Anderson Energy Ltd.
TSX : AXL

Anderson Energy Ltd.

December 04, 2014 17:05 ET

Anderson Energy Proposes to Reorganize, Complete a $35 Million Non-Dilutive Financing and Further Rationalize Its Shallow Gas Assets

CALGARY, ALBERTA--(Marketwired - Dec. 4, 2014) - Anderson Energy Ltd. ("Anderson" or the "Company") (TSX:AXL) has signed agreements to reorganize its business, which will result in the disposition of predominantly shallow gas assets which produced approximately 510 BOED of production (95% natural gas) in the third quarter of 2014 and the receipt of $35 million in non-dilutive financing. This transaction is being completed under a plan of arrangement and requires both shareholder approval and court approval to proceed.

Under the plan of arrangement, holders of common shares of the Company will exchange their shares for common shares of a new corporation, on a one for one basis, and the Company will transfer to the new corporation all of its business, other than the assets being indirectly acquired by the third-party. The new corporation will operate under the name Anderson Energy Inc. and the symbols representing its outstanding common shares (AXL) and convertible debentures (AXL.DB and AXL.DB.B) will remain unchanged. The assets of Anderson Energy Inc. will comprise approximately 92% of the Company's existing oil and gas assets.(1)

Anderson has agreed with the purchaser not to solicit any superior proposals, to grant such purchaser a right to match any unsolicited superior proposal and to pay a $1 million termination fee to the purchaser in certain circumstances. A copy of the arrangement agreement, plan of arrangement and related documents will be available under the Company's profile at www.sedar.com.

The Company will be mailing an information circular to its shareholders and others affected by the arrangement in late December 2014 or early January 2015. Completion of the transaction must be approved by at least two thirds of the votes cast at the meeting of shareholders and is subject to the receipt of court and other regulatory approvals. The shareholders' meeting will be held approximately four weeks following mailing of the information circular, with court approval and closing shortly thereafter. The Company's board of directors recommends that shareholders vote in favour of the transaction and insiders owning approximately 11% of the outstanding shares have entered into support agreements under which they agree to do so.

Upon closing, the transaction will significantly improve the Company's liquidity to pursue its Cardium drilling inventory in Willesden Green, increase the Company's oil and NGL production weighting and continue the Company's plan to rationalize its non-core shallow gas asset base. The Company has received an indicative term sheet from its banker indicating that upon closing of the transaction, Anderson Energy Inc. will have access to a $31 million operating loan facility, subject to the satisfaction of customary closing conditions.

Anderson Energy's 2014 capital program is $52 million and is focused on light oil and liquids rich Cardium and Glauconite horizontal drilling opportunities in the greater Willesden Green area in Central Alberta, where the Company is currently involved in a 13 well horizontal drilling program that is expected to be completed in the first quarter of 2015. As the transaction will not close until early 2015, there will be no impact on the Company's 2014 annual production guidance, which is 3,200 BOED (34% oil, condensate and NGL) and its 2014 exit production guidance of 3,700 BOED (42% oil, condensate and NGL). The Company expects to provide guidance for 2015 following the closing of this transaction.

(1) Based upon the pre-tax net present value of proved and probable reserves, using a 10% discount rate, as set forth in the April 30, 2014 modified corporate look-ahead analysis of the Company's reserves prepared by GLJ Petroleum Consultants Ltd.

Certain statements in this news release including, without limitation, management's assessment of future plans and operations; benefits of the consummation of the plan of arrangement including the result on the Company's liquidity; the ability of Anderson Energy Inc. to obtain a new operating loan facility; benefits and valuation of the development prospects described herein; number of locations in drilling inventory and wells to be drilled; timing and location of drilling and tie-in of wells and the costs thereof; productive capacity of the wells; timing and construction of facilities; expected production rates; percentage of production from oil and natural gas liquids; dates of commencement of production; amount of capital expenditures and the timing and method of financing thereof; extent of reserves additions; drilling program success; programs to optimize, rationalize, consolidate and improve profitability of assets; factors on which the continued development of the Company's oil and gas assets are dependent; commodity price outlook; and general economic outlook may constitute "forward-looking information" within the meaning of applicable securities laws and necessarily involve risks and assumptions made by management of the Company including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; adequate weather to conduct operations; sufficiency of budgeted capital, operating and other costs to carry out planned activities; wells not performing as expected; inability to complete property dispositions or to complete them at anticipated values; delays resulting from or inability to obtain required approvals, including regulatory approvals; changes to government regulation; ability to access sufficient capital from internal and external sources; and other factors, many of which are beyond the Company's control. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as the factors are interdependent, and management's future course of action would depend on its assessment of all information at the time. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and readers should not place undue reliance on the assumptions and forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Anderson's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at Anderson's website (www.andersonenergy.ca).

The forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Production volumes and reserves are commonly expressed on a BOE basis whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. Although the intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants, BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six Mcf to one 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. In recent years, the value ratio based on the price of crude oil as compared to natural gas has been significantly higher than the energy equivalency of 6:1, and utilizing a conversion of natural gas volumes on a 6:1 basis may be misleading as an indication of value.

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