NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE
SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO
COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED
STATES SECURITIES LAWS.
Blackbird Energy Inc. (“
Blackbird”) (TSX-V: BBI)
and Pipestone Oil Corp. (“
Pipestone Oil”) are
pleased to announce that they have closed their previously
announced business combination (the
“
Transaction”), which was completed by way of a
plan of arrangement (the “
Arrangement”).
Concurrent with the Transaction, Blackbird and Pipestone Oil have
closed equity financings totaling $111.0 million with certain
existing shareholders and Pipestone Oil has arranged $198.5 million
of debt financing (collectively, the
“
Financings”). The closing of the Transaction and
Financings results in the strategic combination of two adjacent and
contiguous Pipestone Montney land bases under a single well
capitalized, high growth company that will operate under the name
Pipestone Energy Corp. (“
Pipestone Energy” or the
“
Company”).
Garth Braun, former Chairman, CEO, and President
of Blackbird, stated, “We are delighted to complete the merger with
Pipestone Oil and wish to thank our shareholders, employees, and
stakeholders for their support. We believe this Transaction will
deliver significant growth and value creation in a highly
challenged time for our domestic energy industry. As a pro forma
company, Pipestone Energy will have significant scale, diversified
access to processing and a combined potential value that we believe
is far greater than the sum of the parts.”
Paul Wanklyn, President and CEO of Pipestone
Energy, stated, “We are very pleased to have closed the Transaction
and Financings, and look forward to focusing on the execution of
our development plan. The significant financing commitment that
existing shareholders have made in connection with this combination
speaks to the high-quality nature of the assets and their support
of our business plan and management team. The innovative debt
structure, led by National Bank Financial, and including Bank of
Montreal, provides flexible development capital to fund our capital
program, alongside the equity commitments, through 2019. We look
forward to building value for Pipestone Energy shareholders in a
prudent and efficient manner in the years to come.”
It is expected that the common shares of
Pipestone Energy (the “Pipestone Energy Shares”)
will commence trading on the TSX Venture Exchange
("TSX-V") under the trading symbol "PIPE" within
two to three business days following the date of this press release
and the issuance of a bulletin by the TSX-V regarding completion of
the Arrangement. Blackbird’s existing common share purchase
warrants (“Warrants”) will continue as obligations
of Pipestone Energy and will retain the trading symbol
“BBI.WT”.
The Transaction was completed by way of a series
of amalgamations involving Blackbird, a wholly-owned subsidiary of
Blackbird and Pipestone Oil to create Pipestone Energy pursuant to
the Arrangement made effective today under the Business
Corporations Act (Alberta), which followed a pre-Arrangement
continuance of Blackbird to the Province of Alberta. Pursuant to
share conversion terms under the Arrangement, the issued and
outstanding common shares of Blackbird (the “Blackbird
Shares”) were converted to Pipestone Energy Shares and
effectively consolidated on a 10:1 basis (the
“Consolidation”). In connection with the
Arrangement, Pipestone Oil’s sole shareholder, Canadian
Non-Operated Resources L.P. (“CNOR L.P.”) received
103,750,000 Pipestone Energy Shares in exchange for its Pipestone
Oil shares, which made the Transaction a reverse take-over carried
out in accordance with TSX-V Policy 5.2 – Changes of Business and
Reverse Takeovers. Upon completion of the Arrangement and equity
financings, former Blackbird shareholders own approximately 45.3%
of the Pipestone Energy Shares issued and outstanding (or
approximately 50.8% on a fully diluted basis including all
pre-existing Blackbird dilutive securities), and CNOR L.P. owns
approximately 54.7% of the Pipestone Energy Shares. The Transaction
closed with the conditional approval of the TSX-V and remains
subject to final approval of the TSX-V which requires the filing of
customary closing documents.
As part of a share reorganization under the
Arrangement, Blackbird’s minority interest in the Stage Completions
Group of Companies was transferred to a holding company
(“Stage Holdco”) whose shares have been
distributed to former holders of Blackbird Shares.
Pursuant to the terms of the equity financings,
an aggregate of $111 million of equity was raised by Blackbird and
Pipestone Oil, all on a non-brokered, private placement basis.
