Chrome Capital Inc.
TSX VENTURE : KRM.P

October 30, 2009 13:10 ET

Chrome Capital Inc. and Blacksteel Oil Sands Inc. Announce Amalgamation Agreement

CALGARY, ALBERTA--(Marketwire - Oct. 30, 2009) - Chrome Capital Inc., (TSX VENTURE:KRM.P) ("Chrome" or the "Corporation"), a capital pool company, announces that, further to the news release of September 15, 2009, it has entered into an arm's length Amalgamation Agreement dated October 22, 2009 (the "Agreement") to complete the contemplated amalgamation (the "Amalgamation") with Blacksteel Oil Sands Inc. ("Blacksteel") and a wholly-owned subsidiary ("AcquireCo") of Chrome (upon completion of the Amalgamation the "Resulting Issuer"). It is intended that the Amalgamation will constitute Chrome's "Qualifying Transaction" for the purpose of Policy 2.4 of the TSX Venture Exchange Inc. (the "Exchange").

Under the terms of the Amalgamation, Chrome will exchange five (5) Chrome shares at a deemed price of $0.10 per Chrome Share for each issued and outstanding Blacksteel share at the time of the Amalgamation and exchange all Blacksteel options and warrants for Chrome options and warrants on the same terms. Blacksteel has a total of 15,234,029 shares issued and outstanding along with the following convertible securities currently outstanding, 837,500 stock options and 150,000 share purchase warrants. Therefore, under the terms of the Amalgamation, Blacksteel securityholders will be issued approximately 76,170,145 Chrome Shares and will hold approximately 4,187,500 stock options and 1,000,000 share purchase warrants. All of the securities will be subject to the Consolidation referred to below.

As previously announced, a condition of the Amalgamation is that Chrome close a financing of Chrome shares by way of a private placement (the "Concurrent Financing") concurrently with the Amalgamation. Pursuant to the Concurrent Financing, Chrome will issue a minimum of 21,000,000 Chrome Shares at a price of $0.10 per share for minimum gross proceeds of $2,100,000 and a maximum of 30,000,000 Chrome Shares for gross proceeds of approximately $3,000,000. Chrome has entered into a Finders Agreement with Canaccord Capital Corporation (the "Finder") to assist in the completion of the Concurrent Financing. The Finder is entitled to a commission of 10% cash and 8% broker warrants exerciseable at a price of $0.10 per broker warrant for a period of two years following the closing of the Concurrent Financing, for any investors who purchase Chrome shares under the Concurrent Financing that are found by the Finder. These securities will be subject to the Consolidation referred to below.

The Agreement obligates Chrome, as the sole shareholder of AcquistionCo to approve the Amalgamation. Accordingly, approval of the Amalgamation by the Chrome shareholders is not required. Blacksteel shareholders will be asked to approve the Amalgamation at a special meeting prior to closing of the Amalgamation. It is anticipated that closing of the Amalgamation and the Concurrent Financing will occur no later than December 15, 2009.

Blacksteel is an Alberta incorporated privately held early stage oil and gas company focused primarily on oil sands development whose principal business activity is in the exploration, exploitation, development and production of petroleum and natural gas resources in the Western Canadian Sedimentary Basin. Blacksteel has a 100% working interest in 22 sections (14,080 acres) of Crown oil sands leases in the Peace River area of northern Alberta and a working interest in a natural gas producing property at Grassland, Alberta approximately 180 km north of Edmonton, Alberta. The oil sands lands are subdivided into two projects, Raven and Whitemud.

Reports

Blacksteel has received reports prepared in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities on the reserve estimates. A reserves report of the Grassland property ("Grassland Reserves Report"), effective April 30, 2009 and dated July 15, 2009 and a Resource Report for the estimates of Contingent Resources for the Raven project ("Raven Resource Report"), effective April 30, 2009 and dated July 15, 2009 and a Resource Report for the estimated of Prospective Resources for the Whitemud project ("Whitemud Resource Report") have been prepared by DeGolyer and MacNaughton Canada Limited, qualified reserves evaluators in reports effective April 30, 2009 and dated September 28, 2009.

