Solimar Energy Limited

Solimar Energy Limited

June 11, 2012 10:36 ET

Solimar Energy to Raise Additional Funds for Kreyenhagen Project

MELBOURNE, AUSTRALIA--(Marketwire - June 11, 2012) -


As at 5.00pm Monday 11 June (Melb'n Time)

Solimar Energy Limited (TSX VENTURE:SXS) (ASX:SGY) ("Solimar" or the "Corporation") is pleased to announce that it is offering, and has allocated Cdn$4 million of subscription receipts, principally to a North American investment group, to obtain additional funding for its Californian projects. The funds to be raised by the issue of subscription receipts will be placed in escrow and will be released to the Corporation on satisfaction of certain conditions. This funding, once received by the Corporation, will allow Solimar to expedite its development plans for its Californian projects where active drilling and production testing programs are underway.

  • Raising of Cdn$4 million via subscription receipts exchangeable for convertible debentures (with a conversion price of Cdn$0.10 per share) and associated warrants. Particulars of the offering, including conditions, are described below.
  • Principal investment by Second City Capital Partners, a fund controlled by Canadian investor Mr. Samuel Belzberg.
  • Testing operations at its core project, Kreyenhagen, will soon commence with production testing of two wells initially, and a further two wells available for subsequent testing.
  • The Kreyenhagen project will target an independently assessed oil resource containing unrisked oil in place of up to 79 million barrels* net to Solimar's working interest and where steam assisted production is expected to yield high recoveries of oil.
  • The building of a 20 MMBTU portable steam generation unit for a second phase of production testing at Kreyenhagen that is expected to be ready for operation in Q4 2012.
  • Solimar is also continuing testing and drilling activities at its Paloma oil and gas discovery, where: the Paloma Deep-1 well is in production testing phase; the Paloma Deep-2 well is currently being drilled to a proposed total depth of 13,300 feet; and the Paloma-3 (B&N 31B-36) well has been drilled to 6,000 feet, completed and is awaiting testing of up to two hydrocarbon zones indicated on wireline log and mudlog data.
  • The issue of the Cdn$4 million of Debentures and associated Warrants, and the consequent release of the offering proceeds from escrow, is estimated to occur in mid July 2012 following shareholder approval.

Commenting on the capital raising and planned activity, the Corporation's CEO John Begg said:

"The proceeds being raised from this capital raising will strengthen the Corporation's balance sheet and allow Solimar to move ahead with its testing programs at its core projects in the San Joaquin Basin. At Kreyenhagen, the program will include the two phase (Cold Flow and Huff and Puff) production testing previously announced as well as additional appraisal drilling. The Board is pleased to again be achieving support for its business plan and projects by strategic investors in North America. It is particularly pleasing to have attracted investment in the Corporation by Second City Capital Partners which was established and is supported by Mr Samuel Belzberg, a sophisticated investor and philanthropist with extensive interests in property and other energy related investments."

Solimar intends to complete a private placement of 80 subscription receipts at an issue price of Cdn$50,000 per subscription receipt (a "Subscription Receipt"), to raise gross proceeds of Cdn$4 million (the "Offering Upon the satisfaction of certain conditions, including shareholder approval and approval of 2/3 of the existing holders of convertible debentures of the Corporation, each Subscription Receipt will be exchangeable, for no additional consideration, into one Cdn$50,000 convertible debenture (a "Debenture").

Each holder of a Debenture shall also receive, for no additional consideration, 250,000 share purchase warrants (the "Warrants") per Debenture. Each Warrant will entitle the holder to acquire one common share of the Corporation (a "Common Share") at a price of Cdn$0.12 up to July 31, 2015. The Corporation will have the right to accelerate the expiry date of the Warrants to 30 days from the date of notice once the volume weighted average trading share price ("VWAP") of the Common Shares is equal to, or greater than, Cdn$0.25 per share on the TSX Venture Exchange ("TSX-V") for 21 consecutive trading days.

The net proceeds of the Offering are intended to be used to fund the Corporation's capital expenditures in California, mainly for the Kreyenhagen project, and general corporate purposes. The Offering will be largely subscribed for by Second City Capital Partners, a fund controlled by Mr. Samuel Belzberg, or its nominees, and may include other institutional and sophisticated investors.

Each Subscription Receipt will entitle the holder to receive, without payment of additional consideration, one Debenture and 250,000 Warrants following the approval of the issue of Debentures and Warrants by Solimar shareholders at a meeting of shareholders proposed to be held in July 2012 and the approval of the issue of the issue of Debentures by 2/3 of the existing holders of convertible debentures of the Corporation. In the event shareholders do not approve the Offering by August 10, 2012 or the other conditions are not satisfied, the funds, together with any interest earned thereon, will be returned to the subscribers of Subscription Receipts without penalty or deduction and the Subscription Receipts will be cancelled.

