Solimar Energy Limited
ASX : SGY
TSX VENTURE : SXS

Solimar Energy Limited

February 13, 2012 12:36 ET

Solimar Closes Capital Raising

MELBOURNE, AUSTRALIA--(Marketwire - Feb. 13, 2012) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Solimar Energy Limited (ASX:SGY) (TSX VENTURE:SXS) ("Solimar" or the "Corporation") is pleased to announce that it has raised C$2.8 million before costs by the issuance of Convertible Unsecured Debentures (the "Debentures") that are convertible at C$0.10 per Common Share and have a two (2) year term and warrants (the "Warrants") entitling the holder to acquire Common Shares of the Corporation for C$0.15 per Common Share for a two (2) year term (the "Offering").

The Offering was managed by a syndicate of agents led by Canaccord Genuity Corp. and included Fraser Mackenzie Limited (the "Agents").

Further details of the key terms of the Debentures and Warrants are summarized in Appendix 1 (Summary of key terms of the Debentures) and Appendix 2 (Summary of key terms of the Warrants).

Commenting on the capital raising, Solimar CEO, John Begg, said:

"Our strategy has been to assemble a portfolio of projects in the oil prone San Joaquin Basin and allow results in the field to determine which projects should progressively be the focus of the Company's resources. Recent, positive results at the Company's Kreyenhagen and Paloma projects mean that the funds from this capital raising will mainly be directed at production testing and further drilling at these core projects.

In parallel, while still adding to our overall land position via leasing initiatives, we have begun a partial divestment program for non-core assets (such as Maricopa) and farmouts. These initiatives are capable of adding to working capital and offsetting the cost of drilling programs on selected other projects in our portfolio, such as Tejon Footwall where the Company owns 75% of this large exploration prospect."

Sincerely,

John Begg, Chief Executive Officer - Solimar Energy Limited

Convertible Unsecured Subordinated Debenture Financing

The Offering comprised the issue of 56, C$50,000 par value convertible unsecured senior debentures (the "Debentures") subject to a coupon interest rate of 10% per annum, payable quarterly in arrears, at the election of Solimar, in cash or through the issuance of common shares of the Corporation ("Common Shares") at a price equal to a 10% discount to the volume weighted average trading price of the Common Shares on the TSX Venture Exchange ("TSX-V" or the "Exchange") for the 10 trading days immediately preceding the applicable quarterly interest payment date. The Debentures have a maturity date of 31 December 2013 and will be convertible into Common Shares at the holder's option at a conversion price equal to C$0.10 per Common Share.

The Corporation will have the right to accelerate the maturity date of the Debentures to 30 days from the date of notice once the share price of the Corporation's common shares is equal to, or greater than, C$0.20 per share on the TSX-V or the ASX for 21 consecutive trading days.

Each holder of a Debenture received 250,000 share purchase warrants (the "Warrants") per Debenture. Each Warrant entitles the holder to acquire one Common Share at a price of C$0.15 for a period of 24 months after the closing date. The Corporation will have the right to accelerate the expiry date of the Warrants to 30 days from the date of notice once the share price of the Corporation's common shares is equal to, or greater than, C$0.25 per share on the TSX-V or the ASX for 21 consecutive trading days.

The Agents will be paid a commission equal to 6% of aggregate gross proceeds raised from the Offering.

The Offering is subject to final TSX-V Acceptance.

Further details of the key terms of the Debentures are summarized in Appendix 1 and further details of the key terms of the Warrants are summarized in Appendix 2 (attached).

This press release contains certain forward-looking statements within the meaning of applicable securities law. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur, including without limitation statements relating to intended work programs and divestments and associated timelines. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation cannot assure that actual results will be consistent with these forward looking statements. They are made as of the date hereof and are subject to change and the Corporation assumes no obligation to revise or update them to reflect new circumstances, except as required by law. Prospective investors should not place undue reliance on forward looking statements. These factors include the inherent risks involved in the exploration for and development of crude oil and natural gas properties, the uncertainties involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices, the possibility of cost overruns or unanticipated costs or delays and other uncertainties associated with the oil and gas industry.

Appendix 1

Summary of the key terms of the Debentures

1.1 Nature of Debentures

(a) Each Debenture is issued for a principal amount of C$50,000 and is a convertible unsecured debenture.

