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STATES SECURITIES LAWS
Blackbird Energy Inc. (“
Blackbird”) (TSX-V: BBI)
and Pipestone Oil Corp. (“
Pipestone Oil”) are
pleased to announce that they have entered into an agreement (the
“
Arrangement Agreement”) dated October 29, 2018
that provides for the combination of Blackbird and Pipestone Oil
(the “
Transaction”). Concurrent with the
Transaction, Blackbird and Pipestone Oil have entered into
agreements with certain of their existing shareholders who have
committed to common equity financings totaling $111.0 million and
Pipestone Oil has arranged $198.5 million of debt financing
(collectively, the “
Financings”). The Transaction
and Financings will result 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”).
Pipestone Energy will be the operator of a
pure-play condensate-rich Montney asset in the Pipestone area near
Grande Prairie with proved plus probable reserves (“2P
Reserves”) of ~165 MMboe (~36% condensate / oil + ~11%
NGLs) and risked best estimate contingent resources (“2C
Resources”) of ~221 MMboe (~36% condensate / oil + ~10%
NGLs) booked on only ~58% of total lands, as evaluated by McDaniel
& Associates Consultants Ltd. (“McDaniel”)(1).
The McDaniel reserves and resource evaluations support sustained
production potential of greater than 50,000 boe/d with an
associated before-tax 2P Reserves NPV10% of ~$1.2 billion and
before-tax 2C Resources NPV10% of ~$0.8 billion (in each case based
on forecast pricing)(1). The Financings fully fund Pipestone Energy
to achieve its planned 2019 restricted exit production rate of
14,000 to 16,000 boe/d, with diversified processing and egress
solutions already in place.
The Transaction will be completed by way of an
amalgamation of Blackbird and Pipestone Oil to create Pipestone
Energy pursuant to a plan of arrangement (the
“Arrangement”) under the Business Corporations Act
(Alberta) with a pre-Arrangement continuance of Blackbird to
Alberta. Pursuant to share conversion terms under the Arrangement,
the issued and outstanding common shares of Blackbird
(“Blackbird Shares”) will be converted to common
shares of Pipestone Energy (“New Shares”) and
effectively consolidated on a 10:1 basis (the
“Consolidation”). Pipestone Oil’s sole shareholder
Canadian Non-Operated Resources L.P. (“CNOR LP”)
will be entitled to receive 103.75 million New Shares (equivalent
to 1.0375 billion pre-Consolidation Blackbird Shares). Upon
completion of the Arrangement and Financings, Blackbird
shareholders would own approximately 45.1% of the New Shares to be
outstanding (or approximately 50.8% on a fully diluted basis
including all existing Blackbird dilutive securities).
The amalgamation of Blackbird and Pipestone Oil
is intended to be tax-deferred for Canadian federal income tax
purposes for shareholders of both entities and to qualify as a
tax-free (or tax-deferred) reorganization for U.S. federal income
tax purposes. As part of a share reorganization under the
Arrangement, Blackbird’s minority interest in the Stage Completions
Group of Companies will be transferred to a holding company
(“Stage Holdco”) whose shares will be distributed
to Blackbird’s shareholders.
Garth Braun, Chairman, CEO, and President of
Blackbird, stated, “While on the cusp of a significant growth
trajectory, we are pleased to provide our shareholders with this
transformative opportunity that further de-risks Blackbird’s path
to unlock the potential of our Pipestone Montney resource. This
accretive transaction will accelerate value for our shareholders
through an expanded high-graded inventory of top tier drilling
locations, enhanced access to lower cost equity and debt capital
and a world-class development team to continue the advancement of
our premier condensate rich Montney asset in a socially and
environmentally responsible manner. This next phase of development
will see the combined company grow to a level where it will deliver
meaningful free cash flow to our shareholder base. The combination
of these two companies creates scale, diversified access to
processing and a combined potential value that will be greater than
the sum of the parts.”
Paul Wanklyn, President and CEO of Pipestone
Oil, stated, “The assets of Blackbird and Pipestone Oil are a
perfect fit and we are excited to bring them together at this early
stage as it will afford many operational synergies as the company
moves into large scale development. 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. We look
forward to building value for Blackbird and Pipestone Oil
shareholders in a prudent and efficient manner in the years to
come.” Rick Grafton, co-founder of Grafton Asset Management,
stated, “The significant financial commitment we have made
underscores the confidence level we have in the long-term value
creation that Pipestone Energy can deliver to its
shareholders.”
(1) |
|
The
McDaniel reserves and resource evaluations are effective August 1,
2018, utilizing the McDaniel July 1, 2018 price deck, which has
been prepared in accordance with the COGE Handbook and NI
51-101. |
Key Investment Highlights of Pipestone
Energy
- A pure-play Pipestone
Montney company with the single largest condensate-rich acreage
position in the sweet spot of the over-pressured window of the
fairway
- Over 98,000 net acres of Montney lands within the very rich gas
condensate window at Pipestone;
- Up to four separate Montney development horizons tested on
Pipestone Energy’s lands or in close proximity contribute to over
175 meters of average Montney thickness across the land base;
- Pipestone Oil currently has ~9,000 boe/d of restricted
production behind pipe from nine wells, based on 2P Reserves type
curves, with an additional six wells scheduled to be completed by
year end 2018; and
- The land base is well delineated with 31 horizontal wells
across the property.
- Type curve forecasts are
supported by strong initial test results and offsetting production
validated by industry’s successful delineation efforts
- McDaniel’s Very Rich Gas Condensate 2
(“VRGC2”) Pipestone Montney B and C type curves,
which are representative of the near-term development plans,
generate half-cycle IRRs of ~55% to >95% with payout periods of
~17 months to ~13 months(1); and
- Strong initial test results with rates of 900 to 3,100 boe/d
(average ~1,800 boe/d) and condensate gas ratios of up to ~300
bbl/MMcf (average ~170 bbl/MMcf)(2).
- Decades of drilling
inventory established with significant reserves and resource
recognition
- Management has identified 1,450 potential drilling locations in
four Montney development horizons;
- 2P Reserves of ~165 MMboe (~$1.2 billion before tax NPV 10%)
and 2C Risked Resource of ~221 MMboe (~$0.8 billion before tax NPV
10%) with 555 drilling locations booked;
- Only two out of four prospective layers have been booked as
either reserves or resource; and
- Completing an exploratory Lower Montney well with initial test
results expected before year end 2018.
