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SUMMARY OF THE PROXY STATEMENT

 

This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the business combination and the proposals to be considered at the special meeting, you should read this entire proxy statement carefully, including the annexes. See also the section entitled “Where You Can Find Additional Information.”

 

This proxy statement includes certain terms commonly used in the oil and natural gas industry, which are defined elsewhere in this proxy statement in “Glossary of Oil and Natural Gas Terms” set forth in Annex J.

 

Falcon Minerals Corporation

 

As discussed further herein, Osprey expects to acquire the Royal Entities from Royal and the Contributors pursuant to the business combination. In connection with the closing, we intend to change our name from “Osprey Energy Acquisition Corp.” to “Falcon Minerals Corporation.” Unless context otherwise requires, references in this section to the “Company,” “we,” “our” or “us” are to Osprey Energy Acquisition Corp. as it relates to matters prior to the consummation of the business combination, and are to the combined company of Falcon Minerals Corporation and the Royal Entities acquired in the business combination as it relates to matters following the consummation of the business combination.

 

Business Overview

 

Falcon Minerals Corporation is an oil and gas minerals company that will, following the consummation of the business combination, own and acquire royalty interests, mineral interests, non-participating royalty interests and overriding royalty interests (“Royalties”) in high-growth, top-tier, unconventional, oil-weighted basins in North America. Our primary business objective is to provide strong total shareholder returns through growing our intrinsic value and increasing cash dividends to stockholders over time. We expect our free cash flow to increase as a result of organic development on our properties in what we believe is the “core-of-the-core” Eagle Ford Shale. Also, we intend to grow intrinsic value and free cash flow per share by making accretive acquisitions from third parties while maintaining financial flexibility and a strong balance sheet. We intend to target acquisitions in highly economic basins with oil-weighted producing assets and substantial upside potential from undeveloped resources. We are led by the experienced management team of Osprey in partnership with Blackstone, both of whom have highly successful, multi-year track records of building energy companies organically and through acquisitions.

 

Overview of Royal and the Royal Entities

 

Royal owns Royalties that entitle it to a portion of the production of oil, natural gas and natural gas liquids (“NGLs”) from the underlying acreage at the sales price received by the operator, net of production expenses and taxes. Royal has no obligation to fund finding and development costs or pay capital expenditures associated with either drilling and completions operations or plugging and abandonment spending. Royal also has minimal allocated lease operating expenses. As such, Royal has historically operated with high cash margins, converting a large percentage of revenue to free cash flow, the majority of which can be distributed to its shareholders. Royal has historically paid out substantially all of its free cash flow to its equityholders in the form of cash dividends. Although Royal has made substantial cash dividends in the past, and Osprey plans to continue to pay out substantially all of its free cash flow following the consummation of the business combination, there is no guarantee or requirement that Osprey pay dividends in the future. See the sections titled “Summary of the Proxy Statement—Dividend Policy” and “Risk Factors—Risks Related to Osprey and the Business Combination—We may change our dividend policy at any time and there is no guarantee that we will pay dividends in the future.”

 

As of March 31, 2018, Royal’s assets consisted of Royalties underlying approximately 250,000 gross unit acres (approximately 20,000 net royalty acres normalized to a 1/8 ^th royalty, which assumes eight royalty acres for every mineral acre or a 12.5% royalty interest per net mineral acre) that are concentrated in what we believe is the “core-of-the-core” of the liquids-rich condensate region of the Eagle Ford Shale in Karnes, DeWitt and Gonzales Counties, Texas. In all three of these counties, Royal also has substantial exposure to the Austin Chalk and Upper Eagle Ford formations, which have recently experienced increased horizontal development activity, in addition to the more established and historically developed Lower Eagle Ford formation. We believe that the wells and remaining drilling locations on the properties underlying Royal’s assets are among the most economic in North America, with operator IRRs in excess of 100% at current NYMEX pricing and operator break-even oil prices under $35 per barrel of oil. Further, we believe that the high levels of current and future forecasted development activity are supported by positive oil price differentials (averaging a positive $3.65 per barrel of oil over the past 12 months), which are currently advantaged relative to other onshore oil producing regions including the Midland and Delaware Basins of West Texas. At current NYMEX strip pricing, Royal has approximately 3,000 locations with operator IRRs in excess of 100%. In addition, Royal’s assets include Royalties related to approximately 58,000 gross unit acres in the Appalachian region, including Pennsylvania, West Virginia and Ohio. As of March 31, 2018, Royal’s acreage is extensively delineated by 1,814 producing wells, of which 1,495 are located in Karnes, DeWitt, and Gonzales Counties, providing extensive subsurface data control and substantial confidence on individual well initial production rates, production profiles and estimated ultimate recoveries (“EURs”). The average net daily production attributable to the net royalty interest owned by Royal was 4,764 BOE/d (70% liquids) for the three months ended March 31, 2018.

 

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The Eagle Ford Shale is the second largest oil field in North America and is one of the lowest-cost and most active unconventional shale trends. It has a world-class aerial extent that covers approximately 13 million surface acres and benefits from extensive data control as a result of more than 12,000 producing horizontal wells drilled on the acreage. The Eagle Ford has top-tier single-well economics, is operated by premier oil and gas companies and has access to abundant offtake infrastructure with close proximity to the U.S. Gulf Coast. In recent years, the entire Eagle Ford Shale play has undergone a technical transformation largely driven by the utilization of modern drilling and completion techniques, resulting in improved oil and gas sectional recoveries, enhanced production rates, EURs and well economics and increased activity by operators. Royal’s acreage is located in what we believe is the “core-of-the-core” of the Eagle Ford Shale and is characterized by high oil and liquids content and low finding and development costs as well as positive differentials that drive attractive economics to operators on an absolute basis and relative to other unconventional basins. We believe these factors make the development of Royal’s underlying acreage commercially viable and attractive in lower commodity price environments, and strongly attractive in normal commodity price environments, competing with the lowest-cost shale resources in North America. Over 98% of Royal’s Eagle Ford and Austin Chalk acreage is operated by ConocoPhillips (“ConocoPhillips”), EOG Resources, Inc. (“EOG”), BHP Billiton Petroleum (“BHP”) and Devon Energy Corporation (“Devon”) through a joint venture and Pioneer Natural Resources Company (“Pioneer”).

 

Upon the closing of the business combination, we will retain 100% ownership of the assets owned by the Royal Entities prior to the closing.

 

Our Competitive Strengths

 

We believe that the following strengths will allow us to successfully execute our business strategies:

 

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Highly-economic, multi-year inventory of low-risk drilling locations in what we believe is the “core-of-the-core” liquids-rich condensate fairway of the Eagle Ford Shale. Royal’s concentrated acreage position is located in Karnes, DeWitt and Gonzales Counties, in what we believe is the “core-of-the-core” of the Eagle Ford Shale, one of the most prolific oil and liquids-rich plays in North America. This acreage contains a proven, productive hydrocarbon system across multiple benches that offers ideal rock quality properties and provides exposure to extensive, highly economic and long-lived oil-weighted resources. The resource underlying Royal’s Royalties is characterized by high oil and liquids content and low finding and development costs, supporting attractive operator economics compared to other unconventional basins. According to RS Energy Group, this area has industry-leading well economics with operator IRRs greater than 100% at current NYMEX pricing and operator break-evens under $35 per barrel of oil. Further, Royal’s acreage position is delineated by 1,814 producing wells, of which 1,495 are located in Karnes, DeWitt, and Gonzales Counties, illustrating the extensive subsurface data control underpinning operators’ development plans. We believe these characteristics make the acreage underlying Royal’s Royalties commercially viable, low risk and highly attractive to Royal’s operators in a variety of commodity price environments. At current NYMEX strip pricing, Royal has approximately 3,000 locations with operator IRRs in excess of 100%. We believe this extensive inventory of highly economic undeveloped drilling locations will contribute to strong organic growth on Royal’s acreage.