The Cadotte Property (Raven project), located in north western Alberta, approximately 35 kilometers north east of Peace River and immediately adjacent to a major oil exploration and production company's proposed 80,000 bbls/day project, consists of 5 sections of Bluesky bearing regional sand, deposited in a near shore marine environment. The following table reflects the resource estimates contained in the Raven Resource Report:



Estimate of the Gross Working Interest Contingent Bitumen Resources
as of April 30, 2009 for Blacksteel Oil Sands Inc. in Certain
Bitumen Accumulations in Alberta

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Gross Working Interest Contingent
Bitumen Resources Summary
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Low Best High
Accumulation Country Province Basin (bbl) (bbl) (bbl)
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Western
Canadian
Cadotte - Sedimentary
32-85-19W5 Canada Alberta Basin 3,893,854 6,733,265 17,471,414
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Western
Canadian
Cadotte - Sedimentary
05-86-19W5 Canada Alberta Basin 3,956,226 6,750,507 17,751,269
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Western
Canadian
Cadotte - Sedimentary
06-86-19W5 Canada Alberta Basin 2,099,032 3,979,088 11,130,587
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Western
Canadian
Cadotte - Sedimentary
07-86-19W5 Canada Alberta Basin 1,166,129 2,244,667 7,491,741
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Western
Canadian
Cadotte - Sedimentary
08-86-19W5 Canada Alberta Basin 2,809,815 5,680,740 15,401,553
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TOTAL 13,925,056 25,388,267 69,246,564
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The Raven Resource Report provides estimates of Contingent Resources associated with the Cadotte property (Raven project). Contingent Resources are 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 which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will be commercially viable to produce any portion of the resources. Contingent Resources are outside current areas of application for development. These resource estimates are not classified as reserves at this time, pending further reservoir delineation, project application, facility and reservoir design work. Contingent Resources entail additional commercial risk than reserves, which have not been included in the net present valuation. Adjustments for commercial risks have not been incorporated in the summaries of Contingent Resources set forth below.

A range of Contingent Resource estimates (Low, Best and High) were prepared to reflect a range of technical uncertainty in the development of tarsand accumulations employing Steam Assisted Gravity Drainage (SAGD) technology. Low Estimate Contingent Resources were assigned to mapped regions of oil-in-place with a minimum of approximately 12 m of bitumen pay along with a conservative estimate of recovery factor. Best Estimate Contingent Resources were assigned to mapped regions of oil-in place of identified pods with a minimum of approximately 10 m of bitumen pay along with a best estimate of recovery factor. High Estimate Contingent Resources were assigned to mapped regions of oil-in-place of identified pods with at least 9 m of continuous bitumen pay along with a more optimistic estimate of recovery factor.

The Pluvious Propery (Whitemud project) also located in north western Alberta, approximately 40 kilometers north of Peace River, spans 17 sections and targets the Mississippian Debolt and Elkton formations comprising a series of shallowing upward carbonates. The following table reflects the resource estimates contained in the Whitemud Resource Report:



Estimate of the Gross Working Interest Prospective Bitumen Resources
as of April 30, 2009 for Blacksteel Oil Sands Inc. in Certain
Bitumen Accumulations in Alberta

----------------------------------------------------------------------------
Gross Working Interest Prospective
Bitumen Resources Summary
----------------------------------------------------------------------------
Low Best High
Accumulation Country Province Basin (bbl) (bbl) (bbl)
----------------------------------------------------------------------------
Western
Canadian
Pluvius - Sedimentary
Debolt B Canada Alberta Basin 956,924 22,767,976 146,050,456
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Western
Canadian
Pluvius - Sedimentary
Debolt C Canada Alberta Basin 1,004,179 21,200,228 141,671,518
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Western
Canadian
Pluvius - Sedimentary
Debolt D Canada Alberta Basin 1,134,132 26,585,076 158,727,794
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Western
Canadian
Pluvius - Sedimentary
Elkton Canada Alberta Basin 193,318 4,410,548 36,795,989
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TOTAL 3,288,552 74,963,827 483,245,758
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The Whitemud Resource Report also provided estimates of Prospective Resources attributable to the Pluvius property (Whitemud project). Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. The Prospective Resource estimates set forth below have been risked for the chance of discovery and hence are considered partially risked estimates. Adjustments for commercial risks have not been incorporated in the summaries. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources. Prospective Resources were attributable to undiscovered pods in unexplored regions, utilizing average parameters from the other discovered accumulations in the vicinity and the statistical success within the explored regions of the leases. Prospective Resources entail additional commercial and exploration risks than reserves and Contingent Resources, which have not been included in the net present valuation.

A range of Prospective Resources estimates were prepared to reflect a range of technical uncertainty for the development of carbonate reservoir development using Cyclic Steam Stimulation (CSS) technology within the Debolt and Elkton formations. Best and High Prospective Resource estimates were assigned using aggregated pay thresholds sufficient to justify the resource development. Such aggregation of pays is a function of thickness, porosity, bitumen saturation, recovery factors and thermal losses under assumed economic conditions. Blacksteel's Prospective resource estimates of bitumen have been risked for the chance of discovery, but have not been risked for chance of development. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development.

