More than 86 percent of Equal Energy Ltd. shareholders voted Tuesday in favor of a Petroflow Energy Corp. offer to acquire the Oklahoma City-based company.
Petroflow will pay $5.43 for all outstanding Equal shares, plus an additional cash dividend of 5 cents a share, making the deal worth nearly $200 million.
The deal, announced in December, had been criticized by two of Equal’s largest shareholders who contended the company was worth more.
Montclair Energy LLC, which sparked a strategic review at Equal early last year with an unsolicited bid to acquire the company for $4 a share, has been silent since suggesting a stock buyback in April, while California-based investment adviser Lawndale Capital Management LLC indicated it would vote in favor of the Petroflow deal last week after no more favorable proposal emerged.
Lawndale opposed the “golden parachute” compensation package proposed for Equal executives. It was approved by nearly 60 percent of the company’s shareholders Tuesday in an separate, advisory vote at a special meeting in Calgary.
Five Equal executives stand to receive more than $500,000 each once the Petroflow deal is completed, led by CEO Don Klapko at $2.8 million. Klapko also would earn an additional $2.4 million from sale of his Equal stock, according to the proxy statement, which indicates he controls about 440,000 shares.
The Petroflow deal will put Equal’s assets in central Oklahoma’s Hunton formation back in the hands of some of the men who developed them.
Petroflow shareholders Richard Azar and Donny Seay were part of the private group that sold the Oklahoma assets to Equal’s predecessor, the Enterra Energy Trust, in early 2006, according to Equal’s proxy.
Calgary-based Enterra was formed in 2003 to acquire and develop oil and natural gas assets in western Canada to provide predictable cash flow for monthly distribution to unit holders.
The trust farmed out its Oklahoma holdings to Petroflow Energy Ltd. Petroflow paid the drilling and completion costs, while Enterra retained a 30 percent working interest in the acreage.
Enterra moved to end the farm-out agreement in December 2009, alleging Petroflow had not maintained the required pace of drilling on its acreage.
At that time, the trust was struggling after changes to Canadian law and lower natural gas prices left it nearly insolvent in late 2006.
Enterra converted itself into a corporation in May 2010, taking the name Equal Energy. Equal moved its headquarters from Calgary to Oklahoma City in March.
Equal had to go to court to end its drilling arrangement with Petroflow, which struggled with money problems of its own. It was cleared to operate its own Hunton wells on Feb. 15, 2011.
Montclair’s bid for Equal in February 2013 sparked a bidding war that ended 10 months later when the Petroflow deal was announced. The deal is expected to close by the end of the month.