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CALGARY, June 25, 2014 /CNW/ - Elkwater Resources Ltd.
("Elkwater" or the "Corporation") (TSX Venture: ELW)
is pleased to announce that it has entered into a definitive
reorganization and investment agreement (the "Agreement")
with Doug Bailey, Frank Muller, Darrin
Drall, Glenn Cartier and
Ryan Heath (the "Initial Investor
Group") which provides for: (i) a non-brokered private
placement of up to an aggregate of approximately $25 million (the "Private Placement");
(ii) the appointment of a new management team and board of
directors (collectively, the "New Management Team"); and
(iii) a rights offering (the "Rights Offering") to current
holders of common shares ("Common Shares") of Elkwater (collectively, the
"Transaction"). Completion of the Transaction is
subject to customary closing conditions, including the approval of
the TSX Venture Exchange (the "TSXV"). Upon completion
of the Transaction, it is anticipated that the shareholders of
Elkwater will be asked to approve,
at a special meeting called for such purposes: (i) a change of
the Corporation's name to "Striker Exploration Corp."; and (ii) a
consolidation of the Common Shares.
The New Management Team will be led by Doug Bailey as President & Chief Executive
Officer, Frank Muller as Vice
President, Exploration, Darrin Drall
as Vice President, Engineering, Glenn
Cartier as Vice President, Production and Operations and
Ryan Heath as Vice President, Land
and Business Development.
Upon closing of the Transaction, the new board of directors will
be comprised of Neil Roszell,
Kevin Olson, John Ferguson, Patrick
R. Ward and Doug
Bailey. Sony Gill, a partner in the CFMA Group in the
Calgary office of the national law
firm McCarthy Tétrault LLP, will act as Corporate Secretary.
New Management Team
The New Management Team has a solid track record of creating
value in high-growth, junior oil and gas companies through an
integrated strategy of acquiring, exploiting and exploring.
The members of the New Management Team have been involved in senior
leadership roles with oil and gas producers, including companies
focused in the Viking oil resource plays in Alberta and Saskatchewan.
The New Management Team will apply its past experience to grow
the recapitalized Elkwater through
a combination of organic growth and acquisitions.
|
Doug Bailey,
President and Chief Executive Officer
|
Doug Bailey is a
certified general accountant with over 21 years of financial
management, reporting and accounting experience primarily in the
oil and gas industry. Most recently, Mr. Bailey was the Chief
Financial Officer of Hyperion Exploration Corp. from July 2010 to
December 2013. Prior thereto, Mr. Bailey was the Chief Financial
Officer of Canadian Phoenix Resources Corp. from June 2008 to May
2009. Mr. Bailey was also involved in the restructuring of numerous
E&P companies including Action Energy, Magnus Energy and
Arapahoe Energy.
|
|
Frank
Muller,
Vice President, Exploration
|
Frank Muller is a
professional geologist with over 30 years of geosciences,
management and corporate experience specializing in the Viking,
Mannville, Montney and Devonian production horizons throughout the
Western Canadian Sedimentary Basin. From December 2007 to
October 2012, Mr. Muller was a co-founder and Senior Vice President
of WestFire Energy Ltd. until its amalgamation with Guide
Exploration Ltd. to form Long Run Exploration Ltd. Prior
thereto, Mr. Muller was the Senior Vice President, Exploration of
Real Resources Inc. from 2001 to 2007. Mr. Muller graduated from
St. Francis Xavier University in 1984 with a Bachelor of Science in
Geology with Honors.
|
|
Darrin
Drall,
Vice President, Engineering
|
Darrin Drall is a
professional engineer with over 32 years of engineering, management
and corporate experience in the oil and gas industry. Mr.
Drall's experience includes Vice President, Engineering of
Pinecrest Energy Inc. since February 2013, Vice President,
Engineering of WestFire Energy Ltd. from 2008 to 2012, Vice
President Engineering and Operations of Burmis Energy Inc. from
2003 to 2008 and Vice President Corporate Development at Elk Point
Resources Inc. prior thereto. Mr. Drall graduated from the
University of Manitoba in 1982 with a Bachelor of Science degree in
Mechanical Engineering.
|
|
Glenn Cartier,
Vice President, Production and Operations
|
Glenn Cartier is a
professional engineer with 32 years of engineering, management and
corporate experience in the oil and gas industry. From
October 1, 2012 to December 2013, Mr. Cartier was the President and
Chief Executive Officer of Petrox Resources Corp., a TSXV listed
exploration and production company with operations in Western
Canada. Prior thereto, Mr. Cartier was Vice President,
Business Development and Director of Ki Exploration Inc. from
August 2011 to May 2012. Prior thereto, Mr. Cartier was a
co-founder, President, Chief Executive Officer and Director of
Siphon Energy Corp. from June 2008 to August 2011. Mr.