 

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High-quality operators with active development programs. Over 98% of Royal’s Eagle Ford and Austin Chalk acreage is controlled by large top-tier operators, which include ConocoPhillips, EOG, BHP and Devon through a joint venture and Pioneer. These operators are well-capitalized, among some of the most active in the play and have compelling recent well results. For example, in February 2018, ConocoPhillips brought a 6-well pad (4 Lower Eagle Ford and 2 Upper Eagle Ford wells) onto production on its Hooks Ranch lease. The sixty-day initial production rates of these wells outperformed the type curve of Royal’s independent petroleum engineer Ryder Scott by more than 50%. Royal owns a 22.5% royalty interest on the Hooks Ranch acreage, which spans 2,888 gross acres across eight contiguous drilling units and provides significant growth potential. We believe that the results of this 6-well pad support significant additional investment from ConocoPhillips on the Hooks Ranch lease and that there is substantial drilling inventory remaining since nearly 90% of the drilling locations are undeveloped. We are acquiring the full rights to Royal’s proprietary database, which includes the permit to first production life cycle history of all wells on Royal’s acreage since 2010. We believe that having access to this proprietary data provides visibility into near-term organic growth on Royal’s acreage, and we currently have line-of-sight to 149 wells, implying robust near-term activity. For the year ended December 31, 2017, there were 149 wells spud, 165 wells brought on to production and 230 drilling permits filed on Royal’s acreage. We believe that Royal’s operators will continue to develop this acreage due to the superior overall and relative economics compared to other development opportunities in their portfolios and public statements about their intentions to allocate capital to this region.

 

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Significant number of upside opportunities for Royal’s operators to increase production and reserves. The Eagle Ford is undergoing a technical and commercial renaissance as operators continue to focus on optimizing development of their assets. We believe that numerous upside opportunities exist. Examples of these opportunities include further development of the Upper Eagle Ford and Austin Chalk formations, utilization of modern drilling and completion techniques, continued evolution in well spacing, optimization and refinement of the placement and length of well laterals and opportunities for recompletions and enhanced oil recovery (“EOR”). The Lower Eagle Ford has historically been the primary production target on Royal’s acreage, however, recent Upper Eagle Ford and Austin Chalk wells have delivered similar performance. Austin Chalk wells drilled in Karnes County have demonstrated comparable results to nearby Eagle Ford wells. Based on recent Lower and Upper Eagle Ford results, we believe there is little degradation of well performance due to co-development between these zones. Across the entire play, operators are realizing improved oil and gas recoveries from drilling longer laterals and high initial production rates as a result of completion methods focused on proppant intensity greater than 3,000 pounds per foot and tighter frac stage spacing. Royal’s current proved reserves are attributable only to the Lower Eagle Ford Shale and assume well spacing in-line with publicly disclosed operator plans and industry standards. As such, we believe these spacing assumptions are conservative relative to ongoing industry technical learnings and that the significant in-place resource underlying Royal’s acreage can be further exploited via co-development as indicated by ConocoPhillips. Co-development continues to be a major theme for the operators on the acreage underlying Royal’s Royalties and we believe there is the potential to substantially increase Royal’s Eagle Ford inventory for this type of development over time. We also believe that there is a deep inventory of recompletion opportunities and that EOR could also create significant upside value. EOG has publicly stated plans to convert 90 wells to EOR in 2018 across its entire Eagle Ford position and it expects to increase reserves by 30% to 70% as a result of implementing its EOR program. We believe that the ongoing technical and commercial renaissance in the Eagle Ford has been a catalyst for increased activity levels and that it will to drive incremental production and free cash flow growth.

 

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High margin cash flows with strong, visible free cash flow generation. For the three months ended March 31, 2018, Royal delivered strong free cash flow as a result of its operating model, which includes minimal direct operating costs and no capital expenditures. Over this same time period, Royal’s full cycle cash costs were $6.60 per BOE, a significant discount to that of leading upstream operators. Relative to exploration and production companies, Royal experiences significantly lower sensitivity to commodity price decreases, drilling and completion cost increases and limited legal and environmental liabilities. We believe that the Eagle Ford Shale is one of the most geographically advantaged large-scale oil plays in North America, with well-established midstream infrastructure and proximity to Gulf Coast refineries and export facilities. Recently, the Eagle Ford Shale region has experienced positive basis differentials, unlike the Permian Basin or Appalachia, which have both experienced widening basis differentials due to limited infrastructure capacity and extensive distances from end consumer markets. As of June 1, 2018, the Louisiana Light Sweet (“LLS”) benchmark for crude oil was priced at $74.81 per barrel, representing an approximate $9 per barrel premium to the WTI benchmark. Physical sales of Royal's net production are based on LLS pricing. We believe that Royal’s high margin cost structure coupled with its oil-weighted, high-return assets will provide high conversion of revenue to free cash flow.

 

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Experienced and proven management team. Osprey’s management team has significant energy industry experience, including founding, growing and monetizing public and private oil and gas exploration and production and gathering and transportation companies. Members of Osprey’s management team founded Atlas Energy, Inc. which drilled more wells in southwestern Pennsylvania between 2005 and 2010 than any other company and eventually sold to Chevron for $4.3 billion, generating a total return from the initial public offering of over 930%. Members of Osprey’s management team were also founders of Atlas Pipeline Partners, L.P., overseeing the growth of the company from a $40 million enterprise organization at the company’s IPO to its sale to Targa Resources for $7.7 billion in 2015. Osprey’s management team is responsible for the successful listings and initial public offerings of six energy companies over the last 18 years. Additionally, they have overseen over $23 billion in acquisitions and divestures in the upstream and midstream energy sectors.

 

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Partnership with Blackstone, one of the largest alternative asset managers of private capital in the world. In 2011, Blackstone formed Royal. Blackstone has extensive experience in the Eagle Ford through current and prior investments in Royal, GeoSouthern Energy and Gavilan Resources. Blackstone is one of the largest alternative asset managers in the world, with more than $450 billion in assets under management and is a leading global private equity firm and energy private equity franchise. Over the past decade, Blackstone has built a leading energy private equity investing franchise with an extensive track record of investing in assets and in partnerships with exceptional management teams. As of March 31, 2018, Blackstone had committed approximately $15 billion of equity in energy transactions throughout the energy value-chain on a global basis. Oil and gas companies represent a significant share of Blackstone’s investments in the energy sector with approximately $7 billion committed. Following the closing of the business combination, Blackstone will retain a significant ownership stake in Falcon Minerals, representing approximately 47% of the voting interest in Osprey through its ownership in our Class C common stock and will control a majority of our board, with the ability to appoint six out of eleven directors. We believe that our partnership with Blackstone will provide access to a unique set of value enhancing opportunities and be a competitive advantage relative to our peers.

 

Business Strategies

 

Our primary business objective is to maximize stockholder returns through the execution of the following strategies:

 

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Benefit from reserve, production and cash flow growth from organic development of Royal’s acreage. We are a beneficiary of the continued organic development by operators on the acreage underlying Royal’s Royalties. We believe that the acreage underlying these Royalties is located in the “core-of-the-core” Eagle Ford Shale, is delineated and has attractive operator economics. Operators on Royal’s acreage have publicly announced intentions to focus on multi-year development plans for the Eagle Ford, which we believe will drive growth in our production and free cash flow. For example, ConocoPhillips recently announced its intention to grow its Eagle Ford production by 25% per year through 2020. We believe there is an opportunity for production to grow over time as operators further delineate their Upper Eagle Ford and Austin Chalk positions, increasingly employ modern drilling and completion techniques, and increase overall recovery through recompletions and EOR.

