May 23, 2020 Valuation Discussion Materials Prepared for the Special Committee to the Board of Directors Exhibit (c)(3)
Seaport Gordian Energy (“Seaport Gordian” or “SGE”) is pleased to present the enclosed discussion materials to the Special Committee (the “Special Committee”) of the Board of Directors of TransAtlantic Petroleum (“TransAtlantic” or the “Company”). The information contained herein does not include any recommendations and Seaport Gordian does not provide any opinions relative to the common stock purchase offer. This book can be viewed as a follow up discussion with the Special Committee regarding the common stock purchase offer, specifically to address some of the issues and concerns driven by the terms of the previous offer SGE evaluated the implications of further future dividends to the Series A Preferred holders both in terms of cash and common stock dividends SGE has looked at various pricing scenarios for the common including utilizing Black-Scholes as a valuation mechanism for valuing the common shares Analysis of the implications of a fixed per share amount is contained herein as an alternative to an absolute dollar purchase price for the common shares SGE updated the strip pricing in the reserve valuation and determined what the common shareholder value would be under various price decks applied to the company’s reserves and EBITDAX estimates over the next couple years. Seaport Gordian then reviewed the terms of the proposal again to further analyze possible structural changes that should be considered in order to make the offer more realistic for the Special Committee to evaluate and/or negotiate Lastly, given the relatively short timeline to respond, Seaport Gordian is available and capable of assisting to intermediate in negotiating and documenting terms contained within the common shareholder purchase offer Executive Summary
Ideally, we believe Malone Mitchell would like to have the other preferred equity shareholders co-invest If the preferred shareholder groups successfully purchase the unaffiliated common shares on a pro rata basis, post close, there is no reason to have the preferred or convertibility feature If the other preferred shareholders do not participate with the Mitchell Group, they will have some priority over Mitchell’s pro forma common position Keep in mind, stock dividends disadvantage the unaffiliated shareholders Ownership Overview 3 Seaport Gordian Energy • Ideally, we believe Malone Mitchell would like to have the other preferred equity shareholders co-invest • If the preferred shareholder groups successfully purchase the unaffiliated common shares on a pro rata basis, post close, there is no reason to have the preferred or convertibility feature • If the other preferred shareholders do not participate with the Mitchell Group, they will have some priority over Mitchell’s pro forma common position • Keep in mind, stock dividends disadvantage the unaffiliated shareholders Ownership Overview Scenario I: Various Offer Prices per Share Outflow Inflow Offer $ / Share Mitchell Group Mitchell Group Other Preferred Holders Unaffiliated Holders 0.10 $ (6,234,900) $ 3,095,828 $ 537,072 $ 2,602,000 $ 0.11 $ (6,858,390) $ 3,405,410 $ 590,780 $ 2,862,200 $ 0.12 $ (7,481,880) $ 3,714,993 $ 644,487 $ 3,122,400 $ 0.13 $ (8,105,370) $ 4,024,576 $ 698,194 $ 3,382,600 $ 0.14 $ (8,728,860) $ 4,334,159 $ 751,901 $ 3,642,800 $ 0.15 $ (9,352,350) $ 4,643,742 $ 805,609 $ 3,903,000 $ 0.16 $ (9,975,840) $ 4,953,324 $ 859,316 $ 4,163,200 $ 0.17 $ (10,599,330) $ 5,262,907 $ 913,023 $ 4,423,400 $ 0.18 $ (11,222,820) $ 5,572,490 $ 966,730 $ 4,683,600 $ 0.19 $ (11,846,310) $ 5,882,073 $ 1,020,438 $ 4,943,800 $ 0.20 $ (12,469,800) $ 6,191,655 $ 1,074,145 $ 5,204,000 $ 0.21 $ (13,093,290) $ 6,501,238 $ 1,127,852 $ 5,464,200 $ 0.22 $ (13,716,780) $ 6,810,821 $ 1,181,559 $ 5,724,400 $ 0.23 $ (14,340,270) $ 7,120,404 $ 1,235,267 $ 5,984,600 $ 0.24 $ (14,963,760) $ 7,429,986 $ 1,288,974 $ 6,244,800 $ 0.25 $ (15,587,250) $ 7,739,569 $ 1,342,681 $ 6,505,000 $ Scenario II: Various Offer Prices per Share Outflow Inflow Offer $ / Share Mitchell Group Mitchell Group Other Preferred Holders Unaffiliated Holders 0.10 $ (6,858,390) $ 3,594,620 $ 661,770 $ 2,602,000 $ 0.11 $ (7,544,229) $ 3,954,082 $ 727,947 $ 2,862,200 $ 0.12 $ (8,230,068) $ 4,313,544 $ 794,124 $ 3,122,400 $ 0.13 $ (8,915,907) $ 4,673,006 $ 860,302 $ 3,382,600 $ 0.14 $ (9,601,746) $ 5,032,468 $ 926,479 $ 3,642,800 $ 0.15 $ (10,287,585) $ 5,391,930 $ 992,656 $ 3,903,000 $ 0.16 $ (10,973,424) $ 5,751,392 $ 1,058,833 $ 4,163,200 $ 0.17 $ (11,659,263) $ 6,110,853 $ 1,125,010 $ 4,423,400 $ 0.18 $ (12,345,102) $ 6,470,315 $ 1,191,187 $ 4,683,600 $ 0.19 $ (13,030,941) $ 6,829,777 $ 1,257,364 $ 4,943,800 $ 0.20 $ (13,716,780) $ 7,189,239 $ 1,323,541 $ 5,204,000 $ 0.21 $ (14,402,619) $ 7,548,701 $ 1,389,718 $ 5,464,200 $ 0.22 $ (15,088,458) $ 7,908,163 $ 1,455,895 $ 5,724,400 $ 0.23 $ (15,774,297) $ 8,267,625 $ 1,522,072 $ 5,984,600 $ 0.24 $ (16,460,136) $ 8,627,087 $ 1,588,249 $ 6,244,800 $ 0.25 $ (17,145,975) $ 8,986,549 $ 1,654,426 $ 6,505,000 $ Investor Group Mitchell Group Other Preferred Holders Unaffiliated Holders Shares Common Ownership 30,958,277 5,370,724 26,019,999 Adjusted Common Ownership(1) 35,946,197 6,617,704 26,019,999 Percentage Preferred Ownership 80.0% 20.0% 0.0% Common Ownership 49.7% 8.6% 41.7% Adjusted Common Ownership(1) 52.4% 9.6% 37.9% (1) Adjusted for the impact of a 10% dilutive dividend Scenario I: Stock Purchase Offer Outflow (6,850,000) $ - $ - $ Inflow 3,401,245 $ 590,057 $ 2,858,699 $ Net (3,448,755) $ 590,057 $ 2,858,699 $ Scenario II: Impact of 10% Dilution (Stock Dividend) Outflow (6,850,000) $ - $ - $ Inflow 3,590,222 $ 660,961 $ 2,598,817 $ Net (3,259,778) $ 660,961 $ 2,598,817 $ Scenario III: Quarterly Cash Dividend Inflow 1,106,400 $ 276,600 $ -$
Capital Structure – EBITDA Valuation Current and Projected Total Enterprise Value Various pricing scenarios include hedges At current strip prices, the hedge book has a MTM of -$2.16 MM Forward forecast includes amortization of debt Forecast does not include any adjustments for preferred dividends in common stock – shares outstanding remains flat No cash dividends are contemplated in the analysis 4 Seaport Gordian Energy Current TEV Calculation (12/31/2019 Balance Sheet) YE2020 TEV Calculation (12/31/2020 Balance Sheet) YE2021 TEV Calculation (12/31/2021 Balance Sheet) ($MM except per share values) ($MM except per share values) ($MM except per share values) Stock Price 0.24 Stock Price 0.24 Stock Price 0.24 Shares Outstanding 62.3 Shares Outstanding 62.3 Shares Outstanding 62.3 Market Capitalization 14.7 $ Market Capitalization 14.7 $ Market Capitalization 14.7 $ (+) Total Debt 20.0 (+) Total Debt 2.7 (+) Total Debt - (+) Preferred 46.1 (+) Preferred 46.1 (+) Preferred 46.1 (-) Cash 9.7 (-) Cash 4.0 (-) Cash 3.3 Total Enterprise Value 71.0 $ Total Enterprise Value 59.5 $ Total Enterprise Value 57.5 $ LTM EBITDA 39.3 $ LTM EBITDA 8.1 $ LTM EBITDA 4.9 $ NTM EBITDA 8.1 $ NTM EBITDA 4.9 $ NTM EBITDA 4.8 $ TEV / LTM EBITDA 1.8x TEV / LTM EBITDA 7.3x TEV / LTM EBITDA 11.7x TEV / NTM EBITDA 8.8x TEV / NTM EBITDA 12.1x TEV / NTM EBITDA 12.0x Values Estimated at Average of 5.0x LTM EBITDA and 