Donnycreek Energy Inc.

Donnycreek Energy Inc.

May 24, 2012 20:16 ET

Donnycreek Announces $3.5 Million Private Placement Equity and Debenture Financing

CALGARY, ALBERTA--(Marketwire - May 24, 2012) -


Donnycreek Energy Inc. ("Donnycreek" or the "Company") (TSX VENTURE:DCK) reports that the Company is undertaking a private placement of up to $3,500,000 (the "Offering"). These funds will be raised through the issuance of a combination of: (i) $1,700,000 of "flow-through" common shares of the Company ("FT Shares") within the meaning of the Income Tax Act (Canada) at a price of $0.85 per FT Share; and (ii) $1,800,000 of principal amount of ten percent (10%) redeemable, convertible, unsecured debentures of the Company ("Convertible Debentures").

The proceeds from the FT Shares will be used to incur eligible exploration and development expenses prior to December 31, 2013 and which will be renounced as Canadian Exploration Expenses for income tax purposes to subscribers effective on or before December 31, 2012.

The Convertible Debentures shall bear interest at a rate of ten percent (10%) per annum, payable commencing July 31, 2012 and quarterly thereafter and will mature June 15, 2014 (the "Maturity Date"). The Convertible Debentures will be convertible into common shares of the Company ("Common Shares") at the holder's option at any time prior to the Maturity Date at a conversion price of $1.00 per Common Share. The Company will have the ability to redeem the Convertible Debentures in certain circumstances where an offer or business combination is made to acquire Common Shares or if the closing price or the volume weighted average price of the Common Shares exceeds $1.40 for 21 consecutive trading days. A portion of the proceeds from the Convertible Debentures will be used for the tie-in of the Corporation's first Montney horizontal well in Kakwa, Alberta and for working capital purposes.

Fees and commissions may be payable to eligible persons in connection with the Offering.

The FT Shares and the Convertible Debentures issued pursuant to the Offering will be subject to a four month hold from the date of closing of the Offering. Completion of the Offering is expected to occur on or about June 15, 2012 and is subject to regulatory approvals, including the approval of the TSX Venture Exchange.

Kakwa Area Discovery Well

Donnycreek reported on May 3, 2012 that the first horizontal Montney well Hz 13-17-63-5 W6M ("13-17 Well"), located on its 16 section (8 net) 50% working interest contiguous land block at Kakwa, Alberta was successfully drilled and completed with a 15 stage foam frac.

Following a 96 hour frac flow back, the 13-17 Well was still cleaning up, with average gross production rates over the final 24 hours of production testing being 1,150 bbls/d condensate and 8.29 MMscf/d gas (374 bbls/d condensate and 2.69 MMscf/d; 823 boe/d net to Donnycreek, before payout including royalty share of production) against a wellhead pressure of 1,100 psi (7,584 kPa). In addition to well head condensate, gas analysis from the 13-17 Well suggests that an additional 25-35 bbls/MMscf of natural gas liquids are recoverable through typical refrigeration processing, and up to 70 bbls/MMscf if deep cut processing is available. The 13-17 Well was drilled and completed within the expected timelines and on budget.

A portion of the proceeds raised from the Offering will be deployed on Donnycreek's 16 gross section (4,140 ha/10,240 acres) land block located in the liquids-rich Kakwa Montney gas trend.

Donnycreek holds an undivided 25% working interest and 10% GORR on 75% before payout and a 50% working interest after payout in the 13-17 Well. Donnycreek holds a 50% working interest in the balance of the 16 section Kakwa Deep Basin land block. The successful drilling and completion of the 13-17 Well is a tangible step, together with significant results reported by other operators in the area in de-risking the 16 section Kakwa land block. This productivity test substantially exceeded our expectations for liquids yield and confirms the technical work that had suggested the acreage was in the core of the liquids-rich Montney trend. The 13-17 Well was completed over a 1,430 metre horizontal length in the Middle Montney, and the Company's geological interpretation indicates that comparable targets also exist across the 16 section block in the Upper Montney formation.

Surveying and applications have commenced for tie-in operations of the 13-17 Well and for a follow-up horizontal Middle Montney drilling location located at 14- 30 -63-5 W6M ("14-30") approximately 3 miles northwest of the 13-17 Well (DCK: 50%). The 14-30 follow-up well will be drilled offsetting a by-passed Montney pay well with log characteristics similar to that of the 13-17 Well. The Company currently anticipates the 13-17 Well to be tied-in by October 2012.

The Kakwa property is accessible for field operations year-round and is located within 4 miles of a major, midstream operated, natural gas and NGL processing facility.

Donnycreek has approximately 17.6 million Common Shares issued and outstanding (19.6 million fully diluted).

Donnycreek is a Calgary-based oil and natural gas production company focused on horizontal, multi-stage frac development in the Deep Basin area of west central Alberta. The Company holds working interests in 28 gross sections (7,250 ha/17,920 acres); 20 net sections (5,180 ha/12,800 acres) prospective for Montney, Bluesky, Wilrich and Falher liquid rich resource development.

Further information relating to Donnycreek is also available on its website at


Malcolm F.W. Todd, Chief Executive Officer


Certain information set forth in this news release contains forward-looking statements or information ("forward-looking statements"), including statements concerning the uses of the net proceeds of the Offering, the expected timing of the closing of the Offering, the recovery of additional natural gas liquids from the 13-17 Well, the additional clean up of frac fluid from the 13-17 Well, comparable targets in the Upper Montney formation, the drilling of the Kakwa 14-30 well and the targeted portion of the Montney for such well, the timing of the tie-in of the 13-17 Well, drilling plans for the Company's Kakwa acreage and the prospective zones of liquid rich resource development on the Company's lands.

The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Donnycreek, including expectations and assumptions concerning timing of receipt of required regulatory approvals and third party consents and the satisfaction of other conditions to the completion of the Offering as well as expectations and assumptions concerning the success of future drilling activities.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Donnycreek's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, operational risks in exploration and development, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal and external sources. Although Donnycreek believes that the expectations in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our management's discussion and analysis and other documents available at Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Donnycreek does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document 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. References to oil in this discussion include crude oil and natural gas liquids ("NGLs"). NGLs include condensate, propane, butane and ethane. References to gas in this discussion include natural gas.

This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of US persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act")), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.


Contact Information

  • Donnycreek Energy Inc.
    Malcolm Todd
    President and Chief Executive Officer
    (604) 684-2356
    (604) 684-4265 (FAX)