Elkwater Resources Ltd.
TSX VENTURE : ELW

November 20, 2014 16:30 ET

Elkwater Resources Ltd. Announces Closing of Strategic Acquisitions

CALGARY, ALBERTA--(Marketwired - Nov. 20, 2014) -

NOT FOR DISSEMINATION IN THE UNITED STATES.
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.

Elkwater Resources Ltd. ("Elkwater" or the "Company") (TSX VENTURE:ELW) is pleased to announce that the Company has completed the following previously announced strategic transactions:

  1. the acquisition of all of the issued and outstanding common shares (the "Exoro Shares") of Exoro Energy Inc. ("Exoro"), an arm's length private oil and gas company with assets concentrated in West Central Alberta, including Pembina, Chigwell and Ferrier/Willesden Green (the "Exoro Assets"), by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"); and

  2. the acquisition of medium gravity oil producing assets concentrated in the Killam area (the "Killam Assets") of east central Alberta (the "Asset Acquisition" and together with the Arrangement, the "Acquisitions") from an arm's length oil and gas producer.

The Arrangement

On November 19, 2014, the Arrangement was approved at the special meeting of Exoro shareholders by 100% of the votes cast by the Exoro shareholders present in person or represented by proxy. The Arrangement was also approved by the Court of Queen's Bench of Alberta on November 19, 2014.

Pursuant to the Arrangement, Exoro shareholders received, at their election, for each Exoro Share held, either: (i) 3.47 common shares of the Company ("Elkwater Shares") (at a deemed price of $0.375 per Elkwater Share) and 1.735 Elkwater Share purchase warrants ("Warrants"); (ii) $1.30 in cash; or (iii) a combination thereof. Each Warrant entitles the holder thereof to purchase one Elkwater Share (a "Warrant Share") at a price of $0.50 per Warrant Share for a period of 18 months following the closing date of the Arrangement. Immediately prior to the completion of the Arrangement, each of the former officers and directors of Exoro resigned.

Based on September 2014 field estimates, the Exoro Assets add an aggregate of 1,944 boe/d (65% oil and NGLs) of operated production. The Exoro Assets include 132,281 gross (83,118 net) acres of land at an average working interest of approximately 63% situated in an area with extensive infrastructure and multiple sales points.

The total transaction value for the acquisition of Exoro by Elkwater, including the assumption of approximately $22.8 million of net debt, is approximately $83.3 million.

The Asset Acquisition

On November 20, 2014, the Company completed the Asset Acquisition for total consideration of approximately $30.5 million with an effective date of October 1, 2014.

Based on September 2014 field estimates, the Killam Assets add an aggregate of 576 boe/d (61% oil and NGLs) of operated production in the Killam area of east central Alberta. The Assets include 5,760 gross (5,440 net) acres of land at an average working interest of 94% and access to wholly-owned infrastructure. The Killam Assets are targeting shallow depth medium oil production from the Mannville formation and form part of the greater Provost Mannville/Viking light oil play of Central Alberta.

For additional information in respect of Exoro and the Killam Assets, please see the news release of the Company dated October 15, 2014.

Subscription Receipt Financing

The Acquisitions were partially funded through a bought deal financing of subscription receipts of the Company ("Subscription Receipts") co-led by Desjardins Securities Inc. ("Desjardins"), TD Securities Inc. (together with Desjardins, the "Joint Bookrunners") and FirstEnergy Capital Corp. (together with the Joint Bookrunners, the "Co-Lead Underwriters") and included Dundee Securities Ltd., Clarus Securities Inc., National Bank Financial Inc., Canaccord Genuity Corp., Cormark Securities Inc., GMP Securities L.P. and Scotia Capital Inc., whereby the Company issued 240,000,000 Subscription Receipts at a price of $0.375 per Subscription Receipt for aggregate gross proceeds of $90.0 million.

In accordance with their terms, each holder of a Subscription Receipt will be entitled to receive, without payment of additional consideration or further action on the part of the holder and subject to adjustment in certain circumstances, one Elkwater Share and one-half of one Warrant (together, the "Qualified Securities") for each Subscription Receipt held upon the earlier of: (a) March 2, 2015, being the date that is four months and a day following the date of issuance of the Subscription Receipts; and (b) the day on which a receipt (the "Final Receipt") is issued by the Alberta Securities Commission, as principal regulator, for a final short form prospectus qualifying the distribution of the Qualified Securities in each of the provinces of Canada in which Subscription Receipts were sold (the "Qualifying Provinces").

The Company has agreed to use its reasonable commercial efforts to file the final short form prospectus qualifying the distribution of the Elkwater Shares and the Warrants underlying the Subscription Receipts in each of the Qualifying Provinces and obtain the Final Receipt within 30 days from the date of delivery of the Release Notice. On November 13, 2014, the Company filed the preliminary short form prospectus qualifying the distribution of the Elkwater Shares and the Warrants underlying the Subscription Receipts in each of the Qualifying Provinces.

Following the completion of the Arrangement and upon the issuance of the Elkwater Shares and Warrants underlying the Subscription Receipts, Elkwater will have a total of 536,554,722 (716,554,722 on a fully diluted basis) Elkwater Shares issued and outstanding.

In connection with the closing of the Acquisitions, Elkwater entered into a new credit agreement made as of November 20, 2014 with a syndicate of Canadian chartered banks with respect to new credit facilities consisting of: (i) a $40 million committed secured, extendible, 364-day revolving term facility; and (ii) a $15 million committed secured, extendible 364-day revolving operating facility.

Advisors

Desjardins acted as lead financial advisor to Elkwater with respect to the Acquisitions. Dundee Securities Ltd. acted as financial advisor to Elkwater with respect to the Acquisitions.

FirstEnergy Capital Corp. acted as financial advisor to Exoro in connection with the Arrangement.

About Elkwater

Elkwater is a publicly traded Calgary, Alberta-based company engaged in the oil and gas exploration and development industry. Elkwater shares are listed on the TSX Venture Exchange under the trading symbol "ELW".

Forward-Looking and Cautionary Statements

Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as "may", "will", "should", "expect", "believe", "anticipate" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, the filing of the final prospectus to qualify the Qualified Securities and the issuance of the Qualified Securities. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Forward-looking statements are subject to a wide range of risks and uncertainties, and although Elkwater believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized.

Although the Company believes that the expectations reflected in its forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because the Company can give no assurance that such expectations will prove to be correct. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.

Any number of important factors could cause actual results to differ materially from those in the forward -looking statements including, but not limited to, regulatory and third party approvals not being obtained in the manner or timing anticipated, the ability to implement corporate strategies, the state of domestic capital markets, the ability to obtain financing, changes in general market conditions and other factors more fully described from time to time in the reports and filings made by Elkwater with securities regulatory authorities.

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

Disclosure provided herein in respect of boe 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.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

This press 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.

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 RELEASE.

Contact Information

  • Elkwater Resources Ltd.
    Doug Bailey
    President and Chief Executive Officer
    403-262-0242

    Elkwater Resources Ltd.
    Neil Burrows
    Vice President, Finance and Chief Financial Officer
    403-262-0242