Hyperion Exploration Corp.
TSX VENTURE : HYX

Hyperion Exploration Corp.

March 03, 2011 10:12 ET

Hyperion Exploration Corp. Announces Garrington and Buck Lake Light Oil Focused Asset Acquisitions and Bought Deal Financing

CALGARY, ALBERTA--(Marketwire - March 3, 2011) -

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Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) is pleased to announce that it has entered into a binding arrangement on two quality light oil focused asset acquisitions and a concurrent bought deal financing.

ACQUISITION HIGHLIGHTS

  • Hyperion has entered into a definitive agreement with an arm's length public company to acquire high working interest, operated assets currently producing 350 boe/day in the Garrington area of west central Alberta (the "Garrington Assets") for total consideration of $22.0 million (the "Garrington Acquisition"). Currently production is from one Cardium horizontal light oil well plus light oil and liquids rich gas production from the Ellerslie and Elkton formations.

  • Hyperion has also entered into a letter agreement with an arm's length public company to acquire 4.0 gross (2.6 net) sections of land highly prospective for Cardium horizontal light oil drilling in the Buck Lake area of west central Alberta (the "Buck Lake Assets") for total consideration of $4.25 million (the "Buck Lake Acquisition" and, collectively with the Garrington Acquisition, the "Acquisitions"). The completion of the Buck Lake Acquisition is subject to the execution of a definitive agreement on or before March 4, 2011.

  • Hyperion is also pleased to announce a concurrent bought deal financing with a syndicate of underwriters for an offering, on a private placement basis, of 22,000,000 subscription receipts ("Subscription Receipts") at a price of $1.50 per Subscription Receipt and 1,111,150 common shares ("Common Shares") to be issued on a "flow-through" basis ("Flow-Through Shares") at a price of $1.80 per Flow-Through Share to raise aggregate gross proceeds of approximately $35.0 million (the "Offering").

The Acquisitions add 18.5 net high quality Cardium horizontal light oil locations to the Company's inventory and 9.5 net high quality multi-zone opportunities for Glauconitic horizontal light oil development, Ellerslie light oil development and Elkton horizontal liquids rich gas development.

When combined with its existing inventory, the Company will have 74.5 net high impact light oil locations and 10 liquids rich natural gas locations. This significant and multi-year drilling inventory provides substantial development potential for both reserve and production growth.

The Garrington Acquisition is expected to close on or about March 21, 2011, and will be conditional upon customary regulatory approvals, including, without limitation, the TSX Venture Exchange, and other conditions typical for this type of transaction. The Buck Lake Acquisition is expected to close on or about March 4, 2011.

STRATEGIC RATIONALE AND ACQUISITION HIGHLIGHTS

The Acquisitions further accelerate the Company's growth and are representative of the Company's strategy to acquire and exploit light oil opportunities. The Acquisitions complement the Company's current positions for Cardium Horizontal light oil development in the areas of North Pembina, Niton, and Boundary Lake oil development at Paradise, British Columbia. These areas share characteristics of high quality, long life production with low risk, scalable and repeatable drilling opportunities. The acquired properties are 100% operated with high working interests, have 3-D seismic coverage, offset well control and vertical and horizontal well production history and control of local producing infrastructure with 4,200 net acres of undeveloped land.

Garrington Acquisition

The Garrington Assets, operated with approximately 90% working interest, are currently producing 125 bbl/day (net) of light oil, 70 bbl/day (net) of natural gas liquids and 930 mcf/day (net) of natural gas (350 boe/day net). 

The total purchase price for the Garrington Assets is $22.0 million cash with an effective date of January 1, 2011. The proven and active lands to be acquired offer multi-zone light oil opportunities from the Cardium, Glauconitic, and Ellerslie formations and liquids rich gas from the Elkton formation. Included in these production totals is a Cardium horizontal light oil well (100% working interest) which was brought on stream in late 2010.

The initial 30 day production rate for this well was 183 bbl/day of light oil and 68 mcf/day of natural gas (194 boe/day). On the 4 net sections of land being acquired, using vertical well control and 3-D seismic, Hyperion's team has identified 11 gross (8.5 net) Cardium horizontal oil locations, 4 gross (3.5 net) Glauconitic horizontal oil locations, 2 gross (2 net) Ellerslie oil locations and 5 gross (5 net) Elkton horizontal liquids rich gas locations.

Buck Lake Acquisition

The Buck Lake Assets, 4 gross (2.6 net) sections of land and local pipeline infrastructure, are being purchased for $4.25 million cash with an effective date of February 1, 2011. 

The Buck Lake Acquisition adds to the Company's current land position in the area. Based on recent industry success with Cardium horizontal light oil development in the area and the Company's technical evaluation of the lands, Hyperion's team has identified 16 gross (10 net) Cardium horizontal light oil locations exhibiting similar economic qualities as the Company's 33 net existing North Pembina Cardium locations.

The Acquisitions are accretive to Hyperion on certain key metrics, including cash flow per share (fully diluted) and production per share (fully diluted).

