CALGARY, Aug. 1, 2014 /CNW/ - Hawk Exploration Ltd.
("Hawk" or the "Corporation") announces that it has
entered into a purchase and sale agreement with TriHawk Energy Ltd.
("TriHawk") and certain other parties pursuant to which the
Corporation has agreed to acquire certain petroleum and natural gas
assets ("Assets") in the plains region of Alberta and Saskatchewan in consideration of a grant to
TriHawk of a gross over-riding royalty (the "GORR") over the
acquired assets (the "Acquisition").
Hawk also announces today that it has entered
into a loan agreement with respect to a $13.5 million Operating Demand Loan Facility
("New Facility") with a Canadian chartered bank for the
purposes of financing working capital and the repayment and
cancellation of certain existing bank credit facilities of the
Corporation.
The Acquisition
Hawk and TriHawk have determined the value of
the Assets to be $1.2 million.
The Assets include interests in 3,260 (2,285 net) acres of land
mainly within Hawk's core area in western Saskatchewan (2,110 (1,870 net) acres of which
are undeveloped), six (1.8 net) producing wells (four (0.4 net) of
which are operated by Hawk) that produced an average of 24
boe/d (68% heavy oil) in the first quarter of 2014 and total
proved plus probable reserves of 75 Mboe.1 The GORR
provides for royalty rates ranging from 3 to 20 percent on the
Assets. The Acquisition is expected to close on or
about August 29, 2014.
The Acquisition will enhance the Corporation's
core land position, consolidate its working interests in a number
of its operated wells and increase the Corporation's current
production and cash flow.
Steve
Fitzmaurice, the President, CEO and Chairman of the Board of
the Corporation is the sole shareholder of TriHawk and is also a
director and senior officer of TriHawk. Each of Messrs.
Bonnar, Deobald, and DeWiel, all senior officers of the
Corporation, are directors and/or officers of TriHawk.
Additionally, each of Messrs. Fitzmaurice, Bonnar, Deobald and
DeWiel indirectly hold interests in the production, revenues and
assets of TriHawk through participation agreements. As such,
the Acquisition is considered a "related party transaction" for the
purposes of Multilateral Instrument 61-101 - Protection of
Minority Security Holdings in Special Transactions ("MI
61-101"). The independent members of the Board of
Directors, with the assistance of the non-interested members of the
Corporation's executive team and third-party advisors, examined,
reviewed and negotiated the Acquisition and related
documentation. Additionally, the Corporation commissioned
technical reports from GLJ Petroleum Consultants evaluating the
reserves and certain values associated with the Assets and the
GORR, both dated effective as at June 30,
2014. Based on the foregoing, the Board unanimously
determined, with Mr. Fitzmaurice abstaining, that the fair market
value of the Acquisition was $1.2
million, and that it would be in the best interests of the
Corporation to enter into the agreement with respect to the
Acquisition. The Corporation is relying on an exemption from
the minority approval and valuation requirements of MI 61-101 due
to the fact that the fair market value of the transaction does not
represent greater than 25% of the Corporation's market
capitalization.
|
___________________________________ |
| 1 |
Reserves attributable to the Assets were evaluated by GLJ
Petroleum Consultants, independent qualified reserves evaluators,
in accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities, with an effective date
of June 30, 2014, and are TriHawk's working interest reserves
before the deduction of royalties and without including any of
TriHawk's royalty interests. Proved developed producing
reserves are 18 Mboe, total proved reserves are 50 Mboe, proved
plus probable developed producing reserves are 28 Mboe. |
The Acquisition is also a "Reviewable
Transaction" within the meaning of TSX Venture Exchange
("TSXV") Policy 5.3 - Acquisitions and Dispositions of
Non-Cash Assets and closing of the Acquisition will be subject
to the receipt of TSXV approval of the Acquisition.
New Facility
The New Facility bears interest at the at the
bank's prime rate plus 0.5 percent to 1.0 percent, or at banker's
acceptance rates plus a stamping fee of 1.75 percent to 2.25
percent. A standby fee of 0.20 to 0.30 percent is charged on
the undrawn portion of the New Facility. The New Facility is
secured by a general security agreement with a floating charge over
the assets of the Corporation. The New Facility will replace
the Corporation's existing $12.0
million facility with another Canadian chartered bank.
About Hawk
Hawk is an emerging exploration company engaged
in the exploration, development and production of conventional
crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A shares of Hawk
trade on the TSXV under the trading symbol HWK.A.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as the term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
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. Boe per day or boe/d 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.
Given that the value ratio of oil compared to natural gas based on
currently prevailing prices is significantly different than the
energy equivalency ratio of 1 boe to 6 thousand cubic feet of
natural gas, utilizing such a conversion ratio may be misleading as
an indication of value. Mboe means thousands of boe.
The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to the
effects of aggregation.
Forward Looking Statements: This press
release contains forward-looking statements. More particularly,
this press release contains statements concerning: (i) the closing
and anticipated dates of closing of the Acquisition; (ii) the
receipt of TSXV acceptance of the Acquisition; (iii) the effect of
the Acquisition on the Corporation's business going forward; and
(iv) the replacement of Hawk's existing credit facility with the
New Facility. The forward-looking statements contained in
this document are based on certain key expectations and assumptions
made by Hawk, including: (i) with respect to the anticipated
closing date of the Acquisition, expectations and assumptions
concerning timing of receipt of required regulatory approvals, and
third party consents and the satisfaction of other conditions to
the completion of the Acquisition, and (ii) with respect to the
remaining forward looking statements, expectations and assumptions
concerning the success of future drilling and development
activities, the performance of existing wells, the performance of
new wells, the availability of services, the availability and cost
of capital, prevailing commodity prices, prevailing economic
conditions, prevailing weather and break-up conditions, and
prevailing royalty regimes. Although Hawk 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 Hawk 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 approvals or satisfy
the conditions to closing the Acquisition, risks associated with
the oil and natural gas industry in general. The forward-looking
statements contained in this document are made as of the date
hereof and Hawk 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.
SOURCE Hawk Exploration Ltd.