Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc.

April 20, 2011 13:18 ET

Ridgeline Announces Proposed Acquisition of Intellectual Property for Frac Water and Produce Water Treatment

Technology lowers water treatment costs and enhances capture of heavy metals, hydrocarbons, and other contaminants

Tests demonstrate increased recovery of hydrocarbons

CALGARY, ALBERTA--(Marketwire - April 20, 2011) -Ridgeline Energy Services Inc. (TSX VENTURE:RLE) ("Ridgeline" or the "Company"), an environmental technology and consulting company focused on waste management in the oil and gas industry, reports that it has entered into a definitive purchase agreement dated April 4, 2011 with Danzik Hydrological Sciences, LLC ("DHS") and Dennis M. Danzik (the "Purchase Agreement") to acquire 100% of DHS, a private Delaware limited liability company. Mr. Danzik is the sole member and owner of the interests in DHS. Both DHS and Mr. Danzik are at arm's length to Ridgeline.

DHS holds the worldwide rights to certain intellectual property (IP) developed by Dennis M. Danzik, an inventor resident in the U.S.A. DHS also holds a 50% interest in the Eau Claire Partnership, a partnership between DHS and Ridgeline Eau Claire Inc, a wholly owned subsidiary of Ridgeline.

The IP relates to a method for treating contaminated water from the oil, gas and other industries. Specifically, the technology lowers water treatment costs and enhances the capture of heavy metals, hydrocarbons, and other contaminants. In addition, the IP offers an innovative and economic way to produce fuel recovered from waste water. The treatment processes using the IP returns a combustible by-product that can burn cleaner than diesel fuel and can be blended in to other fuels, including natural gas.

Management's third party laboratory testing of the IP has shown it can economically and effectively treat contaminated waste waters to meet the required standards for recycling, reuse and environmental protection. The IP has also successfully increased recovery of hydrocarbons from water produced from hydraulic fracturing (frac water) and oil sands waste water, which in turn can be used to supply customers with, on site, distributed electrical energy. Testing has also confirmed success in the treatment of water containing dissolved poisonous gases, such and hydrogen sulfide or "H2S".

In January of this year, Ridgeline through the Eau Claire Partnership announced that it had entered into an agreement to install and operate a fully integrated water treatment facility using the IP for a major natural gas exploration and development company in N.E. British Columbia. The water treatment facility is scalable and upon completion will be capable of handling in excess of 4,000 cubic meters per day of return frac water, process water, camp waste water and drilling waste water. More recently, in March 2011, we entered into a development agreement to treat produced and flowback waste water from oil and gas operations in Alberta.

Purchase Terms

Under the terms of the Purchase Agreement in consideration for the acquisition of DHS and the related IP, subject to the approval of the TSX Venture Exchange (the "Exchange"), Ridgeline will issue to Mr. Danzik:

  1. as a portion of the purchase price for those IP assets related to water remediation, 34,581,743 common shares of Ridgeline (the "Common Shares") at a deemed price of $0.44 per share for aggregate consideration of $15,215,966;

  2. as a portion of the purchase price for those IP assets related to energy and fuel recovered from waste water, up to 12,000,000 Common Shares at a price equal to closing market price on the day prior to such Common Shares being issued.

    Such 12,000,000 Common Shares shall be subject to a three (3) year earn out provision in which Ridgeline will issue Common Shares to Mr. Danzik based on twenty (20%) percent of the trailing average of gross revenues collected by Ridgeline from sales of all products derived from the IP assets related to energy and bio-fuel; and
  1. as a final portion of the purchase price Mr. Danzik shall also receive a royalty equal to $0.000625 USD for each U.S. gallon of water treated or fuel manufactured from the IP assets held by DHS.

In addition to regulatory approval, the proposed acquisition of DHS by Ridgeline is subject to a number of conditions, including among other things: due diligence on the IP, obtaining an independent valuation on DHS; delivery of a trade secret report to be held in escrow by intellectual property counsel; any necessary approval of Ridgeline's shareholders; entering into a development and supply agreement; and the appointment of two director nominees of Mr. Danzik acceptable to the Exchange. There are no assurances that these conditions will be satisfied, fulfilled or waived.

The acquisition of DHS will not result in a "reverse take-over" or a "change of business" of Ridgeline as those terms as defined under the policies of the Exchange. Based on the number of Common Shares to be issued to Mr. Danzik under the Purchase Agreement, Mr. Danzik will become both an insider and a control person of Ridgeline in accordance with applicable securities laws and policies. As the proposed transaction will result in a "change of control", shareholders of Ridgeline will be asked to approve the creation of a new control person as required under Exchange Policies.