(b) Each Debenture will pay interest at the rate of 10% per annum, payable quarterly in arrears with the first interest payment date on 31 March 2012. The Corporation has the power to elect whether to pay the interest in cash or in Common Shares at a price equal to a 10% discount to the volume weighted average trading price of the Common Shares for the 10 trading days immediately preceding the applicable deadline for delivery of the share interest payment notice to holders of Debentures.

(c) No fractional Common Shares will be issued.

(d) The Debentures may be issued in certificated or uncertificated form.

1.2 Debenture Trustee

Computershare Trust Company of Canada (the "Trustee") has been appointed as trustee to hold the rights, interests and benefits under the Debentures on behalf of the holders of the Debentures.

1.3 Conversion of Debentures

(a) The Debentures will be convertible into Common Shares at the option of the holder at any time prior to:

(i) close on the maturity date (31 December 2013); or

(ii) close on the business day immediately preceding the date specified by the Corporation for redemption; or

(iii) if subject to a change of control, close on the business day immediately preceding the change of control purchase date which is the date which is 30 days from when the Corporation notifies the holders of the Debentures of the change of control;

at a conversion price equal to C$0.10 per Common Share (subject to adjustments).

(b) The Corporation will have the right to accelerate the maturity of the Debentures once the Corporation's share price is at least 200% of the Conversion Price (C$0.10 at the time of issue) per Common Share for 21 consecutive trading days on the TSX-V or ASX. The accelerated maturity will take place 30 days after the Corporation gives notice to the Debentureholders.

(c) On the maturity date, the Corporation may elect to satisfy its obligation to repay the C$50,000 principal amount of each Debenture by issuing and delivering that number of freely tradeable Common Shares obtained by dividing C$50,000 by 95% of the volume weighted average trading price of the Common Shares on the TSX-V for the 21 consecutive trading days ending five trading days preceding the maturity date. Fractional entitlements to a Common Share will be satisfied by a cash payment equal to the current market price of such fractional interest.

(d) Common Shares issued on the redemption of the Debentures or as payment of interest on the Debentures may not be issued to persons in Australia other than to Sophisticated or Professional Investors as those terms are defined in the Corporations Act 2001 (Cth) (the "Corporations Act").

(e) Common Shares issued on the redemption of the Debentures or as payment of interest on the Debentures will only be issued in compliance with the securities laws of any applicable jurisdiction.

1.4 Change of Control

(a) Within 30 days of a change of control of the Corporation, the Corporation must notify the Trustee (and the Trustee will notify Debentureholders) that a change of control has occurred, provide information in relation to the change of control and make an offer to acquire the then outstanding Debentures.

(b) The offer to acquire the Debentures still in existence must be in cash and at a price equal to 105% of the principal amount of the Debentures plus accrued and unpaid interest through to the Maturity Date.

(c) Once 67% or more of the aggregate principal amount of outstanding Debentures have accepted the offer following the change of control, the Corporation has the right to compulsorily acquire those Debentures still outstanding whose holders have not accepted the offer following the change of control.

1.5 Adjustments

Adjustments include the following:

(a) If, prior to the time of expiry of certain rights with respect to the conversion of Debentures ("Time of Expiry"), the Corporation:

(i) subdivides, redivides or otherwise changes its outstanding Common Shares into a greater number of shares; or

(ii) reduces, combines or consolidates its outstanding Common Shares into a smaller number of shares; or

(iii) issues Common Shares, or securities exchangeable into Common Shares, to Shareholders by way of stock dividend; or

(iv) sets a record date for any of the foregoing that is prior to the Time of Expiry,

then the number of Common Shares obtainable under each Debenture shall be adjusted in the same proportion as the Common Shares.

(b) If, prior to the Time of Expiry, the Corporation:

(i) reclassifies its Common Shares;

(ii) reorganizes its capital other than in the manner described above in (a);

(iii) consolidates, amalgamates, arranges or merges with or into any other body corporate, trust, partnership or entity,

then the holder of any Debentures which had not been converted prior to that adjustment event shall receive, as a result of the relevant adjustment, the entitlements they would have been entitled to receive if they had been, on the date of the adjustment, the registered holder of the Common Shares underlying their unexercised Debentures.

(c) Standard adjustments will be made where the Corporation:

(i) issues options, rights or warrants;

(ii) makes a distribution of shares, rights, options, warrants, evidence of its indebtedness or other assets;

(iii) pays a dividend in shares or similar equity interests in a subsidiary or other business unit (e.g. a spin-off);

(d) The adjustments described in (a) and (b) above are cumulative and will apply to successive events resulting in any such adjustment.