Blackbird entered into the previously announced subscription
agreements with GMT Exploration Company LLC (“GMT
Exploration”) and certain funds and accounts managed by
its principal shareholder GMT Capital Corp. (“GMT
Capital”), pursuant to which GMT Capital and GMT
Exploration invested an aggregate of $26,010,000 in Blackbird
Shares, following the conversion of an equal number of subscription
receipts, at a pre-Consolidation price of $0.34 per subscription
receipt (the “GMT Private Placement”). GMT Capital
previously held approximately 11% of the Blackbird Shares and
following the closing of the equity financings and the Transaction
now holds less than 10% of the Pipestone Energy Shares. The GMT
Private Placement is subject to the final approval of the TSX-V,
which requires the filing of customary documents with the TSX-V.
The 76,500,000 Blackbird Shares issued pursuant to the GMT Private
Placement have been exchanged for 7,650,000 Pipestone Energy Shares
pursuant to the Arrangement. The GMT Private Placement was approved
by the shareholders of Blackbird at a special meeting of
shareholders on December 19, 2018 in connection with the approval
of the Arrangement and other matters. In addition, CNOR L.P.
invested $85 million in common shares of Pipestone Oil prior to
closing of the Transaction (the “CNOR
Commitment”). Proceeds of the GMT Private Placement and
the CNOR Commitment will be used for Pipestone Energy’s 2019
capital expenditure program, with a portion of the CNOR Commitment
having been used for Pipestone Oil’s Q4 2018 capital expenditure
program. The number of Pipestone Energy Shares issued to CNOR LP
pursuant to the Arrangement was determined with reference to $0.34
per Blackbird Share, and such 103,750,000 Pipestone Energy Shares
are subject to the escrow provisions of TSX-V Policy 5.4 – Escrow,
Vendor Considerations and Resale Restrictions. No finders’ fees or
commissions were payable with respect to the equity financings. A
previously announced potential private placement to certain
insiders of Pipestone Energy at a price of $3.40 per share did not
proceed as of the date of this announcement.
After giving effect to the Arrangement, pursuant
to which each former shareholder of Blackbird (the Blackbird Shares
closed at $0.24 per share on the TSX-V on January 3, 2019) received
0.1 of one Pipestone Energy Share and one share of Stage Holdco for
each Blackbird Share previously held, Pipestone Energy has
approximately 189.6 million Pipestone Energy Shares outstanding and
175.2 million Warrants. Pursuant to automatic adjustment
provisions, each Warrant is now exercisable for 0.1 of one
Pipestone Energy Share and one Stage Holdco Class A common share at
an exercise price of $0.30 per Warrant until the Warrants expire in
accordance with their terms on May 19, 2021 (subject to future
adjustment in accordance with their terms).
The Pipestone Energy management team is led by
Paul Wanklyn as President and CEO, Bob Rosine as Senior VP &
COO, Dave Allen as VP Geoscience, Darcy Erickson as VP Operations,
Dan van Kessel as VP Corporate Development, and Eva Kiefer as
interim CFO.
The Pipestone Energy board of directors is
comprised of Gordon Ritchie as Chairman, Garth Braun, Bill
Lancaster, John Rossall, Geeta Sankappanavar, Robert Tichio, and
Paul Wanklyn.
Operations Update
Drilling:
During Q4 2018, Pipestone Energy drilled 4
Montney development wells to support its exit 2019 growth, as well
as 1 exploratory well on the far eastern portion of its acreage to
test the emerging volatile oil window in the Montney and preserve 9
sections that were nearing expiry. On the 3-1 pad, the Company has
drilled 3 of its planned 5 wells, with the third well representing
a pacesetter for Pipestone Energy in terms of speed and cost.
Estimated average drilling costs for the last two wells on this pad
at rig release were $2.2 million, or ~12% under our budget of $2.5
million.
