Renegade Petroleum Ltd.

Renegade Petroleum Ltd.

April 13, 2010 08:09 ET

Renegade Petroleum Ltd. Announces Two Acquisitions, Farm-in Agreement, Bought Deal Financing and Increased Guidance

CALGARY, ALBERTA --(Marketwire - April 13, 2010) -


Renegade Petroleum Ltd. ("Renegade" or the "Company") (TSX VENTURE:RPL) is pleased to announce an asset acquisition (the "Asset Acquisition"), a private company acquisition (the "Private Company Acquisition", collectively the "Acquisitions") and a farm-in agreement (the "Farm-In") with a total transaction value of approximately $52.5 million. Renegade is also pleased to announce a $25 million bought deal subscription receipt financing (the "Financing") convertible into common shares of Renegade ("Common Shares") co-led by GMP Securities L.P. and Genuity Capital Markets and including Dundee Securities Corporation, Macquarie Capital Markets Canada Ltd., Paradigm Capital Inc., FirstEnergy Capital Corp., and Peters & Co. Limited.


Through the Acquisitions, Renegade is acquiring high quality, high netback, long reserve life, light oil assets focused in the Company's southeast Saskatchewan core area for total consideration of $33 million in cash and approximately 5.3 million Common Shares. Cash consideration will be financed through available cash and bank line and with proceeds from the Financing. 

The producing properties are predominately operated with high working interests, 3D seismic coverage and control of key producing infrastructure and are associated with a light oil prospective undeveloped land base. The Acquisitions provide Renegade with conventional high netback light oil assets; consolidate Renegade's core areas in Hastings/Alameda, Rocanville, and provides additional exploration acreage in Wordsworth/Alida. The Acquisitions also more than double Renegade's net undeveloped acreage.

The combined assets have the following characteristics:

Current production 500 Boepd
Proved plus probable reserves (1) 1.96 million barrels
Percentage of proven reserves 66%
Proved plus probable RLI (1) 10.75 years
Undeveloped land (net) 34,878 acres
Total drilling locations 38.0 gross (32.5 net)
Operating netback (2) $48.00
  1. Based on Sproule Associates Limited reserve reports for each acquisition as at December 31, 2009.
  2. Based on CDN$75.00/Bbl WTI and US$/CDN$ exchange rate of 0.95 and calculated by subtracting royalties and operating costs from revenues.


The Acquisitions are accretive to Renegade on a per share basis on all key metrics. The transaction metrics are as follows:

Production (1) $85,000 per producing boe
Proved plus probable reserves (1) $21.65 per boe
Proven plus probable recycle ratio 2.2 times
  1. Based on Sproule Associates Limited reserve reports for each acquisition as at December 31, 2009.
  2. Assumes $400/acre for undeveloped land (transaction metrics exclude the farm-in transaction and related proceeds of US$1.2 million).


The Acquisitions represent the successful continuation of Renegade's business plan to acquire high quality light oil assets and high impact light oil resource play assets.

The Asset Acquisition enhances two core areas for Renegade: Hastings/Alameda and Rocanville, along with core holdings in Steelman. The Asset Acquisition provides Renegade with long life high netback conventional light oil production and 4 additional owned and operated facilities and infrastructure. The assets being acquired with the acquisition have been under exploited by horizontal drilling techniques and provide significant exploitation upside. Production from the Hastings/Alameda area comes primarily from the Midale and Frobisher formations and analogous wells in the area have initial production rates in excess of 150 Boepd. Production from Rocanville comes primarily from the Bakken and analogous wells in the area have initial production rates of 150 Boepd.

The Prairie Hunter acquisition provides Renegade with a dominant contiguous land base in the Wordsworth/Alida area and adds 17,800 net acres of undeveloped land in southeast Saskatchewan. With the recent discovery of a prolific new oil pool discovery on the Prairie Hunter lands, Renegade is excited to add additional high impact exploration activities in this area to its large inventory of light oil development drilling.

The Farm-In provides Renegade with a high impact Bakken and Three-forks/Sanish exploration play to potentially open up a new resource play immediately south of southeast Saskatchewan at reasonable depths and drilling costs. 

