NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS.
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 Tetrault 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, Doug Bailey is a certified general accountant with
President and Chief over 21 years of financial management, reporting and
Executive Officer 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, Frank Muller is a professional geologist with over 30
Vice President, years of geosciences, management and corporate
Exploration 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, Darrin Drall is a professional engineer with over 32
Vice President, years of engineering, management and corporate
Engineering 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, Glenn Cartier is a professional engineer with 32 years
Vice President, of engineering, management and corporate experience in
Production and the oil and gas industry. From October 1, 2012 to
Operations 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, Ryan Heath is a professional landman with 15 years of
Vice President, Land negotiation, management and corporate experience in
and Business the oil and gas industry. From November 2010 to June
Development 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).
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Elkwater Resources Ltd.
Don Brown
President and Chief Executive Officer
(403) 262-0242
(403) 262-0339 (FAX)
2000, 840 - 7th Avenue S.W.
Calgary, Alberta T2P 3G2
c/o Elkwater Resources Ltd.
Doug Bailey
(403) 262-0242
(403) 262-0339 (FAX)
2000, 840 - 7th Avenue S.W.
Calgary, Alberta T2P 3G2
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