In total, 80 Debentures may be issued upon exchange of the Subscription Receipts. The Debentures will have a coupon interest rate of 11% per annum, payable quarterly in arrears, at the election of the Corporation, in cash or through the issuance of Common Shares at a price equal to a 10% discount to the VWAP of the Common Shares on the TSX-V for the 10 trading days immediately preceding the applicable quarterly interest payment date.

The Debentures will mature on December 31, 2014 (approximately 2.5 years from their date of issuance). However, if a National Instrument 51-101 Standards of Disclosure For Oil and Gas Activities compliant report is not received by September 30, 2013, which discloses either gross contingent resources for the Kreyenhagen project of 5 million barrels of oil equivalent (2.5 MMBOE net amount to the Corporation) or probable reserves for all other assets of at least 5 MMBOE, the maturity date will be December 31, 2013. References to "Maturity Date" hereinafter refer to either December 31, 2014 or December 31, 2013, as applicable.

The Debentures will be direct obligations of the Corporation ranking (i) equally with each other, (ii) pari passu with the existing outstanding Cdn$2,800,000 principal amount of convertible unsecured debentures issued in February 2012, and (iii) senior in right of payment and priority to any existing and future indebtedness and financial obligations and / or liabilities subject to the exceptions to be set out in the debenture indenture.

The Corporation will have the right to accelerate the Maturity Date of the Debentures to 30 days from the date of notice once the VWAP of the Common Shares is equal to, or greater than, Cdn$0.20 per share on the TSX-V for 21 consecutive trading days.

The Corporation will have the right to repay the Debentures 12 months from the Maturity Date at a 5% premium to the Offering price ("Early Prepayment"). If the Corporation elects for Early Prepayment, the Corporation must give Debentureholders 60 days' notice and will be subject to minimum prepayment amounts.

The Debentures will be convertible into Common Shares at the option of the Debentureholder at any time prior to the close of business on the Maturity Date at a conversion price equal to Cdn$0.10 per Common Share.

On the Maturity Date, any Debentureholder may, at its option, require the Corporation, on not more than 60 days and not less than 40 days prior notice and subject to regulatory approval (if necessary), to satisfy its obligation to repay each Cdn$50,000 Debenture by issuing and delivering that number of freely tradeable Common Shares obtained by dividing the principal amount of the Debentures outstanding (or applicable portion thereof) by 95% of the VWAP of the Common Shares on the TSX-V for the 20 consecutive trading days ending five trading days preceding the Maturity Date.

Eligible finders or lenders will be paid a commission or set up fee equal in the aggregate to 4% of the aggregate gross proceeds raised pursuant to the Offering.

Completion of the private placement is subject to certain conditions including, but not limited to, the approval of 2/3 of the existing holders of convertible debentures of the Corporation, execution of definitive transaction documentation and receipt of all necessary regulatory approvals, including the approval of the TSX-V and the ASX and the approval of the Corporation's shareholders.

Solimar expects a representative of Second City Capital Partners, Mr Ryan Dunfield, to join the Board. Mr. Dunfield is Vice President with the Vancouver B.C. private equity group Second City Capital Partners, and its affiliate, Gibralt Capital Corporation. Mr. Dunfield is heavily involved with the acquisition and divestiture of portfolio companies within the resource sector. Previous to Second City Capital Partners, Mr. Dunfield worked in the debt capital markets, with exposure to corporate banking, leveraged finance and loan syndications. Mr. Dunfield received a Bachelor of Economics and Finance from the University of Calgary.

*Resource Assessment of Certain P&NG Holdings in the Kreyenhagen Area for Solimar Energy Limited (as of 31 October, 2011) - By Sproule Unconventional Limited. This report was highlighted in a release to the ASX and Canada on 18 November, 2011 and published in full on 22 November, 2011.

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 testing, work programs, financing 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. There is no assurance that the Offering will be completed.

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.


John Begg, Chief Executive Officer

Solimar Energy Limited

About Second City Capital Partners (Source:

Second City Capital Partners ("SCCP") is a research intensive value investor focused on a low risk strategy of deploying capital into high quality real asset sectors, such as: Real Estate, Oil and Gas, Energy Services, Materials, Infrastructure, and Power. SCCP is a financial sponsor and is opportunistic in its deployment of capital.

ABN 42 112 256 649

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
    Registered Office: 566 Elizabeth Street
    Melbourne, Victoria 3000
    +61 3 9347 2409
    +61 3 9349 1186 (FAX)