/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE UNITED
STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY
CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW./
CALGARY, Nov. 13, 2018 /CNW/ - Standard Exploration
Ltd. ("Standard" or the "Corporation") (SDE:
TSXV) is pleased to announce that it has entered into a definitive
reorganization and investment agreement with Ian Atkinson, Calvin
Yau, Chris Birchard and
Gary McMurren (the "Initial
Investor Group") which provides for: (i) a non-brokered private
placement of up to an aggregate of $20.0 million, provided that the Corporation
shall be entitled to increase the size of the private placement to
$25.0 million as a result of excess
demand (the "Private Placement"); (ii) the appointment of a
new management team (the "New Management Team") and new
board of directors (the "New Board") in connection with the
completion of the Private Placement; and (iii) subject to
regulatory approval, a rights offering (the "Rights
Offering") to holders of common shares ("Common Shares")
of Corporation (collectively, the "Recapitalization").
Completion of the Recapitalization is subject to customary closing
conditions, including the approval of the TSX Venture Exchange (the
"TSXV").
The Corporation is also pleased to announce that it has entered
into a definitive agreement (the "Acquisition Agreement"),
pursuant to which the Corporation will acquire all of the limited
partnership units of Gulf Pine Energy Partners, LP ("Gulf
Pine") for a total transaction value of USD$24.4 million (comprised of cash consideration
of USD$3,425,000), including net debt
(the "Transaction"). In connection with the Transaction, the
Corporation has arranged for a USD$13.5
million credit facility held with a reputable US independent
commercial bank. The Transaction is subject to customary closing
conditions, including the approval of the TSXV.
New Management Team
The New Management Team will be led by Ian Atkinson as President and Chief Executive
Officer, Calvin Yau, as Vice
President, Finance and Chief Financial Officer, Chris Birchard, as Vice President, Geoscience,
Gary McMurren as Vice President,
Engineering and Sanjib (Sony) Gill
as Corporate Secretary.
The New Management Team has a solid track record of creating
value in oil and gas companies through the early identification of
scalable, highly economic oil and gas assets, and the application
of technical expertise and operational excellence. The New
Management Team has been involved in senior leadership roles with
numerous successful oil and gas companies that have delivered
significant production and value growth to their shareholders. The
New Management Team has intimate knowledge of the Gulf Pine assets
and the US Gulf Coast market (Mississippi, Louisiana and Alabama) having operated upstream assets in
this region since 2013.
Ian
Atkinson,
Director, President
and Chief Executive Officer
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Ian Atkinson has been
the founder of several private and public oil and gas companies
with over 25 years of technical, executive and board of director
experience. Mr. Atkinson was the founder, President and Chief
Executive Officer of Gulf Pine Energy since 2014. Prior thereto,
Mr. Atkinson was a founder and Senior Executive Officer of
Athabasca Oil Corporation ("Athabasca"). At Athabasca, Mr.
Atkinson was instrumental in the successful completion of
Athabasca's IPO and a significant joint venture with PetroChina.
Mr. Atkinson holds a Masters of Science degree in Engineering and
an ICD.D designation.
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Calvin Yau
Vice President,
Finance and Chief Financial Officer
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Calvin Yau was a
co-founder of Gulf Pine Energy and was the Vice President, Finance
and Chief Financial Officer since 2014. Mr. Yau is a chartered
accountant with over 15 years of financial experience including
numerous debt and equity offerings and M&A transactions in the
oil and gas industry.
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Chris
Birchard
Vice President,
Geoscience
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Chris Birchard was a
co-founder of Gulf Pine Energy and was the Vice President,
Geosciences since 2014. Mr. Birchard has over 20 years of
exploration and management experience in the oil and gas industry.
Previously, Mr. Birchard was the Senior Geologist and Team Lead at
Athabasca. Mr. Birchard discovered the largest conventional oil
pool in Alberta in the last 25 years – Dixonville Montney
'C'.