- Committed funding to
achieve forecast 2019 exit production rate of 14,000 to 16,000
boe/d
- The integrated development plan for the combined asset base
contemplates total capital expenditures of ~$220 to $260 million
for Q4 2018E and 2019E, including ~$100 million for field
gathering, well site facilities, and water handling;
- The planned capital expenditures are fully funded by the
Financings and forecast cash flow from operations; and
- Based on forecast exit 2019 production rates and an estimated
operating netback of $28(1) per boe, Pipestone Energy forecasts
run-rate annualized net operating income of $145 to $165
million.
- Positioned for significant long-term growth and free
cash flow generation
- On a combined basis, Pipestone
Energy will have firm access to natural gas processing and egress
solutions to support production of greater than 30,000 boe/d by
2022E; and
- The McDaniel reserves and resource
evaluations support sustained production potential of greater than
50,000 boe/d from two Montney development intervals, with
additional upside from the Montney A and Lower Montney.
(1) |
|
Flat
US$65/bbl WTI, C$1.90/GJ ($2.00/Mcf) AECO, $0.775 CADUSD (the
“Pricing Assumptions”). Assumes a 2,500 meter
lateral length. |
(2) |
|
Represents production over the last 24 hours of a production
test. |
Strategic Rationale for Blackbird
Shareholders
The Transaction would have significant benefits
for Blackbird shareholders resulting from increased scale and
access to capital as well as ownership in a pro forma company with
a high-graded development inventory that is well positioned to
execute on a development plan that would more efficiently unlock
the value of its Pipestone Montney assets.
- The strategic combination
provides shareholders with continued exposure to a stronger
world-class Montney growth story
- Significantly bolsters high-graded drilling inventory within
the economic sweet spot of the play; and
- Material operating synergies to be realized through more
efficient development of interlocking lands.
- A de-risked financing
strategy accelerates the path to increase production, cash flow and
value
- Improved cost of capital versus stand-alone scenarios to access
required development funding;
- The development plan to reach forecast 2019 exit production of
14,000 to 16,000 boe/d is fully funded by committed equity and term
debt and forecast funds from operations; and
- The pro forma exit 2019 forecast is expected to be
significantly accretive to Blackbird’s stand-alone forecast on a
production and cash flow per share basis.
- Compelling value to enhance
exposure to the Pipestone Montney resource play
- ~305% increase (3 to 14 MMboe) in proved developed reserves
(~70% per fully diluted share after the Financings);
- ~171% increase (29 to 79 MMboe) in total proved reserves (~14%
per fully diluted share after the Financings); and
- ~180% increase (59 to 165 MMboe) in total 2P Reserves (~17% per
fully diluted share after the Financings).
- Improved business
flexibility, size, liquidity, access to capital and diversified
exposure to processing and egress helps lift pro forma market
positioning
- Equity and debt capital providers have demonstrated a
significant commitment to the larger scale, combined company;
and
- The Transaction increases the number of alternatives available
to process and sell petroleum products produced from Blackbird’s
assets.
- Experienced management team and strong
governance
- To ensure continuity of leadership,
the new seven member board of Pipestone Energy includes two
Blackbird nominees, including Garth Braun, Chairman, CEO, and
President of Blackbird; and
- The management team of Pipestone
Energy has the requisite experience to continue to develop the
combined asset base in an efficient, economic, ethical, safe and
environmentally responsible manner.
Board of Directors and Management Team
of Pipestone Energy
Pipestone Energy will be led by Paul Wanklyn,
President and Chief Executive Officer and Bob Rosine, Chief
Operating Officer. Certain employees of both companies will have
roles in Pipestone Energy.
The board of directors of Pipestone Energy will
be comprised of the following seven members: two Blackbird
nominees, Garth Braun (Chairman, CEO, and President of Blackbird)
and Bill Lancaster (President of GMT Exploration Company LLC);
three Pipestone Oil nominees, Geeta Sankappanavar (Co-Founder &
President of Grafton Asset Management), Robert Tichio (Partner at
Riverstone Holdings LLC), and Paul Wanklyn (President and CEO of
Pipestone Energy); and two additional independent nominees (one of
whom will serve as the Chairperson of the Pipestone Energy board of
directors). Richard Grafton will serve as a strategic advisor to
the board of directors. In connection with the Transaction,
Pipestone Energy will enter into a nomination agreement with CNOR
LP providing for nomination rights for three directors as of the
date of closing of the Transaction, which initially will be Geeta
Sankappanavar, Robert Tichio, and Paul Wanklyn, with such number of
director nominees subject to continued Pipestone Energy
shareholding requirements for CNOR LP.
Key Attributes of Pipestone Energy and
Preliminary Guidance
Capitalization and Preliminary Guidance
Capitalization (Prior to the Proposed
10:1 Share Consolidation) |
|
Common Shares Outstanding (B) |
~1.9 |
Listed Warrants Outstanding (MM) |
~175.2 |
Estimated Adjusted Net Debt (Cash) as at
September 30, 2018 ($MM)(1) |
~$(60.0) |
|
|
Capital Expenditures |
|
Q4 2018E ($MM) |
$110 to $120 |
2019E ($MM) |
$110 to $140 |
|
|
Forecast Production and
Netback |
|
Average 2019E (boe/d) |
3,000 to 3,500 |
Exit 2019E (boe/d) |
14,000 to 16,000 |
Exit 2019E Estimated Liquids Weighting (%) |
35-40% Condensate + 5-10% NGLs |
Operating Netback ($/boe)(2) |
~$28 |
(1) |
|
Includes
estimated transaction costs and proceeds from the Financings, and
does not include any proceeds from the exercise of Blackbird
dilutive securities. |
(2) |
|
Based on
the Pricing Assumptions. |
|
|
|
Select Pipestone Energy Type Curve Parameters and
Economics
Pipestone Energy Montney VRGC2
Type Curves |
|
|
Montney B |
|
Montney C |
Parameters |
|
|
|
|
DC&T Cost ($MM) |
|
$9.7 |
|
$9.7 |
Raw Gas EUR (Bcf) |
|
4.2 |
|
3.4 |
Condensate EUR (Mbbls) |
|
392 |
|
313 |
Average Horizontal Length (m) |
|
2,500 |
|
2,500 |
Frac Intensity (t/m) |
|
2.5 |
|
2.5 |
|
|
|
|
|
|
|
Montney B |
|
Montney C |
Economics(1) |
|
|
|
|
Payout (months) |
|
13 |
|
17 |
Before-tax IRR (%) |
|
96% |
|
58% |
Before-tax NPV 10% ($MM) |
|
$9.8 |
|
$6.3 |
(1) |
|
Based
on the Pricing Assumptions. |
|
|
|
Reserves and Resources
|
|
Volume (MMboe) |
|
NPV 10%
(before-tax)(1)($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. |
Processing and Egress Solutions
Pipestone Energy will have firm access to 60
MMcf/d of natural gas gathering, compression and processing through
the Keyera Wapiti Gas Plant beginning in Q4 2019E, with an option
to increase to 90 MMcf/d at the company’s election, and firm access
to 20 MMcf/d through the planned Tidewater Pipestone Gas Plant
beginning in Q3 2019E, ramping to 30 MMcf/d by 2021E.