4.0x NTM EBITDA $35 Oil $35 Oil YE2020 YE2021 Estimated TEV 114.3 $ Estimated TEV 23.6 $ 4.9 $ Market Capitalization 57.9 $ Market Capitalization (21.2) $ (37.9) $ $40 Oil $40 Oil Estimated TEV 114.6 $ Estimated TEV 29.6 $ 17.2 $ Market Capitalization 58.3 $ Market Capitalization (15.2) $ (25.6) $ $45 Oil $45 Oil Estimated TEV 115.0 $ Estimated TEV 35.6 $ 29.6 $ Market Capitalization 58.6 $ Market Capitalization (9.2) $ (13.2) $ $50 Oil $50 Oil Estimated TEV 115.4 $ Estimated TEV 41.5 $ 41.9 $ Market Capitalization 59.0 $ Market Capitalization (3.3) $ (0.9) $ $55 Oil $55 Oil Estimated TEV 115.7 $ Estimated TEV 47.5 $ 54.3 $ Market Capitalization 59.4 $ Market Capitalization 2.7 $ 11.5 $ $60 Oil $60 Oil Estimated TEV 116.1 $ Estimated TEV 53.5 $ 66.6 $ Market Capitalization 59.8 $ Market Capitalization 8.7 $ 23.8 $ Capital Structure – EBITDA Valuation Current and Projected Total Enterprise Value • Various pricing scenarios include hedges • At current strip prices, the hedge book has a MTM of -$2.16 MM • Forward forecast includes amortization of debt • Forecast does not include any adjustments for preferred dividends in common stock – shares outstanding remains flat • No cash dividends are contemplated in the analysis
Capital Structure – PDP PV-10 Valuation Net Asset Value Analysis Forward forecast includes amortization of debt Forecast does not include any adjustments for preferred dividends in common stock – shares outstanding remains flat No cash dividends are contemplated in the analysis 5 Seaport Gordian Energy Current TEV Calculation (12/31/2019 Balance Sheet) YE2020 TEV Calculation (12/31/2020 Balance Sheet) YE2021 TEV Calculation (12/31/2021 Balance Sheet) ($MM except per share values) ($MM except per share values) ($MM except per share values) Stock Price 0.24 Stock Price 0.24 Stock Price 0.24 Shares Outstanding 62.3 Shares Outstanding 62.3 Shares Outstanding 62.3 Market Capitalization 14.7 $ Market Capitalization 14.7 $ Market Capitalization 14.7 $ (+) Total Debt 20.0 (+) Total Debt 2.7 (+) Total Debt - (+) Preferred 46.1 (+) Preferred 46.1 (+) Preferred 46.1 (-) Cash 9.7 (-) Cash 4.0 (-) Cash 3.3 Total Enterprise Value 71.0 $ Total Enterprise Value 59.5 $ Total Enterprise Value 57.5 $ PDP PV-10 at Current Strip 61.0 $ PDP PV-10 at Current Strip 53.9 $ PDP PV-10 at Current Strip 45.3 $ TEV / PDP PV-10 1.2x TEV / PDP PV-10 1.1x TEV / PDP PV-10 1.3x NAV based on PDP PV-10 at Various Flat Prices Below $35 Oil $35 Oil YE2020 YE2021 Estimated TEV 168.5 $ PDP PV-10 32.6 $ 24.9 $ Market Capitalization 112.2 $ NAV (12.2) $ (17.9) $ $40 Oil $40 Oil Estimated TEV 168.9 $ PDP PV-10 42.3 $ 32.7 $ Market Capitalization 112.5 $ NAV (2.5) $ (10.1) $ $45 Oil $45 Oil Estimated TEV 169.2 $ PDP PV-10 52.3 $ 40.7 $ Market Capitalization 112.9 $ NAV 7.5 $ (2.1) $ $50 Oil $50 Oil Estimated TEV 169.6 $ PDP PV-10 62.5 $ 49.0 $ Market Capitalization 113.3 $ NAV 17.7 $ 6.2 $ $55 Oil $55 Oil Estimated TEV 170.0 $ PDP PV-10 72.8 $ 57.4 $ Market Capitalization 113.6 $ NAV 28.0 $ 14.6 $ $60 Oil $60 Oil Estimated TEV 170.4 $ PDP PV-10 83.2 $ 65.8 $ Market Capitalization 114.0 $ NAV 38.4 $ 23.0 $ Capital Structure – PDP PV-10 Valuation Net Asset Value Analysis • Forward forecast includes amortization of debt • Forecast does not include any adjustments for preferred dividends in common stock – shares outstanding remains flat • No cash dividends are contemplated in the analysis
