Colonia Energy Corp. Announces Duce Oil Ltd. Acquisition, and Bought Deal Financing
November 23 2009 - 7:03AM
Marketwired Canada
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES.
Colonia Energy Corp. ("Colonia" or the "Company") (TSX VENTURE:CLA) is pleased
to announce that it has entered into a share purchase and sale agreement (the
"Purchase Agreement") in respect of Duce Oil Ltd. ("Duce"), a private SE
Saskatchewan producer, for total consideration of $31.0 million (the "Duce
Acquisition") and in addition intends on entering into purchase agreements with
Duce's minority working interest partners for cash consideration of $4.0 million
(collectively the "Acquisitions") for total consideration of $32.0 million cash
and $3.0 million in Colonia common shares. Colonia is also pleased to announce a
$35.0 million bought deal private placement of 175,000,000 subscription receipts
("Subscription Receipts") at a price of $0.20 per Subscription Receipt (the
"Financing"). These Acquisitions are a key step in furthering the Company's
business plan of being an aggressive, high growth oil weighted junior oil and
gas company.
SUMMARY OF ACQUISITION
The Acquisitions provide Colonia with conventional high impact, high netback
light oil assets and a significant position in the Bakken light oil resource
play. In addition, Colonia will operate 14 facilities in SE Saskatchewan
providing significant control over its production.
Duce has the following characteristics:
Current Production 475 Boepd (100% light oil)
Proved plus Probable Reserves (1) 1.1 MMBoe
Proved plus Probable RLI 6.3 years
35 net sections
Land (5,800 net undeveloped acres)
Average producing wells per section 1.4 net wells
Total drilling locations 82 gross; 68.6 net
Operated Facilities 13 all SE Saskatchewan
Operating Net Back (2) $45.93 per Boe
Working capital surplus (3) $1.0 million
(1) Reserves evaluated by Sproule Associates Limited with respect to the Duce
Oil assets as at October 1, 2009, in accordance with National Instrument 51-101.
(2) Based on US$80.00/Bbl WTI and US$/CDN$ exchange rate of 0.94 and calculated
by subtracting royalties and operating costs from revenues.
(3) Represents the estimated assumed working capital surplus of Duce.
TRANSACTION METRICS
The Acquisitions and Financing are accretive to Colonia on a per share basis on
all key metrics. Net of undeveloped land at an estimated value of $2.9 million,
the transaction metrics are as follows:
Production $65,450 per producing Boepd
Proved plus Probable Reserves (1) $29.59 per Boe
(1) Reserves calculated as disclosed above.
DUCE ACQUISITION
Colonia is pleased to announce that it has entered into a Purchase Agreement
with Duce. Pursuant to the Purchase Agreement, Colonia has agreed to acquire all
of the outstanding common shares of Duce through a combination of cash and the
issuance of common shares of Colonia. Colonia will, subject to adjustment based
on the working capital surplus of Duce at the time of the closing of the
transaction, issue a total of approximately 15.0 million common shares, at a
deemed price of $0.20 per common share and make a cash payment of $28.0 million
to the shareholders of Duce. In addition, Colonia intends on entering into
agreements with Duce's minority working interest partners, through Duce, to buy
out their working interests for total cash consideration of $4.0 million. Total
consideration for Duce and Duce's minority working interest partners is $35.0
million. The transaction is anticipated to close on or about January 8, 2010.
Completion of the transaction is subject to certain conditions and the receipt
of all regulatory approvals, including the approval of the TSX Venture Exchange
("TSX-V").
BOARD APPOINTMENT
Colonia is pleased to announce that following the closing of the Duce
Acquisition, Mr. Dallas Duce has agreed to join the Board of Directors of
Colonia.
EQUITY FINANCING
Colonia is also pleased to announce that it has entered into an agreement with a
syndicate of underwriters, co-led by GMP Securities L.P. and Peters & Co.
