Bronco Energy Ltd.
TSX : BCF

Bronco Energy Ltd.

April 21, 2009 07:11 ET

Bronco Announces Private Placement Financing

CALGARY, ALBERTA--(Marketwire - April 21, 2009) -

THIS PRESS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH US NEWSWIRE SERVICES.

Bronco Energy Ltd. ("Bronco" or the "Company") (TSX:BCF) announced today a best efforts private placement (the "Offering") of up to $15 million principal amount of Secured Subordinated Convertible Debentures (the "Debentures"). RBC Capital Markets is the exclusive placement agent and financial adviser to the Company for the Offering. The Company has granted RBC Capital Markets an option, exercisable until 24 hours prior to closing, to place up to an additional $5 million principal amount of Debentures.

The Debentures mature on April 30, 2012 and will bear interest at a rate of 6% per annum, payable semi-annually in arrears on April 30 and October 31 each year commencing on October 31, 2009. The Debentures will be convertible into common shares of Bronco, at the option of the holder, at a conversion price of $0.50 per share, subject to customary anti-dilution adjustments. The Debentures will not be redeemable prior to the maturity date.

Subscribers of Debentures will also receive 1,000 share purchase warrants (the "Warrants") per $1,000 principal amount of Debentures. Each Warrant will entitle the holder to purchase one common share of the Company, at any time prior to April 30, 2014, at a price of $0.57 per common share, subject to customary anti-dilution adjustments.

The net proceeds from the Offering will be used for capital expenditures and working capital purposes.

Operations

"We are pleased with our production over the last three months and to-date in April," said Peter Pelensky, CEO of Bronco. "This Offering will fund our 2009 capex plan to bring on production from the last ten of our 68 wells. The infrastructure is substantially in place and capex of approximately $4.6 million will further optimize production and upgrade the battery to reduce operating costs further."

The average net production estimated for Q1 2009 is 1,047 boepd (including 822 bopd of raw bitumen and 1,353 mcfpd of gas). For the period April 1 to 20, 2009, the average net production estimate is 1,350 boepd (including 950 bopd of raw bitumen and 2,400 mcfpd of gas). With the cost reductions implemented over the past 10 weeks and at current oil and gas prices, Bronco should achieve positive netbacks exiting Q2 2009.

Financing Details

The Debentures and Warrants will be offered in each of the provinces of Canada by way of private placement pursuant to an exemption from the prospectus requirement and in the U.S. pursuant to an exemption from registration. The Offering is subject to certain closing conditions, including the approval of the Toronto Stock Exchange (the "TSX") and the consent of Bronco's lender under its senior secured credit facility. The Company will provide additional details regarding the terms of the Offering and the Debentures in a subsequent press release.

It is anticipated that certain insiders of the Company, including directors and officers, may subscribe for Debentures and Warrants under the Offering. In addition, certain subscribers may become insiders of the Company following completion of the Offering as a result of acquiring Debentures and Warrants convertible or exercisable for 10% or more of the outstanding common shares of the Company. Pursuant to TSX requirements, the Company will provide details of any subscriptions by existing or new insiders, and any effect that the Offering may have on control of the Company, in a subsequent press release.

A committee of directors of the Company, free from any interest in the Offering and unrelated to the parties involved in the Offering, has recommended proceeding with the Offering. Based on the recommendation of these directors, their belief that the Company is in serious financial difficulty and their belief that the Offering will improve the Company's financial situation, the board of directors believes that the Offering is reasonable in the circumstances.

As the number of common shares issuable pursuant to the conversion of the Debentures and the exercise of the Warrants exceeds the number of securities issuable under the rules of the TSX without shareholder approval, the Company has applied to the TSX for an exemption from the requirement to seek shareholder approval, as required pursuant to Section 607(g) of the TSX Company Manual, in accordance with Section 604(e) of the TSX Company Manual on the basis of the Company's financial hardship.

This press release is not an offer to sell securities in the United States. Securities may not be offered or sold in the United States in the absence of registration or an exemption from registration.

Disclosure provided in respect of barrels of oil equivalent per day ("boepd") may be misleading, particularly if used in isolation. A boepd conversion ratio of six thousand cubic feet of gas per day ("mcfpd") to one barrel of oil per day ("bopd") is used and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Information

Certain statements contained in this document constitute forward-looking statements (the "forward-looking statements"). These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "guidance", "continue", "estimate", "expect", "forecast", "may", "will", "project", "potential", "target", "intend", "could", "might", "should", "believe" and similar expressions. In particular, forward-looking statements herein include, but are not limited to, statements with respect to: timing of re-completion and tie-in of wells; well and facility performance, completion timing and method of funding thereof; productive capacity of wells, anticipated or expected production rates; completion and facilities costs; our ability to lower our cost structure; our growth expectations; timing of development of developed non-producing and undeveloped reserves; the performance characteristics of our oil and natural gas properties; oil and natural gas production levels; the size and quantity of the oil and natural gas reserves; projections of market prices and costs; supply and demand for oil and natural gas and commodity prices; expectations regarding the ability to raise capital and to continually add to reserves through acquisitions, exploration and development; treatment under governmental regulatory regimes and tax laws; our tax horizon; expected levels of royalty rates, operating costs, general administrative costs, costs of services and other costs and expenses; and realization of the anticipated benefits of acquisitions and dispositions. Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment that, based on certain estimates and assumptions, the resources and reserves described can be profitably produced in the future. Although we believe that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, level of activity, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking statements and information.

With respect to the forward-looking statements, we have made assumptions regarding, among other things: our ability to obtain financing on acceptable terms as required; future performance of our wells and facilities, including the battery; future performance of our drilling rigs and our ability to obtain additional equipment in a timely manner, if and as required; the impact of increasing competition for transportation capacity and supplies; future oil and natural gas production levels from our current and new wells; our ability to market our oil successfully; future capital expenditure levels; future prices and differentials between light, medium and heavy oil prices; and our ability to monetize our other non-core assets; our ability to maintain or increase our credit facility and our ability to obtain financing on acceptable terms as required.

Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the prices of oil and natural gas; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure of our oil processing battery to operate at the expected capacity; failure to install pipeline facilities as and when expected; failure to obtain industry partner and other third party consents and approvals, when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital; the availability of capital on acceptable terms; an adverse revision to the borrowing base under our credit facility; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; market demand for our non-core assets; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the oil and gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors described in our public filings (including our annual information form and management's discussion and analysis) available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this document are expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking statements to conform such statement to actual results or to changes in our expectations except as otherwise required by applicable securities legislation.

Contact Information

  • Bronco Energy Ltd.
    Peter J. Pelensky, P. Eng
    President and CEO
    (403) 699-8383
    or
    Bronco Energy Ltd.
    David Johnson, CA
    VP Finance and CFO
    (403) 693-0038
    www.broncoenergy.ca