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Gary McMurren
Vice President, Engineering
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Gary McMurren was a
co-founder of Gulf Pine Energy and was the Vice President,
Engineering since 2014. Mr. McMurren has over 20 years of
engineering, operational and management experience in the oil and
gas industry. Previously, Mr. McMurren was the Director of Light
Oil at Athabasca where he built a team of over 100 staff and grew
production to company mandated levels in 18 months.
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Sanjib (Sony)
Gill
Corporate Secretary
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Sony Gill is a
partner at McCarthy Tétrault LLP, a national law firm. Mr. Gill has
dealt with all aspects of a public and private company's creation,
growth, restructuring and value maximization. Mr. Gill has
extensive experience in the negotiation, structuring and
consummation of a broad range of corporate finance, securities and
mergers and acquisitions transactions. He serves on the board of
directors of, and acts as corporate secretary to, numerous public
and private companies. Mr. Gill is recognized in Chambers
Canada as a leader in Corporate Commercial – Alberta. He also
appears in the Canadian Legal Lexpert Directory as a leading
lawyer in the area of Corporate Mid-Market, and as a leading lawyer
in the current edition of Who's Who Legal: Energy. In 2011,
he was named among Lexpert magazine's Rising Stars: Leading
Lawyers Under 40.
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New Board of Directors
Upon closing of the Transaction, the New Board will be comprised
of Ian Atkinson, Bruce Beynon, Michael G.
Kohut, Tamara MacDonald,
Andrew McCreath, C. Neil Smith and R. Steven
Smith.
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.
Bruce
Beynon
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Mr. Beynon is a
professional geologist with 30 years of oil and gas industry
experience. Mr. Beynon is the Executive Vice President, Exploration
and Corporate Development at Baytex Energy Corp. and was most
recently the President of Raging River Exploration Inc. until
August, 2018. Mr. Beynon also held executive positions with Compass
Petroleum Partnership, Peloton Exploration Corp., Espoir
Exploration Corp. and KeyWest Energy Inc. Mr. Beynon graduated with
a Masters of Science degree in Geology in 1991.
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Michael G.
Kohut
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Mr. Kohut is the
Chairman of the Board at Big Rock Brewery Inc. and is a Director of
Ikkuma Resources Corp. He was the Vice President of Finance at
Paramount Resources Ltd. from November, 2017 to April 2018. Mr.
Kohut was the Chief Financial Officer of Trilogy Energy Corp. from
June, 2006 to October 2017. Mr. Kohut has over 25 years of
experience in senior executive roles at various companies and on
various boards of directors.
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Tamara
MacDonald
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Ms. MacDonald was
most recently the Senior Vice President, Corporate and Business
Development of Crescent Point Energy Corp. Ms. MacDonald has been
involved in over 530 transactions totaling over $14.5 billion. Ms.
MacDonald has over 26 years of industry experience.
Prior to Crescent Point, Ms. MacDonald worked with NCE
Petrofund Corp., Merit Energy Ltd., Tarragon Oil & Gas Ltd. and
Northstar Energy Corp. She has a Bachelor of Commerce Degree
with a major in Petroleum Land Management from the University of
Calgary, an ICD.D designation.
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Andrew
McCreath
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Mr. McCreath is a CFA
with over 30 years of experience in the investment community
including the last 20 years as a Portfolio Manager. Mr.
McCreath managed Sentry Diversified Total Return Fund and was the
winner of the 2011 Lipper Award for the Best Fund Over Three Years
in the Canadian Focused Equity Category. Mr. McCreath also managed
Sentry Market Neutral LP and was the winner of the 2010
Morningstar Best Relative Value Hedge Fund (Gold in 2010). Mr.
McCreath is also the Market Commentator on BNN Bloomberg
TV.
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C. Neil
Smith
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Mr. Smith has over 32
years of technical, financial and international capital markets
experience. Most recently, Mr. Smith was the Chief Operating
Officer at Crescent Point Energy Corp. where he was responsible for
all aspects of the company's capital budget, safe operations,
reserves management and acquisition evaluations as well as
corporate operations risk management analysis and social
responsibility reporting. He has a proven track record of creating
shareholder value through innovative development of assets in a
safe and capital-efficient manner.
