Blackhawk Resource Corp.
TSX VENTURE : BLR

Blackhawk Resource Corp.
Black Bore Exploration Ltd.

July 13, 2009 09:01 ET

Letter of Intent to Combine Blackhawk Resource Corp. and Black Bore Exploration Ltd.

CALGARY, ALBERTA--(Marketwire - July 13, 2009) - Blackhawk Resource Corp. (the "Corporation" or "Blackhawk") (TSX VENTURE:BLR) and Black Bore Exploration Ltd. ("Black Bore") are pleased to announce that they have entered into an arm's length letter of intent (the "LOI") dated June 29, 2009, where the parties have agreed to negotiate a definitive agreement relating to a combination transaction (the "Transaction") pursuant to which Blackhawk will acquire all of the issued and outstanding securities of Black Bore (the combined entity hereinafter referred to as the "Resulting Issuer"). Pursuant to the Letter of Intent, the parties have agreed to the essential terms of the Transaction.

If the Transaction is completed, Blackhawk will issue units ("Units") to the Black Bore shareholders having a deemed value of $0.12 per Unit, which implies an entity minimum value for Black Bore of approximately $923,360 plus if certain production performance targets are satisfied in the 18 months following closing a further 12,311,474 Blackhawk shares will be issued pursuant to the Performance Rights (as described below) for a further consideration value of $1,477,377. As such, if the Transaction is completed, upon Closing Blackhawk will have 37,727,671 common shares issued and outstanding (on a non-diluted basis) plus Performance Rights to acquire a further 12,311,474 Blackhawk Shares.

About Black Bore

Black Bore Exploration Ltd. ("Black Bore") is an unlisted reporting issuer which is an Alberta based oil and gas exploration and production company which is currently focused on two core areas in the Western Canadian Sedimentary Basin. Both areas are in east-central Alberta. The first area, Wood River, is located in and around Township 43, Range 23 West of the Fourth Meridian. Production from the Wood River area consists primarily of natural gas from the Horseshoe Canyon coal zone. The second area, Bodo, is in and around Township 38, Range 1 West of the Fourth Meridian. Production from the Bodo area is primarily heavy oil from the McLaren Formation. Black Bore has approximately 5,120 acres (net) of land. Black Bore intends to drill between one and four gross wells in its core areas prior to March 31, 2010.

Black Bore's principal executive offices are located at Suite 500, 635 - 8th Avenue SW, Calgary, Alberta T2P 3M3.

Summary of the Transaction

It is anticipated that the Transaction will be structured as an amalgamation in which a newly incorporated wholly-owned subsidiary of Blackhawk will combine with Black Bore. As a result of the amalgamation, each Black Bore common share will be exchanged for one (1) Blackhawk Unit and Black Bore will become a wholly-owned subsidiary of Blackhawk.

As consideration for the acquisition of all of the Black Bore common shares pursuant to the amalgamation Blackhawk will issue one (1) Unit for each one (1) Black Bore Common Share issued and outstanding immediately prior to the amalgamation. As there are currently 7,694,671 Black Bore common shares issued and outstanding, the Black Bore shareholders will receive 7,694,671 Blackhawk Units pursuant to the amalgamation. Each Unit of Blackhawk will comprise: (a) one Blackhawk common share ("Blackhawk Share"); (b) one 75 BOE/D Performance Right; and (c) 0.6 of one 150 BOE/D Performance Right. Each whole Performance Right will entitle the holder to acquire one Blackhawk Share upon satisfaction of the relevant production threshold. Assuming the conversion of the all the Performance Rights the Consideration will result in approximately 20,000,000 Blackhawk Shares being issued for all of the Black Bore Shares.

Each whole BOE/D Performance Right will entitle the holder to acquire at any time before the 18 month anniversary from issuance of such BOE/D Performance Right, without action or payment of any additional consideration, one Blackhawk Share, provided the Black Bore Lands Production Factor plus the Acquired Lands Production Factor has exceeded the relevant boe/d amount for a continuous 90 day period.