 

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Pursue third party acquisitions that increase intrinsic value, are accretive to free cash flow per share and leverage relationships of Osprey’s management team and Blackstone. We believe that the oil and gas Royalties market is highly fragmented and Osprey’s management team has identified a multitude of privately funded minerals companies that have more than $5.3 billion of committed capital in aggregate. Beyond these initial identified opportunities, we believe that the overall Royalties market is materially larger, as supported by Kimbell Royalty Partners, LP’s total minerals market size estimate of $500 billion in its May 29, 2018 investor presentation. As such, we believe tremendous potential exists for us to be an industry consolidator as a public company with what we believe is “core-of-the-core” Royalties assets that can leverage the acquisition experience of Osprey’s management team and Blackstone. Our disciplined criteria for acquisitions is focused on attractive acquisition multiples and include similar characteristics to Royal’s existing assets, such as high single-well rates of return, exposure to well-capitalized top-tier operators, existing oil-weighted production and the potential for organic production growth. In addition, Osprey’s management team and Blackstone have a broad network of industry relationships that we believe provides us with a competitive advantage in pursuing potential third party acquisition opportunities.

 

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Focus on growing cash dividends and increasing the intrinsic value of our business to provide strong total stockholder returns. We intend to pay out a substantial portion of our free cash flow through cash dividend payments to stockholders, and we also intend to focus on enhancing the intrinsic value of our business. As an owner of Royalties, we are able to convert a high percentage of our revenues to free cash flow because we have no obligation to fund capital expenditures and have minimal allocated lease operating expenses. We believe that our emphasis on owning Royalties with exposure to oil-weighted basins that are operated by well-capitalized and active operators will allow us to grow cash dividends over time as these operators develop their assets. We believe that our high margin, advantaged cost structure combined with our ability to successfully make accretive acquisitions will enhance the intrinsic value of our business over time, grow free cash flow per share and provide strong total stockholder returns.

 

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Maintain a conservative capital structure and financial flexibility and prudently manage our business for the long term. We intend to maintain a conservative capital structure to allow us the financial flexibility to execute our business strategies over the long term, including the ability to pursue strategic acquisitions. We plan to target a debt to EBITDA ratio of less than one and expect that initial leverage post-combination will be approximately 0.5x on forecasted 2018 EBITDA. Following the completion of the business combination, assuming no redemptions, we expect to have approximately $82 million of available liquidity under our $115 million Revolving Credit Facility borrowing base. We believe that this liquidity, together with free cash flow from operations and access to the public debt and equity markets, will provide us with the financial flexibility to execute on strategic acquisitions.

 

Dividend Policy

 

Osprey has not paid any cash dividends on its common stock to date and does not intend to pay cash dividends prior to the completion of the business combination. Following the completion of the business combination, Osprey initially intends to pay out substantially all of the free cash flow of the combined company in the form of a regular quarterly dividend. As of the date hereof, Osprey plans to continue to pay substantially all of its free cash flow as a quarterly dividend for the foreseeable future. While it has no plans to change this policy, Osprey cannot assure you that we will pay dividends at any rate or at all for any specified period following the business combination. There is no guarantee or requirement that Osprey pay dividends in the future. The payment of cash dividends in the future will be dependent upon the combined company’s revenues, earnings and free cash flow, if any, capital requirements and general financial condition following the completion of the business combination. The payment of any cash dividends following the business combination will be within the discretion of the Osprey board at such time. See “Risk Factors—Risks Related to Osprey and the Business Combination—We may change our dividend policy at any time and there is no guarantee that we will pay dividends in the future.” Osprey defines free cash flow as cash flow less capital expenditures.

 

Under the Second A&R Charter and the Osprey Opco LPA, in the event of any dividend or distribution received by Osprey from Opco on account of the common units held by Osprey at any time following the completion of the business combination, the Osprey board is required to declare a dividend or distribution of that amount, net of Osprey’s taxes, to the holders of the Class A common stock. The record date for any such dividend or distribution to the holders of Class A common stock is to be the same or as soon as practicable after, the record date for the corresponding dividend or distribution received by Osprey from Opco. The payment of dividends or distributions by Opco to Osprey following the completion of the business combination (other than certain tax distributions and distributions in the event of a liquidation of Opco) will be within the discretion of the Opco GP at such time, which is a wholly-owned subsidiary of Osprey.

 

Osprey’s organizational documents, including the Second A&R Charter, do not otherwise require the Osprey board or Osprey to make any dividends or distributions to the holders of Class A common stock, other than distributions in the event of a liquidation of Osprey.

 

Summary Historical and Pro Forma Financial and Operating Data of Osprey

 

The following table presents summary historical unaudited financial information of Osprey and summary unaudited pro forma financial information for Osprey after giving effect to the business combination, assuming two redemption scenarios as follows:

 

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No Redemptions : This scenario assumes that no shares of Class A common stock are redeemed from the public stockholders.

 

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Illustrative Redemption : This scenario assumes for illustrative purposes that 8,599,250 shares of Class A common stock are redeemed, resulting in an aggregate payment of approximately $86.5 million from the Trust Account.

 

The unaudited pro forma condensed consolidated combined statement of operations data of Osprey for the three months ended March 31, 2018 combines the historical statement of operations of Osprey and the historical consolidated statement of the contributed operations of Royal, giving effect to the business combination as if it had been consummated on January 1, 2017. The unaudited pro forma condensed consolidated combined balance sheet of Osprey as of March 31, 2018 presents the historical balance sheet of Osprey and the historical condensed consolidated balance sheet of Royal pro forma for removal of certain of Royal LP’s subsidiaries not being contributed in the business combination, giving effect to the business combination as if it had been consummated on March 31, 2018. For more information, please see the sections entitled “Selected Historical Financial Information of Osprey” and “Unaudited Pro Forma Condensed Consolidated Combined Financial Information of Osprey.”

 

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Parties to the Business Combination

 

Osprey Energy Acquisition Corp.

 

Osprey Energy Acquisition Corp. is a Delaware special purpose acquisition company formed on June 13, 2016 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving Osprey and one or more businesses.

 

Osprey’s Class A common stock, warrants and units, consisting of one share of Class A common stock and one-half of one warrant (“units”), are traded on NASDAQ under the ticker symbols “OSPR,” “OSPRW” and “OSPRU,” respectively. Osprey intends to apply to list the Class A common stock and warrants on the New York Stock Exchange (“NYSE”) following the closing. The units will automatically separate into the component securities upon the closing and, as a result, will no longer trade as a separate security.

 

The mailing address of Osprey’s principal executive office is 1845 Walnut Street, 10 ^th Floor, Philadelphia, Pennsylvania 19103.

 

Royal Resources L.P.

 

Royal Resources L.P. is a Delaware limited partnership formed on March 16, 2012 for the purpose of owning and acquiring royalty interests, mineral interests, non-participating royalty interests and overriding royalty interests, or ORRIs, in oil and natural gas properties in North America.

 

The mailing address of Royal’s principal executive office is One Allen Center, 500 Dallas Street, Suite 1250, Houston, Texas 77002.

 

The Business Combination

 

On June 3, 2018, Osprey entered into the Contribution Agreement to acquire from the Contributors all of their partnership interests in the Royal Entities, on the terms and subject to the conditions set forth therein. Pursuant to the Contribution Agreement, Osprey will contribute cash to Osprey Opco, in exchange for (i) a number of common units equal to the number of shares of Class A common stock outstanding as of the closing, and (ii) a number of Osprey Opco warrants exercisable for common units equal to the number of Osprey warrants outstanding as of the closing. Following the closing, Osprey will control Osprey Opco through its ownership of Osprey GP, the sole general partner of Osprey Opco.

