Blacksteel Energy Inc.

Blacksteel Energy Inc.

September 30, 2014 19:58 ET

Blacksteel Energy Inc. Announces Formal Agreement to Acquire Oilfield Service Companies and Extension of Existing Warrants

CALGARY, ALBERTA--(Marketwired - Sept. 30, 2014) -


Blacksteel Energy Inc. (TSX VENTURE:BEY) ("Blacksteel" or the "Corporation") is pleased to announce that it has entered into a definitive share purchase agreement (the "Purchase Agreement") dated September 25, 2014 to acquire Alcan Fluid Disposal Ltd. ("Alcan"), Peace Drilling and Research Ltd. ("Peace Drilling") and Integrated Resource Technologies Ltd. ("Integrated") (the "Proposed Transaction"). The Transaction is considered to be a reverse take-over under the policies of the TSX Venture Exchange Inc. ("TSXV"). Completion of the Proposed Transaction will be subject to customary closing conditions, including regulatory approval and approval by Blacksteel's shareholders.

The Proposed Transaction

Under the terms of the Purchase Agreement, Blacksteel will acquire all of the issued and outstanding shares of Alcan, Peace Drilling and Integrated (collectively referred to herein as the "TargetCos") for an aggregate purchase price of $8,480,645, subject to working capital adjustments at closing. The consideration for the Proposed Transaction consists of the issuance of 31,658,851 common shares of Blacksteel (the "Acquisition Shares") at a deemed price of $0.15 per share, cash payment of $1,470,645 and the assumption of $2,261,172.31 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 $1,170,645 satisfied through the issuance of 4,666,667 Acquisition Shares and a cash payment of $470,645; and

Integrated: Purchase price of $3,460,000 satisfied through the issuance of 7,992,184 Acquisition Shares and the assumption of secured debt of $2,261,172.31.

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 of Blacksteel (the "Common Shares") at a deemed price of $0.15 per share.

Trading in the Blacksteel Shares is currently halted pending review of the Proposed Transaction by the TSXV. There can be no assurance that trading in Blacksteel Shares will resume prior to completion of the Proposed Transaction.

Target Companies

The TargetCos are focused on waste management, environmental services and geotechnical drilling in northeastern British Columbia and northwestern Alberta. Alcan Fluid Disposal Ltd. provides waste water processing, disposal facilities and onsite water treatment. Peace Drilling and Research Ltd. is involved in geotechnical and coring services along with soil stabilization and Integrated Resource Technologies Ltd. focuses on remediation and reclamation services. Further details on the Proposed Transaction are set forth in the Corporation's press releases of June 3, 2014 and September 4, 2014.

Private Placement

In conjunction with the Proposed Transaction, Blacksteel has entered into an engagement agreement with a syndicate of agents led by Canaccord Genuity Corp. to complete a commercially reasonable efforts private placement financing for gross proceeds of up to a minimum of $10,000,000 to a maximum of $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"), at a price of $0.15 per Equity Unit Subscription Receipt and $1,000 per Convertible Debenture Subscription Receipt. Further details on the Offering are set forth in the Corporation's press release of September 4, 2014.

In addition, Blacksteel is also concurrently completing a non-brokered private placement (the "Concurrent Private Placement") of up to 10,000,000 units (the "Units") at a price of $0.15 per Unit for gross proceeds of $1,500,000. The Concurrent Private Placement is not subject to any minimum aggregate subscription. Each Unit will consist of one Common Share and one-half of a Common Share purchase warrant ("Warrant"). Each whole Warrant shall be exercisable into one Common Share at a price of $0.25 for eighteen (18) months from the date of closing of the Concurrent Private Placement. Each Warrant is subject to accelerated expiry provisions such that if at any time after the completion of the Concurrent Private Placement the average weighted trading price of the Common Shares on the TSXV is at least $0.35 for twenty consecutive days, the Corporation may give notice to the holders that each Warrant will expire 30 days from the date of providing such notice. Please see the Corporation's press release of September 18, 2014 for full details.

Resulting Issuer

Upon completion of the Proposed Transaction, subject to regulatory approval and customary conditions, it is expected that the directors and officers of the resulting entity (the "Resulting Issuer") will be as follows:

Ken Watson, President, Chief Executive Officer and Director

Mr. Watson has 29 years of experience providing environmental services to the oil and gas and other industries, including, but not limited to: liquid treatment and processing; remediation of impacted soils including train derailment clean-up; operation of municipal landfills and rural transfer stations; negotiations with First Nations, government agencies and energy producers relevant to permitting hazardous treatment facilities and secure landfill sites; and environmental and geotechnical drilling.

