Alston Energy to merge with Canrock
Alston Energy Inc (C:ALO)
Shares Issued 24,335,264
Last Close 4/17/2012
.135
Tuesday April 24 2012 - News Release
Also Canrock Energy Inc (C:CNK) News Release
Mr. Don Umbach of Alston Energy reports
ALSTON ENERGY INC. - AGREEMENT REACHED WITH CANROCK ENERGY CORP. (TSX-V:CNK) TO COMBINE BUSINESSES
Alston Energy Inc. has provided an update on the status of three important corporate initiatives.
Alston has entered into a letter agreement with CanRock Energy Corp. to effect a business combination. The resulting entity would be led by Alston's Don Umbach as chief executive officer and CanRock's Bruce Eckert as chief operating officer.
The terms of Alston's previously announced asset acquisition from Crescent Point Resources Partnership have been amended. The transaction is scheduled to close June 15 2012 (see "Amendment To Crescent Point Asset Acquisition" below for full details).
Alston's previously announced brokered private placement closed on April 20 2012, on amended terms (see "Closing Of Amended Brokered Private Placement" below for full details).
Assuming successful completion of the Canrock and Crescent Point transactions, these initiatives will establish Alston as an oil-focused, growth-oriented junior exploration and production company with key pro forma metrics as follows:
1P reserves (1362.5 MMboe's in the aggregate) of approximately $23 million (NPV10)*
2P reserves (1894.7 MMboe's in the aggregate) of approximately $33.8 million (NPV10)*
initial production of approximately 710 boepd, 55% oil
12 month exit cash-flow per share estimated at $.06 per share
200 potential drilling locations in an emerging light-oil resources play
16.5 sq. miles of 3D proprietary seismic data with several drilling locations and farm-in opportunities identified
100% Operated working interests in the core properties.
(* Notes:
- (1) Sources of Reserves Data: - Alston's reserves from management's estimates
- - The reserves relating to the Crescent Point transaction from GLJ Petroleum Consultants Ltd.'s evaluation dated and effective December 31, 2011, at GLJ's October 2011 price forecast.
- - CanRock's reserves from McDaniel & Associates Consultants Ltd.'s evaluation dated March 14, 2012 and effective December 31, 2011, at McDaniel's January 1, 2012 price forecast.)
- (2) Barrels oil equivalent (boe) based on 6 Mcf/bbl for natural gas and 1:1 conversion for NGL's.
- (3) The estimated values disclosed do not represent fair market value.
Closing of Amended Brokered Private Placement
On April 20 2012 Alston closed its previously announced amended private placement financing (the "Amended Offering") for gross proceeds of $2,254,859. Pursuant to the Amended Offering, Alston issued 10,227,250 common shares on a "flow-through basis" pursuant to the Income Tax Act (Canada) (the "Tax Act")(the "Flow-Through Shares") at a purchase price of
.16 per Flow-Through Share Unit (a "Flow-Through Share Unit") and 4,123,328 common shares at a purchase price of
.15 per Common Share Unit (a "CommonShare Unit", and together with the Flow-Through Share Unit, a "Unit").
Each Flow-Through Share Unit consists of one common share of Alston to be issued on a "flow-through" basis pursuant to the Income Tax Act (Canada) and one-half of one transferable common share purchase warrant of Alston (each whole common share purchase warrant, a "Warrant"), each Warrant entitling the holder thereof to acquire one common share of Alston at a price of
.20 per common share on or before October 20, 2013. Each Common Share Unit consists of one common share of Alston and one-half of one Warrant (as hereinbefore described). Pursuant to the Amended Offering, Alston issued an aggregate of 7,175,289 Warrants to subscribers of Units.
After giving effect to the Amended Offering, Alston currently has 38,685,842 common shares issued and outstanding. All of the securities issued pursuant to the Amended Offering will be subject to a hold period expiring on August 20, 2012.
Integral Wealth Securities Limited acted as agent for the Offering. In connection with the Amended Offering, Alston paid a commission equal to 8% of the gross proceeds raised under the Amended Offering (except with respect to subscriptions from President's list subscribers) and issued an aggregate of 1,084,006 broker warrants, each broker warrant entitling the holder to purchase one common share of Alston at
.20 per share until April 20, 2014.
The proceeds of the Offering will be used to finance Alston's 2012 capital expenditure program and for general corporate purposes, with the gross proceeds from the sale of the Flow-Through Shares to be used to incur eligible "Canadian Exploration Expenses" (as defined in the Tax Act) which will be renounced in favour of the subscribers of the Flow-Through Shares effective on or before December 31, 2012.
Amendment To Crescent Point Asset Acquisition
Alston has agreed with Crescent Point Resources Partnership ("Crescent Point") to amend the Purchase and Sale Agreement dated December 19, 2011 with respect to Alston's purchase from Crescent Point of certain producing and non-producing properties (the "Asset Acquisition") announced in Alston's news release of December 20, 2011. The total purchase price has been increased from $3.03 Million to $3.25 Million which will now be paid entirely through the issuance to Crescent Point of 21,666,667 common share units ("CPG Units") at a price of
.15 per CPG Unit. Each CPG Unit consists of one common share of Alston and one-half of one transferable common share purchase warrant of Alston (each whole common share purchase warrant, a "CPGWarrant"), each CPG Warrant entitling CPG to acquire one common share of Alston at a price of
.20 per common share for a period of 18 months following the closing of the Asset Acquisition. The Asset Acquisition is expected to close on or about June 15, 2012, subject to extension by Alston and CPG.
