SAINT HELIER, Jersey, April 10,
2014 /PRNewswire/ --
LONGREACH OIL AND GAS LIMITED (TSXV: LOI)
(the "Company" or "Longreach") is pleased to
announce that it has closed today a non-brokered private placement
of units with investors for aggregate gross proceeds to the Company
of $9,700,000 (the "Private
Placement"). The subscription price per unit was
$1,000 and each unit consisted of one
10% secured convertible debenture of the Company in the principal
amount of $1,000 (collectively,
the "Debentures") and 1,000 ordinary share purchase
warrants (collectively, the "Warrants").
Net proceeds of the Private Placement will be used to support
the ongoing drilling of the Company's Kamar well at Sidi Moktar and
for general corporate and administrative purposes. The
completion of the Private Placement (described initially in the
Company's press release dated March 3,
2014) will permit the Company to continue with its
contracted drilling activities of the Kamar well at Sidi
Moktar. The Company intends to refinance or repay the
indebtedness under the Debentures through the proceeds of a
subsequent public or private offering of equity securities, which
may include a rights offering to all shareholders of the
Company.
The Debentures mature two years from the date of closing and
bear interest at a rate of 10% per annum, payable quarterly in
arrears. Following the first anniversary of the date of
closing, holders of Debentures may convert from time to time, in
whole or in part, outstanding principal under the Debentures into
ordinary shares of the Company ("Shares") at a conversion
price equal to the greater of: (a) $0.30 (subject to typical adjustments in certain
circumstances); and (b) the current market price of the Shares at
the time of conversion (based on the volume weighted average
trading price of the Shares for the 20 trading days ending on the
fifth trading day preceding the date of conversion). Holders
of Debentures are restricted from converting Debentures without the
approval of the TSX Venture Exchange if, as a result of conversion,
the holder would hold more than 20% of the issued Shares. In
addition, following the first anniversary of the date of closing,
the Company may redeem from time to time, in whole or in part,
outstanding principal under the Debentures for cash at a redemption
price equal to the face value of the principal amount being
redeemed, plus an amount equal to three months of interest
calculated on the amount of Debentures being redeemed.
The obligations of the Company under the Debentures are secured
by a security interest in the Company's present and after acquired
property and, in connection therewith, the Company and holders of
Debentures have executed a general security agreement under the
laws of Jersey (Channel Islands) providing a security interest in
favour of the Debenture holders.
The Debentures provide customary events of default including
failure to pay interest when due within 30 days, failure to repay
principal on redemption or maturity, and the occurrence of
insolvency events or proceedings. In addition, the Company
has made certain covenants in favour of holders of Debentures,
including covenanting not to incur additional indebtedness,
covenanting to use commercially reasonable efforts to complete an
equity financing within one year for the purpose of repaying or
refinancing the Debentures, and covenanting to use commercially
reasonable efforts to seek shareholder approval in certain
circumstances for the creation of a new control person, if
requested by a holder of Debentures who would otherwise need such
approval in order to permit the full conversion of Debentures.
Each Warrant is exercisable for a term of two years following
closing and may be exercised for one Share at an exercise price of
$0.30 per Share (subject to typical
adjustments in certain circumstances). Holders of Warrants
are also restricted from exercising Warrants without the approval
of the TSX Venture Exchange if, as a result of exercise, the holder
would hold more than 20% of the issued Shares.
A commission in the amount of $315,800, representing approximately 3.26% of the
gross proceeds, is payable to a finder in connection with the
Private Placement.
Two of the investors in the Private Placement, being Dundee
Corporation ("Dundee") and funds advised by West Face
Capital Inc. ("West Face"), are significant shareholders of
Longreach, holding 12,291,146 Shares (representing approximately
15.15% of the issued Shares) and 8,571,453 Shares (representing
approximately 10.56% of the issued Shares), respectively.
Accordingly, the participation of these insiders in the Private
Placement is considered a "related party transaction" pursuant to
applicable securities laws and the policies of the TSX Venture
Exchange (the "TSXV").
Dundee subscribed for a total of 2,820 units comprised of
$2,820,000 principal amount of
Debentures and 2,820,000 Warrants. Assuming Dundee fully
converted the principal of the Debentures at the minimum conversion
price of $0.30 and fully exercised
its Warrants at $0.30 per Warrant,
and assuming there was no restriction on conversion and exercise as
discussed above, Dundee would hold 24,511,146 Shares representing
approximately 26.25% of the issued Shares (calculated on a
partially diluted basis).
