The purchase agreement is expected to be signed in the near future and the aforementioned purchase is subject to a due diligence review of the Assets by the Corporation, in addition to regulatory, stock exchange and any necessary shareholder approvals. It is anticipated that the closing of the acquisition will occur sometime in the month of June.
The Assets consist of approximately 13,600 gross acres (8,375 net) of land and stable production of approximately 150 (net) barrels of light sweet oil (38 degree API) per day. The Assets are currently under an Alberta Energy Regulator (AER) approved enhanced oil recovery scheme "waterflood" and has no horizontal development to date.
The Corporation would be acquiring a 54% operated working interest in the Assets through the purchase. The Corporation plans on undertaking low risk infill development drilling utilizing horizontal drilling and multi-stage hydraulic fracturing to complete wells on the property along with optimizing the existing waterflood scheme.
The property has existing pipelined oil and water injection facilities in place to handle future infill development drilling. A major Canadian independent reserves evaluator has assigned significant reserves and net present value to the assets, the details of which will be provided in a further news release.
The purchase price for the Assets is $15.5 million , prior to adjustments. The Corporation intends to raise financing to pay for the purchase price of the Assets through a combination of debt and equity in an amount expected to be approximately $21 million , such that there will be a sufficient amount of working capital to drill new infill horizontal wells on the property and tie in any resulting production.
The Corporation has agreed to pay a finders’ fee to a company and three individuals in connection with the asset purchase described herein, such amounts to be paid in cash and/or shares of the Corporation, subject to any applicable limitations of the TSX Venture Exchange. The anticipated finders’ fee is to be paid on the total purchase price of the Assets and will be 3.5% of such amount, expected to be paid in common shares in the capital of the Corporation at a deemed price of $0.05 per share, and may include other considerations.
Following the completion of the purchase of the Assets and the financing described herein, the Corporation anticipates completing a consolidation of its issued and outstanding common shares on the basis of one (1) post-consolidation share for every three (3) pre-consolidation shares. Approval of the share consolidation will require a vote by the shareholders of the Corporation, the details of which will be provided in an information circular in connection with a future meeting of the shareholders.
