Kevin Adair's Canamax Energy Ltd. (CAC) added one cent to 60 cents on 128,000 shares. It has adjusted the terms of a $15-million private placement, which was previously intended to consist of 60-cent subscription receipts, but will now include 65-cent flow-through shares as well. The financing was announced earlier this month in connection with a $24-million acquisition of 750-barrel-a-day Montney assets in Alberta's Grande Prairie. (As noted in the June 1 Energy Summary, the seller appears to be Storm Resources Ltd. (SRX), which is unloading the assets so it can focus on its core Umbach Montney area in British Columbia.) This acquisition is expected to close by July 31. Last week, Canamax announced a different acquisition, this time of Powder Mountain Energy Ltd. (PDM), up a cent to 45 cents on 179,700 shares. Powder Mountain's shares closed at 33 cents on Friday, June 12. On Monday, June 15, Canamax said it would buy Powder Mountain for 45.5 million shares at a deemed price of 60 cents each, for a total transaction value of $27.3-million. Much of the value comes from Powder Mountain's $21.5-million in cash and working capital. The company also has about 100 barrels a day of light oil production in southeast Saskatchewan, but Canamax is less interested in that; its core province is Alberta. Mainly Canamax wants the cash so it can tidy up its balance sheet and close the Grande Prairie asset acquisition. Following closing of all the acquisitions and the private placement, Canamax expects to have 1,900 barrels a day of production, $3-million to $4-million in cash and working capital, and no debt.
Shareholders of Powder Mountain will hold about 40 per cent of the new Canamax, assuming the takeover goes through. A special meeting will be held on July 29 for them to vote on it. About one-third of them have already said they will vote in favour, including 32 Degrees Capital, which holds 14.4 million of the company's 48.1 million shares. It acquired them almost one year ago exactly and must be disappointed with how things turned out. Most of the shares were bought in a private placement done by Passport Energy as part of its merger with Amarok Energy to create Powder Mountain. 32 Degrees participated in the placement so it could become Powder Mountain's control person, and also sold some land in exchange for shares. That gave it a total of 14.4 million shares that were worth about 90 cents each by the time the merger closed on June 17, 2014. Unfortunately, June 17, 2014, was just one day after the TSX energy index hit a three-year peak and then started to descend. The pain was not felt at first, and Powder Mountain's stock hit a high of $1.35 in July, but then -- like so many others -- it got caught up in the oil price shock and could not recover. A takeover by Canamax is hardly its worst outcome. It clearly knows this, as evidenced by its intensely bullish press release. For example, while Canamax merely lists the qualities of the resulting company, Powder Mountain goes a step further and says the resulting company will have achieved "critical mass."