Norex Exploration Services Inc.

Norex Exploration Services Inc.

April 19, 2009 19:12 ET

Norex Announces $3.8 Million Equity Financing

CALGARY, ALBERTA--(Marketwire - April 20, 2009) - Norex Exploration Services Inc. (TSX:NRX) ("Norex" or the "Company") today announced its intention to issue $3.795 million of common shares on a non-brokered private placement basis. The Company has entered into a term sheet with ARC Energy Venture Fund 4 ("ARC Fund 4") providing for the indirect issuance of $3.0 million of common shares, and has received requests from Ravenswood Management Company, LLC and certain officers and directors of Norex for an additional $795,000 of common shares. In total, Norex expects to issue 15.18 million common shares priced at $0.25 per share under the terms of this financing. Closing is expected on or about May 15, 2009 and is subject to the approval of eligible shareholders at the Company's annual and special meeting scheduled for mid-May. Detailed information respecting the financing will be included in the management information circular to be mailed to the Company's shareholders in respect of the annual and special meeting.

"The Company has aggressively reduced its internal cost structures in the wake of current industry conditions. We have repaid $2.9 million in long term debt in the first quarter with only $11.8 million of total long term debt (including the current portion thereof) outstanding at March 31, 2009 together with a strong working capital position. We have renewed our credit facilities with our main lender which includes an operating line facility for up to $15 million in addition to a $20 million revolving term facility. This financing together with our current credit facilities further strengthens our balance sheet while providing the capital to take advantage of growth opportunities at reasonable valuation levels," commented Mr. Paul Crilly, President and CEO.

To satisfy the unique requirements of ARC Fund 4, such common shares will be acquired by ARC Fund 4 through the exercise of an equivalent number of common share purchase warrants (to be issued by the Company at no cost) at an exercise price of $0.25 per warrant, for total gross proceeds to the Company of $3,000,000. The other subscribers will participate in the financing by directly subscribing for common shares.

The closing of the financing is conditional on regulatory (including Toronto Stock Exchange) and disinterested shareholder approval and other customary closing conditions, including the negotiation with the subscribers of definitive subscription agreements. The Company established an Independent Committee of its Board of Directors which reviewed the terms of the proposed financing and made a recommendation to the full Board of Directors, which was accepted, to approve the financing as being in the best interests of the Company and its shareholders.

The financing is a "related party transaction" under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions ("61-101"), since the Company is proposing to issue securities to: (i) ARC Fund 4, a "control person" of the Company; and (ii) various directors and officers of the Company. MI 61-101 requires that, in addition to any other required securityholder approval, in order to complete a related party transaction, the approval of a simple majority of the votes cast by "minority" Shareholders is required. In addition, in accordance with the applicable rules of the Toronto Stock Exchange, the shareholders must approve the financing as it may result in a dilution greater than 25% of the currently issued and outstanding common shares. Such approval must exclude the votes of insiders of the Company who are participating in the financing. Once completed, the financing will result in the issuance of approximately 39.0% of the issued and outstanding Common Shares (on a non-diluted basis) as at the date hereof.

Forward-looking Statements

Certain information set forth in this news release, including management's assessment of the Company's future plans and operations, contains forward-looking statements, which are based on the Company's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "outlook", "expects", "anticipates", "believes", "projects", "intends", "continues", "estimates", "objective", "ongoing", "may", "will", "should", "might", "plans" and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's 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. The Company provides seismic data acquisition services and is exposed to a number of risks and uncertainties that are common to companies in the same business.
These risks and uncertainties include demand for the Company's services which is affected by, among other things, the speculative nature of resource exploration and development activities, changes in commodity prices, general economic, market and business conditions; changes in customer exploitation budgets; competition for capital and skilled personnel and shortages thereof; the competitive nature of the seismic industry; the ability to keep pace with constantly changing technology; uncertainty in various factors in the oil and gas industry, including the ability to comply with current and future health, safety, environmental and other laws; the general risk inherent to seismic data acquisition activities; risks relating to expansion including pressure on operational and technical resources; risks relating to the reliance on key officers, employees and consultants, including an unexpected loss or departure of any one of them; cancellation of work previously awarded to the Company; the possibility of a conflict of interest arising for the directors and officers of Norex who are participants in other sectors of the oil and gas industry; risks relating to having shareholders who are able to exert influence over the affairs of Norex; the possibility of the need for future financing, which may not be available on favourable terms; the risk of not renewing current credit facilities; the volatility of, and lack of liquidity in, the trading market for the shares of Norex; actions by governmental or regulatory authorities including increasing taxes and changes in other regulations; and the occurrence of unexpected events involved in resource exploration including, but not limited to, adverse weather conditions and wind. Adverse weather or field operating conditions can also negatively impact field productivity and, as a result, the Company's overall profitability. Certain jobs awarded to the Company are on a "turnkey" pricing basis where the Company bears the risk of lost productivity, increased input and/or subcontractor costs. As a result, factors reducing field productivity and any in increases in the Company's input costs could have a material affect on the Company's profitability. There can be no assurance that the financing described above will receive the required regulatory or shareholder approval to proceed.

The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involved a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements.

The information contained in this press release should not be considered all-inclusive as it excludes changes that may occur in general economic, political and environmental conditions. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Investors are cautioned against attributing undue certainty to forward-looking statements. The forward-looking information and statements contained in this press release speak only as of the date hereof and, subject to its obligations under applicable law, the Company does not intend, and does not assume any obligation, to update these forward looking statements if conditions or opinions should change.

Norex, and its divisions Conquest Seismic Services and US subsidiary, Conquest Seismic Services, Inc., provide premium 2D, 3D, 4D and 3C land-based seismic data acquisition services in Canada and the United States. Norex is the largest operator of ARAM-ARIES® recording equipment in Canada and provides state-of-the-art technology to the North American oil and gas industry. Norex trades on the TSX under the symbol "NRX".

Contact Information

  • Norex Exploration Services Inc.
    Mr. Paul Crilly
    President and CEO
    (403) 216-5929
    Norex Exploration Services Inc.
    Mr. Graham Reid, CA
    VP Finance and CFO
    (403) 216-5929