Development and Supply Agreement

As a condition of closing Ridgeline will enter into a development and supply agreement (the "DSA") with Danzik Applied Sciences, LLC. a private Delaware limited liability company wholly owned by Dennis M. Danzik. Under the terms of the DSA, Danzik Applied Sciences, LLC will provide exclusive manufacturing and research and development services to Ridgeline.

Danzik Applied Sciences will use the IP acquired by Ridgeline to manufacture the equipment to be used by Ridgeline for the water remediation and will also provide assistance in construction, installation, supervision and training in respect of the water remediation assets. Within three years from closing, Ridgeline personnel will be entitled to assume all aspects of operating and manufacturing the IP related facilities and equipment.

Ridgeline has also agreed to fund the research and development of the IP under the DSA and provide for design, engineer, manufacture and install services until Ridgeline can develop these skills and abilities internally. Ridgeline will fund the research and development to a maximum of $5,000,000 over the next three (3) years as follows: (1) an amount equal to 20% of the first $10 million raised in certain debt or equity financings; and (2) a further amount equal to 10% of the next $30 million raised in certain debt or equity financings.

The Intellectual Property

At the core of the IP is an invention by Mr. Danzik which is a: "Unique multi-step reaction process that "cracks" water at a sub-molecular level. This allows "targeting" of reagents and mechanical processes to reduce suspended and dissolved solids, chlorides, dissolved gases, and other harmful contaminates. It utilizes advancements in ion exchange to target heavy metals, clarifies and allows the production of a Water Product™, which can be tailored to the energy producer's needs. The IP also produces a platform for the increased recovery of hydrocarbons, and combustible polymeric material depending on the source."

Mr. Tony Ker, CEO of Ridgeline, stated, "We are very excited about the acquisition as we believe it will transform Ridgeline in the coming years. Prior to the acquisition, we had established ourselves as a provider of environmental services for the oil and gas industry. We have built a consulting business with deep ties in the oil and gas industry. We evaluated numerous environmental technologies; however, Mr. Danzik's technology stood out from all others. Over the past year, we have conducted rigorous evaluation of the technology and commenced pilot projects in the oil and gas industry. Development of the technology continues and is now performing at levels greater than our early expectations. We plan to move forward on our path to commercialization and look forward to working closely with Dennis and his team to drive value for our shareholders."

Mr. Dennis Danzik, CEO of both DHS and Danzik Applied Sciences LLC, commented, "We have enjoyed working closely with Ridgeline. Ridgeline's solid reputation, broad industry relationships and operational discipline will help to ensure we maximize these IP assets and rapidly displace outdated and ineffective water treatment technologies currently in use by the industry.

Mr. Ker continued, "Our plan is to initially focus on the frac and produced water markets in Western Canada followed by entry into the USA and then internationally. We have recently completed tests on contaminated water from the Southern United States. All of the frac water and produce water test or demonstrations have performed well and we are now beginning to explore use of our technology for both SAGD operations and in the tailings pond facilities associated with open pit mining of oil sands. We look forward to keeping our shareholders apprised as we roll-out these technologies to our customers."

Private Placement

Subject to regulatory approval, the Company intends to proceed with private placement of up to 3,000,000 units at a price of $0.44 per unit. Each unit will consist of one common share and one half warrant. Each whole warrant shall be exercisable at price of $0.65 for a period of two (2) from the date of issue. The private placement may be brokered, however, the Company has not yet made a final determination. It is expected that insiders of the Company will be participating in the private placement. The Company intends to use the net proceeds from the private placement to fund the further development of the water treatment business; manufacturing of equipment and research and development.

Trading Halt

The trading of the Company's Common Shares has been halted and shall remain halted pending receipt of satisfactory documentation by the Exchange.

About Ridgeline Energy Services Inc.

Ridgeline Energy Services Inc. (TSX VENTURE:RLE) is an environmental technology and consulting company focused on waste management in the oil and gas industry. Through its subsidiary Ridgeline Water Inc., the Company is developing proprietary technology capable of efficiently treating large volumes of contaminated water generated by oil and gas producers operating in the Western Canadian Sedimentary Basin. The Company is working with energy majors in the application of proprietary technology for effective onsite treatment of produced water, hydraulic fracturing flowback water and oil sands process water (tailings ponds) and to recycle the water used in these oil and gas industry applications. Through its environmental consulting and remediation subsidiaries, Ridgeline Environment Inc. and Ridgeline GreenFill Inc., the Company has built a reputation as an established player in the provision of environmental services to Western Canada's large and growing oil and gas industry. The Company trades on the TSX Venture Exchange under the symbol "RLE". Additional information is available on the Company's website at: http://www.ridgelinecanada.com.

This news release may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.Such information is 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. Readers are cautioned not to place undue reliance on forward-looking information, as no assurances can be given as to future results, levels of activity or achievements.

Neither 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.

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