Shoreline Energy Corp.
TSX : SEQ

July 05, 2011 09:52 ET

Shoreline Energy Corp. Is Pleased to Announce Three Strategic Acquisitions That Increase Production, Reserves and Land Holdings in the Peace River Arch

CALGARY, ALBERTA--(Marketwire - July 5, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Shoreline Energy Corp. ("Shoreline" or the "Company") (TSX:SEQ) a growth orientated oil and gas company is pleased to announce that it has initiated its acquisition program and has entered into agreements to acquire by way of exempt takeover bids three non-arm's length private oil and gas production companies (the "Companies") for a total purchase price of $34,578,410 for production and reserves, undeveloped land, seismic and facilities (the "Purchase Price"). This acquisition adds an estimated 640 barrels of oil equivalent ("BOE") per day of production, 57,000 net acres of land, reserves of 1.55 million BOE on a Total Proved basis, and 2.49 million BOE on a Proved plus Probable basis to Shoreline. This strategic acquisition provides Shoreline a strong and diverse platform to continue its consolidation program in the Peach River Arch area ("PRA") while concurrently shifting Shoreline's liquids and natural gas mix closer to a 50/50 weighting by providing a large inventory of organic projects from which to grow reserves and production.

Subject to required shareholder and regulatory approvals, Shoreline will acquire all of the currently outstanding shares of Lakeridge Energy Corp. ("LEC"), Shoreline Acquisition Corp. ("SAC") and Shoreline Oil & Gas Ltd. ("SOG") (the "Transaction").

The purchase price will be paid by the issuance of up to 1,933,331 common shares of the Company and 1,933,331 warrants to acquire shares of the Company at $12 per share until February 2013 (the "Unit(s)"), and assuming all LEC, SAC and SOG options and warrants are exercised, the assumption of $14,826,000 in debt and long term liabilities. Certain of the vendors have the option of receiving up to $985,811 in cash in lieu of Units of the Company. To the extent that they select this option, the cash component could increase by up to $985,811.00 and the Company Unit component decrease by up to 98,581 Units. Each Company Unit will be issued for an agreed value of $10.00 per Unit. The transactions are each conditional on approval of the shareholders of the Company at an annual and special meeting to be held August 22, 2011 and other conditions, including TSX approval. A management information circular will be mailed in connection with the Company's meeting and will contain further information and details with respect to each of these proposed transactions

Based on agreed value of $10.00 per Unit, a 16% premium to current market price, the aggregate purchase price of $24,721,140(1) is reflective of the following metrics;

- Production: $ 38,627 per BOEPD [per per flowing boe]
- Proved Reserves(2): $15.94 per BOE
- Proved plus Probable Reserves(2): $9.92 per BOE
- Reserve Life Index(3): 6.9 years (Proved), 11 years (2P)
Notes :
1. $24,721,140 assumes $10.00 Shoreline Unit price, inclusion of all debts and liabilities, exercise of all LEC, SAC and SOG outstanding options and warrants, adjustment for land, seismic and facilities.
2. Reserves evaluated by McDaniel & Associates Consultants Ltd. as at December 31, 2010.
3. Estimated production of 640 BOE per day.

The Board of Directors of each of the Companies have unanimously approved the Transaction, have determined that the Transaction is in the best interests of their respective shareholders and have resolved to recommend that their respective shareholders vote in favour of the Transaction. Key insiders of Lakeridge Energy Corp. representing 64% of the currently issued shares will enter into lock-up agreements in support of the Transaction, and have agreed to not solicit or initiate discussions regarding any other business combination, while granting Shoreline the opportunity to match any unsolicited superior offer that is received.

SUMMARY OF THE TRANSACTIONS

In late April 2011, Shoreline successfully concluded an initial public offering on the Toronto Stock Exchange, raising $39.3 million dollars through a syndicated offering. In conjunction with the close of the financing, Shoreline announced the acquisition of a core group of producing and non producing assets located entirely in the PRA, an area where the Shoreline management team has extensive experience, and has identified several opportunities for growth through drilling of vertical and horizontal oil wells, as well as through optimization of existing producing fields and wells.

The Transactions announced today are exciting and are of strategic importance to Shoreline for the following reasons:

- Production increases to an estimated 1400 to 1450 barrels of oil equivalent ("BOE") per day, an increase of 78%;
- Addition of over 57,000 net acres of land, an increase of 81% over current levels;
- Increase in reserves by 1.55 million BOE on a Total Proved basis, and 2.49 million BOED on a Proved plus Probable basis, representing a 76% and 92% increase respectively above existing Shoreline reserves as at December 31, 2010;
- Expansion of Shoreline's Project Inventory:
• Addition of more than 30 vertical and horizontal drilling locations targeting light and medium grade oil.
• Between 20 and 30 low risk optimization projects, with relatively low capital requirements.
• Portfolio of over 40 potential natural gas drilling opportunities, including high impact Doig and Montney liquids rich natural gas .
- Addition of two 100% working interest and operated gas processing facilities; and
- Expansion and strengthening of Shoreline's management team.
RESULTING COMBINED COMPANY OVERVIEW
Company BOEPD Acres
Acquisition 640 57,000
Shoreline Energy Corp. 805 70,000
Total 1445 127,000

GO FORWARD PLANS

Upon closing of the proposed Transactions, Shoreline will release an increased capital expenditure program, as well as revised production guidance for the remainder of 2011. Assuming completion of the Transactions Shoreline's capital budget over the remainder of 2011 and through 2012 will focus on:

- developing light oil from the Charlie Lake formation from Shoreline's extensive land holdings in the Progress, Pouce Coupe, and Bonanza areas at depths of between 1450 and 1650 meters;
- developing medium grade oil from the Gething and Cadomin formations on over 10,000 net acres of land in the Hines Creek at target depths of 1000 meters;
- drilling our first high impact wells targeting both oil and natural gas in the Doig and Montney formations;
- continuing to optimize our existing production assets through wellbore recompletions, restarts, and facility optimization;
- acquiring new two and three dimensional seismic data in three project areas, through a combination of new acquisition and purchase of available industry trade data;
- Addition of management and board members with direct oil and gas experience in the Peace River Arch area; and
- drilling initial test well or wells on a high impact Viking resource oil play in the Redwater area of Central Alberta.

