Silk Road Resources Ltd.
TSX VENTURE : SLK.P

Silk Road Resources Ltd.

September 07, 2012 17:13 ET

Silk Road Energy Inc. Announces Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Sept. 7, 2012) -

NOT FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.

Silk Road Energy Inc. (the "Corporation") (TSX VENTURE:SLK.P) is pleased to announce that it has entered into a non-binding letter of intent dated August 29, 2012 (the "LOI") to acquire (the "Acquisition") certain oil and gas assets located in the Long Coulee and Parkland regions of southern Alberta (the "Assets") from Verity Energy Ltd. ("Verity").

The Corporation intends for the Acquisition to constitute its Qualifying Transaction as a Tier 1 Oil & Gas Issuer, as set out in the policies of the TSX Venture Exchange (the Exchange"). The Acquisition is subject to certain conditions, including Exchange approval.

Summary of the Qualifying Transaction

The LOI contemplates that the Corporation and Verity will enter into a formal purchase and sale agreement (the "Purchase Agreement") governed by the laws of the Province of Alberta, pursuant to which the Corporation would acquire the Assets from Verity for a purchase price of C$1,000,000, subject to certain adjustments detailed therein, to be satisfied by the issuance to Verity of 5,000,000 common shares of the Corporation ("Common Shares") at a deemed issue price of C$0.20 per Common Share (the "Share Consideration"). The parties contemplate the Purchase Agreement will have customary terms and conditions for a transaction of this type. Each of the Corporation and Verity shall pay their own costs in respect of the Acquisition.

At the request of the Corporation, trading in the Common Shares has been halted by the Exchange. Trading is expected to remain halted until, at the latest, filing of a filing statement in connection with the Acquisition. Trading may also resume upon granting of an exemption from sponsorship by the Exchange.

Verity is a privately held Alberta corporation engaged in the exploration and development of oil and gas properties in the western Canadian sedimentary basin. Verity currently has production from three properties in Alberta and one property in British Columbia. Other than David Hall, of Calgary, Alberta, who has control of, manages or directs in excess of 20% of the shares of Verity, there are no "control persons" (as defined pursuant to Exchange policies) of Verity. A summary of significant financial and technical information in respect of the Assets will be provided in a subsequent news release.

The Assets

The Assets currently produce approximately 1,000 mcf/d of gas and approximately 5 bbls/d of oil and liquids. The Assets are located in the Long Coulee/Parkland area of Alberta and production is predominantly from the Belly River, Medicine Hat, Bow Island and Mannville formations.

Closing of the Qualifying Transaction

It is contemplated that closing of the Acquisition shall be subject to a number of terms and conditions, including:

  1. entry into of the Purchase Agreement and satisfaction or compliance with the terms and conditions of such Purchase Agreement;
  2. satisfactory completion, acting reasonably, by the Corporation and Verity of their respective due diligence examinations;
  3. the receipt of any necessary contractual and other third party consents;
  4. the receipt of all necessary regulatory consents and approvals required pursuant to applicable law (including consent of the Exchange and all applicable securities commissions);
  5. if necessary, shareholder approval by the shareholders of the Corporation and/or Verity;
  6. the Share Consideration shall represent not more than 50% of the total issued and outstanding securities of the Corporation;
  7. the Share Consideration shall be approved for listing on the Exchange or such other stock exchange as is approved by Verity;
  8. Mr. John Zang, an insider of Verity, shall be appointed to the board of directors of the Corporation on closing;
  9. the parties shall have agreed to a voting and escrow agreement whereby Verity agrees to vote the Share Consideration owned by it in favor of any reasonable transaction approved and recommended by the board of directors of the Corporation, provided that transaction does not result in an immediate depreciation in the value of the Share Consideration or results in the Share Consideration being not liquid and whereby Verity agrees not to sell the Share Consideration through the open market for a period of the greater of 90 days and any hold period required in accordance with securities laws (but in any event not to exceed four months); and
  10. closing of the Acquisition no later than the earlier of (i) three business days following the receipt of all necessary conditional approvals from the Exchange and (ii) December 15, 2012.

The LOI has been filed by the corporation by way of SEDAR concurrently with the issue of this press release.

The acquisition does not constitute a Non-Arm's Length Qualifying Transaction (as such term is defined in the policies of the Exchange) and does not require approval from the securityholders of the Corporation.

Sponsorship

Sponsorship of a Qualifying Transaction is required by the Exchange unless exempt therefrom in accordance with the Exchange's policies. The Corporation intends to apply for an exemption from the sponsorship requirements pursuant to the policies of the Exchange. There is no assurance that such an exemption will be granted. If the exemption is not granted by the Exchange, then Corporation would be required to engage a sponsor.

Board of Directors and Management of the Resulting Issuer

Upon completion of the Acquisition, the Corporation anticipates appointing Mr. John Zang, an insider of Verity, to the board of directors of the Corporation. The biographies of each of the contemplated directors and officers of the Corporation after the completion of the Acquisition are detailed below.

