Dixie Energy Trust

Dixie Energy Trust

September 20, 2013 16:14 ET

Dixie Energy Trust Increases Interests in Alabama and Mississippi Through the Acquisition of Private Company

CALGARY, ALBERTA--(Marketwired - Sept. 20, 2013) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES AND DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES DESCRIBED HEREIN

Dixie Energy Trust ("Dixie" or the "Trust") is pleased to announce that it and its wholly-owned subsidiary, Dixie Energy Holdings (Canada) Ltd. ("Dixie Canada"), have completed the acquisition (the "Dogtooth Acquisition") of all of the issued and outstanding shares and debt of Dogtooth Investments Ltd. ("Dogtooth") pursuant to the terms of a share sale and purchase agreement (the "Share Purchase Agreement") entered into today among the Trust, Dixie Canada and the shareholders of Dogtooth.

Dogtooth currently holds a working interest in certain oil and gas leases, wells and related infrastructure, including: (i) a 10% interest in approximately 14,100 gross (1,410 net) acres of oil and gas leases in the Maple Branch Prospect located in Monroe and Lowndes Counties, Mississippi, including a 10% working interest in the Holliman #1 and Holliman #2 wells; (ii) a 10% interest in approximately 1,208 gross (120 net) acres of oil and gas leases in Hamilton & West McKinley Creek in Monroe County, Mississippi; (iii) a 9.27% working interest in a producing oil well (Amos 36-3) located in the Brooklyn Field in Conecuh County, Alabama; and (iv) a 25% interest in approximately 3,940 gross (985 net) acres of oil and gas leases in the Queens Prospect located in Conecuh and Escambia Counties, Alabama. Dogtooth's current net production is approximately 50 boe/d (81% oil).

As a result of closing the Dogtooth Acquisition, Dixie has:

  • increased its average working interest in the Maple Branch Prospect to approximately 40%, covering approximately 15,100 gross acres (6,040 net acres);
  • increased its working interest to 50% in the Queens Prospect covering approximately 3,940 gross acres (1,970 net acres);
  • increased its working interest in the Hamilton & West McKinley Creek Prospect to 67.5%, covering approximately 1,208 gross acres (815 net acres);
  • increased current net production to approximately 101 boe/d (76% oil);
  • 46,778,490 trust units outstanding and 10,062,500 trust units issuable on exchange of the Exchangeable Shares; and
  • working capital of approximately $3.5 million.

Pursuant to the terms of the Share Purchase Agreement, the Trust and Dixie Canada acquired all of the issued and outstanding shares and debt of Dogtooth for aggregate consideration of $9.3 million, comprised of $1.25 million in cash and an aggregate of 10,062,500 non-voting exchangeable shares in the capital of Dixie Canada (the "Exchangeable Shares") issued at a deemed price of $0.80 per Exchangeable Share. Each Exchangeable Share is exchangeable at no additional consideration at the election of the holder into one (1) trust unit of the Trust in accordance with, and subject to the terms of, the Exchangeable Shares and a related exchange trust agreement and support agreement entered into among Dixie, Dixie Canada and Olympia Trust Company. The Exchangeable Shares do not have voting or distribution/dividend rights in either the Trust or Dixie Canada (except voting rights in limited circumstances in respect of Dixie Canada) and the one-for-one exchange ratio does not adjust if either the Trust or Dixie Canada pays a distribution/dividend. In addition, each of the shareholders of Dogtooth has deposited all of the Exchangeable Shares received by them (and has agreed to deposit any underlying trust units received on exchange thereof) in escrow. Subject to the terms of the escrow agreement, one quarter of the Exchangeable Shares will be released from escrow on each of the 6, 12, 18 and 24 month anniversaries of the date hereof.

Mr. Ian Atkinson, a director and the Chairman of Dixie Energy Ltd. (the "Administrator"), the administrator of the Trust, and a director of Dixie Canada, was the controlling shareholder and a director and officer of Dogtooth. In connection with the approval by the Administrator and Dixie Canada of the Dogtooth Acquisition, Mr. Atkinson declared his personal interest in the Dogtooth Acquisition and refrained from voting on the approval of the Dogtooth Acquisition. In addition, as part of the deliberations of the independent members of the board of directors of the Administrator to approve the Dogtooth Acquisition, the board of directors of the Administrator received an opinion from its financial advisor, Casimir Capital Ltd., that the consideration payable by Dixie in connection with the Dogtooth Acquisition is fair, from a financial point of view, to the unitholders of the Trust.

The Dogtooth Acquisition is exempt from the valuation and minority approval requirements of Multilateral Instrument 61-101. Dixie did not file a material change report 21 days prior to the closing of the Dogtooth Acquisition as the Share Purchase Agreement was entered into concurrently with closing of the Dogtooth Acquisition.

About Dixie:

Dixie is an energy trust created to provide investors with an oil and gas exploration focused investment. The strategy of Dixie is to acquire, exploit and develop, indirectly through its subsidiaries, long-life crude oil and gas prospects and reserves in the United States gulf coast states, primarily in Mississippi and Alabama.

Forward Looking Statement Disclaimer:

Certain statements included in this news release constitute forward looking statements or forward looking information under applicable securities legislation. Such forward looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this news release include, but are not limited to matters relating to the terms of the escrow.

Forward looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although Dixie believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because Dixie can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this news release, assumptions have been made regarding, among other things, the terms of the escrow agreement will remain the same and will not be subject to amendment or termination. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Dixie and described in the forward looking statements or information. These risks and uncertainties which may cause actual results to differ materially from the forward looking statements or information include, among other things, changes to the terms of the escrow, early termination of the escrow or other amendments to the escrow agreement. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties. Additional information on these and other factors that could affect Dixie's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

The forward looking statements or information contained in this news release are made as of the date hereof and Dixie undertakes no obligation to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this news release are expressly qualified by this cautionary statement.

Note: "boe" means barrel of oil equivalent on the basis of 6 Mcf of natural gas to 1 bbl of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

© 2013 Dixie Energy Trust

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Contact Information

  • Dixie Energy Trust
    David G. Anderson
    403 232 1010