Black Bore Lands Production Factor means the sum of the production calculated on a boe basis from any lands owned by Black Bore immediately prior to the Closing multiplied by 1.0. Acquired Lands Production Factor means the sum of the production from any lands acquired by Blackhawk following the Closing multiplied by 0.5.

Reserves Data

The following tables shows certain information in accordance with National Instrument 51-101 Standards for Disclosure of Oil and Gas Activities for Black Bore as at December 31, 2008 as prepared by AJM Petroleum Consultants Ltd. Such information is subject to all other information contained in the 51-101F1, F2 and F3 as filed on www.sedar.com.



SUMMARY OF OIL AND GAS RESERVES
As of December 31, 2008
(FORECAST PRICES & COSTS)

------------------------------------------------------------
Light & Natural
Medium Oil Heavy Oil Natural Gas Gas Liquids
------------------------------------------------------------
RESERVES Gross Net Gross Net Gross Net Gross Net
CATEGORY (Mbbls) (Mbbls) (Mbbls) (Mbbls) (MMcf) (MMcf) (Mbbls) (Mbbls)
------------------------------------------------------------

PROVED ------------------------------------------------------------
Developed
Producing 13.9 12.3 0 0 268.8 220.0 2.5 1.5
Developed Non-
Producing 4.3 3.6 22.7 20.0 23.2 17.8 0 0
Undeveloped 0 0 0 0 244.1 229.8 0 0
------------------------------------------------------------
TOTAL PROVED 18.2 15.9 22.7 20.0 536.1 467.6 2.5 1.5
Probable 8.3 6.9 13.6 11.4 209.9 169.8 1.8 1.1
------------------------------------------------------------
TOTAL PROVED + 26.5 22.8 36.3 31.4 746.0 637.3 4.4 2.6
PROBABLE
Possible 0 0 0 0 0 0 0 0
------------------------------------------------------------

TOTAL PROVED +
PROB + POSS 26.5 22.8 36.3 31.4 746.0 637.3 4.4 2.6

------------------------------------------------------------


SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE
As of December 31, 2008
(FORECAST PRICES & COSTS)

-------------------------------------------
Net Present Value (NPV) of
Future Net Revenue (FNR)
-------------------------------------------

Before Income Taxes - Discounted at (%/yr)
-------------------------------------------
0 5 10 15 20
RESERVES CATEGORY (M$) (M$) (M$) (M$) (M$)
-------------------------------------------


PROVED -------------------------------------------
Developed Producing 1,616.3 1,303.4 1,084.8 926.5 808.1
Developed Non-Producing 494.3 418.8 361.1 315.9 279.8
Undeveloped 1,244.5 982.2 794.4 655.7 550.5
-------------------------------------------
TOTAL PROVED 3,355.1 2,704.4 2,240.2 1,898.1 1,638.4
Probable 1,912.8 1,252.0 882.8 659.7 515.3
-------------------------------------------
TOTAL PROVED + PROBABLE 5,268.0 3,956.4 3,123.0 2,557.7 2,153.7
Possible 0 0 0 0 0
-------------------------------------------

TOTAL PROVED + PROB + POSS 5,268.0 3,956.4 3,123.0 2,557.7 2,153.7

-------------------------------------------


-------------------------------------------
Net Present Value (NPV) of
Future Net Revenue (FNR)
-------------------------------------------

After Income Taxes - Discounted at (%/yr)
-------------------------------------------
0 5 10 15 20
RESERVES CATEGORY (M$) (M$) (M$) (M$) (M$)
-------------------------------------------


PROVED -------------------------------------------
Developed Producing 1,616.3 1,303.4 1,084.8 926.5 808.1
Developed Non-Producing 494.3 418.8 361.1 315.9 279.8
Undeveloped 1,208.7 951.6 768.0 632.8 530.5
-------------------------------------------
TOTAL PROVED 3,319.3 2,673.7 2,213.8 1,875.2 1,618.4
Probable 1,679.2 1,066.7 732.6 535.6 411.3
-------------------------------------------
TOTAL PROVED + PROBABLE 4,998.5 3,740.4 2,946.4 2,410.7 2,029.7
Possible 0 0 0 0 0
-------------------------------------------