None of the potential reserves associated with the upside locations described above are included in the table below.

Highlights of the Acquisitions are as follows:

  Garrington Buck Lake Total
Proved developed producing reserves (mboe) (1) 675 - 675
Operating Netback/boe(2) $24.28 -  
Proved developed producing RLI (years) 5.3 nm nm
Effective Date 1-Jan-11 1-Mar-11  
January, 2011 oil and NGL approx. production (bbls/d) 195 - 195
January, 2011 natural gas approx. production (mcf/d) 930 - 930
January, 2011 approx. production (boe/d) 350 - 350
  Total land (net acres) 2,560 1,664 4,224
Cardium oil focused drilling locations (net) 8.5 10 28.5
Glauc oil focused drilling locations (net) 3.5 - 3.5
Ellerslie oil focused drilling locations (net) 2.0 - 2.0
Elkton liquids rich gas focused drilling locations (net) 4.0 - 4.0
  Total drilling locations (net) 18.0 10 28.5
Total transaction value ($mm) $ 22.00 $ 4.25 $ 26.25
Cost for production (total transaction value/boe/d) $ 62,857 - $ 75,000
 
Notes:
 
(1) Reserves evaluated by GLJ Petroleum Consultants Ltd. as at July 1, 2010. Gross Company Reserves means the Company's working interest reserves before the calculation of royalties, and before the consideration of the Company's royalty interests.
 
(2) Based on February 5, 2011 forward strip pricing less royalties and operating costs.

THE OFFERING

Hyperion has entered into an agreement, on a bought deal private placement basis, with GMP Securities L.P. and Canaccord Genuity Corp., as co-lead underwriters, for an offering, on a private placement basis, of 22,000,000 Subscription Receipts at a price of $1.50 per Subscription Receipt and 1,111,150 Flow-Through Shares at a price of $1.80 per Flow-Through Share to raise aggregate gross proceeds of approximately $35,000,070.

Closing of the Offering is expected to occur on or about March 18, 2011, and is subject to customary conditions and regulatory approvals, including the approval of the TSX Venture Exchange. The net proceeds from the sale of the Subscription Receipts will be used to fund the purchase price payable by Hyperion for the Acquisitions. Gross proceeds from the sale of the Flow-Through Shares will be used to fund ongoing activities that will qualify as Canadian Exploration Expense, which will be renounced to the subscribers for the 2011 taxation year.

The gross proceeds from the sale of the Subscription Receipts will be held in escrow pending the completion of the Acquisitions. If the Acquisitions are completed on or before March 28, 2011, the proceeds will be released to Hyperion. If the Acquisitions are not completed on or before March 28, 2011, or the definitive agreement in respect of either of the Acquisitions is terminated at an earlier time, holders of Subscription Receipts will receive a cash payment equal to the offering price of the Subscription Receipts and any interest that was earned thereon during the term of the escrow.

Each Subscription Receipt will entitle the holder thereof to receive one Common Share on the deemed exercise of the Subscription Receipt. The Subscription Receipts will be deemed to be exercised on the earlier of: (a) four months and a day following the closing of the private placement, and (b) that day on which a receipt is issued by the securities regulatory authorities in each of the provinces of Canada, except Quebec, for a final short form prospectus qualifying the Common Shares to be issued upon the exercise of the Subscription Receipts. Hyperion shall use its reasonable commercial efforts to obtain such receipt for the exercise of the Subscription Receipts within 30 days of closing of the Acquisitions (the "Qualification Deadline"). If a receipt is not obtained on or before the Qualification Deadline, Hyperion shall issue to each holder of Subscription Receipts, for no additional consideration and without any further action on the part of the holder, an additional 0.1 of a Common Share for each Common Share to be issued to such holder upon the deemed exercise of the Subscription Receipts. Until the receipt is issued for such prospectus, the Subscription Receipts as well as the Common Shares issuable upon exercise thereof will be subject to a four month hold period under applicable Canadian securities laws. The Flow-Through Shares will be subject to a four month hold period under applicable Canadian securities laws.

Hyperion is a publically traded, high growth junior oil and gas company resulting from the recapitalization of Triple 8 Energy Ltd. in July 2010. Hyperion's business strategy is to grow through acquisitions which lead to lower risk, scalable and repeatable development drilling projects. Currently Hyperion has 81 net drilling locations identified (71 oil, 10 natural gas), including 40 Cardium horizontal light oil prospects. The common shares of the Company trade on the TSX Venture Exchange under the trading symbol "HYX".

Forward Looking and Cautionary Statements

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Hyperion. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Hyperion shareholders and potential investors with information regarding the Company, including management's assessment of Hyperion's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. Hyperion believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements. 

In particular, this press release may contain forward looking statements pertaining to the following:

  • the Offering;
  • the Garrington Acquisition and the Garrington Assets;
  • the Buck Lake Acquisition and the Buck Lake Assets;
  • the performance characteristics of the Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • 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 and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Hyperion does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The Subscription Receipts and the Common Shares issuable upon exercise of the Subscription Receipts have not 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 many not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable states securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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