Neil Roszell and a packed solid team will control Elkwater
Elkwater Resources arranges $25-million financing
2014-06-25 08:46 ET - News Release
Mr. Don Brown reports
ELKWATER RESOURCES LTD. ANNOUNCES RECAPITALIZATION FINANCING AND NEW MANAGEMENT TEAM
Elkwater Resources Ltd. has entered into a definitive reorganization and investment agreement with Doug Bailey, Frank Muller, Darrin Drall, Glenn Cartier and Ryan Heath which provides for: (i) a non-brokered private placement of up to an aggregate of approximately $25-million; (ii) the appointment of a new management team and board of directors; and (iii) a rights offering to current holders of common shares of Elkwater. Completion of the transaction is subject to customary closing conditions, including the approval of the TSX Venture Exchange. 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 and 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 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, president and chief executive officer
Mr. Bailey is a certified general accountant with over 21 years of financial management, reporting and 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 exploration and production companies including Action Energy, Magnus Energy and Arapahoe Energy.
Frank Muller, vice-president, exploration
Mr. Muller is a professional geologist with over 30 years of geosciences, management and corporate 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 honours.
Darrin Drall, vice-president, engineering
Mr. Drall is a professional engineer with over 32 years of engineering, management and corporate 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, vice-president, production and operations
Mr. Cartier is a professional engineer with 32 years of engineering, management and corporate experience in the oil and gas industry. From Oct. 1, 2012, to December, 2013, Mr. Cartier was the president and chief executive officer of Petrox Resources Corp., a TSX Venture Exchange-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, vice-president, land and business development
Mr. Heath is a professional landman with 15 years of negotiation, management and corporate experience in the oil and gas industry. From November, 2010, to June, 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 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 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
Mr. Roszell, PEng, has been the president and chief executive officer of Raging River Exploration Inc. 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
Mr. 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
Mr. Ward, PGeol, 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 and 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 barrels of oil equivalent per day) 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 million units of Elkwater at a price of 10 cents per unit and up to a maximum of 190 million common shares at a price of 10 cents per common share for maximum total proceeds of $25-million. Each unit shall comprise one common share and one common share purchase warrant. Each warrant will entitle the holder to purchase one common share at a price of 12 cents 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 equalling or exceeding 20 cents, an additional one-third upon the market price equalling or exceeding 26.5 cents and a final one-third upon the market price equalling or exceeding 33.5 cents.
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 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 will be issued one 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 10 cents 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 TSX-V.
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 TSX-V and shareholder approval. Under the policies of the TSX-V, 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 TSX-V). In addition thereto, the appointment of the new management team is subject to shareholder approval under the policies of the TSX-V. The required disinterested shareholder approval may be obtained by Elkwater either by receipt of written consents by holders of more than 50 per cent of the issued and outstanding voting shares of Elkwater effective as of the close of business on June 25, 2014, or by approval of a resolution at a special meeting of shareholders. 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 Aug. 15, 2014.
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 per cent 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.
Advisers
Desjardins Capital Markets is acting as financial adviser to the initial investor group. Clarus Securities Inc. and FirstEnergy Capital Corp. are acting as strategic advisers to the initial investor group.
We seek Safe Harbor.