ASA, Pan-Petroleum