Emerge Oil & Gas Inc.

October 28, 2009 18:42 ET

Emerge Oil & Gas Inc. Enters Into Agreement to Acquire Strategic Oil Assets in Lloydminster and Provost and Announces $50 Million Equity Financing

CALGARY, ALBERTA--(Marketwire - Oct. 28, 2009) - Emerge Oil & Gas Inc. ("Emerge" or the "Company") is pleased to announce that it has entered into an agreement with Provident Energy Trust (TSX-PVE.UN; NYSE-PVX) to acquire certain oil and natural gas assets located in the Company's core operating and producing area of Lloydminster around the Saskatchewan and Alberta border, and in Provost, Alberta, for a total purchase price of $87 million (the "Acquisition").

PROPERTY ACQUISITION

Production from the assets during the third quarter of 2009 was 2,200 barrels of oil equivalent per day (boe/d); approximately 1,500 boe/d of heavy oil in the Lloydminster area and 700 boe/d of light and medium oil in the Provost area. Proved plus probable (P+P) reserves were 4.4 million boe at June 30, 2009. The purchase reflects transaction metrics (without adjustment for undeveloped land and seismic) of $39,545 per flowing boe/d and $19.77 per boe of P+P reserves. FirstEnergy Capital Corp. acted as exclusive financial advisor to Emerge in connection with the Acquisition.

Tom Greschner, Chairman, President and Chief Executive Officer of Emerge said: "This asset acquisition will complement our core Lloydminster heavy oil asset base where we have achieved success and are currently producing nearly 1,800 boe/d. We are also extremely excited to add a new light and medium oil core area in the Provost/Thompson Lake area of Alberta. Emerge has added exceptional value for our shareholders and we intend to continue to increase shareholder value on accretive per-share metrics."

The acquisition has an effective date of September 1, 2009 and is subject to standard industry closing conditions. Assuming the successful closing of the Acquisition, which is expected to occur on or around November 30, 2009, Emerge will have production of approximately 4,300 boe/d (94% oil and 6% natural gas and associated liquids) and a P+P reserve base of approximately 9 million boe. Emerge plans to exit 2009 at approximately 4,800 boe/d.

The total purchase price of $87 million, before closing adjustments, consists of $70 million in cash and $17 million in common shares of Emerge. The cash portion of the acquisition will be funded by bank debt and an equity financing.

FINANCING

For the equity financing, the Company is pleased to announce that it has entered into a private placement equity financing agreement with a syndicate of underwriters led by FirstEnergy Capital Corp. (collectively, the "Underwriters"), to issue 25.0 million subscription receipts on a firm bought-deal basis ("Firm Subscription Receipts") at a price of $2.00 per Subscription Receipt for gross proceeds of $50 million. Additionally, the Underwriters will offer to sell, on a commercially reasonable best efforts agency basis, up to an additional 7.5 million subscription receipts ("Offered Subscription Receipts") at a price of $2.00 per Subscription Receipt for gross proceeds of up to $15 million. Total aggregate gross proceeds from the sale of Firm Subscription Receipts and Offered Subscription Receipts (collectively, the "Subscription Receipts") will be $65 million if fully sold (the "Offering"). Certain insiders, including directors, officers, employees and close business associates of the Company, may subscribe for up to $1 million of the Offering on the same price, terms and conditions.

The proceeds of the Offering will be held in escrow pending Emerge's receipt of all necessary regulatory approvals and the completion of the Acquisition prior to December 30, 2009 (the "Acquisition Deadline Date"). Upon satisfaction of these conditions, each Subscription Receipt will be exercisable into one special warrant ("Special Warrant") of Emerge without payment of any additional consideration, and the proceeds of the Offering will be released to Emerge. If closing of the Acquisition does not occur by the Acquisition Deadline Date or the Acquisition is terminated at any earlier time, holders of the Subscription Receipts will be entitled to a return of their full subscription price and their pro rata entitlement to the interest earned on the escrowed funds.

Each Special Warrant issued upon exercise of the Subscription Receipts will be subsequently exercisable into one common share ("Common Share") of Emerge, without payment of any additional consideration, upon the filing and clearing a final prospectus, or Emerge otherwise qualifying the Common Shares by January 31, 2010 ("Qualification Deadline"). If receipts for the final prospectus are not obtained before the Qualification Deadline, the Company shall nevertheless continue to use its best efforts to obtain such receipts or otherwise become a public company, and each holder of Special Warrants will, upon the exercise or deemed exercise of the Special Warrants, receive an additional 0.1 of a Common Share for each Special Warrant so exercised.

The Subscription Receipts, and the Special Warrants issuable on exercise of the Subscription Receipts, will be subject to a hold period until qualification of the Common Shares. The Offering is subject to the receipt of all necessary regulatory approvals and closing of the Offering is scheduled for November 19, 2009.

Emerge Oil & Gas Inc. is a Calgary-based, private junior oil and gas company.

Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas volumes have been converted to oil equivalence at 6,000 cubic feet of natural gas to oil barrel of oil equivalent (6:1). The term boe may be misleading, particularly if used in isolation. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead.

Certain information with respect to Emerge Oil & Gas Inc. ("Emerge") contained herein, including management's assessment of future plans and operations, contains forward-looking statements. These forward-looking statements are based on assumptions and are subject to numerous risks and uncertainties, certain of which are beyond Emerge's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency exchange rate fluctuations, imprecision of reserve estimates, environmental risks, competition from other explorers, stock market volatility and ability to access sufficient capital. As a result, Emerge's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur. In addition, the reader is cautioned that historical results are not necessarily indicative of future performance. Emerge does not intend, and does not assume any obligation, to update or revise these forward-looking statements except as required by applicable securities laws.

Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Emerge's reasonable expectations as to the anticipated results of it's proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Contact Information

  • Emerge Oil & Gas Inc.
    Tom Greschner
    Chairman, President and Chief Executive Officer
    (403) 718-3852
    tomg@emergeoilandgas.com
    or
    Emerge Oil & Gas Inc.
    Anita Tonn
    Vice President, Finance and Chief Financial Officer
    (403) 715-3855
    anitat@emergeoilandgas.com
    or
    Emerge Oil & Gas Inc.
    Suite 1208, 250 - 2nd Street SW
    Calgary, Alberta, Canada T2P 0C1
    (403) 718-3850