Pipestone Energy has secured diversified
transportation and egress capacity on the TransCanada and Alliance
pipeline systems to materially match its processing commitments and
growth plans, while delivering production beyond congested AECO
markets. Pipestone Energy will also maintain preferred access to
the Tidewater gas storage facility.
The Financings
Pursuant to the terms of the Financings, an
aggregate of $111 million of equity will be raised by Blackbird and
Pipestone Oil on a committed basis, with the new directors and
officers of Pipestone Energy anticipated to contribute an
additional amount up to $4.4 million, all on a non-brokered,
private placement basis. Blackbird has entered into subscription
agreements with GMT Exploration Company LLC and certain funds and
accounts managed by its principal shareholder GMT Capital Corp.
(“GMT”), pursuant to which GMT will invest ~$26
million in Blackbird Shares on a subscription receipt basis at a
pre-Consolidation price of $0.34 per subscription receipt (the
“GMT Private Placement”). GMT currently holds ~11%
of the Blackbird Shares. It is anticipated that on the closing of
the Transaction, insiders of Pipestone Energy will subscribe for up
to $4.4 million of New Shares at a price of $3.40 per share. The
GMT Private Placement and the private placement to insiders are
each subject to the approval of the TSX Venture Exchange (the
“TSX-V”). Pipestone Oil has a commitment from CNOR
LP to invest $85 million in common shares of Pipestone Oil on or
prior to closing of the Transaction (the “CNOR
Commitment”). Closing of each of the GMT Private Placement
and the CNOR Commitment is conditional on the closing of the
Transaction. Proceeds of the GMT Private Placement and the CNOR
Commitment will be used for Pipestone Energy’s 2019 capital
expenditure program. No finders fees or commissions will be payable
with respect to the equity financings. The number of New
Shares issuable to CNOR LP pursuant to the Arrangement was
determined with reference to $0.34 per Blackbird Share.
In conjunction with the Transaction, Pipestone
Oil has been provided a binding commitment letter and term sheet
for a $198.5 million two-year first lien credit facility (the
“Credit Facility”), which will be used to fund a
portion of the 2019 capital expenditure program and repay existing
indebtedness. The Credit Facility is comprised of a $10.0 million
revolving credit facility, a $20.0 million letter of credit
facility, and a $168.5 million term loan (“Term
Loan”). The Term Loan is available in tranches between the
anticipated Transaction closing date and Q1 2020 to fund capital
expenditures and to repay existing indebtedness. The interest rate
on the revolving and letter of credit facilities is Prime + 300
bps, and payable in cash on a monthly basis. The Term Loan carries
a swapped floating-to-fixed interest rate of 9.75%, which is funded
through a payment-in-kind interest reserve tranche of $9.0 million.
The Credit Facility is not subject to any scheduled borrowing base
redeterminations or financial covenants. The closing of the Credit
Facility financing, including the execution of a definitive credit
agreement, is expected to occur concurrently with Transaction
closing, anticipated to be in early January 2019.
Support for the Transaction
The Blackbird board of directors has unanimously
approved the Transaction, determined that the Transaction is in the
best interest of Blackbird, and has recommended that the holders of
Blackbird Shares vote in favour of the Transaction. Cormark
Securities Inc. has provided an opinion to the Blackbird board of
directors that, based upon and subject to the assumptions,
limitations and qualifications set forth therein, the consideration
to be received by the holders of Blackbird Shares pursuant to the
Arrangement is fair from a financial point of view to the holders
of Blackbird Shares. BMO Capital Markets has provided an opinion to
the Blackbird board of directors that, based upon and subject to
the assumptions, limitations and qualifications set forth therein,
the consideration to be received by the holders of Blackbird Shares
pursuant to the Arrangement is fair from a financial point of view
to the holders of Blackbird Shares. All of the directors and
officers of Blackbird, and Blackbird’s principal shareholder GMT,
have entered into agreements with Pipestone Oil pursuant to which
they have agreed to vote their Blackbird Shares in favour of the
Transaction, representing approximately 16.9% of the issued and
outstanding Blackbird Shares.
Conditions and Blackbird Shareholder
Meeting
Completion of the Arrangement will be subject to
the approval of the holders of Blackbird Shares at a meeting to be
called to consider the Arrangement (the “Blackbird
Meeting”), by: (i) a majority of not less than 66⅔ percent
of votes cast in person or by proxy; and (ii) a “majority of the
minority” vote to be held in accordance with Policy 5.9 of the
TSX-V. As a result of the GMT Private Placement, GMT’s shares will
be excluded from the majority of the minority vote.
In addition to shareholder approval, the
Arrangement is also subject to the receipt of certain regulatory,
court and TSX-V approvals and certain other closing conditions
customary in transactions of this nature, including under the
Competition Act (Canada). The Arrangement is an “Arm’s Length
Transaction” as contemplated by TSX-V Policy 5.2.
The Arrangement Agreement includes customary
provisions relating to non-solicitation and a fiduciary-out in the
event a financially superior offer is received by either Blackbird
or Pipestone Oil, subject to the other party’s right to match such
superior offer. The Arrangement Agreement also provides for mutual
non-completion fees in the amount of $12 million in the event that
the Arrangement is not completed or the Arrangement Agreement is
terminated by either party in certain circumstances.
