Blacksteel Energy Inc.
TSX VENTURE : BEY

Blacksteel Energy Inc.

September 04, 2014 19:07 ET

Blacksteel Energy Inc. Announces $15 Million Subscription Receipt Financing

CALGARY, ALBERTA--(Marketwired - Sept. 4, 2014) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. WIRE SERVICES

Blacksteel Energy Inc. (TSX VENTURE:BEY) ("Blacksteel" or the "Corporation") is pleased to announce that it has entered into an engagement agreement with a syndicate of agents led by Canaccord Genuity Corp. (collectively, the "Agents") for a commercially reasonable efforts private placement financing for gross proceeds of up to $15,000,000 (the "Offering").

The Offering consists of a private placement of equity unit subscription receipts of Blacksteel ("Equity Unit Subscription Receipts") and convertible debenture subscription receipts of Blacksteel ("Convertible Debenture Subscription Receipts", and together with the Equity Unit Subscription Receipts, the "Subscription Receipts"), at a price of $0.15 per Equity Unit Subscription Receipt and $1,000 per Convertible Debenture Subscription Receipt. The Offering shall consist of a maximum of $5,000,000 of Convertible Debenture Subscription Receipts subject to increase at the discretion of the Corporation. Each Equity Unit Subscription Receipt issued in connection with the Offering will, upon closing of the Proposed Transaction (as defined below), be exchanged or converted into one common share of the Corporation (the "Common Shares"), and one half of one Common Share purchase warrant (the "Warrants"), without further payment or action on the part of the holder. Each whole Warrant shall be exercisable for one Common Share at a price of $0.25 for a period of 18 months following the closing of the Offering. Through a similar series of transactions, each Convertible Debenture Subscription Receipt will be exchanged or converted into one convertible debenture of the Corporation (the "Convertible Debentures"). The Convertible Debentures have a term of four years from issuance (the "Maturity Date"), with an interest rate of 8.5% per annum, payable in cash on a semi-annual basis, with the first payment due on June 30, 2015. Each Convertible Debenture is convertible, at the holder's option, into Common Shares at any time prior to the earlier of the business day immediately preceding the Maturity Date and the business day immediately preceding any date fixed for redemption by the Company at a conversion price of $0.25 per Common Share (the "Conversion Price"). The Conversion Price shall be subject to standard anti-dilution adjustments. Prior to the Maturity Date, and after at least two years from the issuance of the Convertible Debentures, the Corporation may: (a) redeem the Convertible Debentures through payment of the outstanding principal and any accrued and unpaid interest; and/or (b) force the conversion of the Convertible Debentures if the 20 day weighted average volume trading price of the Common Shares is no less than $0.40.

The Offering is being completed in contemplation of Blacksteel's proposed acquisition (the "Proposed Transaction") of Alcan Fluid Disposal Ltd. ("Alcan"), Peace Drilling and Research Ltd. ("Peace Drilling") and Integrated Resource Technologies Ltd. ("Integrated") (collectively the "TargetCos") as outlined in the Corporation's press release of June 3, 2014. As a result of the terms of the Offering, certain terms of the acquisition price for the TargetCos have been amended. The amended terms of the Proposed Transaction are as follows:

The consideration for the Proposed Transaction consists of the issuance of 31,666,667 Common Shares (the "Acquisition Shares") at a deemed price of $0.15 per share, cash payment of $1,476,645 and the assumption of approximately $2,260,000 in debt. The purchase price is allocated among the TargetCos as follows:

Alcan: Purchase price of $3,850,000 satisfied through the issuance of 19,000,000 Acquisition Shares and a cash payment of $1,000,000.

Peace Drilling: Purchase price of $1,176,645 satisfied through the issuance of 4,666,667 Acquisition Shares and a cash payment of $476,645; and

Integrated: Purchase price of $3,460,000 satisfied through the issuance of 8,000,000 Acquisition Shares and the assumption of secured debt of approximately $2,260,000.

The acquisitions of the TargetCos are arm's length transactions. Alcan and Peace Drilling are both British Columbia incorporated companies and Integrated is an Alberta incorporated company. The principal shareholders of Alcan are Altec Inspection Holdings Ltd. ("AIH"), Karen Baker and Ron Baker, the sole shareholder of Peace Drilling is AIH and the sole shareholder of Integrated is Ken Watson. AIH is a British Columbia company owned by Baker Springing Trust, Karen Baker and Ron Baker. Karen Baker and Ron Baker are trustees of the Baker Springing Trust.

In addition, upon completion of the Proposed Transaction, Shift Capital Inc., a company wholly owned by Greg McLean, will receive a financial advisory fee of 500,000 Common Shares at a deemed price of $0.15 per share.

The TargetCos are focused on waste management, environmental services and geotechnical drilling in northeastern British Columbia and northwestern Alberta. Alcan provides waste water processing, disposal facilities and onsite water treatment; Peace Drilling is involved in geotechnical and coring services along with soil stabilization; and Integrated focuses on remediation and reclamation services. Further details on the Proposed Transaction are set forth in the Corporation's press release of June 3, 2014.

"Blacksteel is excited to enter into this transformative transaction that will result in the combined company entering the oil and gas services sector providing fluid and waste disposal and geotechnical drilling. The integrated offering centered out of Fort St. John is well poised to build on its established operating base and clientele list as the development of resource and infrastructure projects accelerate to support LNG exports amongst other major projects. The resulting revenues and cash flow growth from this transaction will position the company on a strong footing for the future," stated Chris Scase, Director of the Corporation.

