Maple Leaf Royalties Corp. Enters Agreement to Purchase Oil and Gas Assets

CALGARY, ALBERTA--(Marketwired - March 23, 2015) - Maple Leaf Royalties Corp. (TSX VENTURE:MPL) ("Maple Leaf" or the "Company") is pleased to announce that it has entered into a definitive purchase agreement with Maple Leaf 2012-II Energy Income Limited Partnership ("Vendor") pursuant to which it has agreed to acquire various royalty interests and non-operated working interests in a total of 17 oil and natural gas wells in Alberta and Saskatchewan (the "Acquired Assets") in consideration of the issuance and delivery to Vendor of 23,500,000 common shares (the "Purchase Price Shares") of Maple Leaf. Based on a price of $0.45 per share, total deemed consideration is $10.575 million.

The transaction is expected to close on or about April 1, 2015 with an effective date of March 1, 2015. Closing is subject to the satisfaction of conditions customary for transactions of this nature and the receipt of all required regulatory approvals, including the acceptance of the TSX Venture Exchange.

At closing, it is anticipated that Maple Leaf's outstanding share capital will consist of 75,415,131 million common shares, 9,994,444 warrants to purchase common shares at a price of $0.3675, and 73,334 stock options to purchase common shares at a price of $0.40. The Company also has about $2.7 million of positive working capital and no debt. Maple Leaf's pro forma production is estimated to be approximately 750 boe per day based on current production levels, weighted 54% to royalty production (with the balance being non-operated working interest production), and a production split that is about 70% natural gas and 30% oil and natural gas liquids.

Acquired Assets Details

The following tables summarize the evaluation by Sproule Associates Limited of the petroleum and natural gas reserves of the Acquired Assets. The net present values of the reserves are presented on a before income tax basis and are based on annual projections of net revenue, which were discounted at various rates. Calculated net present values are not necessarily representative of fair market value. The pricing assumptions that formed the basis for the revenue projections were based on Sproule's December 31, 2014 commodity price forecast. The reserve estimates were made in accordance with NI 51-101 and COGE Handbook reserve definitions.

The Acquired Assets consist of a total of five royalty interest wells and 12 non-operated working interest wells. The royalty interest wells are all located in the greater Bigstone area of Alberta, produce from the Montney formation, and have royalty interests ranging from approximately 0.3% to 10%. The non-operated working interest wells are located in a number of areas, with four in the Kakwa area of Alberta, two in the Sylvan Lake area of Alberta, three in the Rimbey area of Alberta, one in the Oldman area of Alberta, and two in the Java area of Saskatchewan. Producing zones in the non-operated working interest wells include the Falher, Bluesky, Ellerslie, and Elkton, and working interests vary from 25% to 50%. Estimated company interest production from the assets for the month of March 2015 is estimated to be approximately 510 boe per day, comprised of about 74% natural gas and 26% oil and natural gas liquids. About 29% of the current production rate is from royalty interests, with the remaining 71% from non-operated working interests. Field cash flow from the Acquired Assets for the month of March 2015 is anticipated to be approximately $200,000.

The Transaction

The transaction is a Non Arm's Length Transaction under Policy 5.3 of the TSX Venture Exchange as Hugh Cartwright and Shane Doyle, directors of Maple Leaf, are also directors and officers of the General Partner of the Vendor, and John Dickson, the Chief Financial Officer of Maple Leaf, is also the Chief Financial Officer and Secretary of the General Partner of the Vendor. As partial consideration for services provided to the Vendor, 5% of the Purchase Price Shares will be paid to the General Partner of the Vendor. The General Partner is wholly owned by CADO Bancorp Ltd., a corporation owned and controlled by Hugh Cartwright and Shane Doyle. 

Daniel Gundersen, Chief Executive Officer and a director of Maple Leaf, and Adam Thomas, President and a director of Maple Leaf, currently provide consulting services to Vendor. These arrangements will terminate upon closing of this transaction.

The Board of Directors of Maple Leaf formed an independent committee to review and approve the transaction on its behalf. 

The Purchase Price Shares will be subject to a four month restricted period under National Instrument 45-102. The Purchase Price Shares will also be subject to a contractual restricted resale period, with one-third being released from such restriction on each of the four, eight and 12 month anniversaries of the closing date of the transaction.

No insiders of Maple Leaf are expected to be created as a result of the transaction.

"We continue to execute our business plan with this third acquisition in the past four months," commented Maple Leaf CEO Dan Gundersen. "This latest transaction further expands our royalty portfolio in west central Alberta, and also adds some non-operated working interests for additional cash flow."

Reader Advisory

Forward-Looking Statements: Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to the timing for completion of the acquisition of the Assets and the anticipated benefits resulting from the acquisition described in this press release.

Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Maple Leaf believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because Maple Leaf can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: field production rates and decline rates; the ability of Maple Leaf to complete the transaction described in this news release and, once completed, to realize the anticipated benefits of the transaction; the timely receipt of any required regulatory approvals; the ability of Maple Leaf to obtain qualified staff in a timely and cost efficient manner to develop its business; future oil and natural gas prices; currency, exchange and interest rates; and the regulatory framework regarding royalties, taxes and environmental matters. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. Maple Leaf undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. 

Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Maple Leaf and described in the forward-looking information. The material risk factors affecting Maple Leaf and its business are contained in Maple Leaf's Filing Statement dated October 28, 2014 which is available under Maple Leaf's issuer profile on SEDAR at www.sedar.com.

The reader is cautioned not to place undue reliance on this forward-looking information.

Barrel of Oil Equivalent: Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas volumes have been converted to boe at a ratio of 6,000 cubic feet of natural gas to one barrel of oil equivalent. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Boe figures may be misleading, particularly if used in isolation.

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.