TOTAL PROVED + PROB + POSS 4,998.5 3,740.4 2,946.4 2,410.7 2,029.7

-------------------------------------------


AJM PETROLEUM CONSULTANTS PRICE FORECAST
2008-12-31
Base Case Forecast Effective December 31, 2008

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Price Cost Cdn to
Inflation Inflation Exchange

Rate Rate Rate

-------------------------------------------------------------------
2008 2.4% 2.4% 0.951
-------------------------------------------------------------------

-------------------------------------------------------------------
F 2009 0.0% 0.0% 0.820
o 2010 2.0% 3.0% 0.860
r 2011 2.0% 2.0% 0.900
e 2012 2.0% 2.0% 0.950
c 2013 2.0% 2.0% 0.950
a 2014 2.0% 2.0% 0.950
s 2015 2.0% 2.0% 0.950
t 2016 2.0% 2.0% 0.950
2017 2.0% 2.0% 0.950
2018 2.0% 2.0% 0.950
2019 2.0% 2.0% 0.950
2020 2.0% 2.0% 0.950
2021 2.0% 2.0% 0.950
2022 2.0% 2.0% 0.950
2023 2.0% 2.0% 0.950
2024 2.0% 2.0% 0.950
2025 2.0% 2.0% 0.950
2026 2.0% 2.0% 0.950
2026+ 2.0% 2.0% 0.950
-------------------------------------------------------------------


-------------------------------------------------------------------
Crude Oil Pricing

Bow River Heavy Oil
Edmonton Edmonton 25 Deg. API 12 Deg.
City Gate City Gate Hardisty Hardisty
$/bbl Cdn. $/bbl Cdn. $/bbl $/bbl

Real Current Current Current

-------------------------------------------------------------------
2008 $102.85 $102.85 $83.97 $73.18
-------------------------------------------------------------------

-------------------------------------------------------------------
F 2009 $65.40 $65.40 $50.40 $35.40
o 2010 $85.50 $87.20 $65.20 $49.20
r 2011 $92.75 $96.50 $70.50 $54.50
e 2012 $98.30 $104.30 $76.30 $60.30
c 2013 $103.50 $112.05 $84.05 $68.05
a 2014 $103.50 $114.25 $86.25 $70.25
s 2015 $103.50 $116.55 $68.55 $72.55
t 2016 $103.50 $118.90 $90.90 $74.90
2017 $103.50 $121.25 $93.25 $77.25
2018 $103.50 $123.70 $95.70 $79.70
2019 $103.50 $126.15 $98.15 $82.15
2020 $103.50 $128.70 $100.70 $84.70
2021 $103.50 $131.25 $103.25 $87.25
2022 $103.50 $133.90 $105.90 $89.90
2023 $103.50 $136.55 $108.55 $92.55
2024 $103.50 $139.30 $111.30 $95.30
2025 $103.50 $142.10 $114.10 $98.10
2026 $103.50 $144.90 $116.90 $100.90
2026+ 0.0% 2.0% 2.0% 2.0%
-------------------------------------------------------------------


-------------------------------------------------------------------
Natural Gas Liquids Pricing
Edmonton Par Prices

Pentanes +
Ethane Propane Butane Condensate
$/bbl $/bbl $/bbl $/bbl

Current Current Current Current

-------------------------------------------------------------------
2008 $22.82 $56.99 $82.72 $109.23
-------------------------------------------------------------------