The Acquisitions increase Renegade's drilling inventory in its light oil core areas of southeast Saskatchewan, the Viking in south central Saskatchewan and a new core area in North Dakota. As a result of the transactions, Renegade will have pro forma production of 1,250 Boepd, proven plus probable reserves of 3.3 MMBoe, of which 66% are proven reserves, nearly 54,478 net acres of undeveloped land and a drilling inventory of 224.0 gross (149.0 net) exploitation and exploration locations, all for high quality light oil.

Renegade continues to grow its resource play exposure in southeast Saskatchewan and increases its Bakken exposure. The Company anticipates the Financing will result in an under-levered balance sheet, providing greater 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.

The Acquisitions and Financing are accretive to 2010 forecast cash flow per share, reserves and production per share. As a result of these Acquisitions as well as successful drilling, Renegade is increasing its guidance for 2010 exit rate production from a range of 1,800 to 1,900 Boepd to new guidance of 2,400 to 2,500 Boepd, representing a 1,800% increase in production from Q4 2009 averages.


Renegade has entered into an agreement (the "Asset Acquisition Agreement") with a vendor dated April 12, 2010 to acquire all of the vendor's southeast Saskatchewan assets effective April 1, 2010 for consideration of $33.0 million of cash. Renegade has deposited $3.3 million under the terms of the Asset Acquisition Agreement, which is refundable to Renegade if the Asset Acquisition does not close, except in the event of default by Renegade. Closing of the Asset Acquisition is expected to occur on or about April 29, 2010 and is subject to certain conditions customary for transactions of this nature and the receipt of all regulatory approvals, including the approval of the TSX Venture Exchange (the "TSXV").


Renegade has entered into an amalgamation agreement dated April 12, 2010 (the "Amalgamation Agreement") with Prairie Hunter Energy Corporation ("Prairie Hunter"), based in Regina, Saskatchewan. Pursuant to the Amalgamation Agreement, Renegade has agreed to acquire all of the outstanding common shares of Prairie Hunter by way of an amalgamation between Prairie Hunter and a wholly-owned subsidiary of Renegade under The Business Corporations Act (Saskatchewan). Renegade will issue a total of approximately 5.3 million Common Shares at an ascribed value of $3.50 per Common Share to the shareholders of Prairie Hunter under the transaction and Prairie Hunter will become a wholly-owned subsidiary of Renegade. The transaction is subject to the approval of 66â…”% of the shareholders of Prairie Hunter voting in favour of the transaction. Holders of approximately 45% of the common shares of Prairie Hunter have entered into agreements with Renegade pursuant to which they have agreed to vote their shares in favour of the transaction. The board of directors of Prairie Hunter has received a verbal fairness opinion from MGI Securities Inc. that the consideration of 0.41 Common Shares per Prairie Hunter share, is fair, from a financial point of view, to the shareholders of Prairie Hunter. The Board of Directors of Prairie Hunter has unanimously approved the transaction and recommended that the shareholders of Prairie Hunter approve the transaction. The Amalgamation Agreement, among other things, contains non-solicitation covenants and provides for a mutual non-completion fee of $750,000 in the event the transaction is not completed in certain circumstances. The Private Company Acquisition is anticipated to close by May 31, 2010. Completion of the transaction is subject to confirmatory due diligence by Renegade as well as customary conditions and the receipt of all regulatory approvals, including the approval of the TSXV.


Renegade has entered into an agreement (the "Farm-in Agreement") with certain private companies based in North Dakota (the "Farmors") to farm-in, on a 50/50 basis, on 25,950 gross (12,975 net) acres of land in Renville County, North Dakota immediately adjacent to the Saskatchewan border. The Farm-In will create a new core area on a contiguous land block that is prospective for Bakken, Threeforks/Sanish and Frobisher light oil and could result in a new Bakken resource play for Renegade. Under the terms of the Farm-in Agreement Renegade has made a cash payment of US$1.2 million upon signing and will pay $300,000 upon certain conditions being met by the Farmors. The right to earn the 50% interest is based upon the requirement to shoot two 4 square mile 3D seismic surveys by mid September 2010 and drill 1 Bakken Horizontal test well by mid November 2010. 