Cartier graduated from the University of Calgary in 1983 with a
Bachelor of Science degree in Mechanical Engineering.
|
|
Ryan
Heath,
Vice President, Land and Business Development
|
Ryan Heath is a
professional landman with 15 years of negotiation, management and
corporate experience in the oil and gas industry. From
November 2010 to June 2014, Mr. Heath was the Vice President, Land
and Business Development of Hyperion Exploration Corp. Prior
thereto, Mr. Heath was a co-founder and Vice President, Land and
Business Development of Severo Energy Corp. until its sale to
Paramount Energy Trust. Mr. Heath graduated from the
University of Calgary in 2000 with a Bachelor of Commerce degree in
Petroleum Land Management.
|
The New Management Team, in consultation with the proposed new
members of the board of directors, are actively engaged in
interviewing a number of strong candidates to act as the Chief
Financial Officer of Elkwater to
be effective upon completion of the Transaction. The New
Management Team and proposed board of directors are focused on
ensuring that the successful candidate has strong qualifications,
extensive public company experience and a track record of
success. The New Management Team recognizes the value and
importance of strong financial reporting and disciplined internal
controls in ensuring the future success of the Corporation.
New Board of Directors
The directors have strong track records and distinguished
careers in both the oil and gas industry and capital markets and
have held prominent lead positions within a range of successful
companies. Their combined experience and expertise will provide the
New Management Team with invaluable advice, guidance and
mentorship.
|
Neil
Roszell
|
Neil Roszell, P.
Eng., has been the President and Chief Executive Officer of Raging
River Exploration Inc. ("Raging River") since March 2012. Prior
thereto, Mr. Roszell served as the Chief Executive Officer and
President of Wild Stream Exploration Inc. from October 2009 to
March 2012. Prior thereto, Mr. Roszell served as the Chief
Executive Officer and President of Wild River Resources Ltd. from
February 2007 to July 2009 and as the President and Chief Operating
Officer of Prairie Schooner Petroleum Ltd from August 2004 to
September 2006. Mr. Roszell served as the Vice President of
Engineering of Great Northern Exploration Ltd. from September 2001
to June 2004.
|
|
Kevin
Olson
|
Mr. Olson is the
President of Kyklopes Capital Management Ltd. and a director of
Raging River. Prior thereto Mr. Olson was a Portfolio Manager
with EnergyX Equity Inc from 2001 to 2011. Mr. Olson was the Vice
President, Corporate Development of Northrock Resources Ltd. from
2000 to 2001. From 1993 to 1999, Mr. Olson worked with FirstEnergy
Capital Corp. as Vice President, Corporate
Finance.
|
|
John
Ferguson
|
John Ferguson is the
President and Chief Executive Officer of RMP Energy Inc. Prior
thereto, Mr. Ferguson was Vice President, Chief Financial Officer
and Corporate Secretary of RMP Energy Ltd. (a private oil and gas
company). Mr. Ferguson held the position of Vice President of
Finance and Chief Financial Officer with Rider Resources Ltd. from
2003 to 2008, Meota Resources Corp. from 2000 to 2002 and Poco
Petroleums Ltd. from 1992 to 1999.
|
|
Patrick R.
Ward
|
Patrick Ward, P.
Geol., has been the President and Chief Executive Officer of
Painted Pony Petroleum Ltd. since May 6, 2007. Prior thereto,
Mr. Ward served as the Vice President, Exploration of Innova
Exploration Ltd., a public oil and gas company, from May 2004 to
May 2006. Mr. Ward co-founded Chowade Energy Ltd., a private oil
and gas company, in 2003 which merged into Innova Exploration Ltd.
in 2004. From 1999 to 2003, Mr. Ward was Manager, Geology &
Geophysics with the NCE Resources Group and Petrofund Energy Trust,
a public oil and gas energy trust. Mr. Ward was Vice President and
Chief Operating Officer at Rockport Energy Corp., a public oil and
gas company, from 1998 to 1999. Mr. Ward held various positions,
lastly as Exploration Manager from 1981 to 1997 for Total Petroleum
Canada (subsequently Rigel Oil & Gas, both public oil and gas
companies).
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Corporate Strategy
The New Management Team, together with the proposed new members
of the board of directors, have extensive experience in creating
shareholder value through a focused full-cycle business plan and
believes the current market environment provides an excellent
opportunity to reposition Elkwater
as a high growth junior oil and gas company. The New
Management Team believes that Elkwater will be well positioned to take
advantage of acquisition opportunities in the current market.
