SYDNEY: Vintage Energy Ltd (ASX: VEN) and Galilee Energy Limited (ASX: GLL) have entered into a binding Heads of Agreement (HoA) under which Vintage will acquire all of the fully paid ordinary shares in Galilee by way of a scheme of arrangement.

The proposal will create a merged group better resourced to generate value from the favorable long-term outlook for onshore gas and oil in eastern Australia through greater financial strength, an expanded resource base and an enhanced portfolio.

Galilee Executive Chairman, Ray Shorrocks said: “There is a huge opportunity emerging in Australia’s east coast gas market. This merger is aimed at enabling the combined companies and their shareholders to take full advantage of this looming gas shortfall and the impact that will have on gas prices, margins and free cashflow generation.

“It will also provide long-term growth potential and access to funding”.

Vintage Chairman, Reg Nelson said: “The merger will create a company with much greater exposure to east coast gas supply in the near and long term and a stronger balance sheet.

“For Vintage shareholders, it means their company will be better equipped to grow production and revenue from the appraisal of the Odin and Vali gas fields. In addition, our long-term prospects will be enhanced through addition of Galilee’s substantial gas resources.

There is clear complementarity in the Vintage and Galilee acreage holdings. Their combination will result in a portfolio encompassing nearly all of the onshore sedimentary basins currently supplying, or expected to supply, gas to eastern Australia such as the Cooper, Bowen, Surat, Otway and Bonaparte Basins.

“We are looking forward to working with the Galilee team to take the Heads of Agreement to a scheme of arrangement for shareholder action at the earliest opportunity.”

The HoA provides that Vintage will acquire 100% of Galilee shares on issue post the capital raising announced by Galilee today. Under the Scheme, Galilee shareholders will receive two fully paid ordinary shares in Vintage for every one fully paid ordinary Galilee share held on the Scheme record date.

The 100% scrip scheme consideration implies a share price of $0.02 for Galilee based on the closing price of Vintage shares of $0.01 on 12 August 2024, the last day both companies traded on the ASX prior to Galilee entering a trading halt.

Upon implementation of the Scheme, Vintage and Galilee shareholders will hold approximately 60.2% and 39.8% of the merged group respectively, calculated using Galilee shares on issue post- capital raising.

Under the HoA, the merger is conditional upon Galilee completing a $2.5 million capital raising announced today. The capital raising is scheduled for completion on 20 September 2024.

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