 

Pursuant to the Contribution Agreement, at the closing, the Contributors will receive consideration of $800 million plus reimbursement of certain of their transaction expenses. The $800 million consideration will consist of (i) $400 million of cash and (ii) 40 million common units, with each common unit valued at $10.00 per unit. If there is insufficient cash at closing to pay $400 million to the Contributors (as a result of redemptions of Class A common stock or otherwise), then the Contributors will receive less cash and more common units with each additional unit valued at $10.00 per unit. In addition, Royal LP will be entitled to receive earn-out consideration to be paid in the form of common units (with a corresponding number of shares of Class C common stock) if the 30-day VWAP of the Class A common stock equals or exceeds certain hurdles set forth in the Contribution Agreement, as more fully described in “—Impact of the Business Combination on Osprey’s Public Float—Impact of the Earn-out Consideration.”

 

At the closing, Osprey will also issue to the Contributors a number of shares of our Class C common stock, equal to the number of common units issued to such Contributors pursuant to the Contribution Agreement. The Contributors will generally have the right to cause Osprey Opco to redeem all or a portion of their common units in exchange for shares of Class A common stock; provided that Osprey may, at its option, effect a direct exchange of such shares of Class A common stock for such common units in lieu of such a redemption by Osprey Opco. Upon the future redemption or exchange of common units held by a Contributor, a corresponding number of shares of Class C common stock will be cancelled. For more information about the Class C common stock, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Second Amended and Restated Charter.”

 

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For more information about the Contribution Agreement and the business combination and other transactions contemplated thereby, see the section entitled “Proposal No. 1—The Business Combination Proposal.”

 

Conditions to the Closing

 

Under the Contribution Agreement, the respective obligations of each party to consummate the business combination are subject to the satisfaction at or prior to closing of the following: (i) the absence of laws or orders restraining, enjoining, otherwise prohibiting or making illegal the closing; (ii) the expiration of the waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (iii) the representations and warranties of the other party being true and correct, subject to the materiality standards contained in the Contribution Agreement; (iv) material compliance by the other party with its covenants; (v) the approval for listing on the NASDAQ or the NYSE of the shares of Class A common stock issuable in connection with the business combination; (vi) receipt of the required approvals of Osprey’s stockholders in connection with the business combination; (vii) the completion of the offer to holders of Class A common stock to have their shares of Class A common stock redeemed upon the closing in accordance with the terms of the Charter and this proxy statement; and (viii) the delivery of documents and certificates required to be delivered at the closing by the other party under the Contribution Agreement.

 

In addition, the obligations of Royal and the Contributors to consummate the business combination is subject to the cash consideration available to be paid to the Contributors at closing as consideration for the contribution being no less than $355 million, in the aggregate.

 

For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Contribution Agreement—Conditions to Closing of the Business Combination.”

 

Regulatory Matters

 

To complete the business combination, Osprey and the Contributors must obtain approvals or consents from, or make filings with certain U.S. federal authorities. The business combination is subject to the requirements of the HSR Act, which prevents Osprey and the Contributors from completing the business combination until required information and materials are furnished to the Antitrust Division of the Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) and specified waiting period requirements have been satisfied.

 

On June 18, 2018, Osprey and Royal each filed a Premerger Notification and Report Form under the HSR Act. Osprey and Royal received notice of the early termination of the waiting period under the HSR Act on June 26, 2018.

 

For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Regulatory Matters.”

 

Termination Rights

 

The Contribution Agreement contains certain customary termination rights, including, among others, the following: (i) if the closing is not consummated by December 31, 2018 (the “Outside Date”); (ii) upon the parties’ mutual written consent; (iii) if the consummation of the transaction is prohibited by law; (iv) breach of a representation, warranty, covenant or other agreement by a party which would or does result in the failure to fulfill a condition and has not been cured by the earlier of (x) 30 days following written notice from the other party of such breach and (y) the Outside Date; (v) upon a Change in Recommendation by the Osprey board; and (vi) if the required approvals of Osprey’s stockholders in connection with the business combination have not been duly obtained at the Osprey special meeting, after which, following termination of the Contribution Agreement, Osprey will not be permitted to pursue or engage in an alternative business combination, directly or indirectly, with any person engaged primarily in the business owning fee mineral interests and/or royalties.

 

None of the parties to the Contribution Agreement is required to pay a termination fee or reimburse any other party for its expenses as a result of a termination of the Contribution Agreement. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—The Contribution Agreement—Termination.”

 

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Related Agreements

 

Subscription Agreements . In connection with its entry into the Contribution Agreement, Osprey entered into subscription agreements (the “Subscription Agreements”), each dated as of June 3, 2018, with certain qualified institutional buyers and accredited investors (the “Investors”), pursuant to which, among other things, Osprey agreed to issue and sell in a private placement an aggregate of 11,480,000 shares of Class A common stock to the Investors for a purchase price of $10.00 per share, and aggregate consideration of $114,800,000 (the “Private Placement”). The Private Placement is conditioned upon, among other things, the satisfaction or waiver of all conditions precedent to the closing, and is expected to close concurrently with the business combination. The proceeds from the Private Placement will be used to fund a portion of the cash consideration required to effect the business combination.

 

The Subscription Agreements will terminate, and be of no further force and effect, upon the earliest to occur of (i) the termination of the Contribution Agreement in accordance with its terms, (ii) the failure of the parties to satisfy the conditions to closing set forth in the Contribution Agreement, including the receipt of required approvals of the Osprey stockholders in connection with the business combination, (iii) the mutual written agreement of the parties, and (iv) the Outside Date if the closing has not occurred by such date.

 

The shares of Class A common stock to be issued pursuant to the Subscription Agreements have not been registered under the Securities Act, and will be issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Subscription Agreements.” 

 

Lockup Agreement. On June 3, 2018, the Investors in the Private Placement that hold shares of Class A common stock as of the date of the Subscription Agreement, representing approximately 7.5 million shares of Class A common stock purchased in the IPO, each executed a Lockup Agreement pursuant to which they have agreed to refrain from transferring, selling or otherwise disposing of shares of Class A common stock beneficially owned by them as of the date of the Lockup Agreement until the earlier of the closing and the termination of the Contribution Agreement, and to waive their redemption rights with respect to their shares of Class A common stock in connection with the business combination.

 

Voting Agreement . Royal, Osprey Sponsor and certain other persons named therein are party to a voting agreement (the “Voting Agreement”) pursuant to which such parties agreed to, among other things, vote all shares of Osprey it beneficially owns or acquires prior to the closing in favor of the stockholder proposals approving the business combination and the transactions contemplated under the Contribution Agreement. The Voting Agreement also provides that the parties thereto will refrain from disposing, encumbering, redeeming or converting its voting shares of Osprey and refrain from soliciting, negotiating or entering into any agreement with any person relating to a potential business combination involving Osprey. The Voting Agreement terminates upon the earlier of (x) the date of the closing of the transactions and (y) the date on which the Contribution Agreement is terminated. For more information see “Proposal No. 1—The Business Combination Proposal—Related Agreements—Voting Agreement.”

 

Shareholders Agreement. Concurrently with the closing, Osprey, Osprey Sponsor, Royal, the Contributors and Blackstone Management Partners, L.L.C. (“Blackstone”) will enter into a shareholders agreement (the “Shareholders Agreement”) which provides for eleven directors on the Osprey board following the closing, consisting of six directors designated by Royal, two directors designated by Osprey Sponsor and three independent directors mutually selected by Blackstone and Osprey Sponsor.

