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Bowood Energy Inc. and Legacy Oil + Gas Inc. Announce Strategic Transaction to
Create Alberta Bakken-Focused Producer
Canada NewsWire
CALGARY, May 14, 2012
CALGARY, May 14, 2012 /CNW/ - Bowood Energy Inc. ("Bowood") (TSXV: BWD) and
Legacy Oil + Gas Inc. ("Legacy") (TSX:LEG) are pleased to announce that they
have entered into an agreement (the "Agreement") providing for: (i) the sale of
Legacy's southern Alberta assets, excluding assets in the greater Turner Valley
area, to Bowood (the "Asset Purchase"); (ii) the appointment of a new management
team (the "New Management") and certain new directors of Bowood; (iii) a
non-brokered private placement of units of Bowood (the "Private Placement"), and
(iv) a rights offering to the Bowood shareholders (the "Rights Offering").
Asset Purchase
The Asset Purchase will consist of the sale of 68,581 net acres of Legacy's
undeveloped land in southern Alberta, excluding assets in the greater Turner
Valley area, to Bowood for 200,000,000 common shares of Bowood ("Bowood
Shares"). The Asset Purchase includes the Bowood/Legacy joint venture land,
including the Big Valley oil wells drilled at Kipp and Spring Coulee. The
current Legacy farmin agreement with Bowood will be terminated upon closing of
the transaction. Following the completion of the Asset Purchase, the Private
Placement and the Rights Offering, Legacy will own approximately 37% of the
outstanding Bowood Shares.
New Management
The current officers of Bowood will resign and the New Management will be
appointed immediately following the completion of the Asset Purchase. The New
Management will consist of Trent Yanko as President and Chief Executive Officer
and Matt Janisch as Vice-President, Finance and Chief Financial Officer, each of
whom will retain their current positions with Legacy. Mark Franko will be
appointed Corporate Secretary.
The board of directors of Bowood will be reconstituted following completion of
the Asset Purchase to be comprised of Trent Yanko as Chairman, James Pasieka,
Chris Bloomer, Jim Welykochy and Neil Roszell. Chris Bloomer and Jim Welykochy
are currently directors of Bowood.
The New Management has a solid track record of creating value in high-growth,
junior oil and natural gas companies. Trent Yanko has over 23 years of
experience in the founding, technical management and leadership of a number of
private and public oil and natural gas companies. Mr. Yanko is currently
President and Chief Executive Officer of Legacy, which has grown production from
500 Boe per day to more than 16,300 Boe per day in less than three years. Mr.
Yanko was previously President and Chief Executive Officer of Mission Oil & Gas
Inc., which grew from 500 Boe per day to more than 7,000 Boe per day in two
years, primarily due to its success in the Bakken light oil resource play in
southeast Saskatchewan. Before Mission, Mr. Yanko was Vice-President,
Production of StarPoint Energy Ltd., helping grow production from 250 Boe per
day to 9,000 Boe per day in 13 months.
Matt Janisch is currently Vice President, Finance and Chief Financial Officer of
Legacy and has over 25 years of oil and natural gas and financial experience and
was previously Executive Vice-President and Chief Financial Officer of Bow
Valley Energy Ltd., an international oil and gas producer, and has 12 years of
investment banking and equity research experience with BMO Capital Markets.
Mark Franko is a partner with the Calgary office of Heenan Blaikie LLP. He has
practiced securities law since 1998 with a focus on mergers and acquisitions and
private and public financings in the oil and natural gas sector. Mr. Franko is
the Corporate Secretary of Legacy.
James Pasieka is a partner with the Calgary office of Heenan Blaikie LLP. He has
extensive experience in structuring and negotiating transactions for capital
projects, joint ventures, corporate financings, and mergers, acquisitions, and
divestitures. Currently, Mr. Pasieka practices in all segments of the energy
sector; in general corporate/commercial law; and in corporate finance, including
early-stage and venture capital financing and mergers, acquisitions, and
takeovers. He also has broad experience in Alberta's electricity sector. Mr.
Pasieka is an officer and director of a number of public energy companies,
including Legacy.
Chris Bloomer currently serves as Senior Vice-President and Chief Operating
Officer of the Heavy Oil Business Unit as well as a Director of Petrobank Energy
and Resources Ltd. Previously, he also held the position of CFO. Mr. Bloomer has
been at Petrobank since 2002. Mr. Bloomer is also a director of Calmena Energy
Services.