Completions:
At its 15-14 pad the Company completed a 6 well
cube in three separate layers, including its first Lower Montney
well, during the fourth quarter. These wells were all completed
utilizing plug and perf technology and averaged 202 perforation
clusters at 12 meter spacing. Frac sand volumes averaged ~6,200
tonnes per well, resulting in an average proppant loading of 2.5
tonnes per meter. Pipestone Energy is estimating an average
completion cost of $4.7 million per well, a savings of ~19%
relative to the average budgeted cost of $5.8 million. Our team was
able to capitalize on the benefits of pad style, multi-well
operations and to optimize costs through better logistics, water
and sand management, and equipment utilization. Our location close
to the Grande Prairie service hub contributes to our ability to
optimize costs based on the speed of delivery of services to the
work site.
Infrastructure:
Pipestone’s raw gas gathering system and well
site production facilities are under construction and proceeding on
budget, with completion expected in Q3 2019. Initial engineering
design work is underway to link the east-west (Tidewater) and
north-south (Keyera) in-field gathering systems for added
flexibility in order to optimize natural gas and condensate
deliveries to our midstream service providers.
Updated Capitalization and Guidance
The Company is providing updated guidance with
respect to capital expenditures, with some capital shifting from Q4
2018E to 2019E, without modifying the total five quarter forecast
spending range. Capital guidance for Q4 2018 is lower due to
capital cost savings generated from drilling and completions
efficiencies and a delay in the construction of the infield
gathering system because of warmer than expected weather in late
November / early December. The estimated capital cost savings from
Q4 2018E are not expected to alter the potential range of five
quarter capital expenditures at this time. Pipeline construction is
now actively underway, and the initial pipeline delay will not
impact production start-up timing to the Keyera or Tidewater
facilities.
|
|
Capitalization |
|
Common Shares Outstanding (MM) |
|
~189.6 |
Listed Warrants Outstanding (MM)(1) |
|
~175.2 |
Estimated
Adjusted Net Debt (Cash) as at December 31, 2018 ($MM)(2) |
|
|
$36 |
|
|
|
Capital Expenditures |
|
|
Q4 2018E ($MM) |
|
$85 to
$95 |
2019E ($MM) |
|
$135 to
$165 |
|
|
|
Forecast
Production and Netback |
|
|
|
Average
2019E (boe/d) |
|
|
3,000
to 3,500 |
Exit
2019E (boe/d) |
|
|
14,000
to 16,000 |
Exit
2019E Estimated Liquids Weighting (%) |
|
|
35-40%
Condensate + 5-10% NGLs |
Run-Rate
Exit 2019E Operating Netback ($/boe)(3) |
|
|
$21.50 |
|
|
|
|
(1) Each warrant is exercisable for 0.1 common shares in
Pipestone Energy and 1 common share of Stage Holdco.(2) Includes
estimated transaction costs and proceeds from the Financings and
does not include any proceeds from the exercise of Blackbird
dilutive securities.(3) Flat US$55/bbl WTI, C$1.40/GJ AECO, $0.75
CADUSD.
|
Reserves
and Resources |
|
|
|
|
|
|
|
Volume (MMboe) |
|
NPV 10% (before-tax)(1)($MM) |
Proved Reserves |
|
~79 |
|
~$555 |
2P Reserves |
|
~165 |
|
~$1,170 |
2C Resources |
|
~221 |
|
~$810 |
(1) |
|
Based on
McDaniel reserves and resource evaluations effective August 1,
2018, utilizing the McDaniel July 1, 2018 price deck. These pro
forma reserves and resources are based on the addition of two
individual McDaniel’s evaluations that were completed in accordance
with National Instrument 51-101 Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”) and, pursuant thereto, the Canadian
Oil and Gas Evaluation Handbook (“COGE Handbook”); as a result of
the pro forma nature, a revised stand-alone reserves, and or
resources report may differ. |
|
|
|
Further Information
Paul
WanklynPresident and Chief Executive Officer(403)
228-8684paul.wanklyn@pipestonecorp.com |
Dan
van KesselVP Corporate Development(403)
228-8688dan.vankessel@pipestonecorp.com |
Website: www.pipestonecorp.com
Advisory Regarding Forward-Looking
Statements
In the interest of providing shareholders of
Pipestone Energy information regarding the Transaction, this news
release contains certain information and statements
(“forward-looking statements”) that constitute forward-looking
information within the meaning of applicable Canadian securities
laws. Forward-looking statements relate to future results or events
are based upon internal plans, intentions, expectations and
beliefs, and are subject to risks and uncertainties that may cause
actual results or events to differ materially from those indicated
or suggested therein. All statements other than statements of
current or historical fact constitute forward-looking statements.
