Blacksteel Energy Inc.

TSX VENTURE : BEY


Blacksteel Energy Inc.

June 03, 2014 13:04 ET

Blacksteel Energy Inc. Announces Letter of Intent to Acquire Oilfield Service Companies

CALGARY, ALBERTA--(Marketwired - June 3, 2014) -

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

Blacksteel Energy Inc. (TSX VENTURE:BEY) ("Blacksteel") is pleased to announce that it has entered into a letter of intent dated May 16, 2014 (the "Letter Agreement") 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 Transaction will be subject to customary closing conditions, including regulatory and shareholder approval.

The Proposed Transaction

Blacksteel is acquiring 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 $8,486,645, subject to working capital adjustments at closing. The consideration for the Proposed Transaction consists of the issuance of 23,750,000 common shares of Blacksteel (the "Acquisition Shares") at a deemed price of $0.20 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 14,250,000 Acquisition Shares and a cash payment of $1,000,000.

Peace Drilling: Purchase price of $1,176,645 satisfied through the issuance of 3,500,000 Acquisition Shares and a cash payment of $476,645; and

Integrated: Purchase price of $3,460,000 satisfied through the issuance of 6,000,000 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 300,000 common shares of Blacksteel (the "Blacksteel Shares") at a deemed price of $0.20 per share.

Trading in the Blacksteel Shares may remain 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.

Private Placement

In conjunction with the Transaction, Blacksteel is proposing to complete a brokered private placement of subscription receipts (the "Private Placement") for gross proceeds of up to $15,000,000 at a price to be determined in the context of the market. The net proceeds of the Private Placement will be used to fund the cash component of the Proposed Transaction, acquisition of capital assets and general corporate purposes. Each subscription receipt (a "Subscription Receipt") will entitle the holder to acquire, for no additional consideration, one Blacksteel Share. It is expected that the gross proceeds of the Private Placement will be held in escrow pending delivery by Blacksteel 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. Further details on the Private Placement will be provided once Blacksteel has entered into an engagement letter with an investment dealer.

Target Companies and Financial Information

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.

The most recent unaudited management prepared financial information for the TargetCos is set out below:

Peace Drilling - March 31, 2014 year end
Current Assets $ 247,674
Fixed Assets $ 115,922
Total Assets $ 363,596
Current Liabilities $ 79,375
Long term Liabilities $ 626,380
Total Liabilities $ 705,755
Revenue $ 625,873
Expenses $ 556,757
Net Income $ 69,116
Integrated - March 31, 2014 year end
Current Assets $ 7,464
Fixed Assets $ 65,725
Total Assets $ 73,189
Current Liabilities $ 7,270
Long term Liabilities $ 3,294,620
Total Liabilities $ 3,301,890
Revenue $ 139,000
Expenses $ 190,186
Net Ordinary Income (Loss) $ (51,186 )
Net Other Income $ 100,495
Net Income $ 49,309
Alcan - March 18, 2014 (7 1/2 months)
Current Assets $ 297,743
Fixed Assets $ 340,899
Total Assets $ 638,643
Current Liabilities $ 247,440
Long term Liabilities $ 1,427,416
Total Liabilities $ 1,682,817
Revenue $ Nil
Expenses $ 37,449
Net Income (Loss) $ (37,449 )

Resulting Issuer

Blacksteel currently has 26,918,016 Blacksteel Shares outstanding. Upon completion of the Proposed Transaction, it is expected that the resulting entity (the "Resulting Issuer") will have 50,968,016 common shares issued and outstanding, not including any Blacksteel Shares that may be issued upon completion of the Private Placement. The Resulting Issuer will be considered an industrial issuer under the policies of the TSXV.

The directors and officers of the Resulting Issuer are expected to 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.

Mr. Watson's previous work experience also includes Field Superintendent for Oilfield Maintenance for Wesden Oilfield Services from 1989-1992 and Special Projects Manager with Central Treating and Newalta Corporation from 1992-1997.

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 previously spent seven years in investment banking roles with bank owned and independent IIROC registered firms.
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 that, 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.

It is anticipated that the parties will nominate additional directors to the board of the Resulting Issuer.

Upon completion of the Proposed Transaction, it is expected that the Resulting Issuer will grant stock options to directors and officers to acquire up to 3,739,301 Blacksteel Shares. Each grant of options will be for a ten year term and exercisable at a price of $0.20 per share. Furthermore, additional stock options may be granted to directors, officers, employees and consultants subject to the number of Blacksteel Shares issued upon exercise of the Subscription Receipts under the Private Placement.

Sponsorship of the Proposed Transaction

It is contemplated that pursuant to the policies of the TSXV, unless Blacksteel is able to obtain an exemption or waiver, it will be required to engage a TSXV member or participatory organization to act as sponsor in connection with the Proposed Transaction.

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) completion of due diligence; (c) TSXV acceptance; (d) Blacksteel Shareholder approval; and (e) completion of the Private Placement for gross proceeds of not less than $2,500,000.

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 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 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 Private Placement is not completed for minimum gross proceeds of $2,500,000; the assumptions relating to the parties entering into the formal agreement in respect of the Proposed Transaction, its structure, and the timing thereof, 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, 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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