FAIRNESS OPINION

Shoreline has engaged MGI Securities Inc. to provide a fairness opinion to the independent committee of the board of directors of Shoreline, that the proposed Transaction is fair, from a financial point of view to the shareholders of Shoreline.

MANAGEMENT TEAM ADDITIONS

Upon closing of the Transactions, the following individuals are anticipated to be joining Shoreline's existing management team;

J. Kevin Stromquist, Professional Geologist with 29 years experience in both senior and junior producers, and 19 years of experience managing assets and developing hydrocarbons in the PRA. Currently Mr. Stromquist holds the role as Chairman and VP Exploration of Lakeridge Energy Corp. Previously VP Exploration of Iteration Energy, and VP Exploration of Canadian Natural Resources Ltd.
Brian R. Cumming, Professional Engineer with over 30 years experience in exploitation and production engineering, reserve evaluation, acquisition evaluation and field operations. Over 22 years experience in the PRA,.Previously VP Engineering Triton Energy Corp and VP Operations Resolute Energy Ltd.
David R. Bell, Professional Engineer with over 22 years experience in oil and gas operations (drilling completions, pipeline and facilities construction), at both senior and junior producers. Previous PRA experience at Numac/Westcoast Petroleum and Elk Point Resources Inc.
Janet (Jan) Boydol, Landman with over 25 years of land asset management experience with a combination of both private and publicly traded junior oil and gas producers.

RELATED PARTIES

Mr. Trevor Folk and Mr. Shaun Alspach are directors and officers of Shoreline, and Mr. Daniel Grisdale is an officer of Shoreline. Mr. Folk, Mr. Alspach and Mr. Grisdale and certain members of their respective families are shareholders of Lakeridge Energy Corp. Mr. Folk and Mr. Grisdale are officers and directors of both SAC and SOG and Mr. Alspach is a director of both SAC and SOG. Trevor Folk, Shaun Alspach and Dan Grisdale own 0.13%, 0.28% and 0.065% percent of the issued shares of the Company before the transaction and following completion of the transaction will own 0.51% 2.23%and 1.06% percent of the issued shares of the Company respectively.

By virtue of the fact that Mr. Folk, Mr. Alspach and Mr. Grisdale are directors and/or officers of the Shoreline and shareholders of Lakeridge, these three individuals are each considered to be a related party of the Shoreline. By virtue of the fact that Mr. Folk, Mr. Alspach and Mr. Grisdale will be receiving shares of the Shoreline as consideration for the Lakeridge shares being purchased by Shoreline, the Lakeridge transaction is considered to be a related party transaction. Multilateral Instrument 61-101 ("MI 61-101") requires an issuer to obtain minority securityholder approval prior to carrying out a related party transaction. Shoreline qualifies for an exemption from this requirement under Section 5.7 of MI 61-101 and, therefore, minority shareholder approval will not be required in order to approve and carry out the Lakeridge transaction. At the annual and special meeting of Shoreline to be held on August 22, 2011, the Lakeridge acquisition will simply require the approval of a majority of the holders of shares of Shoreline voting at the meeting.

SHAREHOLDER MEETING

The Transactions are conditional on regulatory approval, including but not limited to approval of the Toronto Stock Exchange. Approval of the shareholders of Shoreline Energy Corp., will be sought at a meeting to be held August 22, 2011. An information circular detailing the proposed acquisition is anticipated to be mailed to shareholders of Shoreline Energy Corp. on or before July 20, 2011.

Shoreline Energy Corp. is an emerging junior oil and gas company based in Calgary Alberta. Shoreline provides shareholders a combination of value growth through development of oil and gas reserves and production with a specific focus in the Peace River Arch of northwest Alberta. In addition to value growth through development, the Company provides investors a fixed quarterly dividend of $0.20 per share beginning September 30, 2011.

The Company is a publicly traded company on the TSX. Further information is available on SEDAR at www.sedar.com.

BOEs 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 contains forward-looking statements. More particularly, this press release contains forward-looking statements concerning the completion of the Offering, the success of the Offering, timing of the Offering, the use of proceeds of the Offering and the listing of the Common Shares on the TSX. These statements are based on current expectations and assumptions regarding, among other things, general economic and industry conditions and the regulatory approval process. The forward looking statements involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated. Such risks include, but are not limited to, those listed under the heading "Risk Factors" in the Company's preliminary prospectus. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The TSX has neither approved nor disapproved of the information contained herein.

Contact Information

  • Shoreline Energy Corp.
    Mr. Trevor Folk
    President and Chief Executive Officer
    (403) 398-4070
    tfolk@shorelineenergy.ca
    Suite 400, 209 - 8th Avenue S.W. Calgary, Alberta T2P 1B8