Forward-looking statements are typically, but not always,
identified by words such as “anticipate”, “estimate”, “expect”,
“intend”, “forecast”, “continue”, “propose”, “may”, “will”,
“should”, “believe”, “plan”, “target”, “objective”, “project”,
“potential” and similar or other expressions indicating or
suggesting future results or events.
Forward-looking statements are not promises of
future outcomes. There is no assurance that the results or events
indicated or suggested by the forward-looking statements, or the
plans, intentions, expectations or beliefs contained therein or
upon which they are based, are correct or will in fact occur or be
realized (or if they do, what benefits Pipestone Energy may derive
therefrom).
In particular, but without limiting the
foregoing, this news release contains forward-looking statements
pertaining to: future development potential for the Pipestone
Energy assets; obtaining the final approval of the TSX-V and the
date that the Pipestone Energy Shares will commence trading on the
TSX-V; anticipated completion costs per well; anticipated
completion dates for the development of infrastructure projects;
anticipated strategic, financial and operational benefits of the
Transaction, including, but not limited to, 2019E, 2022E and future
estimated production, estimated capital expenditures; operating
netbacks, and Pipestone Energy’s IRR’s; and Pipestone Energy’s
proposed drilling locations.
Certain of the information in this news release
is “financial outlook” within the meaning of applicable securities
laws. The purpose of this financial outlook is to provide readers
with disclosure regarding Pipestone’s reasonable expectations as to
the anticipated results of its proposed business activities.
Readers are cautioned that this financial outlook may not be
appropriate for other purposes.
With respect to the forward-looking statements
contained in this news release, Pipestone Energy have assessed
material factors and made assumptions regarding, among other
things: future commodity prices and currency exchange rates,
including consistency of future oil, natural gas liquids (NGLs) and
natural gas prices with current commodity price forecasts; the
ability to integrate Blackbird’s and Pipestone Oil’s businesses and
operations and realize financial, operational and other synergies
from the Transaction; Pipestone Energy’s continued ability to
obtain qualified staff and equipment in a timely and cost-efficient
manner; the predictability of future results based on past and
current experience; the predictability and consistency of the
legislative and regulatory regime governing royalties, taxes,
environmental matters and oil and gas operations, both provincially
and federally; Pipestone Energy’s ability to successfully market
its production of oil, NGLs and natural gas; the timing and success
of drilling and completion activities (and the extent to which the
results thereof meet expectations); Pipestone Energy’s future
production levels and amount of future capital investment, and
their consistency with Pipestone Energy’s current development plans
and budget; future capital expenditure requirements and the
sufficiency thereof to achieve Pipestone Energy’s objectives; the
successful application of drilling and completion technology and
processes; the applicability of new technologies for recovery and
production of Pipestone Energy’s reserves and other resources, and
their ability to improve capital and operational efficiencies in
the future; the recoverability of Pipestone Energy's reserves and
other resources; Pipestone Energy’s ability to economically produce
oil and gas from its properties and the timing and cost to do so;
the performance of both new and existing wells; future cash flows
from production; future sources of funding for Pipestone Energy’s
capital program, and its ability to obtain external financing when
required and on acceptable terms; future debt levels; geological
and engineering estimates in respect of Pipestone Energy’s reserves
and other resources; the accuracy of geological and geophysical
data and the interpretation thereof; the geography of the areas in
which Pipestone Energy conducts exploration and development
activities; the timely receipt of required regulatory approvals;
the access, economic, regulatory and physical limitations to which
Pipestone Energy may be subject from time to time; and the impact
of industry competition.
Information and statements regarding Pipestone
Energy’s reserves and resources also are forward-looking
statements, as they involve the implied assessment, based on
certain estimates and assumptions, that the reserves and resources
exist in the quantities predicted or estimated and can be
profitably produced in the future. In addition, with respect to the
type curves and test rates, there is no certainty that future wells
will generate results to match type curves or test rates presented
herein.
