Spry Energy Ltd.

May 01, 2008 16:45 ET

Spry Energy Ltd. Announces Agreement to Acquire Calgas Exploration Ltd.

CALGARY, ALBERTA--(Marketwire - May 1, 2008) - Spry Energy Ltd. ("Spry" or the "Company") is pleased to announce that it has entered into an agreement pursuant to which it will make an offer (the "Offer") to acquire, subject to certain conditions, all of the issued and outstanding shares of Calgas Exploration Ltd. ("Calgas"), for total consideration of approximately $35 million, including the assumption of approximately $7.9 million of net debt including related deal costs and assuming that all options to purchase Calgas shares that are "in-the-money" are put to Calgas for cash. Under the terms of the Offer, shareholders of Calgas will receive $1.34 cash for each Calgas share tendered pursuant to the Offer. The aggregate cash consideration to be paid to the shareholders of Calgas pursuant to the Offer will be approximately $27.5 million.

The acquisition of Calgas will add approximately 575 boe/d of production to Spry and is expected to increase Spry's estimated proved and probable reserves and related future net revenue as reported in Spry's Statement of Reserves Data and other Oil and Gas Information for the year ended June 30, 2007 and dated September 13, 2007 prepared in accordance with National Instrument 51-101 - Standards of Disclosure of Oil and Gas Activities, which is available on SEDAR at www.sedar.com. The acquisition will also add approximately 25,000 net acres of undeveloped lands. Several Calgas properties are in close proximity to Spry's existing properties.

On closing, Spry Energy's production rate will be approximately 2,100 boe/d; net undeveloped land will total 95,000 acres and Spry will have over 90 drilling locations to pursue. On December 31, 2007 Spry had a working capital surplus of $2.6 million and no debt. Spry will increase its line of credit from $13 million to $25 million on closing.

The Board of Directors of Spry has unanimously approved the Offer. Calgas' Board of Directors has unanimously approved the Offer, has concluded that the Offer is fair to the Calgas shareholders and is in the best interests of Calgas shareholders and will recommend that Calgas shareholders accept the Offer.

The Offer will be subject to certain conditions, including the deposit of not less than 66 2/3% (unless waived by Spry) of the outstanding shares of Calgas, receipt of all required regulatory approvals and other customary conditions. In addition, Calgas has agreed that it will not solicit or initiate discussions or negotiations with any third party for any take-over bid or other business combination involving Calgas. Further, Spry has reserved the right to match any competing proposals. Under certain circumstances, Calgas has agreed to pay a non-completion fee of $1,350,000 to Spry. A take-over bid circular detailing the Offer is to be mailed to shareholders of Calgas in mid-May, with closing anticipated in late June 2008. The directors and officers of Calgas and certain other shareholders, representing approximately 46% of the issued and outstanding shares of Calgas, have agreed to tender their shares, subject to certain exceptions, and have entered into lock-up agreements with Spry evidencing such commitment.

In connection with the Offer, Spry will be completing a non-brokered private placement financing of (i) common shares of the Corporation to be issued on a "flow-through" basis pursuant to the Income Tax Act (Canada) (the "Flow-Through Shares") at a price of $6.30 per Flow-Through Share for gross proceeds of up to $2,000,000; and (ii) subscription receipts for common shares of Spry (the "Common Share Subscription Receipts") at a price of $5.30 per Common Share Subscription Receipt for gross proceeds of up to $21,000,000.

Each Common Share Subscription Receipt will entitle the holder to receive one common share in the capital of Spry without further payment or action on the part of the holder, upon the take-up by Spry of not less than 662/3% of the shares of Calgas in accordance with the terms and conditions of the Offer (the "Take-Up"). The gross proceeds received from the issuance of the Common Share Subscription Receipts will be deposited in escrow pending the Take-Up by Spry of the Calgas shares.

The net proceeds from the issuance of the Flow-Through Shares and Common Share Subscription Receipts will be used to finance the Offer and Spry's 2008 exploration program.

CAUTIONARY STATEMENTS

Certain statements regarding Spry including management's assessments of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve known and unknown risks and uncertainties, most of which are beyond Spry's control. These risks may cause actual financial and operating results, performance, levels of activity and achievements to differ materially from those expressed in, or implied by, such forward-looking statements.

Such factors include, but are not limited to: the impact of general economic conditions in Canada and the United States; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced; competition; the lack of availability of qualified personnel; fluctuations in commodity prices; the results of exploration and development drilling and related activities; imprecision in reserve estimates; the production and growth potential of Spry's various assets; fluctuations in foreign exchange or interest rates; the ability to access sufficient capital from internal and external sources; and obtaining required approvals of regulatory authorities.

Accordingly, Spry gives no assurance nor makes any representations or warranty that the expectations conveyed by the forward-looking statements will prove to be correct and actual results may differ materially from those anticipated in the forward looking statements. Spry undertakes no obligation to publicly update or revise any forward-looking statements.

The term "boe" may be misleading, particularly is 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 news release shall not constitute an offer to sell, or the solicitation of an offer to buy, securities in the United States, or any province or territory of Canada, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities offered will not be, and have not been, registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of that Act.

Contact Information

  • Spry Energy Ltd.
    Mr. Kenneth Bowie, P.Eng., MBA
    President and CEO
    (403) 984-6352