Further details regarding the Arrangement will
be contained in an information circular (the “Information
Circular”) to be sent to Blackbird securityholders in
connection with the Blackbird Meeting. The Information Circular is
expected to be mailed to holders of Blackbird Shares within the
next two to three weeks with the Blackbird Meeting to be held
thereafter and the Transaction is anticipated to be closed in early
January 2019. All holders of Blackbird Shares are urged to read the
Information Circular once available as it will contain additional
important information concerning the Arrangement. A copy of the
Arrangement Agreement and the Information Circular and related
documents will be filed with Canadian securities regulators and
will be available on Blackbird’s profile at www.sedar.com.
Effect on Outstanding Blackbird Options
and Public Warrants
Convertible securities of Blackbird not
exercised before closing will remain outstanding following
completion of the Transaction, and will be automatically adjusted
for the conversion of Blackbird Shares to New Shares and effective
Consolidation under the Arrangement to thereafter be exercisable
for 0.1 of a New Share following completion. In accordance with the
warrant indenture governing Blackbird’s publicly-listed warrants, a
warrant holder who duly exercises warrants after closing of the
Transaction will also receive, in addition to New Shares, one Stage
Holdco share for every warrant exercised.
Advisors
Cormark Securities Inc., as Lead, and BMO
Capital Markets are acting as financial advisors to Blackbird with
respect to the Transaction. Bennett Jones LLP is acting as
Blackbird’s legal advisor.
Peters & Co. Limited is acting as the
exclusive financial advisor to Pipestone Oil with respect to the
Transaction. National Bank Financial is acting as strategic advisor
to Pipestone Oil and the Lead Arranger and Sole Bookrunner with
respect to the Credit Facility. CIBC World Markets acted as a
strategic advisor to the CNOR LP board of directors. Osler, Hoskin
& Harcourt LLP is acting as Pipestone Oil’s legal advisor.
Conference Call and Webcast
Blackbird and Pipestone Oil will host a
conference call and webcast to discuss the proposed merger today.
The details of the conference call and webcast are below.
An updated corporate presentation (Link:
Presentation) highlighting the strategic combination of Blackbird
and Pipestone Oil is available on Blackbird’s website at
www.blackbirdenergyinc.com and Pipestone Oil’s website at
www.pipestoneoilcorp.com.
Conference Call October 31,
2018 |
8:30 a.m. MDT (10:30 a.m.
EDT) |
Blackbird and Pipestone Oil will host a
conference call tomorrow, October 31, 2018, starting at 8:30 am MDT
(10:30 am EDT). To participate please dial toll free in North
America 1-866-470-2346 or international 1-409-217-8310 and
enter 6676599 when prompted. Alternatively, to listen to the
conference call online, please
enter https://edge.media-server.com/m6/p/6ao4tgkr in your web
browser. |
|
An archived recording of the conference call
will be available shortly after the event by accessing the webcast
link above. The conference call will also be archived on
Blackbird’s website at www.blackbirdenergyinc.com and Pipestone
Oil’s website at www.pipestoneoilcorp.com. |
Advisory Regarding Forward-Looking
Statements
In the interest of providing shareholders of
Blackbird and potential investors information regarding Blackbird,
Pipestone Oil and Pipestone Energy and 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: expected timing to mail the Information Circular and
to complete the Transaction; anticipated strategic, financial and
operational benefits of the Transaction, including, but not limited
to, 2019E, 2022E and future estimated production, estimated capital
expenditures; drilling plans for 2018; 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, Blackbird and Pipestone Oil 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; the ability to obtain regulatory approvals
and meet other closing conditions for 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 Blackbird’s
and Pipestone Oil’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 Blackbird and Pipestone Oil each believe 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 obtain approvals for the
Transaction; 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, 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 Blackbird and
Pipestone Oil assume 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, Blackbird’s and
Pipestone Oil’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 Oil’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.
Advisory Regarding Oil and Gas
Information
General
Information in this news release regarding
Blackbird’s and Pipestone Oil’s estimated reserves and resources,
net present value of related future net revenue, and production is
expressed on a net Blackbird and Pipestone Oil (as applicable)
interest basis, being their respective working interest (operating
and non-operating) share after deduction of royalty obligations
plus any royalty interest. Estimates of future net revenue are
after deduction of forecasted royalties, operating costs, estimated
well abandonment and reclamation costs and estimated future
development costs, but without any provision for interest costs,
debt service charges or general and administrative expenses.
Reserves and resources volumes attributed to
Blackbird’s and Pipestone Oil’s properties and related future net
revenue are estimates only. There is no assurance that the
estimated reserves and resources can or will be recovered or that
estimated future net revenues will be realized. Actual reserves and
resources may be greater or less than those estimated, and the
difference may be material. Similarly, estimated net present values
of related future net revenue attributed to reserves and resources
do not represent fair market value of those reserves or resources
(whether or not risked). There is no assurance that the forecast
prices and cost assumptions applied in evaluating the reserves and
estimating related future net revenue will be attained, and
variances between actual and forecast prices and costs may be
material. An estimate of risked NPV of future net revenue of
contingent resources is preliminary in nature and is provided to
assist the reader in reaching an opinion on the merit and
likelihood of Blackbird or Pipestone Oil proceeding with the
required investment. It includes contingent resources that are
considered too uncertain with respect to the chance of development
to be classified as reserves. There is uncertainty that the risked
NPV of future net revenue will be realized.
The determination of oil and gas reserves and
resources involves estimating subsurface accumulations of oil,
condensate NGLs and natural gas that cannot be exactly measured.
The preparation of estimates is subject to an inherent degree of
associated risk and uncertainty, including factors that are beyond
Blackbird’s or Pipestone Oil’s, as applicable, control. The
estimation and classification of reserves and resources is a
complex process involving the application of professional judgment
combined with geological and engineering knowledge to assess
whether specific classification criteria have been satisfied. It
requires significant judgments based on available geological,
geophysical, engineering, and economic data as well as forecasts of
commodity prices and anticipated costs. As circumstances change and
additional data becomes available, whether through the results of
drilling, testing and production or from economic factors such as
changes in product prices or development and production costs,
reserves estimates also change. Revisions may be positive or
negative.