"The three private companies have worked together over a number of years and now is the right time to enter the public markets as we see the opportunity for growth in the oilfield services and infrastructure sectors. The proceeds from this financing will allow the company to fulfill the customer driven demand we are experiencing presently and expect to grow," stated Ken Watson, who will be President and Chief Executive Officer of the Corporation upon completion of the Proposed Transaction.

It is expected that the gross proceeds of the Offering will be held in escrow pending delivery by Blacksteel and the Agents of a certificate to the effect that all conditions (other than payment of the purchase price) necessary to complete the Proposed Transaction have been completed. The net proceeds of the Offering will be used to fund the cash component of the Proposed Transaction, acquisition and deployment of capital assets and general corporate purposes. The Offering is expected to close on or about September 30, 2014.

The Offering is subject to the approval of the TSX Venture Exchange (the "TSXV"). The Subscription Receipts will be offered in the Provinces of Alberta, British Columbia, Saskatchewan, and Ontario and in such other jurisdictions where the Subscription Receipts can be issued on a private placement basis, exempt from any prospectus, registration or other similar requirements. The Subscription Receipts may also be placed privately in the United States with certain qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933 and with certain accredited institutional investors under Regulation D.

The Agents shall be paid a cash fee equal to 6.0% of the gross proceeds of the Offering and receive broker warrants to acquire Common Shares equal to 6.0% of the gross proceeds from the Equity Subscription Receipts and 4% of the gross proceeds from the Convertible Debenture Subscription Receipts, divided by $0.15, half of which shall be payable upon closing of the Offering and half of which shall be payable upon closing of the Proposed Transaction. The broker warrants shall have an exercise price of $0.15 per broker warrant and have an expiry of 12 months from the date of the closing of the Offering. A reduced commission of 2.0% shall apply to gross proceeds from subscriptions received from certain investors identified by the Corporation.

Appointment of Director

Blacksteel is also pleased to announce that Stuart O'Connor has agreed to join its board of directors upon completion of the Proposed Transaction, subject to regulatory approval and customary conditions.

Mr. O'Connor is currently the President of Timber Ridge Capital Ltd., a private investment and holding company as well as an officer and/or director of various other companies including Fitzroy Developments Ltd., a private real estate company and Arcurve Inc., a private international software development company. He is the former Chairman of the Board of Flint Energy Services Ltd. (TSX), a public oilfield service company, which was sold to URS Corporation in a $1.25 billion transaction; and a former Director of IROC Energy Services Corp. (TSX-V), a public oilfield services company. In addition, Mr. O'Connor has been a founding partner in various other enterprises including a private oil and gas company, a financing company and a real estate company. Mr. O'Connor was also the Chief Executive Officer and President of Merak Projects Ltd., a software developer focused on the international oil and gas industry and a former Partner with Bennett Jones LLP, a national law firm, practicing corporate and securities law.

Mr. O'Connor holds a Bachelor of Science (Chemical Engineering) degree from the University of Calgary and a Bachelor of Laws degree from Queen's University.

Upon completion of the Proposed Transaction, it is expected that Blacksteel will grant additional stock options to directors, officers and employees to acquire up to the maximum allowable amount pursuant to the Corporation's stock option plan. Each grant of options will be for a term between five to ten years and exercisable at a price equivalent to the price of the Offering.

Significant Conditions to Completion of the Proposed Transaction

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to: (a) entering into a formal agreement; (b) TSXV acceptance; (c) Blacksteel Shareholder approval; and (d) completion of the Offering for gross proceeds of not less than $10,000,000.

The Proposed Transaction cannot close until the required shareholder approvals are obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Blacksteel Energy Inc. should be considered highly speculative.

Blacksteel Energy Inc.

Blacksteel is a junior oil and gas company involved in the exploration, exploitation, development and production of petroleum and natural gas resources. The Corporation has a 100% working interest in a four section petroleum and natural gas lease in the Del Bonita Area of Southern Alberta, which it believes may have Bakken potential. It also has a 25% working interest in one section of land in the Crossfield area, which the Corporation believes is oil prospective in the Elkton formation.

This news release contains forward-looking statements relating to the Offering and the Proposed Transaction, including statements regarding the anticipated acquisition of the TargetCos, the completion of the Offering, the appointment of a director, receipt of all necessary regulatory and shareholder approvals and satisfaction of all other closing conditions in connection with the Proposed Transaction and other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things: the risk that the Proposed Transaction will not be completed if a formal agreement is not reached or that the necessary approvals and/or exemptions are not obtained or some other condition to the closing of the Proposed Transaction is not satisfied; the risk that closing of the Proposed Transaction could be delayed if the TargetCos are not able to obtain the necessary approvals on the timelines planned; the timing of obtaining required approvals and satisfying closing conditions for the Proposed Transaction, state of the economy in general and capital markets in particular; the risk that the Offering does not close or that the gross proceeds are not at least $10,000,000; investor interest in the business; and future prospects of Blacksteel and the TargetCos.

The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, Blacksteel, Alcan, Peace Drilling and Integrated disclaim any intention and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additionally, Blacksteel, Alcan, Peace Drilling and Integrated undertake no obligation to comment on the expectations of, or statements made, by third parties in respect of the matters discussed above.

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.

Not for distribution to U.S. Newswire Services or for dissemination in the United States of America. Any failure to comply with this restriction may constitute a violation of U.S. Securities Laws.

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