He is a Co-Founder and President, Chief Executive Officer and Director of Integrated Resource Technologies Ltd. and President and a Director of Peace Drilling & Research Ltd. Mr. Watson also co-founded Complete Environmental Inc. ("Complete"), which purchased Babkirk Land Services Inc. in 2009. He was a key player in Complete obtaining the operational permit for a secure hazardous landfill and hazardous treatment facility. Complete was sold in 2011 to Tervita Corporation.

Greg McLean, Vice-President Finance and Chief Financial Officer

Mr. McLean is currently an Associate Portfolio Manager with Qwest Investment Funds and an independent financial consultant. He was most recently Director of Investments for a family trust encompassing assets of $1.4 billion and Executive Vice-President, Investments for Cavendish Investing Ltd. Mr. McLean had previously founded a private investment boutique focused on financings, M&A, structured buy-outs and private equity transactions and has nine years of investment banking experience with Wolverton Securities, Octagon Capital, Canadian Western Capital and First Marathon Securities.

Mr. McLean holds a Bachelor of Commerce degree from the University of Alberta and a Masters in Business Administration degree from the Ivey School of Business.

Eugene Chen, Corporate Secretary and Director

Mr. Chen leads the Capital Markets group in the Calgary office of the national law firm McMillan LLP. He has over twenty years of experience in advising emerging and growth oriented companies on corporate finance, mergers and acquisitions, and securities matters. Mr. Chen has acted for numerous oilfield service companies and provided advice on corporate and transactional structure, capital financing and corporate governance. He is a director of numerous private and public companies.

Mr. Chen holds a Bachelor of Science degree from the University of Alberta and a Bachelor of Laws degree from the University of British Columbia. He is a member of the Law Society of Alberta.

Ron Baker, P. Eng., Director

Mr. Baker is a professional engineer with over 45 years of experience in the oil and gas industry. He has been the President of Altec Inspection Ltd. since 1976, an engineering consulting company involved in all aspects of pipeline construction, inspection and management, including but not limited to project management, structural evaluation and inspection, cost forecasting and foundation design. He is also a director of Macro Enterprises Inc., a TSXV listed company involved in pipeline and facilities construction and maintenance services to entities in the oil and gas industry.

Mr. Baker is a past technical advisor to the Oil and Gas Commission of British Columbia ("OGC") and a member of committees on the Oil and Gas Standards of the CSA (Z184 (Pressure Testing) and Z184 (Design Stress Group)). From 2005-2010, he was the Chair of PAG (Practice Advisory Group), an industry liaison committee to the OGC.

Mr. Baker has a Bachelor of Science (Chemistry) degree from the University of Calgary and a Bachelor of Science in Engineering (Metallurgical) from the University of Alberta. He is a member of the British Columbia Association of Professional Engineers and Geoscientists.

Chris Scase, CGA, Director

Mr. Scase is an accounting professional with almost twenty years of industry and public accounting experience. He is currently Vice-President, Finance and Chief Financial Officer at Camber Resource Services Ltd., a company which provides production chemicals to the oil and gas industry. Mr. Scase was previously Vice-President and Chief Financial Officer of Ceiba Energy Services Inc., a TSXV listed oilfield services company. Prior to this, he was the Calgary Managing Partner of Scase and Partners Professional Accountants. Mr. Scase has acted as a director, officer and controller for a number of private companies, including being the Chief Financial Officer for a group of private companies engaged in oil and gas exploration in the Western Canada sedimentary basin.

Mr. Scase has a Bachelor of Commerce degree from the University of Calgary and is a Certified General Accountant.

Stuart O'Connor, Director

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., 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., 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.

Warrant Extension

Blacksteel is also pleased to announce that it has received conditional approval from the TSXV to extend the expiry term of 5,120,910 Common Share purchase warrants (the "Existing Warrants") issued as part of its 2013 financing. This amendment represents the second amendment made to the Existing Warrants.

The original expiry date of the Existing Warrants was July 31, 2014 at 5:00 p.m. (Calgary time), which date was extended to September 30, 2014 (the "Amended Expiry Date") on July 30, 2014. All of the Existing Warrants entitle the holder to purchase one Common Share at an exercise price of $0.20 per share.

The Amended Expiry Date is being extended to November 30, 2014 at 5:00 p.m. (Calgary time). All other terms and conditions of the Existing Warrants remain unchanged. The Corporation will deliver a Notice of Amendment reflecting the amended expiry date to the registered holders of the respective Existing Warrants.

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) TSXV acceptance; (b) Blacksteel Shareholder approval; and (c) 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 Proposed Transaction, including statements regarding the anticipated acquisition of the TargetCos, the anticipated election of directors for the Resulting Issuer, the completion of the Private Placement, the 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 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

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