Grassland Reserves Report

In addition to its oil sands properties, Blacksteel drilled, completed and tied-in a successful natural gas producing well on a 100% working interest basis before payout and 55% working interest after payout, subject to a gross overriding royalty to a private company. This well started producing natural gas on February 10, 2009 and produced approximately 77 million cubic feet (MMcf) of sales gas to August 31, 2009. The following table reflects the reserves estimates contained in the Grassland Reserves Report:



Summary of Reserves as of April 30, 2009

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Light and Medium Oil Heavy Oil
------------------------------------------------------
Reserves Category Gross(2) Net(3) Gross(2) Net(3)
(Mbbls) (Mbbls) (Mbbls) (Mbbls)
----------------------------------------------------------------------------
Proved
Developed Producing - - - -
Developed Non-Producing - - - -
Undeveloped - - - -
----------------------------------------------------------------------------
Total Proved - - - -
----------------------------------------------------------------------------
Total Probable - - - -
----------------------------------------------------------------------------
Total Proved + Probable - - - -
----------------------------------------------------------------------------
Total Possible - - - -
----------------------------------------------------------------------------
Total Proved + Probable +
Possible - - - -
----------------------------------------------------------------------------


----------------------------------------------------------------------------
Natural Gas(1) Natural Gas Liquids
------------------------------------------------------
Reserves Category Gross(2) Net(3) Gross(2) Net(3)
(MMcf) (MMcf) (Mbbls) (Mbbls)
----------------------------------------------------------------------------
Proved
Developed Producing 188 147 - -
Developed Non-Producing - - - -
Undeveloped - - - -
----------------------------------------------------------------------------
Total Proved 188 147 - -
----------------------------------------------------------------------------
Total Probable 130 111 - -
----------------------------------------------------------------------------
Total Proved + Probable 318 258 - -
----------------------------------------------------------------------------
Total Possible 175 148 - -
----------------------------------------------------------------------------
Total Proved + Probable +
Possible 493 406 - -
----------------------------------------------------------------------------

Notes:
(1) Estimates of Reserves of natural gas include associated and
non-associated gas.
(2) "Gross Reserves" are Blacksteel's working interest reserves before the
deduction of royalties.
(3) "Net Reserves" are Blacksteel's working interest reserves after
deductions of royalty obligations plus Blacksteel's royalty interests.


Possible reserves are those additional reserves that are les certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Blacksteel anticipates that in 2010 it will incur aggregate expenses of $1,351,000 related to the development of its oil sands and conventional oil and gas properties made up of $984,000 for the drilling of one exploratory well on each of the Raven and Whitemud properties and $367,000 for the development program at Grassland.

The following table sets forth certain financial information of Blacksteel for the three months ended July 31, 2009 and for each of the last two fiscal years (since inception). The three month period ended July 31, 2009 reflects management prepared information and has not been audited.



----------------------------------------------------------------------------
Three Months Ended Year Ended April 30
July 31, 2009 (unaudited) (audited)
($) ($)
----------------------------------------------------------------------------
2009 2008
----------------------------------------------------------------------------
At Period End:
----------------------------------------------------------------------------
Current Assets 661,651 377,253 2,084,042
----------------------------------------------------------------------------
Total Assets 4,969,819 4,635,377 2,952,983
----------------------------------------------------------------------------
Current Liabilities 92,480 94,672 72,629
----------------------------------------------------------------------------
Retained Earnings (deficit) (9,613,793) (9,454,963) (4,195,246)
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For the Period:
----------------------------------------------------------------------------
Total Revenue 82,214 121,941 17,128
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Net Income (loss) (158,830) (458,049) (80,668)
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Independent of the Amalgamation, Chrome has set November 2, 2009 for a special meeting of Chrome shareholders to approve a consolidation of its common shares on the basis of five old common shares for one new common share (the "Consolidation"), change its name to "Blacksteel Energy Inc." and approve the election of six directors who, on closing of the Amalgamation will resign from the board of Chrome and five of their vacancies will be filled with nominees of Blacksteel.

Following closing of the Amalgamation and the Concurrent Financing (share prices for which are reflected on a pre-consolidated basis) and completion of the Consolidation, it is anticipated that the Resulting Issuer will have approximately 19,847,629 common shares issued and outstanding in the event of a minimum private placement and 21,647,629 common shares in the event of a maximum private placement.

The obligation of Blacksteel and Chrome to complete the transaction is subject to the approval of the respective boards of directors of the companies, the shareholders of Blacksteel, and the Exchange. Completion of the Amalgamation is also subject to the absence of any material adverse changes in the assets, business, liabilities, financial condition or prospects of the companies prior to the completion of the Amalgamation, compliance with all laws, regulations and Exchange policies by the companies and acceptance by the Exchange that the resulting issuer upon completion of the Amalgamation and the Concurrent Financing will meet the minimum listing requirements of the Exchange.