-------------------------------------------------------------------
F 2009 $20.10 $42.50 $52.30 $68.65
o 2010 $23.25 $56.70 $69.75 $91.55
r 2011 $23.70 $62.75 $77.20 $101.35
e 2012 $26.10 $67.80 $83.45 $109.50
c 2013 $28.35 $72.85 $89.65 $117.65
a 2014 $28.95 $74.25 $91.40 $119.95
s 2015 $29.55 $75.75 $93.25 $122.35
t 2016 $30.15 $77.30 $95.10 $124.85
2017 $30.75 $78.80 $97.00 $127.30
2018 $31.35 $80.40 $98.95 $129.90
2019 $31.95 $82.00 $100.90 $132.45
2020 $32.70 $83.65 $102.95 $135.15
2021 $33.30 $85.30 $105.00 $137.80
2022 $34.05 $87.05 $107.10 $140.60
2023 $34.80 $88.75 $109.25 $143.40
2024 $35.40 $90.55 $111.45 $146.25
2025 $36.15 $92.35 $113.70 $149.20
2026 $36.90 $94.20 $115.90 $152.15
2026+ 2.0% 2.0% 2.0% 2.0%
-------------------------------------------------------------------


-------------------------------------------------------------------
Natural Gas Pricing

Alberta Alberta Alberta Alberta Alberta
Reference AECO AECO System Direct
Average Average Average Plant Gate Plant Gate
Price Price Price Sales Sales
$/mcf S/mcf $/mcf $/mcf $/mcf

Current Real Current Current Current

-------------------------------------------------------------------
2008 $7.90 $8.22 $8.22 $8.09 $7.97
-------------------------------------------------------------------

-------------------------------------------------------------------
F 2009 $6.75 $7.00 $7.00 $6.70 $6.80
o 2010 $7.80 $7.90 $8.05 $7.75 $7.85
r 2011 $7.90 $7.90 $8.20 $7.90 $8.00
e 2012 $8.70 $8.50 $9.00 $8.70 $8.80
c 2013 $9.50 $9.00 $9.75 $9.45 $9.55
a 2014 $9.65 $9.00 $9.95 $9.65 $9.75
s 2015 $9.85 $9.00 $10.15 $9.85 $9.95
t 2016 $10.05 $9.00 $10.35 $10.05 $10.15
2017 $10.30 $9.00 $10.55 $10.25 $10.35
2018 $10.45 $9.00 $10.75 $10.45 $10.55
2019 $10.70 $9.00 $10.95 $10.65 $10.75
2020 $10.95 $9.00 $11.20 $10.90 $11.00
2021 $11.15 $9.00 $11.40 $11.10 $11.20
2022 $11.40 $9.00 $11.65 $11.35 $11.45
2023 $11.60 $9.00 $11.90 $11.60 $11.70
2024 $11.85 $9.00 $12.10 $11.80 $11.90
2025 $12.05 $9.00 $12.35 $12.05 $12.15
2026 $12.35 $9.00 $12.60 $12.30 $12.40
2026+ 2.0% 0.0% 2.0% 2.0% 2.0%
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Notes: - All prices are in Canadian dollars.
- Edmonton city gate prices based on light sweet crude posted at
major Canadian refineries. (40 Deg. API less than 0.5% Sulphur).
- Natural Gas liquid prices are forecasted at Edmonton therefore an
additional transportation cost must be included to plant gate sales
point.
- 1 Mcf is equivalent to 1 mmbtu.
- System gas prices includes TCGSL, Progas, Pan Alberta and Alliance.
- Real dollars listed include future growth in prices with no
escalation considered.
- Alberta gas prices, except AECO, include an Average cost of service
to the plant gate.


Subsequent to December 31, 2008, Black Bore disposed of 2.4 boe/d of production for proceeds of $124,000. These amounts are not deducted from the above table. The estimated Net Present Values above do not represent fair market value of the reserve estimates.

Financial Information

The following information is derived from Black Bore's management-prepared unaudited financial statements as at the three month period ended March 31, 2009 and the Blackhawk management-prepared unaudited financial statements for the three month period ended February 28, 2009. Such information is subject to all other information contained in the relevant financial statements as filed on www.sedar.com.



