SkyWest Energy Corp.

SkyWest Energy Corp.

December 03, 2010 14:20 ET

SkyWest Energy Corp. Announces Execution of Definitive Agreement for Previously Announced Private Company Acquisition and an Increase in Bought Deal Financing to $32 Million

CALGARY, ALBERTA--(Marketwire - Dec. 3, 2010) - SkyWest Energy Corp. ("SkyWest" or the "Company") (TSX VENTURE:SKW) is pleased to announce it has entered into a definitive agreement (the "Arrangement Agreement") to acquire a private company ("Privateco") as previously announced for a combination of cash and SkyWest shares. As consideration Privateco's shareholders will receive $1.10 per share in cash ($10,000,000) and two (2) SkyWest shares at fifty two (52 cents) per share, resulting in total consideration of approximately $20,000,000including the issuance of up to 19,848,325 shares (assuming full conversion of the Privateco convertible securities). Including estimated transaction costs and the assumption of $3 million of net debt of Privateco (as of September 30, 2010), the total consideration is approximately $23 million. The Acquisition is expected to close in mid-December in the event a meeting of the Privateco shareholders is not required and early January if a meeting is required. The Board of Directors, management and certain shareholders of Privateco, representing approximately 75% of the basic shares outstanding, have entered into support agreements to vote their shares in favor of the Arrangement Agreement. The completion of the Acquisition is subject to a number of conditions, including but not limited to the approval by the Privateco Shareholders, receipt of all regulatory approvals, including the approval of the TSX Venture Exchange. The Arrangement Agreement provides for the payment of a mutual break fee upon the occurrence of certain events.

As of the closing date, Privateco's production isexpected to be approximately520boepd.In addition, Privateco has a total of 7.25 gross (5.0 net) sections of lands located in the Pembina Cardium fairway, on which Privateco has recently participated in 4 successful Cardium horizontal wells.

An independent director of SkyWest is a director, officer and shareholder of Privateco. The Chief Financial Officer of SkyWest is a shareholder of Privateco.

Highlights of the Acquisition are as follows:

Estimated proved plus probable reserve value of approximately $21,836,000(1), 50% natural gas and50% oil and NGLs;

  • 24 net PembinaCardium horizontal oil locations;
  • 90% of production is operated with a85% average producing well working interest;
  • Gross Lands of 51,747 acres(40,849 net acres).
  • Acquisition cost of:
    • $16.55/boe (proved plus probable);
    •  $44,230 per flowing boe
  • 7.3 year RLI.

(1) Based on 1,390mboe of proved plus probable reserves as of March 31, 2010, as assessed by GLJ Petroleum Consultants Ltd.


The Acquisition is consistent with the Corporation's mandate to acquire, explore and exploit high working interest, high quality, and oil in place reservoirs, with a particular emphasis on Pembina opportunities. Privateco's Pembina area lands are located in a very active area where recent Cardium Formation land sales have ranged from $1,000,000 to $3,000,000 per section. The combination of SkyWest and Privateco results in a company that is focused, financially strong and opportunity rich with in excess of 94 netCardium horizontal locations.


SkyWest is also pleased to announce that further to its news release issued on November 17, 2010, it has entered into an amended engagement agreement with a syndicate of investment dealers led by Wellington West Capital Markets Inc. and including Haywood Securities Inc., FirstEnergy Capital Corp. and Desjardins Securities Inc. (collectively, the "Underwriters") to increase its previously announced Offering of $25,012,000 to a total size of $32,000,020. Under the agreement, the Underwriters will now purchase from SkyWest 61,538,500 Special Warrants at an issue price of $0.52 per Special Warrant. All other terms and conditions of the Offering remain the same as previously announced. Proceeds from the offering will be used to fund the Privateco Acquisition, as described in detail above and in the Company's press release dated November 8, 2010, to fund ongoing exploration and development activities and for general corporate purposes.

The Offering is expected to close on or about December 7, 2010 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange and the securities regulatory authorities.

Information Regarding SkyWest

SkyWest Energy Corp. is aCardium focused, public oil and gas exploration and development company, located in Calgary, Alberta with operations in Alberta. SkyWest currently trades on the TSX Venture Exchange (TSXV) under the Symbol "SKW".

Statements herein that are not historical facts may be considered forward looking statements including management's assessment of future plans and operations, growth expectations within the Corporation, expected initial production rates from certain new wells, timing of completion of wells and of production additions, expected size of various plays, construction or expansion of facilities and the timing thereof and expected costs and the effects thereof, drilling plans and the effects thereof. These forward-looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Corporation's objectives, goals or future plans are forward-looking statements. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties including, without limitation, risks associated with the Acquisition, 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, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, SkyWest's actual results may differ materially from those expressed in, or implied by, the forward-looking statements.

Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although SkyWest believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because SkyWest can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the ability of SkyWest to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which SkyWest has an interest in to operate the field in a safe, efficient and effective manner; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which SkyWest operates; and the ability of SkyWest to successfully market its oil and natural gas products.

Readers are cautioned that the foregoing list of factors and assumptions is not exhaustive. Additional information on these and other factors that could effect SkyWest's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website ( Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and SkyWest 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.


Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

Contact Information

  • SkyWest Energy Corp.
    Lawrence Urichuk
    President & CEO
    Main Phone (403) 265-0071
    (403) 265-0073 (FAX)
    SkyWest Energy Corp.
    Joel MacLeod
    VP Finance and CFO
    Main Phone (403) 265-0071
    (403) 265-0073 (FAX)
    SkyWest Energy Corp.
    Suite 480, 435 - 4th Ave S.W.
    Calgary, Alberta T2P 3A8