NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES
Iteration Energy Ltd. ("Iteration") (TSX:ITX) and Storm Ventures International
Inc. ("SVI"), a private Alberta-based oil and gas exploration and production
company, are pleased to announce that they have entered into a definitive
arrangement agreement (the "Arrangement Agreement") pursuant to which Iteration
and SVI have agreed to complete a strategic business combination pursuant to a
statutory plan of arrangement (the "Arrangement"). The combination will create a
new, growth oriented company named Chinook Energy Inc. ("Chinook") with current
production in excess of 20,000 boe/d and a deep inventory of repeatable drilling
opportunities in both Western Canada and Tunisia.
Chinook will be led by SVI's current executive team, with Matthew Brister as
President and Chief Executive Officer. The SVI management team has demonstrated
a successful track record of corporate and project initiation, growth and value
creation in Western Canada over the last 25 years. Staff and management of
Chinook is expected to be comprised of current employees of SVI and Iteration.
Transaction Consideration
Under the terms of the Arrangement, Iteration shareholders may elect to receive:
(a) $1.83 cash for each Iteration share held, subject to a minimum aggregate
cash payment of $50 million and a maximum aggregate cash payment of $225
million, or
(b) 0.5631 of a common share of SVI for each Iteration share held, subject to
pro ration, if required, based on cash elections described above; or
(c) any combination of the foregoing, subject to the cash restrictions set out
above.
If the maximum cash is elected, Iteration shareholders will receive
approximately $1.05 of cash and 0.2400 of a common share of SVI for each
Iteration share held. If the minimum cash is elected, Iteration shareholders
will receive approximately $0.23 of cash and 0.4923 of a SVI share for each
Iteration share held. The Arrangement contemplates a $3.25 per share value for
SVI.
Based on $1.83 per Iteration share, the consideration received by Iteration
shareholders represents an 18% premium to Iteration's 30-day weighted average
trading price on the Toronto Stock Exchange and an 8% premium to the closing
trading price on April 30, 2010.
Matthew Brister, President and Chief Executive Officer of SVI, commented, "We
are very pleased to be able to expand our Western Canadian operations through
the integration of Iteration into our business. The Iteration assets, along with
our existing West Central Alberta properties have high quality gas resource play
opportunities in the Montney, Nikanassin and Notikewin with scale to support
growth from our initial 20,700 boe/d production base for several years. The
application of new technologies in these plays is quickly becoming proven in the
areas we operate and their exploitation on Iteration's lands have been hampered
by capital availability and more recently, gas prices. In addition, I am very
confident that our Tunisia light oil assets will add a material growth component
to Chinook."
Brian Illing, President and Chief Executive Officer of Iteration, added, "We are
pleased that Iteration's comprehensive strategic review has produced a very
positive outcome in the form of the transaction with SVI. Chinook will have an
attractive asset base in Western Canada and high impact exploration upside in
Tunisia. With strong leadership, a highly-skilled combination of executives and
staff, and substantial access to capital with solid institutional investor
support, Chinook is an exciting opportunity for our shareholders".
Transaction Financing and Institutional Sponsorship
SVI has entered into a $75 million fully committed subscription receipt
financing with a group of its existing investors, led by Alberta Investment
Management Corporation, on behalf of certain of its clients ("AIMCo"), at a
price of $3.25 per share.
SVI also intends to raise a minimum of $50 million by way of a marketed
subscription receipt private placement through a syndicate co-led by TD
Securities Inc. and FirstEnergy Capital Corp. AIMCo has agreed to subscribe for
$11.5 million of this offering and fully backstop the remaining $38.5 million,
if required. Each subscription receipt will be converted, for no additional cost
or action by the holder, into one common share of Chinook in accordance with the
Arrangement. If the full net proceeds from the subscription receipt financings
exceed the amount required to satisfy cash elections by Iteration shareholders
pursuant to the Arrangement, the remaining net proceeds are expected be used for
debt reduction and general corporate purposes. SVI plans to market this offering
to investors in North America and Europe and it is expected that the offering
will be priced in mid-May.
Lastly, SVI has entered into a fully committed bridge financing with AIMCo for
up to $125 million to fund the balance of the cash requirements of the
Arrangement, if any, to the extent that cash elections by Iteration shareholders
exceed the net proceeds from the subscription receipt financings. At its option,
Chinook may reduce the amounts outstanding under the bridge facility by way of
asset sales to AIMCo at prevailing market metrics.
"We are very appreciative of AIMCo's support of SVI as a private company and the
confidence they have shown in this transaction", said Matthew Brister. "We view
AIMCo as a long-term partner and a catalyst to expanding our institutional and
long-term investor base." AIMCo currently owns approximately 36% of SVI's shares
and pro-forma the Arrangement is expected to own between 22% and 26% of
Chinook's shares.
