Loon Energy Inc. ("Loon" or the "Company") (TSX VENTURE: LEY)
announces that its board of directors (the "Board") has approved a
strategic plan to reorganize the business of Loon. The
reorganization is intended to enhance overall shareholder value
through a series of events including: 1) formation of a new company
named "Loon Energy Corporation" ("Loon Corp"), which will own the
assets of Loon located in Colombia and Peru, South America; 2) a
listing of the common shares (the "Loon Corp Shares") of Loon Corp
on the TSX Venture Exchange (the "TSXV"); 3) a delisting of the
common shares of Loon from the TSXV, which will continue to hold
the assets of the Company located in Brunei, Syria and Slovenia; 4)
a change in the name of the Company to "Kulczyk Oil Ventures Inc."
("Kulczyk Oil"); and 5) the listing of the common shares (the
"Kulczyk Oil Shares") of Kulczyk Oil on the Warsaw Stock Exchange
(the "WSE"). The proposed reorganization of Loon will be completed
by way of a plan of arrangement (the "Arrangement") pursuant to the
Business Corporations Act (Alberta) (the "ABCA") and will require
securityholder approval. A special meeting to consider approving
the Arrangement has been scheduled to be held on December 9, 2008.
An information circular and proxy statement (the "Information
Circular") containing particulars of the Arrangement, together with
information concerning Loon Corp and Kulczyk Oil following the
implementation of the Arrangement, will be mailed to
securityholders of Loon on or about November 7, 2008.
Steps one to four inclusive of the proposed reorganization are
intended to occur coincident with the proposed closing of the
Arrangement, which is expected to occur on or about December 10,
2008. Step five, the listing of the Kulczyk Oil Shares on the WSE,
is expected to occur in May 2009. Once all of the steps are
completed, shareholders of Loon will be entitled to own one Kulczyk
Oil Share and one Loon Corp Share for each common share of Loon
held.
Strategic Rationale
The management and board of directors of Loon believe that the
current market price of Loon's common shares does not adequately
reflect the potential of the Company and that a split of the
Company into separate operating entities will enable a more focused
and accurate valuation. The listing of Kulczyk Oil on the WSE is
expected to improve Kulczyk Oil's cost of capital.
The initial focus of Kulczyk Oil will be in Europe, the Middle
East and Asia while that of Loon Corp will be Latin America. This
reorganization will provide shareholders with the option of
involvement in the areas most familiar to them by continued
involvement in Kulczyk Oil or Loon Corp or in both companies and
will create a base which gives each company a more focused growth
platform. The listing of the Kulczyk Oil Shares on the WSE is
expected to improve the cost of capital of Kulczyk Oil as the time
approaches for the first exploratory drilling on Kulczyk Oil's
properties in Brunei and in Syria. Poland is one of Europe's
fastest growing and most dynamic economies. Capital traditions in
Poland date back to 1817 when the Warsaw Mercantile Exchange was
established. The WSE began activity in its present form in 1991
and, as of September 30, 2008, the total market capitalization of
companies listed on the WSE exceeded Euros 105 billion. One of the
main operational centres of the Company's major shareholder,
Kulczyk Investment House S.A. ("KIH"), seated Luxembourg, is
located in Warsaw.
Special Securityholders Meeting
The special meeting of the securityholders of Loon will be held
on December 9, 2008 in the Glacier Lily Room, Sheraton Suites Eau
Claire, 255 Barclay Parade, Calgary, Alberta at 2:30 p.m. local
Calgary time.
Put Right
In consideration to the holders of Kulczyk Oil Shares for the
uncertainty over the length of time it will take to have the
Kulczyk Oil Shares listed on the WSE, and the resulting lack of
liquidity to their investment in Kulczyk Oil during this period, as
part of the Arrangement, the holders of Kulczyk Oil Shares will
also be given a right (the "Put Right") which, if exercised, would
require Kulczyk Oil to purchase the holder's Kulczyk Oil Shares at
a price of $0.25 per share. A maximum of $12 million will be
available for holders of Kulczyk Oil Shares who decide to exercise
the Put Right. It is possible, therefore, that depending on the
number of shareholders who exercise their Put Right, that
shareholders may receive cash on a pro rata basis, with the balance
being accounted for in Kulczyk Oil Shares. To provide Kulczyk Oil
with the funds necessary to finance the Put Right, KIH has agreed
to subscribe for 48,000,000 Kulczyk Oil Shares at the same price as
the Put Right, for gross aggregate proceeds to Kulczyk Oil of $12
million. Details on how a shareholder may exercise the Put Right
will be set forth in the Information Circular. Each of the
directors, officers and insiders of Loon intend to retain all of
their Kulczyk Oil Shares.
Trading on the WSE
All trades in shares that are listed on the WSE, and which occur
on that stock exchange, must ultimately be executed through a
Polish brokerage firm. Therefore, to make purchases or sales of
Kulczyk Oil Shares once those shares are listed on the WSE,
Shareholders who are not resident in Poland must either use a
brokerage firm who has a relationship with a brokerage firm in
Poland who can effect those transactions on its behalf, or must
open an account directly with a Polish-based brokerage firm.