Blackbird
Figures provided in this news release as to
Blackbird’s reserves volumes and net present value of future net
revenue attributable thereto are estimates of such volumes and
values as at July 31, 2018 based on an evaluation by McDaniel,
Blackbird's independent qualified reserves evaluator. Figures
provides in this news release as to Blackbird’s resources volumes
and net present value of future net revenue attributable thereto
are estimates of such volumes and values as at May 1, 2018 based on
an evaluation by McDaniel. McDaniel’s evaluations were 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”).
Certain contingencies currently prevent the
classification of Blackbird’s contingent resources as reserves. The
221.3 MMboe of 2C Resources of the combined company disclosed in
this news release include Blackbird’s Best Estimate Development
Pending Contingent Resources of 135.9 MMboe in the Pipestone /
Elmworth Montney area in Alberta. The corresponding estimate
of risked before tax NPV of future net revenue for Best Estimate
Development Pending Contingent Resources, using a discount rate of
10% per year, is $587.3 million. The product types associated with
Blackbird’s contingent resources include crude oil, natural gas,
condensate, and NGLs. Contingent resources are defined in the
COGE Handbook as those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from known accumulations
using established technology or technology under development, but
are not currently considered to be commercially recoverable due to
one or more contingencies. Contingencies may include factors such
as economic, legal, environmental, political and regulatory matters
or a lack of markets. It is also appropriate to classify as
contingent resources the estimated discovered recoverable
quantities associated with a project in the early evaluation
stage.
Pursuant to the COGE Handbook, there are three
classification levels of contingent resource estimates: Low
Estimate, Best Estimate and High Estimate. Best estimate is
considered to be the best estimate of the quantity that will be
actually recovered. It is equally likely that the actual remaining
quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at
least a 50% probability that the quantities actually recovered will
equal or exceed the best estimate. Pursuant to the COGE Handbook,
contingent resources are sub-classified based on project maturity.
All of Blackbird’s contingent resources disclosed in this news
release have been sub-classified as “Development Pending”, which
applies in circumstances where resolution of the final conditions
for development is being actively pursued and indicates a
relatively high chance of development versus the other
sub-classifications.
All of Blackbird’s contingent resources have
been risked using an 80% chance of development. For contingent
resources, the chance of development is the estimated probability
of a project being commercially viable, and development proceeding
in a timely fashion. Determining chance of development requires
consideration of each applicable contingency and quantifying them
so as to arrive at an overall development risk factor. In
quantifying the chance of development, the factors that were
assessed quantitatively to be less than one in the development risk
calculation included the economic status, the project evaluation
scenario status, and the development time frame. The chance of
development multiplied by the unrisked resource volume estimate
yields the risked resource volume estimate. As many of these
factors have a wide range of uncertainty and are difficult to
quantify, the chance of development is an uncertain value that
should be used with caution.
Continuous development through multi-year
exploration and development programs and significant levels of
future capital expenditures are required in order for additional
resources to be recovered in the future. The principal risks that
would inhibit the recovery of additional reserves relate to the
potential for variations in the quality of the Montney formation
where minimal well data currently exists, access to the capital
required to develop the resources, low commodity prices that would
curtail the economics of development and the future performance of
wells, regulatory approvals, access to required services at an
appropriate cost, and the effectiveness of well fracturing
technology and applications. For contingent resources to be
converted to reserves, Blackbird must ascertain commercial
production rates, then develop firm plans, including with respect
to timing, infrastructure and the commitment of capital.
Confirmation of commercial productivity is generally required
before Blackbird can prepare firm development plans and commit
required capital for the development of the contingent resources.
Additional contingencies relate to the current lack of
infrastructure required to develop the resources in a relatively
quick time frame. As continued delineation occurs, some resources
currently classified as Contingent Resources are expected to be
re-classified to reserves.
The estimated cost reflected in McDaniel’s
evaluation of Blackbird’s contingent resources to bring on
commercial production from the Best Estimate Development Pending
contingent resources for all four product types is approximately
$1,833 million (when discounted at 10%, the estimated cost is
approximately $668 million). The expected timeline to bring these
resources on production is between the years 2021 and 2042. Best
Estimate Development Pending Contingent Resources are expected to
be recovered using the same technology of horizontal drilling and
multi-stage fracturing that Blackbird has already proven to be
effective in its Pipestone/Elmworth Montney play.
The estimates of contingent resources provided
herein are estimates only and there is no guarantee that the
estimated contingent resources will be recovered. Actual contingent
resources may be greater or less than the estimates provided in
this news release, and the differences may be material. The
estimates of contingent resources and future net revenue for
individual properties may not reflect the same confidence level as
estimates of contingent resources and future net revenue for all
properties, due to the effects of aggregation. There is no
assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Blackbird’s contingent resources will be
attained and variances could be material. There is uncertainty that
it will be commercially viable to produce any portion of the
contingent resources described herein, or that Blackbird will
produce any portion of the volumes currently classified as
contingent resources.
Pipestone Oil
Unless otherwise indicated: (i) reserves and
resources estimates have been prepared by McDaniel, Pipestone Oil’s
independent qualified reserves evaluators in accordance with the
COGE Handbook, have an effective date of July 1, 2018 and represent
Pipestone Oil’s working interest share; (ii) drilling locations
have been derived from reports by McDaniel (iii) projected and
historical production volumes provided represent Pipestone Oil’s
working interest share before royalties.
Certain contingencies currently prevent the
classification of Pipestone Oil’s contingent resources as reserves.
The 221.3 MMboe of the combined company’s 2C Resources disclosed in
this news release include Pipestone Oil’s Risked Best Estimate
Development Pending Contingent Resources of 85.4 MMboe in the
Pipestone / Elmworth Montney area. The corresponding estimate of
risked before tax NPV of future net revenue for Best Estimate
Development Pending Contingent Resources, using a discount rate of
10% per year, is $232.0 million. The product types associated with
Pipestone Oil’s contingent resources include crude oil, natural
gas, condensate, and NGLs.
All of Pipestone Oil’s contingent resources
disclosed in this news release have been sub-classified as
“Development Pending”, which applies in circumstances where
resolution of the final conditions for development is being
actively pursued and indicates a relatively high chance of
development versus the other sub-classifications.