 

The directors designated by Osprey Sponsor will serve in the class of directors whose term expires on the third annual meeting of Osprey stockholders following the closing. As of the closing, each class of directors will also contain two directors designated by Blackstone, and one independent director mutually selected by Osprey and Royal. The Shareholders Agreement sets forth additional agreements among Osprey, Osprey Sponsor, the Royal Parties and Blackstone regarding the right of Blackstone to designate a certain number of individuals for nomination by the Osprey board to be elected by Osprey’s stockholders at subsequent annual meetings of the Osprey stockholders, based on the percentage of the voting power of the outstanding Class A common stock and Class C common stock beneficially owned by Blackstone and its controlled affiliates, in the aggregate, as described in more detail under “—Related Agreements—Shareholders Agreement.” The Shareholders Agreement will terminate upon the later of (x) the time Blackstone is no longer entitled to designate a director for nomination to the board and (y) following the third annual meeting of stockholders of the Company. For more information, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Shareholders Agreement.”

 

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Registration Rights Agreement. Concurrently with the closing, Osprey and the Contributors will enter into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which Osprey will have certain obligations to register for resale under the Securities Act, all or any portion of the shares of Class A common stock that the holders hold as of the date of such agreement and that they may acquire thereafter, including upon the exchange or redemption of any other security therefor. Additionally, the Registration Rights Agreement provides for customary demand and piggyback rights. For more information about the Registration Rights Agreement, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Registration Rights Agreement.”

 

Second Amended and Restated Charter . Pursuant to the terms of the Contribution Agreement, upon the closing, we will amend and restate our Charter to, among other things, (a) create a new class of capital stock, the Class C common stock, to be issued to the Contributors at the closing, (b) increase the number of authorized shares of our capital stock from 146,000,000 shares to 361,000,000 shares and increase the number of authorized Class A common stock from 125,000,000 shares to 240,000,000 shares, (c) define the duties of certain persons with respect to business opportunities presented to such persons in similar business activities or lines of business as Osprey, (d) adopt Delaware as the exclusive forum for certain stockholder litigation, (e) require the affirmative vote of the holders of at least 75% of the voting power of all outstanding shares of Osprey to amend, repeal or adopt certain provisions of the Charter, (f) opt out of Delaware’s business combination statute, (g) provide for annual meetings of stockholders and prohibit cumulative voting and (h) eliminate certain provisions in the Charter relating to an initial merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (an “initial business combination”) that will no longer be applicable to us following the closing. In addition, we will amend our Charter to change the name of the corporation to “Falcon Minerals Corporation.” For more information about the amendments to our Charter, see the section entitled “Proposal No. 2—The Charter Proposal.”

 

Amended and Restated Limited Partnership Agreement of Opco. Following the closing, Osprey will operate its business through Osprey Opco. At the closing, Osprey, Osprey GP and the Contributors will enter into a second amended and restated agreement of limited partnership of Opco (the “Opco LPA”), which will set forth, among other things, the rights and obligations of the holders of Opco common units. For more information about the Opco LPA, see the section entitled “Proposal No. 1—The Business Combination Proposal—Related Agreements—Amended and Restated Agreement of Limited Partnership of Osprey Opco.”

 

Interests of Certain Persons in the Business Combination

 

In considering the recommendation of our board of directors to vote in favor of the business combination, stockholders should be aware that, aside from their interests as stockholders, Osprey Sponsor and certain of our directors and officers have interests in the business combination that are different from, or in addition to, those of other stockholders generally. Our directors were aware of and considered these interests, among other matters, in evaluating the business combination, and in recommending to stockholders that they approve the business combination. Stockholders should take these interests into account in deciding whether to approve the business combination. These interests include, among other things:

 

●

the fact that Osprey Sponsor holds private placement warrants that would expire worthless if a business combination is not consummated;

 

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●

the fact that Osprey Sponsor and our officers and directors have agreed not to redeem any of the shares of Class A common stock held by them in connection with a stockholder vote to approve the business combination;

 

●

the fact that Osprey Sponsor paid an aggregate of $25,000 for its founder shares and such securities will have a significantly higher value at the time of the business combination, which if unrestricted and freely tradable would be valued at approximately $72,531,250 based on the closing price of our Class A common stock on August 2, 2018;

 

●

if the Trust Account is liquidated, including in the event we are unable to complete an Initial Business Combination within the required time period, Jonathan Z. Cohen has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser amount per public share as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

●

the continuation of Edward E. Cohen, Jonathan Z. Cohen, Brian L. Frank, Steven R. Jones and William D. Anderson as directors of Osprey;

 

●

the fact that Edward E. Cohen, Jonathan Z. Cohen, Jeffrey F. Brotman and Steven R. Jones participated in the Private Placement and executed Subscription Agreements to purchase, in the aggregate, $15,550,000 of Class A common stock at $10.00 per share on the terms set forth in the Subscription Agreements;

  

●

the fact that Osprey Sponsor and our officers and directors may not participate in the formation of, or become a director or officer of, any other blank check company until we have entered into a definitive agreement regarding an Initial Business Combination or fail to complete an Initial Business Combination by July 26, 2019;

 

●

the fact that Osprey Sponsor and our officers and directors will lose their entire investment in us if an Initial Business Combination is not completed;

 

●

the fact that we are a party to a registration rights agreement with Osprey Sponsor which provides for registration rights to such parties;

 

●

the fact that it is currently expected that our executive officers will continue their employment with us following the closing of business combination;

 

●

the fact that none of our directors or executive officers is entitled to compensation that is based on or otherwise relates to the closing; and

 

●

the fact that we will continue to provide indemnification and insurance coverage to our directors and executive officers following the closing of the business combination.

 

Reasons for the Approval of the Business Combination

 

After careful consideration, the Osprey board recommends that Osprey stockholders vote “FOR” each Proposal being submitted to a vote of the Osprey stockholders at the Osprey special meeting.

 

For a description of Osprey’s reasons for the approval of the business combination and the recommendation of the Osprey board, see the section entitled “Proposal No. 1—The Business Combination Proposal—Osprey’s Board of Directors’ Reasons for the Approval of the Business Combination.”

 

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Redemption Rights

 

Under our Charter, holders of our Class A common stock may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the Trust Account as of two (2) business days prior to the closing, including interest (which interest will be net of taxes payable), by (b) the total number of shares of Class A common stock issued in the IPO; provided that Osprey will not redeem any public shares to the extent that such redemption would result in Osprey having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. As of March 31, 2018, this would have amounted to approximately $10.06 per share. Under our Charter, in connection with an Initial Business Combination, a public stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert of as a “group” (as defined under Section 13(d)(3) of the Exchange Act), is restricted from seeking redemption rights with respect to more than 15% of the public shares.

 

If a holder exercises its redemption rights, then such holder will be exchanging its shares of Class A common stock for cash and will no longer own shares of Class A common stock and will not participate in the future growth of Osprey, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Osprey’s transfer agent in accordance with the procedures described herein. See the section entitled “Special Meeting of Osprey Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

 

Impact of the Business Combination on Osprey’s Public Float

 

It is anticipated that, upon the closing, the ownership of Osprey will be as follows:

 

●

the public stockholders will own 27,500,000 shares of our Class A common stock, representing an approximate 60.0% economic interest and an approximate 32.0% voting interest in Osprey;

 

●

the holders of our founder shares, namely Osprey Sponsor, will own 6,875,000 shares of our Class A common stock, representing an approximate 15.0% economic interest and an approximate 8.0% voting interest in Osprey;

 

●

the Investors, which include public stockholders and certain of our directors and officers, will purchase 11,480,000 shares of our Class A common stock, representing an approximate 25.0% economic interest and an approximate 13.4% voting interest in Osprey;

 

●

the Contributors will own 40,000,000 shares of our Class C common stock, representing a 0% economic interest and an approximate 46.6% voting interest in Osprey; and

 

●

Our affiliates, which include Osprey Sponsor and our directors will collectively own an approximate 18.4% economic interest and an approximate 9.8% voting interest in Osprey upon the closing.