Shareholders should consult with their investment advisors to
determine which of these alternatives is best for them. Kulczyk Oil
will post additional information on its website with respect to
trading of Kulczyk Oil Shares on the WSE.
Kulczyk Oil
The assets of Kulczyk Oil will consist of Loon's current
interests in oil and gas exploration properties in Brunei and Syria
together with a minor interest in Slovenia and an investment in
common shares of Jura Energy Corporation (TSX: JEC), a
Pakistan-focused oil and gas exploration and development
company.
In Brunei, Loon Brunei Limited, a wholly-owned subsidiary of
Kulczyk Oil, owns a 40% interest in a Production Sharing Agreement
which gives it the right to explore for and produce oil and gas
from Block L, a 550,000 acre exploration block on which a 350 km2
3D seismic program is currently underway. Kulczyk Oil is carried
through the first US$22.75 million of costs in Brunei.
In Syria, Loon Latakia Limited, a wholly-owned subsidiary of
Kulczyk Oil, owns a 100% interest in a Production Sharing Contract
which gives it the right to explore for and produce oil and gas
from Block 9, a 2.4 million acre exploration block located in
northwest Syria.
Drilling is expected to commence on Brunei Block L in 2009 and
on Syria Block 9 in late 2009 or early in 2010.
In Slovenia, Kulczyk Oil holds minor working interests in a
small land area with potential for deep gas production.
Kulczyk Oil will have a seven member board of directors
consisting of five members of the current board of directors of
Loon together with Dr. Jan Kulczyk and Dariusz Mioduski both of
KIH. Dr. Kulczyk will be the Chairman of Kulczyk Oil and Norman
Holton, currently the Executive Chairman of Loon, will become Vice
Chairman. The management of Kulczyk Oil, with Timothy Elliott as
President and Chief Executive Officer, will otherwise remain
unchanged from that of Loon.
Loon Corp
The assets of Loon Corp will consist of Loon's current interests
in oil and gas properties in Colombia and Peru.
In Colombia, Loon Colombia Limited, a wholly-owned subsidiary of
Loon Corp will own a 49% working interest in a suspended gas well
at Ventilador and a 20% working interest in a new oil discovery and
associated lands at Buganviles.
In Peru, Loon Corp will own a 20% working interest in a
Exploration License Contract which gives it the right to explore
for and produce oil and gas from Block 127, a 2.4 million acre
exploration block in the Amazon Basin area of northeast Peru. Loon
Corp will be carried through approximately US$25 million in costs
on Peru Block 127.
Loon Corp will have a seven member board of directors consisting
of six members of the current board of directors of Loon together
with one officer (Jock Graham, Executive Vice President) of Kulczyk
Oil. Timothy Elliott will be the Chairman of the board of directors
and Norman Holton will be the President and Chief Executive Officer
of Loon Corp.
Board Recommendation
The Board has unanimously concluded that the Arrangement is in
the best interests of the securityholders of Loon and has
unanimously resolved to recommend that the Loon securityholders
vote in favour of the Arrangement.
Advisors
Tristone Capital Inc. has provided the Board with its written
opinion that the consideration to be received by the shareholders
of Loon pursuant to the Arrangement is fair from a financial point
of view to the Loon shareholders. Lazard & Co. Ltd. acted as
strategic and financial adviser to KIH.
Some of the statements contained in this release may be
forward-looking statements. Forward-looking statements may include,
but are not limited to, statements concerning estimates of
recoverable hydrocarbons, expected hydrocarbon prices, expected
costs, statements relating to the continued advancement of the
Company's projects and other statements which are not historical
facts. When used in this document, and in other published
information of the Company, the words such as "could," "estimate,"
"expect," "intend," "may," "potential," "should," and similar
expressions are indicative of a forward-looking statement. Although
the Company believes that its expectations reflected in the
forward-looking statements are reasonable, the potential results
suggested by such statements involve risk and uncertainties and no
assurance can be given that actual results will be consistent with
these forward-looking statements. Various factors, which could
cause actual results to differ from these forward-looking
statements, include the potential that the Company's projects will
experience technical and mechanical problems, geological conditions
in the reservoir which may negatively impact levels of oil and gas
production and changes in product prices and other risks not
anticipated by the Company or disclosed in the Company's published
material. Since forward-looking statements address future events
and conditions, by their very nature, they involve inherent risks
and uncertainties.
The TSX Venture Exchange neither approves nor disapproves of the
information contained herein.
Contacts: Loon Energy Inc. - Calgary, Canada Norman W. Holton
Executive Chairman (403) 264-8877 Email: nholton@loon-energy.com
Loon Energy Inc. - Dubai, UAE Timothy M. Elliott President and
Chief Executive Officer +971-4-339-5212 Email:
telliott@loon-energy.com Loon Energy Inc. - Dubai, UAE Jock M.
Graham Executive Vice President +971-4-339-5212 Email:
jgraham@loon-energy.com Website: www.loon-energy.com Brisco Capital
Partners Corp. (Calgary) Gordon Aldcorn Investor Relations (403)
262-9888 Email: galdcorn@shaw.ca
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