All of Pipestone Oil’s contingent resources have
been risked using an 80% chance of development. In quantifying the
chance of development, the factors that were assessed
quantitatively to be less than one in the development risk
calculation included the economic status, the project evaluation
scenario status, and the development time frame. The chance of
development multiplied by the unrisked resource volume estimate
yields the risked resource volume estimate. As many of these
factors have a wide range of uncertainty and are difficult to
quantify, the chance of development is an uncertain value that
should be used with caution.
Continuous development through multi-year
exploration and development programs and significant levels of
future capital expenditures are required in order for additional
resources to be recovered in the future. The principal risks that
would inhibit the recovery of additional reserves relate to the
potential for variations in the quality of the Montney formation
where minimal well data currently exists, access to the capital
required to develop the resources, low commodity prices that would
curtail the economics of development and the future performance of
wells, regulatory approvals, access to required services at an
appropriate cost, and the effectiveness of well fracturing
technology and applications. For contingent resources to be
converted to reserves, Pipestone Oil must ascertain commercial
production rates, then develop firm plans, including with respect
to timing, infrastructure and the commitment of capital.
Confirmation of commercial productivity is generally required
before Pipestone Oil can prepare firm development plans and commit
required capital for the development of the contingent resources.
Additional contingencies relate to the current lack of
infrastructure required to develop the resources in a relatively
quick time frame. As continued delineation occurs, some resources
currently classified as contingent resources are expected to be
re-classified to reserves.
The estimated cost reflected in McDaniel’s
evaluation of Pipestone Oil’s contingent resources to bring on
commercial production from the Risked Best Estimate Development
Pending Contingent Resources for all four product types is
approximately $1,126.2 million (when discounted at 10%, the
estimated cost is approximately $267.9 million). The expected
timeline to bring these resources on production is between the
years 2027 and 2040 (in accordance with a pre-development study).
The contingent resources are expected to be recovered using the
same technology of horizontal drilling and multi-stage fracturing
that Pipestone Oil has already proven to be effective in its
Pipestone/Elmworth Montney play.
The estimates of contingent resources provided
herein are estimates only and there is no guarantee that the
estimated contingent resources will be recovered. Actual contingent
resources may be greater or less than the estimates provided in
this news release, and the differences may be material. The
estimates of contingent resources and future net revenue for
individual properties may not reflect the same confidence level as
estimates of contingent resources and future net revenue for all
properties, due to the effects of aggregation. There is no
assurance that the forecast price and cost assumptions applied by
McDaniel in evaluating Pipestone Oil’s contingent resources will be
attained and variances could be material. There is uncertainty that
it will be commercially viable to produce any portion of the
contingent resources described herein, or that Pipestone Oil will
produce any portion of the volumes currently classified as
contingent resources.
Type Curve Information and Estimated
Ultimate Recovery
This news release provides indicative
information regarding Pipestone Energy's type curve parameters and
economics. Type curve information reflects current operating
experience in relation to wells of the indicated type, including
with respect to costs, production and decline rates, and are based
on the Pricing Assumptions as indicated. There is no assurance that
actual well results will be in accordance with those suggested by
the type curve information. Actual results will differ, and the
difference may be material. The type curve information includes
estimated ultimate recovery (EUR), which is a measure commonly used
in the oil and natural gas industry but is not a resource category
or defined term under NI 51-101 or the COGE Handbook. EUR refers to
the quantity of petroleum estimated to be potentially recoverable
from an accumulation, plus quantities already produced therefrom.
EUR does not, however, have a standardized meaning and may not be
comparable to similar measures presented by other companies.
Accordingly, EUR should not be used for comparisons. EUR estimates
in this news release reflect type curve information based on
internal empirical data and publicly available information sources
believed to be independent but which Blackbird and Pipestone Oil
cannot confirm was prepared by a qualified reserves evaluator or in
accordance with the COGE Handbook. EUR volumes are not reserves.
There is no assurance that EUR volumes are recoverable or that it
will be commercially viable to produce any portion thereof.
Management uses EUR for internal corporate performance purposes and
to provide a measure to assess that performance over time; however,
such measure is not a reliable indicator of future performance and
therefore should not be unduly relied upon. EUR used in this news
release was prepared by a qualified reserves evaluator.
Initial Production Rates and Short-Term
Test Rates
This news release discloses test rates of
production for certain wells over short periods of time, which are
preliminary and not determinative of the rates at which those or
any other wells will commence production and thereafter decline.
Short-term test rates are not necessarily indicative of long-term
well or reservoir performance or of ultimate recovery. Although
such rates are useful in confirming the presence of hydrocarbons,
they are preliminary in nature, are subject to a high degree of
predictive uncertainty as a result of limited data availability,
and may not be representative of stabilized on-stream production
rates.
Production over a longer period will also
experience natural decline rates, which can be high in the Montney
play and may not be consistent over the longer term with the
decline experienced over an initial production period. Initial
production or test rates may also include recovered “load” fluids
used in well completion stimulation operations. Actual results will
differ from those realized during an initial production period or
short-term test period, and the difference may be material.
Drilling Locations
This news release discloses future development
drilling locations, including future booking potential and total
risked locations. Drilling locations refers to Pipestone Energy’s
total proved, probable and risked contingent (best estimate)
locations, which are derived from reports prepared by McDaniel.
Proved locations and probable locations account for drilling
locations in Pipestone Energy’s inventory that have associated
proved and/or probable reserves. 2C locations account for drilling
locations in Pipestone Energy’s inventory that have associated 2C
resources. Future booking potentials (or unbooked locations)
are internal estimates based on Pipestone Energy’s prospective
acreage and an assumption as to the number of wells that can be
drilled based on industry practice and internal review. Of the
1,450 potential drilling locations identified in this news release,
there are ~870 potential unbooked locations. Unbooked locations do
not have attributed reserves or resources. Unbooked locations
have specifically been identified by management as an estimation of
Pipestone Energy’s multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves data on prospective acreage and geologic formations.
The drilling locations on which we actually drill wells will
ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results and other factors.
Oil and Gas Measures
Barrels of Oil Equivalent – This news release
discloses certain production information on a barrels of oil
equivalent (“boe”) basis with natural gas converted to barrels of
oil equivalent using a conversion factor of six thousand cubic feet
of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate
and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe
may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf:1 bbl is based roughly on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at Blackbird’s and
Pipestone Oil’s sales point. Although the 6:1 conversion ratio is
an industry-accepted norm, it is not reflective of price or market
value differentials between product types. Based on current
commodity prices, the value ratio between crude oil, NGLs and
natural gas is significantly different from the 6:1 energy
equivalency ratio. Accordingly, using a conversion ratio of 6 Mcf:1
bbl may be misleading as an indication of value.