Black Bore
Blackhawk Resource Exploration Ltd.
Corp.(unaudited as at (unaudited as at Pro Forma
February 28, 2009) March 31, 2009) (unaudited)
---------------------------------------------------------------------------
ASSETS
Current assets $1,127,743 $227,502 $1,355,245

Long term
investments 91,250 - 91,250
Petroleum and
natural gas
properties and
equipment 634,019 2,445,503 3,079,522
Property, plant
and equipment 299,026 - 299,026

LIABILITES
Current liabilities 360,187 514,329 874,516

Asset retirement
obligations - 322,971 322,971
Future income tax
liability 20,000 - 20,000

Blackhawk Resource Black Bore
Corp. Exploration Ltd. Pro Forma
---------------------------------------------------------------------------
REVENUE
Oil and gas revenue
net of royalties - $58,226 $58,226
Other revenue 91,059 - 91,059

EXPENSES
Operating costs - 20,655 20,655
Depletion and
accretion - 44,000 44,000
Other 778,207 82,781 860,988


Management

The board of directors of Blackhawk currently consists of David M. Antony, Raymond P. Antony, and Michael Bowie. It is anticipated that Hillar Lilles will join the Blackhawk board (Mr. Lilles is currently a director of Black Bore) upon Closing. Other than Trevor Wong-Chor, who is the Corporate Secretary of each of Black Bore and Blackhawk, none of other the current directors or officers of Blackhawk are directors, officers or shareholders of Black Bore and none of the directors, officers of Black Bore are directors or officers of Blackhawk.

Upon completion of the Transaction, Hillar Lilles will be appointed the President of Blackhawk and Mark Lenson will be appointed VP Exploration of Blackhawk.

As a group, the directors and senior officers of Black Bore own or control (directly or indirectly) 4,345,253 Black Bore common shares representing approximately 56.5% of Black Bore's outstanding common shares. Black Bore currently has approximately 90 shareholders.

Hillar Lilles, a senior officer and director of Black Bore, owns or controls more than 10% of the issued and outstanding Black Bore common shares (on a non-diluted basis). Mr. Lilles owns or controls an aggregate of 1,749,000 Black Bore common shares representing approximately 22.7% of Black Bore's outstanding common shares.

Upon completion of the Transaction, it is anticipated that Mr. Lilles will own or control an aggregate of 1,749,000 common shares of the Resulting Issuer representing approximately 4.6% of the Resulting Issuer's outstanding common shares (on a non-diluted basis) plus Performance Rights which may result in the issuance of a further 2,798,400 common shares.

Mark Lenson, a senior officer and director of Black Bore, owns or controls more than 10% of the issued and outstanding Black Bore common shares (on a non-diluted basis). Mr. Lenson owns or controls an aggregate of 972,853 Black Bore common shares representing approximately 12.6% of Black Bore's outstanding common shares.

Upon completion of the Transaction, it is anticipated that Mr. Lenson will own or control an aggregate of 972,853 common shares of the Resulting Issuer representing approximately 2.5% of the Resulting Issuer's outstanding common shares (on a non-diluted basis) plus Performance Rights which may result in the issuance of a further 1,556,565 common shares.

The municipalities of residence and biographies of the Resulting Issuer's anticipated directors and key officers are as follows:

David Antony, C.A. - Chief Executive Officer and Director (Calgary, Alberta)

Mr. David M. Antony, age 46, is a Chartered Accountant and has over 15 years experience in assisting companies in structuring transactions, accessing capital, and corporate governance. In the last five years, Mr. Antony has been Chief Executive Officer of Southern Pacific Resource Corp. (from 2006 to May 2009) where he continues as Chairman of the board of that company. He is also Chairman of the board for Bridge Resources Corp. Prior thereto, Mr. Antony was a partner at an accounting firm. He is currently Chief Executive Officer of Blackhawk Resource Corp. (since February, 2009) and March Resources Corp. (since 1999).