The following individuals are proposed to fill the vacancies left on the Resulting Issuer's board following completion of the Amalgamation:

Walter Wakula - Principal occupations are that of a CEO and a Corporate Director including appointments as Director and Chair of Blacksteel; President, CEO, Director and Chair of Firesteel Resources Inc. (a junior mining exploration company list on the TSXV); Director and Chair of Foothills Global Capital Group Inc. (a private equity group); and a Director of Mart Resources Inc. (a TSXV listed, junior oil and gas production company).

Jacques Soroka - President and CEO, Blacksteel Oil Sands Inc., prior thereto Business Development Manager, Gemini Corporation (an engineering, procurement, construction and fabrication company) and Project Management Specialist of Bantrel Co. (an engineering, procurement and construction management company).

Steve Strawson - Project Manager with Golder Associates (a ground engineering and environmental sciences group) and Director of Firesteel Resources Inc. (an oil and gas exploration company listed on the TSXV); prior thereto Environmental Assessment Coordinator with Golder Associates.

Chris Scase - Partner, Scase & Lively, Professional Accountants (a professional accounting firm) and former controller of Chemicals by Sterling Ltd. (a production chemical company).

Dr. Robert J. Leslie - President of Leslie Resources, Inc., a private oil and gas exploration and development company, and director of Mart Resources, Inc. (an oil and gas exploration company listed on the TSXV).

Additionally, the officers of the Resulting Issuer will be Jacques Soroka as the President and Chief Executive Officer and Anna Lentz as the Chief Financial Officer. Ms. Lentz is currently the principal of Brava CFO Services Inc. and prior thereto was the Controller of Stoneham Drilling Trust (an oil and gas services company listed on the TSX) and prior thereto was the Chief Financial Officer of the AMC Group of Companies.

In addition, Firesteel Resources Inc., an exploration-stage junior mining company, listed on the TSX Venture Exchange, engaged in the acquisition and exploration of prospective precious and base metal properties in Canada and Mexico and currently holds approximately 3,740,331 common shares of Blacksteel representing 24.6% of the issued and outstanding Blacksteel shares and upon completion of the Amalgamation and the minimum Concurrent Financing will hold approximately 18,701,655 shares of the Resulting Issuer (on a pre-consolidated basis) representing approximately 18.84% of the issued and outstanding shares of the Resulting Issuer and 17.28% in the event a maximum Concurrent Financing.

Sponsorship of a Qualifying Transaction of a capital pool company is required by the Exchange unless exempt in accordance with Exchange policies by the Exchange. Chrome intends to apply for an exemption from sponsorship requirements in accordance with Exchange policies; however, there is no assurance that Chrome will be able to obtain this exemption.

The trading of Chrome's common shares has been suspended pending closing of the Amalgamation and the Concurrent Financing or the transfer of Chrome's shares to the NEX Exchange.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority 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 filing statement 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 a capital pool company 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 press release.

Advisory Regarding Forward Looking Statements

This press release contains forward-looking statements which include, but are not limited to: reserve and resource estimates, anticipated closing of the Amalgamation and the Concurrent Financing, maximum proceeds of the Concurrent Financing, projected timing of closing, expectations as to bringing a producing well back into production, expectations, evaluations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although the Corporation believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurance that such expectations will prove to be correct. Results of the Corporation and the ability to complete the Amalgamation, the Concurrent Financing and carry out the other matters contained in this press release may be affected by a variety of variables and risks including those associated with oil and gas exploration, production and transportation in the event that the Amalgamation is completed, such as loss of market, volatility of oil and gas prices, currency fluctuations, environmental risks, competition from other producers, ability to access sufficient debt and equity capital from internal and external sources, ability to generate sufficient cash flow from operations to meet current and future obligations, and risks associated with existing and potential future lawsuits and regulatory actions made against the Corporation; as a consequence, actual results could differ materially from those anticipated or implied in the forward-looking statements.
The Corporation's forward-looking statements are expressly qualified in their entirety by this cautionary statement and are made as of the date of this new release. Unless otherwise required by applicable securities laws, the Corporation does not intend nor does it undertake any obligation to update or review any forward-looking statements to reflect subsequent information, event, results or circumstances or otherwise.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Chrome Capital Inc.
    Gregory R. Harris
    President, CEO and CFO
    (403) 777-9222
    or
    Blacksteel Oil Sands Inc.
    Jacques Soroka
    President and CEO
    (403) 453-0060