(e) The Corporation will notify the Trustee and holders of the Debentures of its intention to fix a record date that is prior to the Time of Expiry for any matter which may require an adjustment to the Debentures as set out above at (a) and (b).

(f) Notwithstanding (a) and (b) above, no adjustment to the terms of any Debentures shall be made pursuant to or in connection with:

(i) any share purchase plan conducted in accordance with Australian law or applicable securities legislation;

(ii) any stock option, stock purchase, stock savings or share appreciation rights plan of the Corporation in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation;

(iii) a public offering pursuant to a prospectus;

(iv) a private placement in accordance with the rules of any stock exchange on which the Shares are listed for trading;

(v) the exercise of any currently outstanding share purchase warrants or other securities of the Corporation; or

(vi) any arm's length negotiated business combination or other acquisition, pursuant to which holders of Common Shares are not receiving (A) additional Common Shares, rights, options or other form of securities of the Corporation or of any other company or companies involved with respect to such business combination or other acquisition, or (B) dividends or other distributions issued by the Corporation or any other company or companies involved with respect to such business combination or other acquisition.

(g) Notwithstanding the adjustment mechanisms described above, the rights of any holder of Debentures will be changed to the extent necessary to comply with the listing rules of the ASX or TSX-V. In the event of any inconsistencies between the relevant listing rules and the adjustment mechanisms described above, the relevant listing rules will prevail to the extent of any such inconsistency.

1.6 Positive Covenants of the Corporation

(a) The Corporation has covenanted to pay punctually the principal of, premium (if any) and interest accrued on the Debentures on the dates, at the places and in the manner set out in the Debenture Indenture.

(b) The Corporation has covenanted with the Trustee to pay the Trustee reasonable remuneration for its services as Trustee for so long as any Debentures remain outstanding and will repay all monies which the Trustee has paid in connection with the execution of the duties of the Trustee (including the Trustee's remuneration).

(c) For as long as the Debentures are outstanding, the Corporation has covenanted to:

(i) notify the Trustee of any event of default;

(ii) carry on and conduct its activities in a business-like manner and in accordance with good business practices;

(iii) keep proper books of record and account of all financial transactions and the assets and business of the Corporation in accordance with IFRS;

(iv) use commercially reasonable efforts to list the Common Shares on the ASX and maintain such listing thereafter; and

(v) maintain the Corporation's status as a "reporting issuer" not in default of the requirements of applicable securities legislation.

1.7 Negative Covenants of the Corporation

For as long as the Debentures are outstanding and except as may otherwise be permitted by way of an Extraordinary Resolution, the Corporation has covenanted not to:

(a) incur additional indebtedness or guarantee additional indebtedness of any other person or party (other than ordinary course trade payables) except the Corporation shall be permitted to incur additional indebtedness provided that (i) such additional indebtedness ranks subordinate in all respects to the Debentures and (ii) certain guarantees and securities are provided by the Corporation and its subsidiaries to the Trustee in relation to the additional indebtedness;

(b) create, incur, assume or otherwise become liable upon or suffer to exist any mortgage, charge, lien, hypothec, security interest or other encumbrance whatsoever on, against or with respect to any part of the assets of the Corporation or its subsidiaries (subject to security interests arising by operation of law, so long as the obligations secured thereby are not delinquent or in default) unless all payments due under the Debenture Indenture have been secured in priority to the obligations so secured on terms and conditions approved by an extraordinary resolution of the holders of the outstanding Debentures;

(c) sell, assign, lease back or otherwise dispose of any of the assets of the Corporation or its subsidiaries except in the ordinary course of business on arm's length terms, other than for:

(i) a transaction involving a farmout with a value equivalent to or less than the greater of either (A) 50% of the Corporation's net asset value or (B) $20 million; or

(ii) a transaction involving the sale of all of Solimar's working interest in a project, any portion of Solimar's working interest in a project, or a combination of Solimar's working interests in multiple projects, with a transaction value equivalent to or less than $12 million.

(d) declare or pay any dividend or make any other distribution to the holders of its issued and outstanding Common Shares;

(e) enter into any agreement with any affiliate or associate, except on arm's length terms (provided that such agreement must also comply with the other negative covenants);

(f) make any investment (by way of loan, guarantee, share equity or otherwise) in any other person or party other than to the Corporation's subsidiaries; or

(g) make any payments to any person or party other than in the ordinary course of business.