 

If the actual facts are different than the assumptions set forth in “Certain Defined Terms,” the economic and voting interests set forth above will be different. For example, if we assume that all outstanding 7,500,000 private placement warrants held by Osprey Sponsor and all of the 13,750,000 public warrants were exercised following the closing, then the ownership of Osprey’s Class A common stock and Class C common stock would be as follows:

 

●

the public stockholders and former holders of the public warrants will own 41,250,000 shares of our Class A common stock, representing an approximate 61.5% economic interest and an approximate 38.5% voting interest in Osprey;

 

●

the holders of our founder shares and the former private placement warrants, namely Osprey Sponsor, will own 14,375,000 shares of our Class A common stock, representing an approximate 21.4% economic interest and an approximate 13.4% voting interest in Osprey;

 

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●

the Investors, which include public stockholders and certain of our directors and officers, will purchase 11,480,000 shares of our Class A common stock, representing an approximate 17.1% economic interest and an approximate 10.7% voting interest in Osprey; and

 

●

the Contributors will own 40,000,000 shares of our Class C common stock, representing a 0% economic interest and an approximate 37.3% voting interest in Osprey.

 

In this scenario, our affiliates, which include Osprey Sponsor and our directors, will collectively own an approximate 23.7% economic interest and an approximate 14.9% voting interest in Osprey upon the closing.

 

The warrants will become exercisable on the later of 30 days after the completion of an Initial Business Combination and 12 months following the closing of the IPO and will expire five years after the completion of an Initial Business Combination or earlier upon their redemption or liquidation.

 

Please see the section entitled “Unaudited Pro Forma Condensed Consolidated Combined Financial Information of Osprey” for further information.

 

Impact of the Earn-out Consideration

 

Pursuant to the Contribution Agreement, Royal LP may be entitled to receive additional common units (and acquire a corresponding number of shares of Class C common stock) as earn-out consideration if the 30-day VWAP of the Class A common stock equals or exceeds specified prices as follows (each such payment, an “earn-out payment”).

 

The Contribution Agreement provides that, if the 30-day VWAP of the Class A common stock is $12.50 or more per share at any time within the seven years following the closing, Royal LP will receive (a) an additional 10 million common units (and an equivalent number of shares of Class C common stock), plus (b) an amount of common units (and an equivalent number of shares of Class C common stock) equal to (x) the amount by which annual cash dividends paid on each share of Class A common stock exceeds $0.50 in each year between the closing and the date the first earn-out is achieved (with any dividends paid in the stub year in which the first earn-out is achieved annualized for purposes of determining what portion of such dividends would have, on an annual basis, exceeded $0.50), multiplied by 10 million, (y) divided by $12.50. Assuming that this earn-out payment is paid and no annual cash dividends exceeded $0.50 prior to payment (including on an annualized basis), all outstanding 7,500,000 private placement warrants held by Osprey Sponsor and all the 13,750,000 public warrants were exercised, and based upon the other assumptions set forth under “Certain Defined Terms,” then the ownership of Osprey’s Class A common stock and Class C common stock would be as follows:

 

●

the public stockholders and former holders of the public warrants will own 41,250,000 shares of our Class A common stock, representing an approximate 61.5% economic interest and an approximate 35.2% voting interest;

 

●

the holders of our founder shares and the former private placement warrants, namely Osprey Sponsor, will own 14,375,000 shares of our Class A common stock, representing an approximate 21.4% economic interest and an approximate 12.3% voting interest;

 

●

the Investors, which include public stockholders and certain of our directors and officers, will purchase 11,480,000 shares of our Class A common stock, representing an approximate 17.1% economic interest and an approximate 9.8% voting interest in Osprey; and

 

●

the Contributors will own 50,000,000 shares of our Class C common stock, representing a 0% economic interest and an approximate 42.7% voting interest.

 

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The Contribution Agreement provides that, if the 30-day VWAP of the Class A common stock is $15.00 or more per share at any time within the seven years following the closing (which $15.00 threshold will be reduced by the amount by which annual cash dividends paid on each share of Class A common stock exceeds $0.50 in each year between the closing and the date the earn-out is achieved, but not below $12.50), Royal LP will receive an additional 10 million common units (and an equivalent number of Class C common stock). Assuming that this earn-out payment is paid, all outstanding 7,500,000 private placement warrants held by Osprey Sponsor and all the 13,750,000 public warrants were exercised, and based upon the other assumptions set forth under “Certain Defined Terms,” then the ownership of Osprey’s Class A common stock and Class C common stock would be as follows:

 

●

the public stockholders and former holders of the public warrants will own 41,250,000 shares of our Class A common stock, representing an approximate 61.5% economic interest and an approximate 32.5% voting interest;

 

●

the holders of our founder shares and the former private placement warrants, namely Osprey Sponsor, will own 14,375,000 shares of our Class A common stock, representing an approximate 21.4% economic interest and an approximate 11.3% voting interest;

 

●

the Investors, which include public stockholders and certain of our directors and officers, will purchase 11,480,000 shares of our Class A common stock, representing an approximate 17.1% economic interest and an approximate 9.0% voting interest in Osprey; and

 

●

the Contributors will own 50,000,000 shares of our Class C common stock, representing a 0% economic interest and an approximate 47.2% voting interest.

 

See the section entitled “Unaudited Pro Forma Condensed Consolidated Combined Financial Information of Osprey” for further information.

 

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Organizational Structure

 

Prior to the Business Combination

 

The following diagram illustrates the ownership structure of Osprey prior to the business combination.

 

 

(1) Includes founder shares held by Osprey Sponsor and certain of our directors and officers.

 

(2) The economic and voting interests set forth above do not account for private placement warrants and public warrants that will remain outstanding following the business combination and may be exercised at a later date.

 

Following the Business Combination

 

The diagram below illustrates the ownership structure of Osprey immediately following the business combination. The voting and economic interests assume the following:

 

●

at closing, Osprey has sufficient cash at closing to pay $400 million cash consideration to the Contributors and, accordingly, the Contributors receive 40 million common units and 40 million shares of Class C common stock in the aggregate;

 

●

no public stockholders elect to have their public shares redeemed;

 

●

the transactions contemplated by each of the Subscription Agreements is consummated concurrently with the closing and the Investors purchase 11,480,000 shares of Class A common stock, in the aggregate;

 

●

none of Osprey’s existing stockholders or the parties to the Contribution Agreement or Subscription Agreements, who will become stockholders of Osprey at the closing, purchase shares of Class A common stock in the open market; and

 

●

there are no other issuances of equity interests of Osprey or its subsidiaries prior to or in connection with the closing.

 

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	(1)	Includes founder shares held by Osprey Sponsor and certain of our directors and officers.
	(2)	Includes public stockholders and certain of our directors and officers participating in the Private Placement.
	(3)	The economic and voting interests set forth above do not account for private placement warrants and public warrants that will remain outstanding following the business combination and may be exercised at a later date.

 

Board of Directors of Osprey Following the Business Combination

 

Upon the closing, we anticipate expanding the size of our board of directors from five directors to 11. The initial 11 directors following the closing will consist of: (a) six directors to be designated by Royal prior to the closing, (b) two directors to be designated by Osprey Sponsor prior to the closing and (c) three independent directors to be mutually selected by Osprey Sponsor and Royal prior to the closing. The directors designated by Osprey Sponsor will serve in the class of directors whose term expires on the third annual meeting of Osprey stockholders following the closing. The Shareholders Agreement sets forth additional agreements among Osprey, Osprey Sponsor, the Royal Parties and Blackstone regarding the right of Blackstone to designate a certain number of individuals for nomination by the Osprey board to be elected by Osprey’s stockholders at subsequent annual meetings of the Osprey stockholders, based on the percentage of the voting power of the outstanding Class A common stock and Class C common stock beneficially owned by Blackstone and its controlled affiliates, in the aggregate, as described in more detail under “—Related Agreements—Shareholders Agreement.”