James Welykochy is a Professional Geologist with over 29 years experience in the
oil and natural gas industry including over ten years experience in the energy
capital markets. He is now a self-employed financial consultant to the oil and
natural gas industry capital markets. Prior thereto, Mr. Welykochy served as
Vice President, Corporate Development and Director of Ryland Oil Corporation
from August 2008 until the sale of Ryland to Crescent Point Energy in August,
2010. Prior to joining Ryland, Mr. Welykochy served as Vice President of
institutional sales for PI Financial Corp from February 2007 to August 2008.
Prior thereto Mr. Welykochy was an oil and natural gas research analyst with
Genuity Capital Markets from January 2006 to February 2007.
Neil Roszell is a Professional Engineer with over 20 years of experience in the
oil and gas industry. Mr. Roszell is currently the President and Chief Executive
Officer of Raging River Exploration, a junior oil and gas company trading on
TSXV. Previously, Mr. Roszell has acted as a founder of four oil and natural
gas companies and was instrumental in the growth of these junior companies from
inception to their ultimate sale. Mr. Roszell was President and CEO of Wild
Stream Exploration and Wild River Resources, President and COO of Prairie
Schooner Petroleum and Vice President of Engineering of Great Northern
Exploration.
Bowood Strategic Rationale and Corporate Strategy
The combination of assets with the experienced Legacy team creates a high
impact, light oil exploration focused junior with a dominant operated position
and leverage to the emerging southern Alberta Bakkenplay, that is well
positioned to emerge as a larger, stronger and balanced producer with the
following attributes:
* 155,974 net acres of undeveloped land in the over-pressured oil window in the
Alberta Bakken fairway, including a contiguous 60,512 net acre block on the
Blood Tribe Reserve
* Multi-zone potential
* Production of approximately 500 Boe per day
* Proven management team with a track record of value creation in junior
companies
* Well financed, improved access to capital
* Access to the leading technical capabilities of a much larger company
Bowood will be managed by Legacy's current management team and staff, under the
terms of a Services Agreement, in exchange for a monthly fee. All key Legacy
technical, land, accounting and field staff involved with the play since
inception will continue to work the area. Legacy and Bowood have also agreed to
an Area of Exclusion in which Bowood will have first priority over Legacy to
pursue any potential acquisition transaction. The Area of Exclusion covers all
of southern Alberta south of Twp. 27, excluding an area around Legacy's Turner
Valley field.
In addition to the two successful wells drilled to-date by Legacy and Bowood,
recent disclosure by competitors in the play has underscored the potential of
the southern Alberta Bakken play to become a significant multi-zone light oil
resource play. New Management believes as a focused, pure play company, Bowood
is well positioned to benefit from continued industry success while further
delineating the potential of its significant undeveloped land base.
New Management will also pursue a consolidation strategy within Bowood's core
operating area of southern Alberta, increasing exposure to additional high
impact light oil resource plays while also focusing on opportunities that build
an inventory of oil development drilling locations complementary to the oil
resource play exploration program.
Legacy Strategic Rationale
The Agreement consolidates Legacy's interest and control in the emerging
southern Alberta Bakken light oil resource play. Through the Agreement, Legacy
will maintain its exposure to the upside of this multi-zone play without the
promoted drilling obligations under the Bowood/Legacy farmout agreement.
Legacy's interest in the southern Alberta Bakken play is considerably
undervalued at Legacy's current market valuation. The Agreement creates the
potential for Legacy shareholders to unlock and realize significant incremental
value not currently reflected in Legacy's share price, through the ownership of
the shares in a new pure play, high impact, light oil exploration company.
Legacy's technical, land, accounting and field operations team will continue to
manage and operate the play, bringing continuity to the future operations on a
cost-effective basis through the fees received from the Services Agreement.
Private Placement
Pursuant to the Private Placement, Bowood will issue up to 20,833,333 units
("Units") at a price of
.12 per Unit (Bowood's closing price on May 11, 2012)
for gross proceeds of up to $2.5 million to subscribers designated by Legacy.
Each Unit will be comprised of one Bowood Share issued on a flow-through basis
pursuant to the Income Tax Act (Canada) and one share purchase warrant
("Warrant") entitling the holder to purchase one Bowood Share at a price of
.18 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 Bowood
Shares ("Market Price") equaling or exceeding
.20, an additional one-third
upon the Market Price equaling or exceeding
.25 and a final one-third upon the
Market Price equaling or exceeding
.30.
The Units issued under the Private Placement will be issued to the New
Management and other prospective service providers of Bowood and will be subject
to contractual escrow with one-third of such Units released each six months
following the closing date of the Private Placement. The proceeds of the
Private Placement will be used to pay down debt and for general corporate
purposes.