This document includes estimates of net pay
thickness. The estimates were prepared internally. The risks and
uncertainties associated with recovery of resources include, but
are not limited to: that Pipestone Energy may encounter unexpected
drilling results; the occurrence of unexpected events in the
exploration for, and the operation and development of, oil and gas;
delays in anticipated timing of drilling and completion of wells;
geological, technical, drilling and processing problems; and other
difficulties in producing petroleum reserves.
Analogous Information
Certain information in this news release may
constitute “analogous information” within the meaning of NI 51-101,
including information relating to areas, wells or operations that
are in geographical proximity to or believed to be on-trend with
lands held by Pipestone Energy and production information in
respect of wells that are believed to be on trend with Pipestone
Energy’s properties. Such information has been obtained from
governmental or other public sources, regulatory agencies or other
industry participants that are independent of Pipestone Energy.
Pipestone Energy does not, though, know whether any such
information contained herein that constitutes “analogous
information” was prepared in accordance with the COGE Handbook or
by a qualified reserves evaluator or auditor under NI 51-101
(except as otherwise indicated herein), as applicable, and cannot
verify its accuracy. While believed to be reliable, third party
data relied upon by Pipestone Energy may be in error.
Management believes such information may be
relevant to Pipestone Energy’s efforts to understand and predict
reservoir characteristics of properties in which Pipestone Energy
may hold or intend to acquire an interest, and it is presented to
help demonstrate the basis for Pipestone Energy 's business plans
and strategies. There is, however, no assurance that the qualities,
characteristics or results suggested by or inferred from analogous
information are or will be similar to or otherwise representative
of the qualities or characteristics of properties in which
Pipestone Energy has or intends to acquire an interest or the
results that Pipestone Energy may achieve or realize from any
operations thereon. Such information is not, and should not be
construed or relied upon as, an estimate or predictor of resource
potential or future production levels.
The following is selected information
with regard to each of the directors and officers listed
above:
Mr. Wanklyn is the President and Chief Executive
Officer of Pipestone Oil and a Senior Partner at Grafton Asset
Management. Mr. Wanklyn started his career at Canadian Hunter
Exploration Ltd. in 1982 as an exploration geologist, and
ultimately was the company’s Exploration Manager. Since 1993, Mr.
Wanklyn has co-founded and has acted as CEO in numerous private and
public exploration and production companies with operations in
Western Canada and the U.S.. Mr. Wanklyn received an MSc. in
Geology from the University of Colorado in 1985 and a B.Comm from
the University of Alberta in 1981. He is an advisory board member
of the University of Calgary, Hotchkiss Brain Institute, a Board
member of private UK E&P exploration company, Connaught Energy
and a past Board member of the Explorers and Producers Association
of Canada.
Mr. Rosine is the Chief Operating Officer of
Pipestone Oil. Mr. Rosine is a professional engineer with over 30
years of diverse technical and executive experience. Prior to
joining Pipestone Oil, Mr. Rosine served as President & CEO of
OMERS Energy Inc. and has previously held executive positions at a
number of oil & gas companies, including Pengrowth Energy
Corporation, Highpine Oil & Gas Ltd., and other public E&P
companies. Mr. Rosine received his Bachelor of Science degree in
Mechanical Engineering from the University of Calgary in 1981 and a
Bachelor of Science degree in Chemistry from the University of
Alberta in 1977. Bob is a member of APEGA and SPE.
Mr. Braun is Chairman, Chief Executive Officer
and President of Blackbird. Mr. Braun is a seasoned oil and gas
executive with over 13 years of oil and gas experience combined
with 30 years of diversified business experience in finance and
real estate. Over the past several years, Mr. Braun has led
Blackbird through the successful acquisitions of two E&P
companies, the divestiture of non-core Montney assets, the
accumulation of its Montney land at Elmworth and the drilling of
Blackbird's Elmworth Montney wells. Mr. Braun was previously the
Chairman and Chief Executive Officer of an international oil and
gas company, an investment banker and a principal of a private real
estate development company that completed over $1 billion in real
estate development. Mr. Braun is also a founder and director of
Stage Completions Inc., an innovative downhole completions
company.
Mr. Lancaster joined GMT Energy as Vice
President Exploration and Production on January 1, 2000. Effective
April 20, 2001, Mr. Lancaster was named President of GMT Energy.
Mr. Lancaster resigned his position with GMT Energy effective with
the merger and has since then served as a member of the Board and
President of GMT Exploration. He graduated from the University of
Colorado with a bachelor’s degree in Geologic Engineering in 1978.
Mr. Lancaster is a former president of the Colorado Oil and Gas
Association (COGA), on the Board of Directors for the Western
Energy Alliance (WEA), and is a member of the Rocky Mountain
Association of Geologist (RMAG), and the American Association of
Petroleum Geologist (AAPG).
Ms. Sankappanavar is the Co-Founder and
President of Grafton Asset Management. Grafton is a Calgary-based
energy investment firm with ~$1B in capital under management,
focused on investing at the asset level in oil and gas and
infrastructure that supports the intermittency of renewable energy.
Ms. Sankappanavar is responsible for strategy, oversight and
execution of all Grafton’s business and operating units. She is a
graduate of the Massachusetts Institute of Technology and began her
career as a consultant with McKinsey and Company out of the New
York office. Ms. Sankappanavar also serves on the board of
directors for UNICEF Canada, The Palix Foundation, and Jowidana
Hotels Ltd. She has been honoured as one of Canada’s Top 100 Most
Powerful Women, Alberta’s 50 Most Influential People, and one of
Calgary’s Top 40 under 40.
Mr. Tichio is a Partner of Riverstone. He is
based in New York. Prior to joining Riverstone in 2006, Mr. Tichio
was in the Principal Investment Area (PIA) of Goldman Sachs, which
manages the firm's private corporate equity investments. Mr. Tichio
began his career at J.P. Morgan in the Mergers & Acquisition
group, where he concentrated on assignments that included public
company combinations, asset sales, takeover defenses, and leveraged
buyouts. Mr. Tichio serves on the Boards of Directors of Barra
Energia, Carrier I & II, Castex, Centennial, CIOC, CNOR, Eagle
Energy, EP Energy, ILX, Rock Oil, Talos Energy, Teton Range, and
Trail Ridge.