Key Attributes of Chinook (before any potential dispositions):
Chinook will combine high quality gas-weighted assets in Western Canada with an
exciting high growth oil business in North Africa which includes high impact
exploration, field development opportunities and production in Tunisia. Chinook
will have an extensive inventory of drilling and field development opportunities
in both Western Canada and North Africa with more than 775,000 net undeveloped
acres in Canada and more than 1.4 million net acres in Tunisia. Chinook will
also have the following key attributes:
- Initial total company production of approximately 20,700 boe/d consisting of
19,900 boe/d in Canada (30% liquids) and 800 bbl/d of light oil in Tunisia.
- Chinook's business plan will be to target a minimum 10% annual growth in the
assets and production levels in Canada initially relying on the footprint and
scale of the existing opportunities and asset base as a competitive edge.
- Chinook's international business will target 25% plus annual growth and will
initially be focused on oil assets in Tunisia. SVI currently expects the
Tunisian business to be self-funding within 18 months.
- Given the good visibility to activity and potential for meaningful production
growth management's initial production forecast for 2011 is 23,500 boe/d.
- 83.4 mmboe of National Instrument 51-101 ("NI 51-101") Proved plus Probable
reserves (83% in Canada) with significant future reserve growth potential
identified through increased recoveries, field extensions and
exploration.(1)(2)(3)(4)
- Proved plus Probable reserve life index of approximately 10 years.
- Canadian tax pools in excess of $715 million.
Notes:
(1) Before any potential dispositions.
(2) Iteration reserves evaluated as at December 31, 2009 by GLJ Petroleum
Consultants Ltd. and McDaniel & Associates Consultants Ltd. in accordance with
NI 51-101.
(3) SVI reserves evaluated as at December 31, 2009 by Paddock Lindstrom &
Associates Ltd. and Sproule International Limited in accordance with NI 51-101.
(4) Includes pro-forma interim period asset acquisition by SVI. Reserves for
acquired assets evaluated as at December 31, 2009 by McDaniel & Associates
Consultants Ltd. in accordance with NI 51-101.
Upon completion of the Arrangement, management anticipates that it will have the
following domestic and international opportunities:
2010 Focus on Western Canadian Oil Opportunities
- An initial focus on waterflood performance at Manyberries (Sunburst) and
Spirit River/Grovedale (Doe Creek) and follow-up to a potentially prolific Doig
oil discovery in northeast British Columbia.
- Evaluation and exploitation of the Cardium land position in west central Alberta.
- An active 2011 winter program in the Keg River at Rainbow Lake.
Big Play Light Oil Exposure in Tunisia
- Q2 2010 exploration activity including the drilling of a 4,400 metre
Ordovician test at Jenein, Tunisia (65% working interest) and operatorship of a
2,900 metre offshore well at Fushia, Tunisia (35% working interest) in 90 metres
of water.
- Plan of Development approval and appraisal of the onshore oil discovery on the
Remada Sud permit (85% working interest) onshore in the Ghadames Basin.
- In excess of 15 drillable exploratory prospects and three undeveloped
discoveries on 7 blocks.
Priority Development of Gas Resource Opportunities
- Confirm the extent of high quality resource opportunities in the Montney at
Knopcik, Gordondale and Monias.
- Prove up the potential of the large scale exposure to resource opportunities
to the Nikanassin and Notikewin at Gold Creek, Knopcik, Gilby and Brazeau.
- Maintain a development bias towards projects with liquid yield in excess of 25
bbls/mmcf.
Financial Capacity
Prior to closing, SVI expects to finalize an approximate $300 million borrowing
base facility for Chinook, currently being arranged by Societe Generale Canada
Branch and TD Securities, with an expected draw of between $190 - $225 million
dependent upon cash elections made by the Iteration shareholders.
Chinook Management Team
Upon completion of the Arrangement, the executive management team and initial
directors of Chinook will be led by the current SVI management team. Many of the
key individuals have worked together successfully in previous public companies
focused in Western Canada and internationally.
Matthew Brister P. Geol., President and Chief Executive Officer
Mr. Brister has served as President and CEO of Pinnacle Resources, Storm Energy
Ltd. and Storm Energy Inc.
L. Geoffrey Barlow CA, Vice President, Finance and Chief Financial Officer
Prior to joining SVI in November 2007, Mr. Barlow most recently served as Vice
President and Chief Financial Officer of Husky Energy and held senior management
positions at Renaissance Energy before its sale to Husky.
P. Grant Wierzba P Eng. Vice President, Operations
Mr. Wierzba will continue in the senior operations management role of the
Canadian business. Grant's experience includes senior officer positions with
Renaissance Energy, Pinnacle Resources, Storm Energy Inc. and Storm Energy Ltd.