Notwithstanding the negative covenants provided by the Corporation (as summarized above), so long as the Debentures are outstanding:

(h) where:

(i) the Corporation requires additional debt for the acquisition and/or development of the Corporation's oil and gas reserves as part of the ordinary course of business;

(ii) such additional debt is required to rank in priority to the Debentures (the "Senior Indebtedness");

(iii) the Senior Indebtedness is provided by a Canadian, Australian or international financing institution with a sufficient credit rating;

(iv) the purpose of such Senior Indebtedness is limited to the purposes set out in 1.7(h)(i) above; and

(v) the amount of the Senior Indebtedness available to the Corporation is based on the value of, or present value of expected future production from, the Corporation's proved oil and gas reserves, evaluated in accordance with certain Canadian, Australian or U.S. standards; or

(i) where the Corporation completes the sale, assignment, lease-back or other disposition of assets, the fair market value of which, when taken in aggregate in respect of all such sales, assignments and dispositions after the date of the debenture indenture, is equal to or greater than $12 million;

the Corporation will not be required to obtain the approval of the holders of the Debentures regarding either incurring the Senior Indebtedness or disposing of assets equal to or greater than $12 million, by way of an extraordinary resolution or otherwise, provided that incurring such Senior Indebtedness or disposing of assets equal to or greater than $12 million will be deemed a change of control (see 1.4 above).

1.8 Transferability of Debentures

Standard transfer restrictions apply to the sale of the Debentures and underlying Common Shares.

1.9 Rights prior to Conversion

The Debentures do not confer any rights of a Common Shareholder on the holders thereof (including, but not limited to, the right to vote at, to receive notice of, or to attend, meetings of Common Shareholders or any other proceedings of the Corporation, or the right to receive dividends or other distributions).

1.10 Ranking of Debentures

The Debentures will be direct unsecured obligations of the Corporation. Each Debenture shall rank pari passu with one another and with any debentures issued under any supplemental indenture. Except as prescribed by law, the Debentures will have their priority with respect to all other existing and future unsecured indebtedness of the Corporation determined in accordance with the provisions summarized at 1.7 above.

Appendix 2

Summary of the key terms of the Warrants

2.1 Nature of Warrants

(a) Each Warrant shall entitle the holder, upon exercise, to acquire one Common Share at an exercise price of C$0.15 (15 Canadian cents) subject to adjustment mechanisms described below ("Warrant Exercise Price").

(b) No fractional Warrants shall be issued and Warrants may only be exercised in a sufficient number to acquire whole numbers of Common Shares.

(c) The Warrants may be issued in certificated or uncertificated form.

(d) The Warrants will not be listed for quotation on any securities exchange.

2.2 Exercise of Warrants

(a) Each Warrant may be exercised by the holder complying with its obligations under the terms of issue at any time after its grant and prior to the earlier of (A) the date that is 24 months after the closing date or (B) on the day which is 30 days from the later of:

(i) delivery of a notice by the Corporation that the Corporation's share price has been trading at C$0.25 for a minimum of 21 consecutive trading days on the TSX-V or ASX (a "Triggering Event"); and

(ii) issuance of a press release announcing that a Triggering Event has occurred, the Corporation has delivered a notice in accordance with 2.2(a)(i) above and the expiry date of the Warrants

(the "Warrant Expiry Date") after which time the Warrant will lapse and any rights in respect of such Warrant will terminate.

(b) Notwithstanding (a) above, Common Shares issued on the exercise of Warrants may not be issued to persons in Australia other than to Sophisticated or Professional Investors.

(c) Notwithstanding (a) above, Common Shares issued on the exercise of Warrants will only be issued in compliance with the securities laws of any applicable jurisdiction.

2.3 Warrant Agent

Computershare Trust Company of Canada (the "Warrant Agent") has been appointed as agent to hold the rights, interests and benefits under the Warrants on behalf of the holders of the Warrants.

2.4 Bonus Issues

Subject to any amendments to the ASX Listing Rules from time to time, if prior to the exercise of a Warrant, the Corporation makes a bonus issue to shareholders, the number of Common Shares which the Warrant will entitle the holder to acquire upon exercise will be increased by the number of Common Shares which the holder of the Warrant would have received if the Warrant had been exercised before the record date for the bonus issue.

2.5 Rights Issues

Subject to any amendments to the ASX Listing Rules from time to time, if prior to the exercise of a Warrant, the Corporation makes a pro rata issue (except a bonus issue) to shareholders, the exercise price of the Warrant will be reduced as specified in the Listing Rules in relation to pro rata issues (except bonus issues).

