Gordon Creek receives $3-million (U.S.) bridge loan
2015-08-25 08:13 ET - News Release
Mr. Rupert Evans reports
GORDON CREEK ENERGY - CORPORATE UPDATE
Gordon Creek Energy Inc. has closed an interim financing deal with Excalibur Partners XX LP, whereby Excalibur has provided a bridge loan totalling $3-million (U.S.) that will be focused on reworking and reactivating up to 14 previously drilled development wells (PDNP wells) in order to increase cash flows and reserves. The first tranche of $1.0-million (U.S.) was announced March 6, 2015, and closed March, 2015. The second tranche of $2.0-million (U.S.) closed in July, 2015. This represents an increase to the total bridge loan by $400,000 (U.S.) from the originally agreed upon $2.6-million (U.S.) due to greater than initially anticipated interest from investors.
The Excalibur financing was sourced through Houston Merchant Advisory Partners (HMEP) and the company is continuing to work with HMEP to source a new senior facility that would recapitalize the company, repay the Excalibur bridge financing and finance the continued development of the Gordon Creek field.
The Excalibur financing consists of a one-year term subordinated debt carrying an interest rate of 15 per cent (18 per cent if the company chooses to accrue interest payments). Excalibur will also receive a 6-per-cent gross overriding royalty on production from the PDNP wells, which will be expanded to cover all Gordon Creek production if the facility is not repaid within six months. The royalty can be repurchased by the company at any time for $1.68-million (U.S.). Excalibur will also receive, subject to TSX Venture Exchange approval and subject to anti-dilution adjustments, three-year warrants to purchase up to 5,510,971 shares of the company at a price of six cents per share. If the loan is not repaid within six months, Excalibur will receive, until the loan is repaid, an additional 60-per-cent gross overriding royalty on the PDNP wells, the proceeds of which will be applied to the outstanding principal and interest. Each tranche of financing is subject to separate timelines.
The company is also pleased to confirm that the previously announced termination of the commodity streaming agreement with Sandstorm Gold Inc., which provided Sandstorm with a streaming interest in 35 per cent of all Gordon Creek production, was finalized in August, 2015, and is effective July 31, 2015. In consideration for the termination of the interest, Sandstorm will receive a subordinated two-year note for $4.0-million (U.S.) and a 10-per-cent gross overriding royalty on all Gordon Creek production. The company will have the right, at any time, to purchase one-half (5 per cent) of the Sandstorm royalty for $6.0-million (U.S.). As a result of the termination of the Sandstorm streaming interest, the company will effectively now own, subject to royalties, a 100-per-cent interest in the Gordon Creek field and the company's Gordon Creek reserves and cash flows will be calculated accordingly.
Operations
Since April, 2015, the company has commenced workovers on 10 existing gas wells at the Gordon Creek field. While the work is continuing, the company is pleased to have seen improvements in the gas volumes from the worked over wells. The workovers have involved replacing worn equipment and installing larger pumps where needed. Some of the existing infrastructure has also been repaired.
Reserves data
Gordon Creek Energy has filed its reserves data and other oil and gas information for the year ended Jan. 31, 2015, in accordance with National Instrument 51-101 -- standards of disclosure for oil and gas activities. The company's proved plus probable pretax net future cash flows discounted at 10 per cent were approximately $37-million (U.S.) and calculated before the termination of the commodity streaming agreement with Sandstorm discussed above. The company's Jan. 31, 2015, filings are available on the SEDAR website.
Annual general meeting results
The company held its annual general and special meeting of shareholder on July 28, 2015, and all proposed resolutions were approved.
We seek Safe Harbor.