Roy Smitshoek P Eng., Chief Operating Officer SVI, Tunisia
Mr. Smitshoek will continue in the senior operational management role of the
International business. His experience includes senior officer positions with
Renaissance Energy and Moneta.
Walter Vrataric, Vice President Business Development and Land
Mr. Vrataric will have business development and contract responsibilities in
both the domestic and international business units and brings experience from
his time at One Exploration, Rock Creek, Advantage Energy Trust and Search
Energy.
Tim Halpen P Eng. Vice President, Exploitation
Mr Halpen has 13 years experience and has responsibilities for the reservoir
engineering and acquisition and divestiture role in Chinook. His previous
experience includes positions with Cometra Energy, Vintage Petroleum and
Wilderness Energy Corp.
Tom Lindskog P Geol, Vice President, Exploration
Mr. Lindskog is a registered Professional Geologist with 29 years experience in
Western Canada, the United Kingdom continental shelf and North Africa. Mr.
Lindskog's experience includes senior officer positions with Pinnacle Resources,
Storm Energy Ltd. and Storm Energy Inc.
Chinook Board of Directors
Matthew Brister - President and CEO of SVI
John A. Brussa - Partner of Burnet, Duckworth & Palmer LLP
Stuart G. Clark - Independent Businessman
Robert Cook - Senior Vice President of ARC Financial Corp.
Simon Munro - Managing Director of Lime Rock Partners
P. Grant Wierzba - Vice President, Operations and Director of SVI
Donald Archibald - Chairman of Iteration
The Arrangement
The Arrangement is subject to customary TSX, court and regulatory approvals and
the requisite approval of 66 2/3% of votes cast by the securityholders of
Iteration, voting together as a single class, at a securityholder meeting. The
information circular for the Iteration securityholder meeting is expected to be
mailed to Iteration securityholders on or about May 31, 2010 and it is
anticipated that the special meeting of Iteration's securityholders will be held
on or about June 28, 2010 with closing of the Arrangement to occur shortly
thereafter.
Iteration's Board of Directors has unanimously determined that the Arrangement
is in the best interests of Iteration and its securityholders, and has, based
upon, among other things, the opinions of its financial advisors, unanimously
determined that the Arrangement is fair to the Iteration securityholders, has
unanimously approved the Arrangement and the entering into of the Arrangement
Agreement and has resolved unanimously to recommend that Iteration
securityholders vote in favour of the Arrangement. All of the directors and
senior officers of Iteration have entered into lock-up agreements with SVI to
vote their Iteration shares and options in favour of the Arrangement,
representing approximately 16% of the aggregate issued and outstanding Iteration
shares and options.
The Arrangement Agreement prohibits Iteration from soliciting or initiating any
discussion regarding any other business combination or sale of material assets,
contains provisions enabling SVI to match competing, unsolicited proposals and,
subject to certain conditions, provides for Iteration to pay a termination fee
of $20 million to SVI in certain circumstances.
Advisors
TD Securities Inc. acted as sole financial advisor to SVI for the Arrangement.
FirstEnergy Capital Corp. ("FirstEnergy") and Scotia Waterous Inc. ("Scotia")
acted as financial advisors to Iteration. FirstEnergy and Scotia have advised
the Iteration Board of Directors that they are of the opinion that the
consideration to be received by Iteration shareholders pursuant to the
Arrangement is fair from a financial point of view, subject to review of final
documentation. A copy of the fairness opinions will be included in the Iteration
information circular to be sent to securityholders for the special meeting to be
called to consider the Arrangement.
Chinook Statistical Summary - Unaudited Information (1)
-------------------------------------------------------
SVI (5) Iteration Pro Forma
------------------------------
Production - Current
Western Canada (boe/d) 6,100 13,800 19,900
Tunisia (bbls/d) 800 - 800
------------------------------
Total Company (boe/d) 6,900 13,800 20,700
------------------------------
------------------------------
% Gas 66 69 68
2009 Proved Reserves (NI 51-101) (3)(4)
Western Canada (mmboe) 13.9 33.0 46.9
Tunisia (mmboe) 4.9 - 4.9
------------------------------
Total (mmboe) 18.8 33.0 51.8
------------------------------
------------------------------
% Gas 54 63 60
2009 P+P Reserves (NI 51-101) (3)(4)
Western Canadian (mmboe) 18.8 50.4 69.2
Tunisian (mmboe) 14.2 - 14.2
------------------------------
Total (mmboe) 33.0 50.4 83.4
------------------------------
------------------------------
% Gas 42 63 55
Financial Summary - May 1, 2010
Estimated Net Debt ($mm) 27.0(6) 186.5
Basic Shares Outstanding (mm) 122.9 211.1
Fully Diluted Shares Outstanding (mm) (2) 128.1 215.6
Canadian Tax Pools ($mm) 242.0 520.0
Notes:
(1) Before any potential dispositions.
