Upon completion of the foreclosure, Admiral Bay is debt free, haspositive working capital and retains its Ft. Scott Property in BourbonCounty, Kansas. As of July 31, 2009, Ft. Scott had proved reserves ofapproximately 4.2 Bcf and is presently producing approximately 50Mcfgpd. The Company has also retained a 25% working interest in theRevloc Project located in Cambria County, Pennsylvania.
The foreclosureexchanged Company proved reserves of approximately 45 Bcf (as of July31, 2009) of natural gas for the forgiveness of approximately $42.5million in debt as well as a fund to satisfy the Company's other creditobligations. The foreclosed assets had net, after royalty, productionin the quarter ended April 30, 2010 of approximately 2,400 Mcfgpdand is over 50% undeveloped. With the transfer of assets in theforeclosure, the Company also mitigated its future plugging andabandonment liability. The Company also provided the lenders with awarrant to purchase up to 17.5% of the common equity of Admiral Bay ata fixed price of approximately
.039 (CDN) per share over the nextfive years.
As a result of the foreclosure action,Admiral Bay has significantly increased its financial flexibility witha host of options available to attempt to increase shareholder value.The Company is considering a number of strategic options including thesale of additional assets, the purchase of or combination with otheroil and gas assets to create a company with additional scale andgrowing the Company through intrinsic drilling and development ofexisting assets.
"Giventhe anemic gas price environment, especially in the Cherokee Basin, andthe economic morass that has acutely impacted the energy explorationindustry, this result – while personally disappointing – is among thebest outcomes available to Admiral Bay stakeholders," said Admiral BayChief Executive Officer Steve Tedesco.. "The ability to eviscerate over$42 million in secured debt and satisfy our trade creditors without aformal bankruptcy allows Admiral Bay to keep a core asset and considera number of options to rebuild shareholder value, a task on whichmanagement and the Board of Directors are keenly focused."