Notice to United States
Readers
The petroleum and natural gas reserves contained
in this news release have generally been prepared in accordance
with Canadian disclosure standards, which are not comparable in all
respects to United States or other foreign disclosure standards.
For example, the United States Securities and Exchange Commission
(the "SEC") requires oil and gas issuers, in their filings with the
SEC, to disclose only "proved reserves", but permits the optional
disclosure of "probable reserves" and "possible reserves" (each as
defined in SEC rules). Canadian securities laws require oil and gas
issuers disclose their reserves in accordance with NI 51-101, which
requires disclosure of not only "proved reserves" but also
"probable reserves" and permits the optional disclosure of
"possible reserves". Additionally, NI 51-101 defines "proved
reserves", "probable reserves" and "possible reserves" differently
from the SEC rules. Accordingly, proved, probable and possible
reserves disclosed in this news release may not be comparable to
United States standards. Probable reserves are higher risk and are
generally believed to be less likely to be accurately estimated or
recovered than proved reserves. Possible reserves are higher risk
than probable reserves and are generally believed to be less likely
to be accurately estimated or recovered than probable reserves.
In addition, under Canadian disclosure
requirements and industry practice, reserves and production are
reported using gross volumes, which are volumes prior to deduction
of royalty and similar payments. The SEC rules require reserves and
production to be presented using net volumes, after deduction of
applicable royalties and similar payments.
Pipestone Energy advises investors that although
contingent resources are recognized by Canadian securities
regulations under NI-51-101, the SEC does not recognize this term.
Consequently, this news release contains disclosure regarding
resources that a U.S. company would not be permitted to include in
its filings with the SEC. As a result, the disclosure
regarding Pipestone Energy’s properties is materially different
than disclosure provided by U.S. companies in their filings with
the SEC. Investors are cautioned not to assume that any part or all
of any resource will ever be converted into a reserve.
All amounts in this news release are stated in Canadian dollars
unless otherwise specified.
TSX Venture Exchange Required Disclosure
Pipestone Energy expects to be classified by the
TSX-V as a Tier 1 Oil and Gas Issuer upon completion of the
Transaction. Blackbird and Pipestone Oil intend to apply for an
exemption from sponsorship pursuant to section 3.4(a)(i) of TSX-V
Policy 2.2 as the conditions therein are met, or otherwise for a
waiver of sponsorship pursuant to TSX-V discretion. There are no
guarantees that such exemption or waiver from sponsorship will be
obtained, in which case the parties will be required to obtain a
sponsor. No Non-Arm’s Length Party of Blackbird (within the meaning
of section 2.3(e) of TSX-V Policy 5.2) has any direct or indirect
beneficial interest in CNOR LP or Pipestone Oil.
Completion of the transaction is subject to a
number of conditions, including but not limited to, TSX Venture
Exchange acceptance and if applicable, disinterested shareholder
approval. Where applicable, the transaction cannot close until the
required shareholder approval is obtained. There can be no
assurance that the transaction will be completed as proposed or at
all.
Investors are cautioned that, except as
disclosed in the management information circular to be prepared in
connection with the transaction, any information released or
received with respect to the transaction may not be accurate or
complete and should not be relied upon. Trading in the securities
of Blackbird Energy Inc. should be considered highly
speculative.
The TSX Venture Exchange Inc. has in no
way passed upon the merits of the proposed transaction and has
neither approved nor disapproved the contents of this news
release.
Blackbird Energy Inc.
Blackbird Energy Inc. is a highly innovative oil
and gas exploration and development company focused on the
condensate and liquids-rich Montney fairway at Elmworth, near
Grande Prairie, Alberta.
For further information about Blackbird, please
visit the company website at www.blackbirdenergyinc.com or
contact:
Garth Braun Chairman, CEO and President
(403) 500-5550 gbraun@blackbirdenergyinc.com |
Allan Dixon Manager, Business Development
(403) 699-9929 Ext. 103 adixon@blackbirdenergyinc.com |
Pipestone Oil Corp.
Pipestone Oil Corp. is a private oil and gas
exploration and production company incorporated under the Laws of
the Province of Alberta and is located in Calgary, Alberta.
Pipestone Oil has targeted the highly prospective condensate rich
Montney formation located in the Pipestone area of Alberta.
Based on its audited financial statements, as at
December 31, 2017, Pipestone Oil held total assets of $100.0
million, total liabilities of $11.8 million and had shareholder’s
equity of $88.2 million. For the year ended December 31, 2017,
Pipestone Oil generated $1.0 million of gross revenue and a net
income of $0.2 million. As at June 30th, 2018, based on its
unaudited financial statements, Pipestone Oil held total assets of
$131.3 million, total liabilities of $43.7 million and
shareholder’s equity of $87.7 million. For the six months ended
June 30th, 2018, Pipestone Oil generated gross revenue of $1.6
million and a net loss of $0.5 million. Pipestone Oil is a
wholly-owned subsidiary of Canadian Non-Operated Resources L.P., a
limited partnership formed under the Laws of the Province of
Alberta, and is a Calgary based oil and gas investment fund, which
is run by a team of experienced operating, technical, and financial
professionals at Grafton Asset Management Inc. Grafton Asset
Management Inc. is a Calgary-based asset manager focused on
investing across the capital structure of top-tier Canadian energy
companies.
For further information about Pipestone Oil,
please visit the company website at www.pipestoneoilcorp.com
or contact:
Paul WanklynPresident and Chief Executive
Officer(403) 228-8684paul@graftonfunds.com |
Dan van KesselCorporate Development(403)
228-8688dan@graftonfunds.com |
Canadian Non-Operated Resources
L.P.
Canadian Non-Operated Resources L.P. is a
Calgary-based oil and gas partnership formed under the laws of the
Province of Alberta in 2014 managed by Grafton Asset Management, a
Calgary-based oil and gas investment management firm. CNOR LP was
formed in connection with an equity commitment by funds managed by
Riverstone Holdings LLC, Grafton Asset Management, and certain
other investors.
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