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R. Steven
Smith
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Mr. Smith is a CA,
CPA and currently the CFO of Broadview Energy Ltd. and a Director
of Broadview Energy and Karve Energy Inc. He started his career in
the oil and gas industry in finance with management and executive
roles at numerous companies including Canadian Pioneer Petroleum
Ltd., Poco Petroleums Ltd., Renaissance Energy, and Pan East
Petroleum Corp. Mr. Smith has spent 12 years as an executive in the
oil and gas industry and 20 years in the buy-side and sell-side of
the investment industry as the Chief Financial Officer and
Portfolio Manager with Norrep Capital Management Ltd. and Vice
President and Director - Institutional Research at FirstEnergy
Capital.
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Corporate Strategy
The New Management Team has extensive experience in creating
shareholder value on an absolute and per share basis through a
focused full-cycle business plan and believes the current market
environment provides an excellent opportunity to reposition
Standard as a high growth junior oil and gas company. The New
Management team believes there is an excellent opportunity to
consolidate high quality, high netback, low decline oil and gas
assets in under-exploited basins in the US Gulf Coast states at
highly attractive metrics. The New Management Team will focus away
from high-priced and infrastructure constrained shale basins in the
US, choosing instead to establish a dominant position in proven oil
and gas basins which attract some of the best commodity pricing in
the US.
Following the completion of the Transaction, Standard expects to
focus on in-field stacked payed development drilling complemented
by accretive oil and gas opportunities in the US Gulf Coast states,
growing through a targeted acquisition and consolidation strategy.
The Corporation's low base decline, high netback production,
efficient inventory of internally generated locations and the
recapitalized corporate structure will allow for sustainable and
efficient per share growth. The New Management Team has identified
a number of potential acquisition targets in the same operating
areas with similar producing characteristics and intends to pursue
those opportunities in the near future.
Upon completion of the Transaction, it is anticipated that the
shareholders of the Corporation will be asked to approve, at a
special meeting called for such purpose, a change of the name of
the Corporation to "Southern Energy Corp.".
The Transaction
Pursuant to the Transaction, subject to the terms of the
Acquisition Agreement, the Corporation shall acquire all of the
issued and outstanding limited partnership units of Gulf Pine for
cash consideration of USD$3,425,000.
Completion of the Transaction is subject to the satisfaction of
a number of conditions, including, but not limited to: (i) receipt
of the approval of the TSXV; and (ii) all conditions under the
Acquisition Agreement (other than payment of the purchase price
necessary to complete the Acquisition) having been satisfied or
waived.
The New Management Team believes shareholders will benefit from
the following attributes of the Transaction:
- stable, onshore US base production of 1,700 boe/d (14% oil)
delivering approximately $11 million
of run rate net operating income at October
1, 2018 strip pricing;
- low production decline rate of less than 15% requiring
approximately 1% of net operating income to maintain production
with the remainder focused on delivering organic growth;
- low risk high rate of return drilling inventory balanced
between oil and gas;
- assets are strategically situated in close proximity to Henry
Hub realizing the best commodity prices in North America, where oil realizes Louisiana
Light Sweet (LLS) pricing (currently over a C$40.00/bbl premium to Edmonton Light) and
natural gas realizes Henry Hub pricing (currently over a
C$3.50/MMBTU premium to AECO);
- uniquely positioned relative to Canadian listed energy
companies with exposure to operational LNG, with 3.7 Bcf/d on
stream and an additional 6 Bcf/d constructed and coming online over
the next 18 months; and
- acquisition purchase price using October
1, 2018 strip pricing:
-
- Less than 3 times the estimated annualized Q4 2018 net
operating income; and
- Approximately $18,000 per flowing
boe/d.
A reserve report prepared in accordance with National Instrument
51-101 will be submitted to the TSXV in support of the
Transaction. Shareholder approval will not be required
pursuant to the policies of the TSXV as the Transaction is not a
"related party transaction" (as such term is defined pursuant to
the policies of the TSXV) and no other circumstances exist which
may compromise the independence of the Corporation or other
interested parties, Standard has minimal operations, Standard
is not and will not otherwise be suspended from trading on
completion of the Transaction, and shareholder approval of the
Transaction is not required under applicable corporate laws and is
not required under applicable securities laws.