(2) Based on in-the-money options at $1.83 for Iteration and $3.25 for SVI.
(3) Before any potential dispositions.
(4) Based on independent December 31, 2009 reserve evaluations net of 2010
dispositions.
(5) Includes pro-forma interim period asset acquisition by SVI.
(6) Excludes approximately $41 million of the purchase price of SVI's
interim period asset acquisition.
Forward-Looking Statements
In the interest of providing SVI's shareholders, Iteration's shareholders and
potential investors with information regarding SVI, Iteration and Chinook,
including management's assessment of the future plans and operations of Chinook,
certain statements contained in this document constitute forward-looking
statements or information (collectively "forward-looking statements") within the
meaning of applicable securities legislation. Forward-looking statements are
typically identified by words such as "anticipate", "continue", "estimate",
"expect", "forecast", "may", "will", "project", "could", "plan", "intend",
"should", "believe", "outlook", "potential", "target" and similar words
suggesting future events or future performance. In addition, statements relating
to "reserves" are deemed to be forward-looking statements as they involve the
implied assessment, based on certain estimates and assumptions, that the
reserves described exist in the quantities predicted or estimated and can be
profitably produced in the future. In particular, this document contains,
without limitation, forward-looking statements pertaining to the following:
expectations of management regarding the proposed Arrangement, including the
timing of completion of the Arrangement, financing activities to be conducted by
SVI in connection with the Arrangement, including the subscription receipt
offerings, bridge financing and the use of proceeds thereof; mailing of an
information circular approving the Arrangement, holding of a securityholder
meeting approving the Arrangement, operating and financial metrics of the
Arrangement, potential synergies resulting from the Arrangement; operational and
business plans subsequent to the Arrangement; debt levels and the pro-forma
effect of the Arrangement on Chinook's production, cash flow, reserves,
undeveloped land position and tax pools.
With respect to forward-looking statements contained in this document, each of
SVI and Iteration have made assumptions regarding, among other things: future
capital expenditure levels; future oil and natural gas prices and differentials
between light, medium and heavy oil prices; future oil and natural gas
production levels; future exchange rates and interest rates; ability to obtain
equipment in a timely manner to carry out development activities; ability to
market oil and natural gas successfully to current and new customers; the impact
of increasing competition; the ability to obtain financing on acceptable terms;
and ability to add production and reserves through development and exploitation
activities. Although SVI and Iteration believe that the expectations reflected
in the forward looking statements contained in this document, and the
assumptions on which such forward-looking statements are made, are reasonable,
there can be no assurance that such expectations will prove to be correct.
Readers are cautioned not to place undue reliance on forward-looking statements
included in this document, as there can be no assurance that the plans,
intentions or expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties that contribute to the
possibility that the predictions, forecasts, projections and other
forward-looking statements will not occur, which may cause SVI's, Iteration's or
Chinook's actual performance and financial results in future periods to differ
materially from any estimates or projections of future performance or results
expressed or implied by such forward-looking statements. These risks and
uncertainties include, among other things, the following: that the Arrangement
may not close when planned or at all or on the terms and conditions set forth
herein; the failure of SVI and Iteration to obtain the necessary securityholder,
Court, regulatory and other third party approvals required in order to proceed
with the Arrangement; volatility in market prices for oil and natural gas;
failure to complete planned financing activities; incorrect assessment of the
value of the Arrangement; failure to realize the anticipated benefits and
synergies of the Arrangement; general economic conditions in Canada, the U.S.
and globally; and the other factors described under "Risk Factors" in
Iteration's most recently filed Annual Information Form available in Canada at
www.sedar.com. Readers are cautioned that this list of risk factors should not
be construed as exhaustive.
The forward-looking statements contained in this document speak only as of the
date of this document. Except as expressly required by applicable securities
laws, SVI and Iteration do not undertake any obligation to publicly update or
revise any forward looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements contained in this
document are expressly qualified by this cautionary statement.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6
Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil.
Boes may be misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 bbl (barrel) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
This joint news release does not constitute an offer to sell or the solicitation
of an offer to buy any securities within the United States. The securities to be
offered have not been and will not be registered under the U.S. Securities Act
of 1933, as amended, or any state securities laws, and may not be offered or
sold in the United States absent registration or an applicable exemption from
the registration requirements of such Act or other laws.
StorageVault Canada (TSX:SVI)
Historical Stock Chart
From May 2024 to May 2024
StorageVault Canada (TSX:SVI)
Historical Stock Chart
From May 2023 to May 2024