Following the completion of the Transaction, Elkwater expects to focus on predominantly
light oil opportunities in Western
Canada, growing through a targeted acquisition and
consolidation strategy complemented by development and exploitation
drilling. The current Elkwater production base (current production
of approximately 170 boepd) and the recapitalized corporate
structure will allow for the exploitation of the current drilling
inventory and the expansion of the Corporation's opportunity suite
through internally generated prospects and strategic
acquisitions.
Upon completion of the Transaction, the recapitalized
Elkwater is expected to have a net
cash position of approximately $20.0
million, assuming the Private Placement is fully
subscribed. The New Management Team believes that this
starting point will provide them with a platform for aggressive
growth through strategic acquisition and internally generated
prospects.
Upon completion of the Transaction and subject to all regulatory
and shareholder approvals, it is anticipated that: (i) the New
Management Team will change the name of the Corporation from
"Elkwater Resources Ltd." to "Striker Exploration Corp."; and (ii)
the Corporation will complete a consolidation of its Common Shares,
at a ratio to be determined by the New Management Team.
Private Placement
Pursuant to the Private Placement, the Initial Investor Group,
together with additional subscribers identified by the Initial
Investor Group, will subscribe for up to a maximum of 60.0 million
units (the "Units") of Elkwater at a price of $0.10 per Unit and up to a maximum of 190.0
million Common Shares at a price of $0.10 per Common Share for maximum total proceeds
of $25 million. Each Unit shall
be comprised of one Common Share and one Common Share purchase
warrant (a "Warrant"). Each Warrant will entitle the
holder to purchase one Common Share at a price of $0.12 for a period of five years. The
Warrants will vest and become exercisable as to one-third upon the
20-day weighted average trading price of the Common Shares (the
"Market Price") equaling or exceeding $0.20, an additional one-third upon the Market
Price equaling or exceeding $0.265
and a final one-third upon the Market Price equaling or exceeding
$0.335.
The completion of the Private Placement is expected to occur on
or about July 9, 2014, and may be
completed in one or more tranches (the "Closing"). The
resignation of the current board of directors and management team
of Elkwater and the appointment of
the New Management Team will occur contemporaneous with the
Closing. The closing of subscriptions for any remaining Units and
of the Common Shares will occur on such dates as determined by the
Initial Investor Group.
Proceeds from the Private Placement will be used for general
corporate purposes.
Rights Offering
Upon completion of the Private Placement, and subject to
Elkwater receiving the Written
Consent (as defined below) on or before July
2, 2014, Elkwater
shareholders will be entitled to participate in the Rights
Offering, which is expected to be conducted by way of a Rights
Offering Circular. Pursuant to the Rights Offering, each
shareholder as of the record date for such offering (the "Record
Date") will be issued one right ("Right") for each
Common Share held on the Record Date, entitling that holder to
purchase one Common Share for every four Rights held at a price of
$0.10 per Common Share at or before
the expiry time of the Rights Offering, following which all
outstanding Rights shall terminate and expire. Subscribers of
Common Shares under the Private Placement will not be entitled to
participate in the Rights Offering with respect to any securities
acquired pursuant to the Private Placement. The Rights Offering is
subject to applicable regulatory approval, including the TSXV.
Shareholder and Stock Exchange Approvals
Completion of the Transaction is subject to a number of
conditions and approvals including, but not limited to, the
approval of the TSXV and shareholder approval. Under the
policies of the TSXV, the completion of the Private Placement is
subject to the approval of the shareholders of Elkwater as the completion of the Private
Placement will result in the creation of a new "control person" (as
defined under the policies of the TSXV). In addition thereto,
the appointment of the New Management Team is subject to
shareholder approval under the policies of the TSXV. The
required disinterested shareholder approval may be obtained by
Elkwater either by receipt of
written consents by holders of more than 50% of the issued and
outstanding voting shares of Elkwater (the "Written
Consent") effective as of the close of business on June 25, 2014 or by approval of a resolution at a
special meeting of shareholders (the "Elkwater
Meeting"). Pursuant to the Agreement, Elkwater has agreed to obtain the Written
Consent on or before July 2, 2014,
failing which the Initial Investor Group has the right to terminate
the Agreement. In the event that the Written Consent is not
obtained on or before July 2, 2014
and the Initial Investor Group waives its termination right,
Elkwater has agreed to convene and
hold the Elkwater Meeting on or before August 15, 2014.