Common Stock Purchase Proposal On April 20, 2020, a group led by Malone Mitchell, representing ~80% of the outstanding Series A Preferred shares of TransAtlantic Petroleum, submitted a letter of intent to create a new entity formed by the Preferred Shareholder Group to acquire 100% of the outstanding common shares of the Company. An offer to the remaining ~20% owners of the Series A Preferred shares has been made to allow them to participate in the acquisition on a pro rata basis and at the same terms Purchase Price: $6,850,000 for 62,349,003 (as of March 20, 2020) shares equating to $0.1098652 per share to be paid in cash and subject to dilution from among other things, the PIK dividends of the Series A Preferred prior to closing Structure of Acquisition: Buyer and Company will structure transaction as a merger Closing Date: No later than October 1, 2020 Conversion: Offer assumes that none of the Series A Preferred shares will be converted into common shares ahead of the purchase and that no Series A Preferred shares will receive any portion of the purchase price Major Concerns Regarding Proposal Per share value of the proposal relative to current market price of common stock Handling of the preferred dividends particularly if they are paid with additional common shares Absolute purchase price that could change materially on a per share basis Timeline to closing and potential market oscillations Proposal Summary Shares Outstanding 62,349,000 Offer Price $6,850,000 Offer per Share $0.109865 Discount to Current Stock Price -54.2%
We need to quantify what this would mean to the unaffiliated common holders. Goal is to shift risk to Malone (buyer). Ideally we would like to get fixed price so dilutive shares don’t matter. Need to run above scenario on that with and without stock dividends. Ideally we would also like to find a mechanism to get the shareholder a bit more squeeze and hopefully a bit more juice On a relative valuation basis, the preferred is ~3x larger than the current market cap of the common, therefore, they have more value at risk than the common holders Negotiating Tools Possible Changes Impact to Mitchell Impact to Other Preferred Impact to Unaffiliated Holders Fixed Price per Share Negative Positive Positive Accumulate Dividends Negative Negative Neutral Abeyance of Dividends until Closing Negative Negative Positive Pay Cash Dividends Positive Positive Negative Formula Based on Brent Pricing Negative Positive Positive Increase Offer Negative Positive Positive Simultaneous Offer for 20% Preferred Holders and 50% Common Negative Positive Positive Convert Preferred at Market or Slight Discount Depends Depends Depends
Updated Engineering Analysis
Reserve Summary – Updated Strip Pricing Reserve Summary Assumptions Strip pricing as of 5/22/2020 (1) Brent strip price as of 5/22/2020 Botas Gas Exchange prices provided by the company Effective as of 05/01/2020 Total: $97MM Asset Development Plan Strip Pricing as of 5/22/2020: $37.48 Oil / $7.25 Gas for 2020; $40.62 Oil / $7.33 Gas for 2021; $43.38 Oil / $7.39 Gas for 2022; $45.93 Oil / $7.44 Gas for 2023; $45.93 Oil / $7.46 Gas for 2024+ Total Proved PV-10 by Top 5 Fields ($MM) Total PV-10 by Rescat ($MM) TransAtlantic Reserve Summary - By Rescat Category Net Oil (MBbl) Net Gas (MMcf) Equivalent (Mboe) % Oil Investment ($MM) PV-10 ($MM) PDP 3,466 451 3,541 98% $1 $61 PDNP 1,220 2,977 1,716 71% $2 $31 PUD 1,583 - 1,583 100% $17 $5 Total Proved 6,268 3,428 6,839 92% $20 $97 PROB 2,124 480 2,204 96% $10 $27 Total 2P 8,392 3,908 9,043 93% $30 $123 POSS 2,855 630 2,960 96% $11 $38 Total 3P 11,247 4,538 12,003 94% $41 $161
Impact of Adjustments on PDP PV-10 PDP PV-10 ($M) Commodity price decreases had the most significant impact on PDP PV-10, followed by production forecast updates
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