In association with the Acquisitions, Renegade has entered into an agreement with a syndicate of underwriters, co-led by GMP Securities L.P. and Genuity Capital Markets and including Dundee Securities Corporation, Macquarie Capital Markets Canada Ltd., Paradigm Capital Inc., FirstEnergy Capital Corp., and Peters & Co. Limited, (collectively, the "Underwriters"), providing for the purchase of, on a bought deal basis, 7,143,000 subscription receipts (the "Subscription Receipts") for aggregate gross subscription proceeds of approximately $25 million, being a purchase price of $3.50 per Subscription Receipt.

The gross subscription proceeds of the Financing shall be held in escrow by Olympia Trust Company as escrow agent and released to Renegade at closing of the Asset Acquisition to fund a portion of such acquisition. Closing of the Financing is subject to customary conditions and regulatory approvals, including the approval of the TSXV, and is expected to occur on or about April 29, 2010. In the event the Asset Acquisition is not completed by May 14, 2010, holders of Subscription Receipts shall be refunded their proportionate share of the escrowed funds (and any interest accrued thereon) and the Subscription Receipts shall be cancelled. 

Subject to prior closing of the Asset Acquisition, each Subscription Receipt will be converted, without further payment or action on the part of the holder thereof, into one common share of Renegade upon the earlier of: (a) four months and a day following the closing date of the Financing, and (b) the day upon which a receipt is issued by the securities regulatory authorities in all the applicable provinces for a final prospectus qualifying the Common Shares to be issued upon conversion of the Subscription Receipts. Renegade has agreed to use its reasonable commercial efforts to obtain such a receipt on or before May 20, 2010. Until the receipt is issued for such prospectus, the Subscription Receipts, as well as the Common Shares issuable upon conversion thereof, will be subject to a four month hold period under applicable Canadian securities laws.


Renegade recently executed a letter agreement banking proposal encompassing a new $30.0 million revolving credit facility underwritten by National Bank of Canada. The new Credit Facility is anticipated to be available by early May 2010. Currently Renegade has no bank debt outstanding.


GMP Securities L.P. acted as financial advisor to Renegade with respect to the Acquisitions.

Genuity Capital Markets acted as financial advisor to Prairie Hunter and MGI Securities Inc. has provided a verbal fairness opinion to the Board of Directors of Prairie Hunter.


Renegade's common shares trade on the TSX Venture Exchange under the symbol RPL. Renegade currently has approximately 32.3 million shares outstanding. The Company's presentation can be viewed on its website at


This press release contains forward-looking statements. More particularly, this press release contains forward-looking statements related to the Acquisitions and Farm-In and their anticipated impact on Renegade; the Financing and bank line of credit; Renegade's capital expenditure program; Renegade's drilling plans; the expected ability of Renegade to execute on its exploration and development program; and Renegade's anticipated reserves and production (both in terms of quantity and raw attributes) and Renegade's anticipated cash flow from operations using estimated benchmark prices.

The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Renegade, including: (i) with respect to the Acquisitions, Financing, Farm-In and bank line of credit, that all conditions precedent to give effect to such transactions, including all regulatory and exchange approvals, will be obtained; (ii) with respect to capital expenditures, generally, and at particular locations, the availability of adequate and secure sources of funding for Renegade's proposed capital expenditure program and the availability of appropriate opportunities to deploy capital; (iii) with respect to drilling plans, the availability of drilling rigs, expectations and assumptions concerning the success of future drilling and development activities and prevailing commodity prices; (iv) with respect to Renegade's ability to execute on its exploration and development program, the performance of Renegade's personnel, the availability of capital and prevailing commodity prices; and (v) with respect to anticipated reserves, production and resulting cash flow, the accuracy of the reserves estimates, the ability to drill and operate wells on an economic basis, the performance of new and existing wells and accounting for risks typically associated with oil and gas exploration and production.

Although Renegade 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 Renegade 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, 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.

The forward-looking statements contained in this document are made as of the date hereof and Renegade 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.


BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf : 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Neither 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

  • Renegade Petroleum Ltd.
    Michael Erickson
    President & CEO
    (403) 355-8922
    Renegade Petroleum Ltd.
    Alex Wylie
    Vice-President, Finance & CFO
    (403) 410-3376