Selected Financial Information
The table below presents selected financial information for Gulf
Pine on a consolidated basis for the six months ended June 30, 2018 (unaudited) and year ended
December 31, 2017 (audited). The
selected financial information was prepared in accordance with U.S.
GAAP. All figures are in U.S. dollars.
USD$000s
|
Six months
ended
June 30,
2018
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Year ended
December 31,
2017
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Assets
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58,526
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65,762
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Liabilities
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23,668
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28,777
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Revenues
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7,023
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11,917
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Net Loss
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3,331
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54,875
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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 an aggregate of
1,000,000,000 Common Shares and units ("Units") of the
Corporation at a price of $0.02 per
Common Share or Unit, as applicable, for aggregate gross proceeds
of $20.0 million. The Private
Placement is expected to occur after the proposed consolidation of
the Common Shares as further discussed below under the heading
"Common Share Consolidation". All prices referred to in this
section are on a pre-consolidation basis.
Units will be issued to subscribers that are to become members
of the New Management Team and the New Board. Common Shares will be
issued to all other subscribers. The completion of the Private
Placement is expected to occur on or about December 14, 2018 (the "Closing").
Each Unit will be comprised of one Common Share and one
performance-based Common Share purchase warrant (each, a
"Performance Warrant"). Each Performance Warrant will
entitle the holder to purchase one Common Share at a price of
$0.02 for a period of five
years. The Performance Warrants will vest and become exercisable as
to one-third upon the 20-day volume weighted average trading price
of the Common Shares (the "Market Price") equaling or
exceeding $0.03, an additional
one-third upon the Market Price equaling or exceeding $0.04 and a final one-third upon the Market Price
equaling or exceeding $0.05. In
addition, in the event the Market Price equals or exceeds
$0.08, each Performance Warrant shall
be exercisable for 1.5 Common Shares, provided that, at the time of
exercise in respect of the additional 0.5 of a Common Share per
Performance Warrant (the "Performance Incentive"), the
Common Shares are listed on the facilities of a recognized stock
exchange (other than the TSXV), the Common Shares are acquired for
cash or for the securities of a company listed on a recognized
stock exchange (other than the TSXV).
The resignation of the current board of directors and management
team of the Corporation and the appointment of the New Management
Team and the New Board will occur contemporaneous with the
Closing.
Upon completion of the Private Placement, the New Management
Team and the New Board's ownership interest is expected to be
approximately 26% on a fully diluted basis (including the
Performance Incentive). The Private Placement will not result in
the creation of a new control person.
Common Share Consolidation
The Corporation intends to complete a consolidation of the
Common Shares on the basis of one post-consolidation Common Share
for up to every 10 pre-consolidation Common Shares (the
"Consolidation"), expected to occur immediately prior to the
Private Placement and the Transaction. The Consolidation is subject
to the approval of the shareholders and the approval of the
TSXV.
Rights Offering
Upon completion of the Private Placement, 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 $0.20 per
Common Share (on a post-consolidated basis) at or before the expiry
time of the Rights Offering, following which all outstanding Rights
shall terminate and expire. Subscribers under the Private
Placement will have a right to participate in the Rights Offering
with respect to any Common Shares acquired pursuant to the Private
Placement.
Members of the New Management Team and New Board will be
entitled to purchase one Unit for every four Rights held at a price
of $0.20 per Unit (on a
post-consolidated basis) at or before the expiry time of the Rights
Offering.
Financial Advisors
Eight Capital is acting as financial advisor to the Initial
Investor Group and Laurentian Bank is acting as strategic advisor
to the Initial Investor Group.
About Gulf Pine
Gulf Pine, a limited partnership existing under the laws of the
State of Delaware, is a private
junior oil and gas exploration, development and production company
formed for the purpose of acquiring, and subsequently enhancing,
producing oil and gas properties primarily in Alabama and Mississippi (the "Gulf Pine
Assets").
