Donnybrook Energy Inc.

TSX VENTURE : DEI


Donnybrook Energy Inc.

February 25, 2013 06:00 ET

Donnybrook Announces Agreement to Sell Simonette and Resthaven Assets

CALGARY, ALBERTA--(Marketwire - Feb. 25, 2013) - Donnybrook Energy Inc. ("Donnybrook" or the "Company") (TSX VENTURE:DEI) reports that it has entered into an asset exchange agreement (the "Asset Exchange Agreement") and an arrangement agreement (the "Arrangement Agreement") with Cequence Energy Ltd. ("Cequence") (TSX:CQE) to sell the Company's interest in its Simonette and Resthaven oil and gas properties for consideration consisting of 10.3 million common shares of Cequence ("Cequence Shares") and Cequence's interest in its Fir oil and gas property. The transaction, including the subsequent distribution of the 10.3 million Cequence Shares to the holders ("Donnybrook Shareholders") of common shares of Donnybrook ("Donnybrook Shares"), is anticipated to be completed, in part, by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement").

The Simonette and Resthaven properties to be sold to Cequence consist of 38 gross (19 net) sections of land with net production of approximately 120 boe per day.

Upon completion of the Arrangement, Donnybrook Shareholders are anticipated to receive, based on the current number of outstanding Donnybrook Shares, approximately 0.0531 of a Cequence Share for each Donnybrook Share while continuing to hold their existing Donnybrook Shares. On closing, it is anticipated that existing Donnybrook Shareholders will own approximately 5 percent of the outstanding Cequence Shares.

Cequence is a natural gas and oil resource play focused company with current production in excess of 9,000 boe per day. The majority of Cequence's production comes from the Deep Basin in the Simonette area where it owns Montney and other Cretaceous oil and gas rights. Cequence currently operates Donnybrook's Simonette property and has the requisite technical, operational, financial flexibility and access to capital to develop the property on an efficient basis for its shareholders.

On a pro forma basis, Donnybrook will hold its existing Bigstone property with 8 gross (3.75 net) sections of land and the newly acquired Fir property which consists of a total of 5 net sections of land and long life, low decline production of approximately 220 net boe per day. The Fir property is approximately 35 km from the Bigstone property.

The board of directors of Donnybrook has unanimously determined that the Arrangement is in the best interests of Donnybrook and is fair to Donnybrook Shareholders. The board of directors has also unanimously approved the transaction and determined to recommend that the Donnybrook Shareholders vote in favour of the Arrangement. Each of the officers and directors of Donnybrook, holding Donnybrook Shares representing an aggregate of approximately 12.5% of the outstanding Donnybrook Shares, have entered into lock-up agreements with Cequence supporting the transaction, pursuant to which they have agreed to vote the Donnybrook Shares held by them in favour of the Arrangement.

RBC Capital Markets is acting as financial advisor to Donnybrook and has provided the board of directors of Donnybrook with an opinion that, as of the date of the Arrangement Agreement, the consideration to be received under the Arrangement is fair, from a financial point of view, to the Donnybrook Shareholders.

Under the terms of the Arrangement Agreement, Donnybrook has agreed that it will not solicit or initiate any inquiries or discussions that may reasonably be expected to lead to an alternative sale of the Simonette and Resthaven assets or any other transaction which could impede, interfere, prevent or delay the transaction contemplated under the Arrangement Agreement. In addition, should a Superior Proposal (as such term is defined in the Arrangement Agreement) be presented to Donnybrook, Donnybrook has granted Cequence the right to match such Superior Proposal. The Arrangement Agreement also provides for the payment of a reciprocal non-completion fee of $1.0 million under certain circumstances.

Completion of the transaction is subject to customary closing conditions, including receipt of court, shareholder, TSX Venture Exchange and other regulatory approvals. Donnybrook Shareholders will be asked to vote on the transaction at a special meeting of Donnybrook Shareholders and the completion of the transaction will require the approval of two-thirds of the votes cast by Donnybrook Shareholders in person or by proxy at the meeting.

An information circular regarding the Arrangement is expected to be mailed to Donnybrook Shareholders in mid-March for a special meeting of the Donnybrook Shareholders to take place in mid-April, with closing expected to occur as soon as reasonably practicable following receipt of court, shareholder and regulatory approvals.

A copy of the Asset Exchange Agreement and the Arrangement Agreement and the information circular and related documents will be filed with Canadian securities regulators and will be available at www.sedar.com.

Further information relating to Donnybrook is also available on its website at www.donnybrookenergy.ca.

ON BEHALF OF THE BOARD OF DONNYBROOK ENERGY INC.

Malcolm F. W. Todd, Chief Executive Officer

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements or information ("forward-looking statements") within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward-looking statements concerning the amount of Cequence Shares for each Donnybrook Share to be distributed to Donnybrook Shareholders, the percentage ownership of Cequence Shares by Donnybrook Shareholders, anticipated timing of the mailing of the information circular and meeting of Donnybrook Shareholders and the closing of the transaction.

The forward-looking statements in this press release are based on certain key expectations and assumptions made by Donnybrook, including the receipt of all necessary approvals, including but not limited to shareholder, court and regulatory approvals including the approval of the TSX Venture Exchange and the satisfaction of the conditions to the closing of the transaction. There is no assurance that these expectations and assumption will be met or satisfied and there is therefore no assurance that the transaction will be completed in the time frame anticipated or at all.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited the risks that the transaction may not close when planned or at all or on the terms and conditions set forth in the Arrangement Agreement and Asset Exchange Agreement, the failure to obtain necessary shareholder, court, regulatory and other third party approvals required in order to proceed with the transaction, risks that the closing conditions will not be met and risks associated with the oil and gas industry in general such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserve, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; stock market volatility; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Donnybrook are included in Donnybrook's Annual Information Form, management's discussion and analysis and other documents filed with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements contained in this press release are made as of the date hereof and Donnybrook undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel 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 that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

NEITHER THE 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 NEWS RELEASE.

Contact Information

  • Donnybrook Energy Inc.
    Malcolm Todd
    President and Chief Executive Officer
    (604) 684-2356
    (604) 684-4265 (FAX)
    www.donnybrookenergy.ca