Texon Petroleum (ASX:TXN) Merger with Sundance Energy Australia (ASX:SEA)

Brisbane, Nov 13, 2012 AEST (ABN Newswire) - The Boards of Texon Petroleum Limited ("Texon") (ASX:TXN) and Sundance Energy Australia Limited ("Sundance") (ASX:SEA) are pleased to announce that they have agreed to the proposed Merger of Texon with Sundance via a scrip transaction that provides a unique consolidation opportunity with significant benefits for shareholders of both companies, including:

- Significant increase in scale of operations and market capitalisation;

- High quality reserve base with basin diversity and combined Proved plus Probable plus Possible reserves of 47.8 mmboe with PV10 of $572.9 million;

- Low risk growth potential through the drill bit in the Bakken/Three Forks, Wattenberg (Niobrara/Codell), and Eagle Ford Shale ("EFS") with significant upside in the combined company's appraisal program in the Mississippian and Woodford;

- Significant funding capacity with, as of 30 September 2012, approximately $163 million in cash and $100 million senior debt facility, with $15 million drawn; and

- Creation via demerger from Texon ("Demerger") of an exciting new exploration vehicle, Talon Petroleum Limited ("Talon"),which will hold all of Texon's non Eagle Ford Shale assets.

Merger Scheme

Sundance and Texon have today agreed to a merger via a scheme of arrangement subject to votes of Texon's shareholders, the Demerger taking place, and Court and other necessary approvals. If approved, Texon shareholders will receive:

- One share in Sundance for every two shares held in Texon valued at $0.41 per share based on Sundance's closing share price on 12 November 2012 of $0.82; and

- One share in Talon for every one share held in Texon that will include significant potential value through Texon's non-EFS exploration portfolio.

Texon's CEO Cliff Foss said, "The transaction between Texon and Sundance makes sense on a number of levels, and provides significant benefits for shareholders of both companies. A transaction with Sundance provides asset diversity and the required capital to fully exploit Texon's attractive low risk development EFS assets which is expected to enhance shareholder value."

Sundance's Managing Director Eric McCrady said "The proposed merger between Sundance and Texon is a unique value-adding consolidation opportunity with significant benefits for shareholders of both companies. The combined Company will have production, cash flow, and reserve growth potential with highly attractive risk adjusted return potential. Importantly, the combined Company will have the funding capacity to unlock significant value for shareholders."

Sundance Post Merger with Texon

Post the Merger with Texon, Sundance will have an attractive and diversified portfolio of onshore US oil and gas assets. Key attributes of the combined Company include:

- Net production in the third quarter of calendar year 2012 would have been 1,242 boepd had the companies been combined, after eliminating production from Sundance's divested South Antelope prospect and Texon's non EFS production;

- Proved reserves of 7.1 mmboe with a PV10 of $113.1 million;

- Proved and probable reserves of 15.9 mmboe with a PV10 of $246.9 million.

In addition to these oil and gas assets, the group will have the financial strength and flexibility to pursue further acquisitions and fully exploit the development potential of its assets, with a cash position in excess of $163 million and undrawn debt facilities of $85 million.

As part of the Merger arrangements, the existing Sundance Board will remain and the current Texon Board will resign, becoming the Board of Talon Petroleum.

Talon Petroleum

In accordance with its previously announced strategy, prior to the Merger, Texon intends to demerge its non-EFS assets on the basis that the EFS assets have moved into a development and production phase and naturally sit separately from Texon's exploration and appraisal business.

Details of the Demerger, which is not conditional upon the Merger taking place, are as follows:

- The Demerger Scheme will result in a demerger of Texon's non EFS assets into Talon;

- Talon will be listed on the ASX and will hold:

- a 100% interest in all oil and gas assets of Texon other than its interest in the EFS assets;

- the Prospect Generation Agreement with Wandoo Energy LLC; and

- cash retained after giving effect to required cash uses associated with the Merger.

- Talon will be led by Cliff Foss and Texon's existing management team;

- The Demerger allows Texon shareholders to continue to participate, through Talon, in the value embedded in Texon's non-EFS oil and gas assets and prospects; and

- It is proposed that the Demerger will be effected through a scheme of arrangement to be considered by Texon shareholders.

Commenting on Talon, Mr Foss said, "Talon provides an exploration and appraisal vehicle that will hold Texon's current non EFS assets including the Olmos and recently leased prospects in East Texas. Recent improvements in horizontal drilling techniques and fracture stimulation, have opened up a number of lower risk opportunities in mature, well serviced areas, and these opportunities will be a focus for Talon."

Process for Demerger & Merger

The Demerger and Merger will be proposed to shareholders under two separate Courtapproved Schemes of Arrangement and is expected to be completed in the first quarter of calendar year 2013 as set forth in the indicative time table below:

------------------------------------------------------------Event                                       Date------------------------------------------------------------Scheme Implementation Agreement signed      13 November 2012Scheme Booklet lodged with ASIC for review  December 2012First Court hearing occurs                  January 2013Scheme Booklet is despatchedto Texon shareholders                       January 2013Texon Scheme Meetings held                  February 2013Second Court hearing to approve Schemes     February 2013Implementation Date                         March 2013------------------------------------------------------------These dates are indicative only and subject to change.

Other Terms

Texon and Sundance have agreed a mutual break fee of $1 million, payable in certain circumstances if the Merger does not proceed, together with other customary protection measures.

A presentation setting out further details of the Merger and Demerger will be made available to the ASX, and on both Texon's and Sundance's websites.

A copy of the Scheme Implementation Agreement ("SIA") (minus schedules and annexures) is attached to this release. The SIA contains, among other terms, the conditions of the Merger proposal, including a requirement that an independent expert opines that the Merger proposal is in the best interests of Texon shareholders and that a favourable tax ruling is obtained in relation to the Demerger.
A Talon presentation will also be made available to the ASX, and on Texon's website shortly.

Advisers

Texon has retained RBS Morgans as financial advisers, and Minter Ellison as legal advisers.

Sundance has retained Johnson Winter& Slattery in Australia and Hogan Lovells in the US as legal advisers.

Investor Briefing

Sundance and Texon will be holding an investor briefing on Wednesday 14 November 2012 at 10:30am (AEDT). Dial-in details are set out below:

Telephone: 1800 558 698 (within Australia) or +61 2 9007 3187 (outside Australia)
Participant passcode: 727480

(1) Subject to there being no superior proposal and subject to obtaining an independent expert's opinion that the Merger proposal is in the best interests of Texon shareholders.

View the complete Texon Petroleum announcement at the link below:

Contact

Texon Petroleum Ltd T: +61-7-3211-1122 F: +61-7-3211-0133 E: texon.info@texonpetroleum.com.au WWW: www.texonpetroleum.com.au