 

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Accounting Treatment

 

The business combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Osprey will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Royal being the largest single individual or group of owners, Royal having the largest minority voting interest, Royal operations comprising the ongoing operations of the combined entity, and Royal comprising a majority of the governing body of the combined entity. Accordingly, for accounting purposes, the acquisition will be treated as the equivalent of Royal issuing stock for the net assets of Osprey, accompanied by a recapitalization. The net assets of Osprey will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the acquisition will be those of Royal.

 

Appraisal Rights

 

Appraisal rights are not available to Osprey stockholders in connection with the business combination.

 

Litigation Relating to the Business Combination

 

On July 27, 2018, a purported Osprey stockholder filed a class action lawsuit in the Court of Common Pleas, Philadelphia, Pennsylvania, against Osprey and the members of the Osprey board, captioned Tomasulo v. Cohen , et al., No. 180703224.  The complaint alleges, among other things, that the Osprey board breached fiduciary duties in connection with the entry into the Contribution Agreement, and by causing Osprey to make allegedly materially inadequate disclosures and material omissions in the preliminary proxy statement initially filed with the SEC on June 14, 2018 in connection with the business combination.  The Company believes that the action is without merit.

 

Other Proposals

 

In addition to the Business Combination Proposal, Osprey stockholders will be asked to vote on the Charter Proposal, the NASDAQ Proposal, the LTIP Proposal and the Adjournment Proposal. For more information about the Charter Proposal, the NASDAQ Proposal, the LTIP Proposal and the Adjournment Proposal see the sections entitled “Proposal No. 2—The Charter Proposal,” “Proposal No. 3—The NASDAQ Proposal,” “Proposal No. 4—The LTIP Proposal” and “Proposal No.5—The Adjournment Proposal.”

 

Date, Time and Place of Special Meeting

 

The special meeting will be held at 3:00 p.m., local time, on August 20, 2018, at the Sofitel Hotel at 120 South 17th Street, Philadelphia, Pennsylvania 19103 or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

 

Voting Power; Record Date

 

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of Class A common stock or Class B common stock at the close of business on August 1, 2018, which is the record date for the special meeting. You are entitled to one vote for each share of Class A common stock or Class B common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. As of August 1, 2018, there were 34,375,000 shares of Class A common stock and Class B common stock outstanding in the aggregate, of which 27,500,000 are public shares and 6,875,000 are founder shares held by Osprey Sponsor.

 

Proxy Solicitation

 

Proxies may be solicited by mail. Osprey has engaged Morrow Sodali LLC to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the special meeting. A stockholder may also change its vote by submitting a later-dated proxy as described in the section entitled “Special Meeting of Osprey Stockholders—Revoking Your Proxy.”

 

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Quorum and Required Vote for Proposals for the Special Meeting

 

A quorum of Osprey stockholders is necessary to hold a valid meeting. Holders of a majority in voting power of Class A common stock and Class B common stock issued and outstanding and entitled to vote at the special meeting, present in person or represented by proxy, constitute a quorum. Abstentions will count as present for the purposes of establishing a quorum.

 

The approval of the Business Combination Proposal, the NASDAQ Proposal, the LTIP Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of Class A common stock and Class B common stock represented in person or by proxy and entitled to vote thereon and actually cast at the special meeting, voting as a single class. Approval of the Charter Proposal requires the affirmative vote of the holders of a majority of the shares of Class A common stock and Class B common stock represented in person or by proxy and entitled to vote thereon at the special meeting, voting as a single class. Accordingly, if a valid quorum is otherwise established, a stockholder’s failure to vote by proxy or to vote in person at the special meeting will have no effect on the outcome of any vote on the Business Combination Proposal, NASDAQ Proposal, the LTIP Proposal or the Adjournment Proposal, but will have the same effect as a vote AGAINST the Charter Proposal.

 

Recommendation to Osprey Stockholders

 

Our board of directors believes that each of the Business Combination Proposal, the Charter Proposal, the NASDAQ Proposal, the LTIP Proposal and the Adjournment Proposal is in the best interests of Osprey and its stockholders and recommends that its stockholders vote “FOR” each of the Proposals to be presented at the special meeting.

 

When you consider the recommendation of the board of directors in favor of approval of these Proposals, you should keep in mind that Osprey Sponsor, members of the board of directors and officers have interests in the business combination that are different from or in addition to (and which may conflict with) your interests as a stockholder. See the section entitled “Proposal No. 1—The Business Combination Proposal—Interests of Certain Persons in the Business Combination.”

 

Risk Factors

 

In evaluating the proposals set forth in this proxy statement, you should carefully read this proxy statement, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.”

 

Summary Historical Reserve and Operating Data of Royal and the Royal Entities

 

The following tables present, for the periods and as of the dates indicated, summary data with respect to the estimated net proved reserves for Royal and summary operating data for Royal.

 

The reserve estimates attributable to Royal’s properties on a consolidated historical basis as of December 31, 2017 presented in the table below are based on reserve reports prepared by Ryder Scott Company, L.P. (“Ryder Scott”) and Netherland, Sewell & Associates, Inc. (“NSAI”), Royal’s independent petroleum engineers, and represent 100% of the total net proved liquid hydrocarbon reserves and 100% of the total net proved gas reserves of Royal in the Eagle Ford Shale, Marcellus Shale, Point Pleasant, and Bakken formations as of December 31, 2017. The reserve estimates attributable to Royal’s properties on a pro forma basis as of December 31, 2017 presented in the table below are based on reserve reports prepared by Ryder Scott and were calculated by specifically identifying and removing the impact of any properties of Royal that are not being contributed pursuant to the Contribution Agreement. As a result the pro forma reserve presentation below represents only the reserves of the contributed Royal assets. A copy of the reserve reports are attached to this proxy statement as Annex I . All of these reserve estimates were prepared in accordance with the SEC’s rules regarding oil and natural gas reserve reporting that are currently in effect. The following tables also contain summary unaudited information regarding production and sales of oil, natural gas and natural gas liquids with respect to such properties.

 

35

 

See the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Royal” and “Business of Royal—Oil and Natural Gas Data” in evaluating the material presented below.

		Royal Historical as of December 31, 2017				Pro Forma Contributed Royal Entities as of December 31, 2017
Estimated proved developed reserves:
Oil (MBbls)			6,301				4,343
Natural gas (MMcf)			20,715				17,410
Natural gas liquids (MBbls)			1,793				1,285
Total (MBOE)			11,547				8,530
Estimated proved undeveloped reserves:
Oil (MBbls)			13,142				11,571
Natural gas (MMcf)			39,037				35,152
Natural gas liquids (MBbls)			2,650				2,057
Total (MBOE)			22,298				19,487
Estimated Net Proved Reserves:
Oil (MBbls)			19,443				15,914
Natural gas (MMcf)			59,752				52,562
Natural gas liquids (MBbls)			4,443				3,342
Total (MBOE)(l)			33,845				28,016
Percent proved developed			34.12	%			30.44	%
PV-10 of proved reserves (in millions)(2)		$	615.2			$	521.1

(1)

Estimates of reserves as of December 31, 2017 were prepared using an average price equal to the unweighted arithmetic average of hydrocarbon prices received on a field-by-field basis on the first day of each month within the year ended December 31, 2017 in accordance with SEC rules and regulations applicable to reserve estimates as of the end of such period. The unweighted arithmetic average first day of the month prices were $51.34 per Bbl for oil and $2.98 per MMBtu for natural gas at December 31, 2017. The price per Bbl for natural gas liquids was modeled as a percentage of oil price, which was derived from historical accounting data. Reserve estimates do not include any value for probable or possible reserves that may exist, nor do they include any value for undeveloped acreage. The reserve estimates represent Royal’s ORRI share in its properties. Although Royal believes these estimates are reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves may vary substantially from these estimates.