West Face subscribed for a total of 1,880 units comprised of
$1,880,000 principal amount of
Debentures and 1,880,000 Warrants. Assuming West Face fully
converted the principal amount of the Debentures at the minimum
conversion price of $0.30 and fully
exercised its Warrants at $0.30 per
Warrant, West Face would hold 16,718,119 Shares representing
approximately 18.72% of the issued Shares (calculated on a
partially diluted basis).
The Private Placement was unanimously approved by the board of
directors of the Company (the "Board"), excluding two
directors who, as a result of their position with the participating
insiders, declared their interest in the Private Placement and
abstained from voting. The Board has determined that the fair
market value of the consideration for, and the subject matter of,
the Private Placement, as it relates to the participation by
related parties, is less than 25% of the Company's market
capitalization. Accordingly, the Company is exempt from the
requirement to obtain a formal valuation and minority shareholder
approval for the Private Placement. The Company did not file
a material change report at least 21 days prior to the closing of
the Private Placement because the participation of, and
subscription agreements with, participating insiders was not known
or entered into until immediately prior to closing.
The Private Placement remains subject to final acceptance by the
TSXV. The Debentures and Warrants (and the Shares which may
be issuable pursuant to the conversion and exercise thereof) are
subject to a four month hold period ending August 11, 2014.
All monetary amounts referred to in this press release are to
Canadian dollars.
About Longreach
Longreach is an independent oil and gas company focused on its
significant land position in Morocco. The Company has a 50%
operated interest in the Sidi Moktar license area covering 2,683
square kilometres and is working closely with ONHYM as a committed
long-term partner to unlock the hydrocarbon potential of the
region. Morocco offers a
politically stable environment to work within and has extremely
favourable fiscal terms to energy producers. Longreach is a
public company listed on the TSX Venture Exchange under the symbol
"LOI".
Additional information about the Company can be found at
http://www.longreachoilandgas.com and under the Company's SEDAR
profile at http://www.sedar.com.
About West Face Capital Inc.
West Face Capital Inc. is one of Canada's leading alternative investment
managers combining control-through-distressed, high-yield,
negotiated finance, proactive equity, and private equity
activities. West Face's capabilities are underpinned by a
seasoned multi-disciplinary investment team, proprietary
origination channels, deep sector expertise, and the ability to
address investment targets in domestic and international
markets.
Special Note Regarding Forward Looking
Statements
This press release contains forward-looking statements.
These statements relate to future events or the Company's future
performance. All statements other than statements of
historical fact are forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of words such as "may", "will", "should", "expect", "plan",
"anticipate", "believe", "estimate", "predict", "project",
"potential", "targeting\", "intend", "could", "might", "continue"
or the negative of these terms or other similar terms.
Forward-looking statements in this press release include, but are
not limited to, statements regarding the potential future equity
offering by the Company for the purpose of repaying or refinancing
the Debentures, as well as the continued development of the
Company's projects in Morocco. Forward-looking statements are
only predictions. Forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Some of the
risks and other factors which could cause results to differ
materially from those expressed in the forward-looking statements
contained in this press release include, but are not limited to:
general economic conditions in Canada, the Kingdom of Morocco and globally; industry conditions,
including fluctuations in the price of oil and gas, governmental
regulation of the oil and gas industry, including environmental
regulation; fluctuation in foreign exchange or interest rates;
risks inherent in oil and gas operations; political risk, including
geological, technical, drilling and processing problems;
unanticipated operating events which could cause commencement of
drilling and production to be delayed; the need to obtain consents
and approvals from industry partners, regulatory authorities and
other third-parties; stock market volatility and market valuations;
competition for, among other things, capital, acquisitions of
reserves, undeveloped land and skilled personnel; incorrect
assessments of the value of acquisitions or resource estimates; any
future inability to obtain additional funding, when required, on
acceptable terms or at all; credit risk; changes in legislation;
any unanticipated disputes or deficiencies related to title
matters; dependence on management and key personnel; and risks
associated with operating in and being part of a joint
venture. Although the forward-looking statements contained in
this press release are based upon assumptions which management of
the Company believes to be reasonable, the Company cannot assure
that actual results will be consistent with its expectations and
assumptions. Material factors and assumptions which
management of the Company has considered in connection with making
the forward-looking statements in this press release include that
the Company will be able to raise adequate proceeds and refinance
or repay the Debentures on terms acceptable to the Company.
Undue reliance should not be placed on the forward-looking
statements contained in this news release as there can be no
assurance that the plans, intentions or expectations upon which
they are based will occur. These statements speak only as of
the date of this press release, and the Company does not undertake
any obligation to publicly update or revise any forward-looking
statements except as expressly required by applicable securities
laws.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
For further information:
Martin Arch
Chief Financial Officer and Secretary
Tel: +44-203-137-7756
march@longreachoilandgas.com