Limited and including Genuity Capital Markets, Macquarie Capital Markets Canada
Ltd., Acumen Capital Finance Partners Limited, CIBC World Markets Inc., Dundee
Securities Corporation and Paradigm Capital Inc. (collectively, the
"Underwriters"), providing for the private placement, on a bought deal basis, of
175,000,000 subscription receipts (the "Subscription Receipts") at price of
$0.20 per Subscription Receipt for gross proceeds of $35.0 million. The net
proceeds of the Financing will be used to fund the purchase price payable by
Colonia for the Duce Acquisition. Closing of the private placement is subject to
customary conditions and regulatory approvals, including the approval of the
TSX-V. Closing is expected to occur on or about December 9, 2009 and, in any
event, will occur following the record date for the Company's previously
announced rights offering such that subscribers under the Financing will not be
entitled to rights pursuant to the rights offering. Both the Subscription
Receipts and common shares will be subject to a four month hold.
Each Subscription Receipt will entitle the holder to receive one common share
without further payment or action on the part of the holder, concurrently with
the successful closing of the Duce Acquisition. If the Duce Acquisition is not
completed by the Company on or before January 20, 2010, then the Subscription
Receipts shall be automatically redeemed by the Company at a price of $0.20 per
Subscription Receipt plus accrued interest.
FINANCIAL ADVISORS
GMP Securities L.P. and Peters & Co. Limited acted as co-financial advisor to
Colonia with respect to the Duce Acquisition.
STRATEGIC RATIONALE AND PRO FORMA COLONIA
The Acquisitions dramatically increase Colonia's operational presence and
opportunity inventory in its light oil focus area of southeast Saskatchewan. As
a result of the transaction, pro forma Colonia will have production of 625
Boepd, proven plus probable reserves of 1.5 MMBoe, more than 14,000 net acres of
undeveloped land and an inventory of over 80 gross drilling locations, all for
light oil. Almost half of Colonia's production will be from the Bakken, giving
the Company significant exposure to the benefits and upside of this light oil
resource play.
Colonia will now have the critical mass and capital to undertake a full-cycle
exploration program and effectively develop a light oil resource play. The
Company anticipates the Financing will result in an under-levered balance sheet,
providing certainty to the execution of a capital program and the ability to
better weather any commodity volatility, with the flexibility to be
opportunistic on future acquisition targets.
Colonia's common shares trade on the TSX-V under the symbol CLA. Colonia
currently has 104.2 million common shares outstanding. Colonia anticipates that
it will have approximately 347.6 million fully diluted common shares following
the completion of the Acquisitions, the Financing and the previously announced
rights offering and private placement.
WARNING
The securities offered have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or applicable exemption from the registration
requirements. This press release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the securities in
any jurisdiction in which such offer, solicitation or sale would be unlawful.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements. More particularly, this
press release contains statements concerning the anticipated dates for the
closing of the disclosed transactions and the anticipated accretive impact of
the transactions on Colonia.
The forward-looking statements contained in this document are based on certain
key expectations and assumptions made by Colonia, including: (i) with respect to
the anticipated closing dates of the transactions, expectations and assumptions
concerning timing of receipt of required shareholder, court and regulatory
approvals and third party consents and the satisfaction of other conditions to
the completion of the transactions and (ii) with respect to the anticipated
accretive impact of the transaction on Colonia, expectations and assumptions
concerning the success of future drilling and development activities, the
performance of existing wells, the performance of new wells and prevailing
commodity prices.
Although Colonia believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance should not
be placed on the forward-looking statements because Colonia can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These include, but
are not limited to, the failure to obtain necessary regulatory approvals or
satisfy the conditions to closing the transactions, risks associated with the
oil and gas industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
commodity price and exchange rate fluctuations and uncertainties resulting from
potential delays or changes in plans with respect to exploration or development
projects or capital expenditures. Certain of these risks are set out in more
detail in Colonia' Annual Information Form which has been filed on SEDAR and can
be accessed at www.sedar.com.
The forward-looking statements contained in this document are made as of the
date hereof and Colonia undertakes no obligation to update publicly or revise
any forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless so required by applicable
securities laws.
MEANING OF BOE
When used in this press release, boe means a barrel of oil equivalent on the
basis of 1 boe to 6 thousand cubic feet of natural gas. Boepd means a barrel of
oil equivalent per day.
Boe's may be misleading, particularly if used in isolation. A boe conversion
ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
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