2.6 Adjustments

Subject to any amendments to the ASX Listing Rules from time to time:

(a) if prior to the exercise of a Warrant there is a consolidation in the capital of the Corporation, the number of Warrants on issue which have not been exercised will be consolidated in the same ratio as the ordinary capital of the Corporation and the exercise price of those Warrants will be amended in inverse proportion to that ratio;

(b) if prior to the exercise of a Warrant there is a subdivision in the capital of the Corporation, the number of Warrants on issue which have not been exercised will be subdivided in the same ratio as the ordinary capital and the exercise price of those Warrants will be amended in inverse proportion to that ratio;

(c) if prior to the exercise of a Warrant there is a return of capital by the Corporation to its shareholders, the number of Warrants on issue which have not been exercised will remain the same and the exercise price of those Warrants will be reduced by the same amount as the amount returned in relation to each Common Share;

(d) if prior to the exercise of a Warrant there is a reduction in the Corporation's capital by way of cancellation of paid up capital which is lost or not represented by available assets where no securities are cancelled, the number of Warrants on issue which have not been exercised and the exercise price of those Warrants will remain unaltered; and

(e) if prior to the to the exercise of a Warrant there is a pro rata cancellation in the Corporation's capital, the number of Warrants on issue which have not been exercised will be reduced in the same ratio as the ordinary capital of the Corporation and the exercise price of those Warrants will be amended in inverse proportion to that ratio.

2.7 Reclassification of Common Shares

Subject to any amendments to the ASX Listing Rules from time to time, if prior to the exercise of a Warrant, there is a:

(a) a reclassification of Common Shares or a capital reorganisation of the Corporation other than as described above at Sections 2.4, 2.5 or 2.6;

(b) a consolidation, amalgamation, arrangement or merger of the Corporation with any other body corporate, trust, partnership or other entity; or

(c) a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity,

(a "Reclassification"), then on the exercise of a Warrant, in lieu of such number of Common Shares which the holder would have been entitled to receive had the Warrant been exercised prior to the Reclassification, the holder of the Warrant will receive such number of Common Shares or other securities or property that the holder would have been entitled to receive had the Warrant been exercised prior to the date of such Reclassification.

2.8 Adjustments to comply with Listing Rules

Notwithstanding the adjustment mechanisms described above, the rights of any holder of a Warrant will be changed to the extent necessary to comply with the ASX Listing Rules. In the event of any inconsistencies between the ASX Listing Rules and the adjustment mechanisms described above, the ASX Listing Rules will prevail to the extent of any such inconsistency.

2.9 No adjustment for certain transactions

No adjustment will be made to the acquisition rights attached to the Warrants if the issue of Common Shares is being made pursuant to or in connection with:

(a) any share purchase plan conducted in accordance with the Corporations Act;

(b) any stock option, stock purchase, stock savings or share appreciation rights plan of Solimar in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation;

(c) a public offering pursuant to a prospectus;

(d) a private placement in accordance with the rules of the stock exchange on which the Common Shares are listed for trading;

(e) the satisfaction of existing instruments issued at the date of the Warrant Indenture; or

(f) any arm's length negotiated business combination or other acquisition, pursuant to which shareholders are not receiving:

(i) additional Common Shares, rights, options or other forms of securities of the Corporation or of any other company or companies involved with respect to such business combination or other acquisition; or

(ii) dividends or other distributions issued by the Corporation or any other company or companies involved with respect to such combination or other acquisition.

2.10 Cumulative Adjustments

The adjustments described in Sections 2.4 to 2.7 and Section 2.1 are cumulative and will be computed to the nearest whole cent, and will apply to successive events resulting in any such adjustment.

2.11 Notice of Adjustments

The Corporation will notify the Warrant Agent and holders of Warrants of its intention to fix a record date that is prior to the Warrant Expiry Date for any matter which may require an adjustment to the Warrants as set out above.

2.12 Transfer of Warrants

Standard transfer restrictions apply to the Warrant and underlying Common Shares.

2.13 Rights Prior to Exercise

A Warrant does not confer on the holder any rights as a Common Shareholder, including but not limited to, the right to vote at, to receive a notice of, or attend, meetings of shareholders or the right to participate in a new issue of securities by the Corporation.

2.14 Ranking of Warrants

All Warrants shall rank pari passu with each other, irrespective of the date of issue.

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.

Contact Information

  • Solimar Energy Limited
    566 Elizabeth Street, Melbourne, Victoria 3000
    +61 3 9347 2409
    +61 3 9349 1186 (FAX)
    www.solimarenergy.com.au