Vladimir Katic, President, Chief Executive Officer and Director

Mr. Katic is currently the Managing Director of Pacific States Energy LLC, an oil & gas limited liability corporation formed in the state of California. From May 2000 to September 2009, Mr. Katic was the President, Chief Executive Officer and a Director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the TSX Venture Exchange), an oil & gas company based in California and listed on the Toronto Stock Exchange. Mr. Katic is a resident of Hermosa Beach, California, U.S.A.

Patrick Devlin, Chief Financial Officer, Secretary and Director

Mr. Devlin has over 29 years of experience in the securities industry, as a lawyer, regulator, certified management accountant and entrepreneur. Mr. Devlin is currently self-employed and practicing law in the Province of British Columbia. From March 2004 to April 2009, Mr. Devlin was a Director and then President, Chief Executive Officer and Director (August 2004 to April 2009) of NEMI Northern Energy & Mining Inc., a mining company listed on the Toronto Stock Exchange. Mr. Devlin was also a Director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the TSX Venture Exchange), an oil & gas company, from 1993 to November 2010. From March 1987 to October 2007, Mr. Devlin was a lawyer in the law firm of Devlin Jensen in the City of Vancouver, in the Province of British Columbia. Mr. Devlin obtained a Diploma of Technology in Finance from the British Columbia Institute of Technology in May 1974 and then attended the University of British Columbia where he obtained his designation as a Certified Management Accountant in May 1976. Subsequently Mr. Devlin obtained his Bachelor of Laws from the University of British Columbia in 1981 and became a member of the Law Society of British Columbia in May 1982. Mr. Devlin is a resident of Vancouver, British Columbia.

Zulfikar Rashid, Director

Mr. Rashid has been the owner of Rodeo Express Delivery Ltd., a mail and courier service, since January 1976. He obtained a Bachelor of Engineering in Electrical and Electronics Engineering from the University of Napier in Edinburgh, Scotland in 1974. Mr. Rashid has also been a member of the Association of Science and Engineering Technology Professionals of Alberta (ASET) since 1976. Mr. Rashid is a resident of Calgary, Alberta.

Jonathan Lexier, Director

Mr. Lexier has been a Director of Terrex Energy Inc. (TSXV: TER) since June 2010. From February 2008 to October 2009, Mr. Lexier was the President and Chief Executive Officer of Highpine Oil & Gas Limited, a company formerly listed on the Toronto Stock Exchange. From July 1999 to January 2008, he was the Chief Executive Officer of NAL Resources Management Limited, an oil & gas company. Mr. Lexier was also a senior officer of NAL Oil & Gas Trust, a company formerly listed on the Toronto Stock Exchange, from October 2000 to January 2008. Mr. Lexier obtained a Bachelor of Science in Engineering (Mechanical) from the University of Manitoba in 1981 and a Master of Business Administration from the University of Western Ontario in 1983. Mr. Lexier is a Professional Engineer and has been a member of APEGGA since 1985. Mr. Lexier is a resident of Calgary, Alberta.

John Zang, Director

Mr. Zang is a member of the Law Society of Alberta and is a sole practitioner lawyer. He is the President and a director of Verity Energy Ltd. He is a director of Touchstone Exploration Ltd. (TSXV:TAB) and of RMS Systems Inc. (TSXV: RMS). He is also a director and officer of Morro Bay Capital Ltd. He is the former President, C.E.O. and director of Tiger Cat Energy Ltd (now RMS Systems Inc.). John was also formerly a director and corporate secretary of Marble Point Energy Ltd., Argo Energy Ltd. (now part of Daylight Energy), Argonauts Group Ltd. (now part of Progress Energy Ltd) and Sandy Cover Energy Ltd. He was also corporate secretary and corporate counsel of Sequoia Oil and Gas Trust and corporate secretary of Norquay Capital Ltd. (now Xtreme Coil Drilling Corp). Mr. Zang is a resident of Calgary, Alberta.

Cautionary Statements

This press release contains forward-looking information. More particularly, this press release contains statements concerning the prospective Qualifying Transaction of the Corporation. The information about Verity contained in the press release has not been independently verified by the Corporation. Although the Corporation believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct. Forward-looking information involves known and unknown risks, uncertainties, assumptions (including, but not limited to, assumptions on the performance and financial results of Verity and the Corporation) and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The terms and conditions of the prospective Qualifying Transaction may change based on the Corporation's due diligence on Verity, the entering into a binding agreement for the Qualifying Transaction and the Acquisition, regulatory and third party comments, consents and approvals and the ability to meet the conditions of the required timeframes. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation undertakes no obligations 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.

Completion of the Acquisition is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

This press release is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Silk Road Energy Inc.
    Zulfikar Rashid
    Director
    403.240.1821