The forward-looking statements contained herein
reflect management's current views, but the assessments and
assumptions upon which they are based may prove to be incorrect.
Although Pipestone Energy believes that its underlying assessments
and assumptions are reasonable based on currently available
information, undue reliance should not be placed on forward-looking
statements, which are inherently uncertain, depend upon the
accuracy of such assessments and assumptions, and are subject to
known and unknown risks, uncertainties and other factors, both
general and specific, many of which are beyond Pipestone Energy’s
control, that may cause actual results or events to differ
materially from those indicated or suggested in the forward-looking
statements. Such risks and uncertainties include, but are not
limited to, volatility in market prices and demand for oil, NGLs
and natural gas and hedging activities related thereto; the ability
to successfully integrate Blackbird’s and Pipestone Oil’s
businesses and operations; general economic, business and industry
conditions; variance of Pipestone Energy’s actual capital costs,
operating costs and economic returns from those anticipated; the
ability to find, develop or acquire additional reserves and the
availability of the capital or financing necessary to do so on
satisfactory terms; and risks related to the exploration,
development and production of oil and natural gas reserves and
resources. Additional risks, uncertainties and other factors are
discussed in Blackbird’s current annual information form as well as
the Blackbird Management Information Circular dated November 21,
2018, annual and interim management’s discussion and analysis, and
other documents filed by it from time to time with securities
regulatory authorities in Canada, copies of which are available
electronically on SEDAR at www.sedar.com.
The forward-looking statements contained in this
news release are made as of the date hereof and Pipestone Energy
assumes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, unless required by applicable securities laws. All
forward-looking statements herein are expressly qualified by this
advisory.
Non-GAAP Financial and Capital
Management Measures
This news release contains references to “free
cash flow”, “funds from operations”, “operating netback”, “IRR” or
“internal rate of return”, “adjusted net debt”, and “net operating
income” which are terms commonly used in the oil and natural gas
industry but without any standardized meaning or method of
calculation prescribed by International Financial Reporting
Standards (“IFRS”) or applicable law. Accordingly, Pipestone
Energy’s determination of these metrics may not be comparable to
similar measures presented by other issuers.
“Free cash flow” should not be considered an
alternative to, or more meaningful than, cash flow – operating
activities as determined in accordance with IFRS, as an indicator
of financial performance. Free cash flow is presented to assist
management and investors in analyzing operating performance by the
business in the stated period. Free cash flow equals cash flow –
operating activities plus change in non-cash working capital less
capital expenditures.
Funds from operations is a non-GAAP measure
which should not be considered an alternative to, or more
meaningful than, cash flow – operating activities as determined in
accordance with IFRS, as an indicator of financial performance.
Funds from operations is presented to assist management and
investors in analyzing operating performance of the Company in the
stated period. Funds from operations equals cash flow – operating
activities plus change in non-cash working capital.
“IRR” or “internal rate of return” is a rate of
return measure used to compare the profitability of an investment
and represents the discount rate at which the net present value of
costs equals the net present value of the benefits. The higher a
project’s IRR, the more desirable the project.
“Operating netback” equals the total of
petroleum and natural gas sales less royalties, operating expenses
and transportation and processing expenses calculated on a per boe
basis. Operating netback is utilized by Pipestone Energy to analyze
the performance of its oil and natural gas assets at the
field-level by isolating the impact of changes in production
volumes.
“Adjusted net debt” is a non-GAAP measure that
equals total debt less current assets plus current liabilities
(excluding any amounts included in total debt), and includes
transaction costs and the Financings. Total debt is calculated as
long-term debt, long-term debt due within one year and short-term
debt. Adjusted net debt is considered to be a useful measure in
assisting management and investors to evaluate Pipestone Energy’s
financial strength.
“Net operating income” represents revenue net of
royalties and operating, sales and transportation expenses.
Management believes that net operating income is a useful
supplemental measure to analyze operating performance and provides
an indication of the results generated by Pipestone Energy’s
principal business activities prior to the consideration of other
income and expenses.
Blackbird Energy Inc. (TSXV:BBI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Blackbird Energy Inc. (TSXV:BBI)
Historical Stock Chart
From Sep 2023 to Sep 2024