Javelin Energy Inc.
TSX VENTURE : JAV

Javelin Energy Inc.

April 06, 2009 17:51 ET

Javelin Energy Announces Corporate Developments and Operations Update

CALGARY, ALBERTA--(Marketwire - April 6, 2009) - Javelin Energy Inc. (TSX VENTURE:JAV) ("Javelin" or the "Company") announces the following corporate developments and provides an operations update.

Corporate Developments

The Company advises that it is continuing to operate under a forbearance arrangement with its principal lender (the "Bank"). At the time that the new management team assumed control of the Company in July, 2007, the Company's reported negative working capital was approximately $8,262,000. Subsequently, the Company received and discovered additional invoices from service providers aggregating in excess of approximately $1,100,000, which increased the Company's negative working capital. On October 9, 2007, the Company entered into an agreement with the Bank to maintain its $2,000,000 development line and increase its operating loan from a $6,000,000 to an $8,000,000 reducing demand loan, reducing at the rate of $300,000 per month, commencing October 31, 2007. As part of the new banking facilities, the Company agreed to maintain a working capital ratio of 1.0 to 1.0 at all times. At March 31, 2008, the Company had a working capital ratio of 0.45 to 1.0 and as a result, the Company and the Bank entered into a Forbearance Agreement effective as of April 22, 2008, which eliminated the $2,000,000 development line and continued the $300,000 per month reductions to the operating loan. Subsequently, the first forbearance agreement was amended by the First Amendment and Extension to Forbearance Agreement which was effective as of September 9, 2008 (the first Forbearance Agreement and the second Forbearance Agreement, jointly, the "Original Forbearance Agreements"), which extended the time for the Company to correct its working capital issue to August 31, 2009, under certain conditions.

The Company continued to pay down its operating loan at the rate of $300,000 per month. However, on March 26, 2009, the Bank demanded repayment in full of all amounts owing to the Bank by the Company. On that date, the principal amount of the loan was approximately $3,200,000 (the "Loan"), which was considerably reduced by the Company from its previous operating loan facility with the Bank of $8,000,000. On the same date, the Company entered into an Amended and Restated Forbearance Agreement (the "Restated Agreement") with the Bank, which basically allowed the Company the opportunity to pursue repayment or reduction of the Loan through alternate financings, the sale of assets or a business combination arrangement. The Restated Agreement amended the Original Forbearance Agreements and provided for the same basic terms and conditions as set out in the Original Forbearance Agreements and other new terms and conditions which included the Bank increasing the Company's line by $1,000,000 to $4,200,000. The additional funds made available by the Bank under the Restated Agreement are being utilized by the Company for working capital purposes, which includes the payment of royalties to Alberta Energy, costs to upgrade the Company's delivery system in Clear Prairie, Alberta and other operating and capital costs. The new terms also provide that payments due on the Loan will be reduced from payments of $300,000 monthly to payments of $50,000 monthly, funded from operations, commencing on May 31, 2009 with a term to July 31, 2009. As part of the Restated Agreement, an officer and director of the Company provided an asset backed personal guarantee of $2,000,000 to the Bank.

Prior to entering into the Restated Agreement and as requested by the Bank, the Company was in the process of finalizing a private placement to inject additional equity and a mezzanine facility to provide additional working capital to the Company. The Company signed a letter of intent with the proposed mezzanine lender in December, 2008, with the loan subject to due diligence and other terms and conditions. It was also a pre-condition of the mezzanine financing and the Loan under the Original Forbearance Agreements, that the Company complete its previously announced private placement of up to $300,000. The Company was cash constrained and required the funds from the private placement to meet its primary banking and working capital commitments. The closing of the private placement was announced on March 2, 2009 for gross proceeds of $255,000. However, after lengthy negotiations, the Company decided not to proceed with the mezzanine facility and entered into the Restated Agreement with the Bank in order to resolve its borrowing and working capital issues.

Operations

The Company also advises that it has continued to experience a steady decline in production and revenues. Production declined to average daily sales production of 196 boed in December, 2008, 19.5 boed in January, 2009 and 40 boed in February, 2009. The decline in production is attributable to a number of factors including curtailment resulting from additions and improvements to the Company's field gathering system and ongoing issues with the Company's field operator, which operates substantially all of the Company's properties in Clear Prairie. Due to the problems that the Company encountered with its field operator, the Company experienced intermittent production and downtime in its production. The Company has been exploring various options to replace its field operator in order to increase production throughput and reduce operating costs. Revenues have been declining partly as a result of the reduced production and also because of decreases in the spot price obtained for natural gas. As a result, the Company's operations did not produce sufficient cash flow to allow the Company to meet its repayment terms to the Bank under the Original Forbearance Agreements. The Company has been working to increase levels of production and actively exploring strategic alternatives in order to meet the terms of the Restated Agreement with the Bank and will be reporting further developments as they arise.

Javelin Annual Meeting

Javelin has obtained an order allowing the date for the holding of the Annual Meeting to be extended to no later than June 19, 2009. However, the Company is currently planning on holding the Annual Meeting before the end of May, 2009. The Company also announces that Stuart M. Olley has resigned as a director of the Company and the Board of Directors thanks Mr. Olley for his contributions. The Board of Directors is currently comprised of Brian D. Fraser, Chairman and Chief Executive Officer, William E. Patterson, Chief Financial Officer and independent directors Michael E.L. Guichon and Peter Guichon. The Audit and Reserves Committee is comprised of Michael E.L. Guichon (Chairman) and Peter Guichon.

About Javelin Energy

Javelin Energy is a junior oil and gas company focused on the acquisition of, exploration for and development of petroleum and natural gas properties in Western Canada. The Company trades on the TSX Venture Exchange under the symbol "JAV".

READER ADVISORY

This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

The term BOE or BOEs may be misleading, particularly if used in isolation. A BOE (barrel of oil equivalent) conversion rate of 6 Mcf per one (1) BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

25,659,848 Common Shares

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved of the contents of this news release and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Javelin Energy Inc.
    Brian D. Fraser
    Chairman and Chief Executive Officer
    (403) 212-1472
    (403) 290-0463 (FAX)
    Email: bfraser@javelinenergy.ca
    or
    Javelin Energy Inc.
    William E. Patterson
    Chief Financial Officer
    (403) 212-1472
    (403) 290-0463 (FAX)
    Email: bpatterson@javelinenergy.ca
    or
    Javelin Energy Inc.
    610, 7015 Macleod Trail SW
    Calgary, Alberta T2H 2K6