The combined proceeds from the Amended Offering and the Asset Acquisition amount to $5,504,859 through issuance of a combined 36,017,245 Units and CPG Units.
Alston has retained Integral Wealth Securities Limited to act as financial advisor with respect to the Crescent Point transaction.
Canrock Business Combination
Alston has entered into a letter agreement effective April 20, 2012 (the "Letter Agreement") with CanRock Energy Corp. ("CanRock") (TSXV: CNK) committing the parties to the good faith negotiation and finalization of a definitive arrangement agreement (the "Arrangement Agreement") to effect a strategic business combination (the "Transaction"). The resulting company will be led by Don Umbach as Chief Executive Officer and Bruce Eckert as Chief Operating Officer.
The Letter Agreement contemplates that the Transaction will be completed by way of a Plan of Arrangement (the "Arrangement") whereby CanRock shareholders will exchange all of their issued and outstanding common shares ("CanRock Common Shares") for common shares of Alston ("Alston Common Shares"). As a result of the transaction CanRock will be a wholly-owned subsidiary of Alston.
Alston and CanRock are at arm's length with each other and the transaction will not result in the creation of any new control person or a "change of control" as that term is defined under TSX Venture Exchange ("TSXV") policies. Once the Arrangement is completed, the resulting entity will continue under the name Alston Energy Inc.
Collectively, the Amended Offering and the Asset Acquisition are referred to herein as the "Prior Transactions". For the purposes of the Transaction:
- (i) Alston Common Shares shall be valued, subject to adjustment, at CDN$9,695,870 representing 61,048,341 Alston Common Shares issued and outstanding as at the date of the Letter Agreement and after giving effect to the Prior Transactions (assuming the maximum offering under the Amended Offering), multiplied by
.1592 per Alston Common Share;
- (ii) CanRock Common Shares shall be valued at an amount equal to CDN$16,367,908 representing 44,301,135 CanRock Common Shares issued and outstanding as at the date of the Letter Agreement, multiplied by
.3695 per CanRock Common Share.
Pursuant to the Arrangement each CanRock Common Share will be exchanged for 2.321 Alston Common Shares (subject to adjustment). Following the Transaction, and assuming the completion of the Prior Transactions (assuming the maximum offering under the Amended Offering), the former holders of Canrock Common Shares will hold 102,822,934 Alston Common Shares representing approximately 62.47% of the issued and outstanding Alston Common Shares.
A special meeting of the shareholders of CanRock Common Shares will be held to vote upon the Transaction. In order for the Arrangement to be approved, shareholders holding 66-2/3% of the voting shares must vote in favour of the Transaction. The meeting is anticipated to occur in late June or early July.
CanRock has retained Emerging Equities as its strategic advisor with respect to the Transaction and to provide a fairness opinion with respect to the consideration to be received by its shareholders pursuant to the Transaction.
Alston has retained Integral Wealth Securities Limited as its financial advisor with respect to the Transaction.
Completion of the Arrangement is subject to a number of conditions, including completion of the Prior Transactions by Alston, Alston and CanRock entering into the Arrangement Agreement, TSXV acceptance, approval of the Court of Queen's Bench of Alberta, and approval of the shareholders of CanRock. The Arrangement cannot close until the required CanRock securityholder approval is obtained. There can be no assurance that the Arrangement will be completed as proposed or at all.
Experienced Management Team
The Letter Agreement contemplates that the resulting entity will be led by Alston's Don Umbach as Chief Executive Officer and CanRock's Bruce Eckert as Chief Operating Officer, and that its Board of Directors will include Don Umbach, Bruce Eckert, Wayne Babcock, Jack Donhuysen, Dennis Nerland and Ryan Dunfield. It is contemplated that Patricia Taguchi, will be named Chief Financial Officer. Ms. Taguchi received her CA designation in 1982. She has extensive oil and gas experience and since 2004 has served as Chief Financial Officer for other public companies, including Madison Energy Corp., Seaway Energy Services Inc. and Ammonite Energy Ltd.
Strategic Rationale
Management of both Alston and CanRock believe this business combination will accelerate the future growth of both companies by creating a larger, stronger company with synergistic benefits by combining G&A and assets. CanRock adds an important attribute of long-life, low-decline medium gravity oil production with near term development upside. Alston brings a larger land base with the future development potential of an emerging light oil resource play. Alston's management team has a proven track record for growth and value creation in the micro-cap, junior oil and gas market, including Dynamic Oil & Gas Inc. and Shellbridge Oil & Gas Inc.
Trading in the Alston Common Shares and CanRock Common shares has been halted at the mutual request of the parties pending the dissemination of the information contained in this news release.About Alston Energy Inc.: Alston is a junior oil and gas company, incorporated in Alberta and listed on the TSXV. Its primary exploration focus is in north-Central Alberta. More information about Alston can be found on SEDAR under the company's profile at www.sedar.com.