Gulf Pine Assets
The Gulf Pine Assets consist of more than 29,000 net acres of
developed land, along with 30,000 net acres of undeveloped land in
Alabama and Mississippi. The corporate production base of
approximately 1,700 boe/d (14% oil) comes from more than two
hundred wells producing mainly from 4 fields in central
Mississippi that exhibit a
combined annual decline of less than 15%. The majority of the
assets are operated and are typified by high working interest
(>90%) utilizing company owned infrastructure with excess
capacity. This will allow the Corporation to control the pace
of development and growth. The New Management Team has
identified a significant infill drilling inventory of stacked pay
locations for both oil and gas opportunities on the held by
production lands that will take advantage of the superior LLS oil
pricing and Henry Hub basis gas pricing in the region. The
producing assets generally exhibit very low recovery factors in
multiple, large oil and gas in place reservoirs which will enable
the New Management Team to use their extensive experience in
horizontal drilling and multistage fracturing to optimize recovery
from the assets.
Reader Advisory
Completion of the Transaction and the Recapitalization are
subject to a number of conditions, including but not limited to,
the completion of the Consolidation and the acceptance of the TSXV.
There can be no assurance that the Transaction nor the
Recapitalization will be completed as proposed or at all.
This press release is not an offer of the securities for sale in
the United States. The securities
have not been registered under the U.S. Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent registration or an
exemption from registration. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of the securities in any state in which
such offer, solicitation or sale would be unlawful.
Investors are cautioned that, except as disclosed in the
management information circular or filing statement to be prepared
in connection with the Transaction, any information released or
received with respect to the Transaction may not be accurate or
complete and should not be relied upon. Trading in the securities
of the Corporation should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits
of the Transaction or the Recapitalization and has neither approved
nor disapproved of the contents of this press release.
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 release.
Abbreviations
boe
|
barrels of oil
equivalent
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boe/d
|
barrels of oil
equivalent per day
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MMbtu
|
one million British
thermal units
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Unit Cost Calculation
For the purpose of calculating unit costs, natural gas volumes
have been converted to a barrel of oil equivalent ("boe")
using six thousand cubic feet equal to one barrel unless otherwise
stated. A boe conversion ratio of 6:1 is based upon an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Forward-Looking Statements
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans", "intends"
and similar expressions are intended to identify forward-looking
information or statements. More particularly and without
limitation, this news release contains forward looking statements
and information concerning the Transaction, the Recapitalization,
the expected composition of the board of directors of and
management, the application to the TSXV in respect of the
Transaction and the Recapitalization, the completion and timing of
the transactions contemplated herein, the Consolidation, including
the timing thereof, the change of name of the Corporation, the
Corporation's corporate strategy and the anticipated benefits of
the Transaction. In addition, statements relating to expected
production, recovery, costs and valuation are deemed to be
forward-looking statements as they involve the implied assessment,
based on certain estimates and assumptions. The forward-looking
statements and information are based on certain key expectations
and assumptions made by the Corporation, including expectations and
assumptions concerning Gulf Pine, the Recapitalization and the
Transaction, the TSXV and regulatory approvals and the satisfaction
of other closing conditions in accordance with the terms of the
Acquisition Agreement. Although the Corporation believes that the
expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward looking statements and
information because the Corporation can give no assurance that they
will prove to be correct. By its nature, such forward-looking
information is subject to various risks and uncertainties, which
could cause the actual results and expectations to differ
materially from the anticipated results or expectations expressed.
These risks and uncertainties, include, but are not limited to, the
parties being unable to obtain the required TSXV approvals,
fluctuations in commodity prices, foreign exchange or interest
rates, stock market volatility and obtaining required approvals of
regulatory authorities. Readers are cautioned not to place undue
reliance on this forward-looking information, which is given as of
the date hereof, and to not use such forward-looking information
for anything other than its intended purpose. The Corporation
undertakes no obligation to update publicly or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, except as required by
law.
SOURCE Standard Exploration Ltd.