Rights Offering
The Rights Offering will be conducted by Bowood by way of a rights offering
circular pursuant to which holders of Bowood Shares as at the record date for
the Rights Offering (the "Record Date") will, in respect of each Bowood Share
held, be issued one right. Each ten rights will entitle the holder to purchase
one Bowood Share at an exercise price, subject to regulatory approval, of
.12,
being equal to the price of the Units to be issued under the Private Placement.
Legacy and subscribers for Units pursuant to the Private Placement will not be
entitled to participate in the Rights Offering with respect to any securities
acquired under the Private Placement. The Rights Offering is subject to
applicable regulatory approval, including the approval of the TSXV. Maximum
gross proceeds under the rights offering will be $3.3 million.
The Agreement
The Agreement is an asset purchase and sale and investment agreement dated May
13, 2012. The Agreement contains a number of customary representations,
warranties and conditions and provides for a mutual non-completion fee of
$1,500,000 payable in certain circumstances. The Agreement will be filed on
SEDAR by Bowood and will be accessible under Bowood's profile at www.sedar.com.
Shareholder and Stock Exchange Approvals
The completion of the matters provided for under the Agreement is subject to a
number of conditions and approvals, including, but not limited to, the approval
of the TSXV. The completion of the Asset Purchase and the Private Placement
would result in the creation of a control person under the policies of the TSXV
and, accordingly, must be approved by the shareholders of Bowood. The required
disinterested shareholder approval may be obtained by Bowood either by receipt
of written consents from holders of more than 50 percent of the issued and
outstanding voting shares of Bowood (the "Written Consent") or by approval of an
ordinary resolution passed at a meeting of the shareholders.
Pursuant to the Agreement, Bowood has agreed to use its best commercially
reasonable efforts to obtain the Written Consent on or before May 31, 2012. In
the event that the Written Consent is not obtained on or before May 31, 2012,
Bowood has agreed to convene and hold a meeting of its shareholders on or before
July 31, 2012 for the purposes of approving the Asset Purchase and the Private
Placement.
It is anticipated that the shareholders of Bowood will be asked to approve a
change of Bowood's name to LGX Oil + Gas Inc. and a consolidation of the Bowood
Shares on a twenty for one basis at the next meeting of shareholders.
Closing
Provided that all of the conditions to close in the Agreement are satisfied or
waived, it is anticipated that closing will occur by no later than June 1, 2012
in the event that the Written Consent is received or July 16, 2012 in the event
that Bowood is required to convene a meeting of its shareholders.
Financial Advisors
GMP Securities L.P is acting as financial advisor to Bowood with respect to the
matters provided for in the Agreement. GMP Securities L.P. has provided the
board of directors of Bowood with an opinion that the consideration to be
received by Bowood through the transaction is fair, from a financial point of
view, to shareholders of Bowood. Haywood Securities Inc. is acting as strategic
advisor to Bowood with respect to the Agreement.
Macquarie Capital Markets Canada Ltd. and FirstEnergy Capital Corp. are acting
as co-financial advisors and National Bank Financial Inc. is acting as strategic
advisor to Legacy with respect to the Agreement.
Board of Directors Recommendation
The board of directors of Bowood has determined that the transactions
contemplated by the Agreement are in the best interests of its shareholders and
has unanimously approved such transactions and recommends that the shareholders
approve the Asset Purchase and Private Placement and execute the Written
Consent. Any shareholder of Bowood wishing to obtain and execute the Written
Consent should contact Bowood as set out below.
Each of the directors and officers of Bowood who, in the aggregate, control
approximately 4.7% of the Bowood Shares, have entered into support agreements
pursuant to which they have agreed, among other things, to approve the Asset
Purchase and Private Placement.
Note Regarding Forward Looking Statements
This document contains forward-looking statements. More particularly, this
document contains statements concerning the completion of the matters
contemplated by the Agreement.
The forward-looking statements are based on certain key expectations and
assumptions made by Legacy and Bowood, including expectations and assumptions
concerning timing of receipt of required shareholder and regulatory approvals
and third party consents and the satisfaction of other conditions to the
completion of the matters contemplated by the Agreement.
Although Legacy and Bowood believe that the expectations and assumptions on
which the forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because Legacy and Bowood
can give no assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and risks. These
include, but are not limited to, risks that required shareholder, regulatory and
third party approvals and consents are not obtained on terms satisfactory to the
parties within the timelines provided for in the Agreement and risks that other
conditions to the completion of the transactions are not satisfied on the
timelines set forth in the Agreement or at all.
The forward-looking statements contained in this press release are made as of
the date hereof and neither Legacy nor Bowood undertakes any obligation to
update publicly or revise any forward-looking statements or information, whether
as a result of new information, future events or otherwise, unless so required
by applicable securities laws.
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.