(2)

In this proxy statement, Royal has disclosed its PV-10 based on its reserve report. PV-10 represents the period end present value of estimated future cash inflows from Royal’s natural gas and crude oil reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using SEC pricing requirements in effect at the end of the period. Because of this, PV-10 can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis. PV-10 differs from standardized measure because it does not include the effects of income taxes. However, because Royal is a limited partnership, it is generally not subject to federal income taxes and thus historically its PV-10 for proved reserves and standardized measure are equivalent. Neither PV-10 nor standardized measure represents an estimate of fair market value of Royal’s natural gas and oil properties. Royal and others in the industry use PV-10 as a measure to compare the relative size and value of estimated reserves held by companies without regard to the specific tax characteristics of such entities.

		Pro Forma Contributed Royal Entities								Royal Historical
		Three Months Ended March 31,				Year Ended December 31,				Three Months Ended March 31,				Year Ended December 31,
		2018				2017				2018				2017				2016				2015
Production Data:
Eagle Ford Shale:
Oil (Bbls)			238,495				885,681				251,749				1,402,729				1,397,556				1,876,487
Natural gas (Mcf)			468,898				1,761,343				507,052				3,083,099				2,936,394				4,201,152
Natural gas liquids (Bbls)			57,190				269,953				62,307				493,334				476,780				621,222
Combined volumes (BOE)			373,835				1,449,191				398,565				2,409,913				2,363,735				3,197,901
Daily combined volumes (BOE/d)			4,154				3,970				4,429				6,603				6,476				8,761
Total:
Oil (Bbls)			239,351				892,893				290,811				1,582,322				1,474,218				1,919,959
Natural gas (Mcf)			759,783				3,124,338				828,148				4,565,892				4,143,679				5,357,859
Natural gas liquids (Bbls)			62,811				301,553				72,011				542,706				511,337				650,599
Combined volumes (BOE)			428,793				1,715,169				500,847				2,886,010				2,676,168				3,463,530
Daily combined volumes (BOE/d)			4,764				4,699				5,565				7,907				7,332				9,489
Average Realized Prices:
Oil (per Bbl)		$	65.05			$	50.96			$	64.67			$	50.10			$	39.91			$	46.12
Natural gas (per Mcf)		$	2.87			$	2.70			$	2.92			$	2.81			$	2.19			$	2.33
Natural gas liquids (per Bbl)		$	23.49			$	20.99			$	23.53			$	20.63			$	12.04			$	13.07
Weighted average combined (per BOE)		$	44.59			$	34.98			$	45.43			$	35.67			$	27.69			$	31.19

36

 

 

SELECTED HISTORICAL FINANCIAL INFORMATION OF OSPREY

 

The following table shows selected historical financial information of Osprey for the periods and as of the dates indicated. The selected historical financial information of Osprey as of December 31, 2017 and for the year ended December 31, 2017 was derived from the audited historical financial statements of Royal included elsewhere in this proxy statement. The selected historical interim financial information of Royal as of March 31, 2018 and for the three months ended March 31, 2018 was derived from the unaudited interim financial statements of Royal included elsewhere in this proxy statement. The following table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Osprey” and our historical financial statements and the notes and schedules related thereto, included elsewhere in this proxy statement.

 

		Three Months Ended March 31, 2018				Year Ended December 31, 2017
		(unaudited)
Statement of Operations Data:
Operating costs		$	(174,900	)		$	(378,454	)
Other income			840,097				1,270,380
Provision for income taxes			(207,154	)			(369,512	)
Net income		$	458,043			$	522,414
Weighted average number of common shares outstanding:
Basic and diluted			8,234,246				7,069,719
Net income (loss) per common share—basic and diluted		$	0.01			$	(0.08	)

 

		As of March 31, 2018				As of December 31, 2017
		(unaudited)
Balance Sheet Data:
Total assets		$	277,922,692			$	277,358,427
Total liabilities		$	10,064,986			$	9,958,764
Value of common stock that may be redeemed in connection with an Initial Business Combination		$	262,857,703			$	262,399,662
Total Stockholders’ equity		$	5,000,003			$	5,000,001

 

37

 

 

SELECTED HISTORICAL FINANCIAL INFORMATION OF ROYAL

 

The following table shows selected historical financial information of Royal for the periods and as of the dates indicated. The selected historical consolidated financial information of Royal as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 was derived from the audited historical consolidated financial statements of Royal included elsewhere in this proxy statement. The selected historical interim condensed consolidated financial information of Royal as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 was derived from the unaudited interim condensed consolidated financial statements of Royal included elsewhere in this proxy statement. The summary unaudited pro forma financial data as of March 31, 2018 and for the year and three months ended December 31, 2017 and March 31, 2018, respectively, has been prepared to present the Royal entities being contributed in the transaction described in this proxy statement. Please see the section entitled “Unaudited Pro Forma Condensed Consolidated Combined Financial Information of Osprey.”

 

Royal’s historical results are not necessarily indicative of future operating results. In addition, the selected historical financial information below includes the results of operations from certain assets, which Osprey will not acquire in the business combination. The selected consolidated and combined financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Royal,” as well as the historical consolidated and combined financial statements of Royal and accompanying notes included elsewhere in this proxy statement.

 

		Royal Historical								Pro Forma Royal Contributed Entities				Royal Historical												Pro Forma Royal Contributed Entities
		Three Months Ended March 31,								Year Ended December 31,				Year Ended December 31,												Three Months Ended March 31,
		2018				2017				2017				2017				2016				2015				2018
		(in thousands)
Operating Results:
Revenues:
Oil and Gas Sales		$	22,838			$	29,420			$	61,365			$	104,321			$	73,579			$	108,018			$	19,205
Realized gain on hedging activities			3				30				391				751				197				-				3
Unrealized gain (loss) on hedging activities			(94	)			1,175				541				1,040				(1,040	)			-				(94	)
Total Revenues			22,747				30,625				62,296				106,112				72,736				108,018				19,114
Costs and Expenses:
Production and ad valorem taxes			1,238				1,663				3,266				5,980				4,768				6,527				993
Lease operating expense			186				111				-				674				440				273				-
Marketing and transportation			631				2,108				3,127				6,926				6,747				7,946				436
Amortization of royalty and working interests in oil and natural gas properties			4,795				11,175				17,896				37,085				37,255				46,533				4,068
General, administrative and other			2,619				1,675				6,018				8,450				6,309				12,175				1,401
Total costs and expenses			9,469				16,732				30,308				59,115				55,529				73,454				6,898
Other Income and (Expense):
Gain on sale of assets			41,274				-				-				31,441				-				-				-
Other income			-				1				60				34				823				436				-
Interest expense			(638	)			(654	)			(1,445	)			(2,799	)			(3,250	)			(5,462	)			(623	)
Total other income (expense):			40,636				(653	)			(1,385	)			28,676				(2,427	)			(5,026	)			(623	)
Net Income:			53,914				13,240				30,604				75,673				14,780				29,538				11,592
Net income attributable to non-controlling interest			(48	)			(33	)			(134	)			(155	)			(69	)			(97	)			(41	)
Net Income attributable to Royal Resources L.P.		$	53,866			$	13,207			$	30,470			$	75,518			$	14,711			$	29,441			$	11,551
Balance Sheet Data:
Cash and cash equivalents		$	14,894											$	10,497			$	8,048							$	6,132
Total assets		$	272,921											$	352,483			$	435,897							$	240,159
Total debt		$	31,051											$	57,923			$	58,794							$	29,888
Total liabilities and owners’ equity		$	272,921											$	352,483			$	435,897							$	240,159