The Corporation
Elkwater consists of
approximately 170 boepd of production (approximately 50% oil and
NGLs) in eastern Alberta and
western Saskatchewan and has
approximately 19.1 million Common Shares outstanding on a fully
diluted basis and current combined working capital deficiency and
long term debt of approximately $4.0
million, excluding the costs of the Transaction. Upon
completion of the Private Placement and assuming the exercise of
all Rights issued in connection with the Rights Offering,
Elkwater will have approximately
269.1 million Common Shares, and assuming the exercise of all
Warrants issued in connection with the Private Placement, there
will be approximately 329.1 million Common Shares outstanding on a
fully diluted basis.
Board of Directors' Recommendation
The board of directors of Elkwater has determined that the transactions
contemplated by the Agreement are in the best interests of its
shareholders, has unanimously approved such transactions and
recommends that Elkwater's
shareholders approve the Agreement and the Transaction and execute
the Written Consent. Any shareholder of Elkwater wishing to obtain and execute the
Written Consent should contact Elkwater as set forth below.
Directors and officers of Elkwater who, in aggregate, own, directly or
indirectly or exercise control or direction over approximately 43%
of the Common Shares, have entered into support agreements or
agreed to enter into support agreements pursuant to which they have
agreed or will agree, among other things, to execute a Written
Consent.
The Agreement
The Agreement contains a number of customary representations,
warranties and conditions and provides for a non-completion fee of
$50,000 payable by Elkwater to the Initial Investor Group, and a
non-completion fee of $50,000 payable
by the Initial Investor Group to Elkwater, in certain circumstances. The
Agreement also provides that the Initial Investor Group shall
receive an expense reimbursement fee of up to $50,000 in the event the Written Consent is not
obtained and Elkwater shareholders
do not approve the Transaction at the Elkwater Meeting. The
complete Agreement will be accessible on Elkwater's SEDAR profile at www.sedar.com.
Advisors
Desjardins Capital Markets is acting as financial advisor to the
Initial Investor Group. Clarus Securities Inc. and FirstEnergy
Capital Corp. are acting as strategic advisors to the Initial
Investor Group.
About Elkwater
Elkwater Resources Ltd. is a Calgary,
Alberta based company engaged in the oil and gas exploration
and development industry. The Corporation's Common Shares are
listed on the TSXV under the trading symbol "ELW".
Forward-Looking and Cautionary Statements
This news release may include forward-looking statements
including opinions, assumptions, estimates, the New Management
Team's assessment of future plans and operations, and, more
particularly, statements concerning the completion of the
Transaction contemplated by the Agreement, the number of securities
issued by way of the Private Placement, the business plan of the
New Management Team, the change of name of the Corporation, use of
proceeds, debt levels and production following completion of the
Transaction.
When used in this document, the words "will," "anticipate,"
"believe," "estimate," "expect," "intent," "may," "project,"
"should," and similar expressions are intended to be among the
statements that identify forward-looking statements.
The forward-looking statements are founded on the basis of
expectations and assumptions made by Elkwater which include, but are not limited
to, the timing of the receipt of the required shareholder,
regulatory and third party approvals, the future operations of, and
transactions completed by Elkwater
as well as the satisfaction of other conditions pertaining to the
completion of the Transaction.
Forward-looking statements are subject to a wide range of
risks and uncertainties, and although Elkwater believes that the expectations
represented by such forward-looking statements are reasonable,
there can be no assurance that such expectations will be
realized.
Any number of important factors could cause actual results to
differ materially from those in the forward -looking statements
including, but not limited to, shareholder, regulatory and third
party approvals not being obtained in the manner or timing set
forth in the Agreement, the ability to implement corporate
strategies, the state of domestic capital markets, the ability to
obtain financing, changes in general market conditions and other
factors more fully described from time to time in the reports and
filings made by Elkwater with
securities regulatory authorities.
Except as required by applicable laws, neither Elkwater nor the Initial Investor Group
undertake any obligation to publicly update or revise any
forward-looking statements.
The term "boe" may be misleading, particularly if used in
isolation. A boe conversion of 6 Mcf: 1 bbl is based upon an energy
equivalency conversion method primarily applicable at the burner
tip and it does not represent a value equivalency at the well
head.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this news release.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities described
herein. The securities have not been and will not be registered
under the United States Securities Act of 1933, as amended (the
"U.S. Securities Act"), or any state securities laws and may not be
offered or sold within the United
States or to United States Persons unless registered under
the U.S. Securities Act and applicable state securities laws or an
exemption from such registration is available.
SOURCE Elkwater Resources Ltd.