Hillar S. Lilles - Proposed President and Director (Calgary, Alberta)

Mr. Lilles, age 36, is a geophysicist with over 13 years experience working in the oil and gas industry, primarily in Canada. Mr. Lilles has been the President and a director of Black Bore Exploration Ltd. since November 1, 2008. Prior to that, Mr. Lilles was President and a director of Black Bore Resources Ltd., a private Canadian corporation. Mr. Lilles holds a BSCe in geological engineering and a B.A. in Economics from Queen's University in Kingston.

Mark Lenson - Proposed Vice President of Exploration (Calgary, Alberta)

Mr. Lenson, age 48, is Vice President and a director of Black Bore Exploration Ltd. He has been involved in the exploration and production aspects of the oil and gas industry for over 23 years. His career includes working for CNRL, Inuvialuit Petroleum Corp., Bow Valley Industries and Redsky Energy. Prior to Black Bore Exploration Ltd. Mr. Lenson was Vice President and a director of Black Bore Resources Ltd. Mr. Lenson holds a degree in geology from Brock University in St. Catharines.

Raymond P. Antony, C.A. - Director (Calgary, Alberta)

Mr. Raymond P. Antony, age 57, has been a Chartered Accountant for more than thirty years. An independent business man since September, 2006 Raymond P. Antony was previously the President of Breakside Energy Ltd., a private oil and gas exploration and production company since January 2004. Prior thereto, Raymond P. Antony was President of Resolution Resources Ltd., a public oil and gas exploration and production company since October 2001. Mr. Raymond P. Antony has obtained significant financial experience and exposure to accounting and financial issues as a director and audit committee member of a number of public companies with international operations in Argentina, Algeria and Peru.

Mr. Raymond P. Antony received a Bachelor of Commerce degree with distinction from the University of Alberta, Edmonton, Canada in 1975 and his Chartered Accountant designation from the Alberta Institute of Chartered Accountants in 1977. Mr. Raymond P. Antony was a partner in a Calgary firm of Chartered Accountants from 1980 to 1996 after articling with Price Waterhouse in Calgary.

Michael Bowie - Director (Calgary, Alberta)

Mr. Bowie, age 38, is a Principal of Summit Liability Solutions since May 2007. Mr. Bowie was formerly the Vice-President Business Development of Vital Energy from April 2005 to December 2006 and EHIS Co-ordinator of Vermillion Energy Trust from June 2002 to April 2005.

Charidy Lazorko, CGA - Chief Financial Officer (Calgary, Alberta)

Ms. Lazorko, age 29, is a Certified General Accountant with over 5 years experience assisting public companies with financial services.

Trevor Wong-Chor, LLB - Corporate Secretary (Calgary, Alberta)

Mr. Wong-Chor, age 40, is a solicitor specializing in corporate finance, mergers and acquisitions and oil and gas. Since September 17, 2004, he has practiced with Davis LLP where he is currently a partner in the Calgary office. From October 1998, to September 17, 2004, he practiced with Borden Ladner Gervais LLP, and its predecessor firms.

Mr. Wong-Chor obtained his Bachelor of Arts degree from the University of Victoria in 1992 and his Bachelor of Laws degree from the University of Calgary in 1997.

Conditions

The proposed transaction is subject to a number of conditions including the following:

(a) approval by the board of directors of both Blackhawk and Black Bore;

(b) approval by the Black Bore shareholders and holders of the Black Bore Convertible Debentures;

(c) satisfactory due diligence by both Blackhawk and Black Bore;

(d) negotiation and execution of a definitive agreement; and

(e) regulatory approval.

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

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.

Trading in the securities should be considered highly speculative.

This new release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

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.

Contact Information

  • Blackhawk Resource Corp.
    David M. Antony
    Chief Executive Officer and Director
    (403) 531-1710
    or
    Black Bore Exploration Ltd.
    Hillar Lilles
    President and Director
    (403) 663-0200