NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS
Triple 8 Energy Ltd. ("Triple 8" or the "Company") (TSX VENTURE:TEE) is pleased
to announce that it has entered into a definitive agreement with an arm's length
public company (the "Vendor") to acquire high working interest, operated assets
in the Pembina, Niton and Chip Lake regions of west central Alberta (the
"Acquired Assets") for total consideration of approximately $30.0 million (the
"Acquisition"). The Acquired Assets produced approximately 530 boe/d in July,
2010. The effective date of the Acquisition is July 1, 2010, with closing
expected to occur in late October, 2010. The Acquisition adds a second asset
consistent with Triple 8's strategy of acquiring and exploiting early stage,
high impact light oil plays.
The Acquisition will be financed from the proceeds of a concurrent bought-deal
equity financing for gross proceeds of approximately $28.0 million, with an
option granted to the underwriters to increase the financing to approximately
$31.75 million. The proceeds of the financing will provide Triple 8 with a
strong balance sheet to ensure continued financial flexibility.
The Acquisition is expected to close on or about October 29, 2010 and will be
conditional upon customary regulatory approvals, including, without limitation,
the TSX Venture Exchange, and other typical conditions for this type of
transaction.
SUMMARY OF THE ACQUISITION
The Acquired Assets are being purchased for $28.0 million cash, the issuance of
17,500,000 share purchase warrants (the "Acquisition Warrants") and $0.6 million
transferred drilling credits (the "Drilling Credits") to the Vendor. Each
Acquisition Warrant will be exercisable for one (1) Common Share at an exercise
price of $0.10 per Acquisition Warrant for a period of 12 months following the
closing of the Acquisition. The Drilling Credits will be transferred to the
Vendor prior to March 31, 2011.
The Acquired Assets consist primarily of Cardium oil at North Pembina, Rock
Creek oil and solution gas at Chip Lake, Upper Mannville Wilrich gas production
at Niton and undeveloped lands in the Northern Pembina and Niton areas of west
central Alberta. Of the approximate 31 net sections of total land being
acquired, approximately 28.5 net sections of land are located in the Northern
Pembina/Niton Cardium fairway, where the main Cardium producing reservoirs are
found. The North Pembina Cardium lands are situated within "Interbar" locations
surrounded by producing Cardium oil pools. The Acquired Assets are ideal for
multi-stage, horizontal wells. The Vendor has drilled and is producing from 1
horizontal well (22% working interest) in the North Pembina area. The Vendor has
drilled and expects to complete a second well (43% working interest) in October,
2010. Management of the Company believes that there is the potential to drill a
total of 33 additional Cardium horizontal locations within the Acquired Assets.
Highlights of the Acquired Assets are as follows:
Proved plus probable reserves (mboe) (1) 2,383
Operating Netback/boe (average 2010) $19.12
Effective date July 1, 2010
July, 2010 oil and NGL approximate production (bbls/d) 141
July, 2010 natural gas current approximately production (mcf/d) 2,332
July, 2010 approximate production (boe/d) 530
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Cardium net undeveloped land (acres) 18,240
Other net undeveloped land (acres) 1,560
Total net undeveloped land (acres) 19,800
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Cardium oil focused drilling locations 33
Mannville gas focused drilling locations 6
Total drilling locations 39
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Total transaction value ($mm) (2) $30.00
Cost for production (total transaction value/boe/d) $56,639
Notes:
(1) The Acquired Assets were evaluated by GLJ Petroleum Consultants Ltd.
effective December 31, 2009. Triple 8, contemporaneous with the completion of
the Acquisition, intends to commission the preparation of a updated reserve
report in accordance with National Instrument 51-101.
(2) Includes $28.0 million cash, an implied value of $1.4 million for the
Warrants and $0.6 million of drilling credits to be transferred from Triple 8 to
the Vendor.
The Acquisition is accretive to Triple 8 on certain key metrics, including cash
flow per share, production per share and reserves per share.
PRODUCTION
For the month of July, 2010, the aggregate production from the Acquired Assets
was 530 boe/d, comprised of 141 bbl/d of light oil and natural gas liquids and
2,332 mcf/d of natural gas. In the August, 2010 production month, the first
horizontal Cardium well, which was on production since May, 2010, was restricted
due to flaring and tie-in operations. The resulting August production averaged
484 boe/d. Once this tie-in operation is complete, production is expected to
return to approximately 530 boe/d.
STRATEGIC RATIONALE
The Acquisition represents the Company's continued growth and the pursuit of
being a top tier oil focused company. The Acquisition complements the Company's
Boundary Lake/Paradise area lands, acquired in July 2010, sharing
characteristics of high quality, long life production through scalable and
repeatable drilling opportunities.
Within the Acquired Assets, 33 net Cardium oil locations and 6 net Mannville
liquids rich gas locations have been identified by management. Each location has
been designated and ranked by proximity to similar wells in the area and
reservoir source evidenced by regional well control and petro-physical
evaluation. Management believes the horizontal wells will qualify for the five
percent royalty rate on up to 60,000 boe, for a maximum of 24 months. These
advantageous royalty rates and the premium quality oil production significantly
enhances the area economics.
When combined with the 15 identified net locations in the Boundary Lake/Paradise
area, the Company, upon completion of the Acquisition, will have multi-year
drilling inventory providing substantial development potential for both reserve
and production growth.
THE OFFERING
Triple 8 has entered into an agreement, on a bought deal private placement
basis, with a syndicate of underwriters co-led by GMP Securities L.P. and
Canaccord Genuity Corp., and including Wellington West Capital Markets Inc.,
Desjardins Securities Inc., Mackie Research Capital Company and Raymond James
Ltd. for an offering, on a private placement basis, of 333,334,000 subscription
receipts ("Subscription Receipts") at a price of $0.075 per Subscription Receipt
and 35,295,000 common shares ("Common Shares") to be issued on a "flow-through"
basis ("Flow-Through Shares") at a price of $0.085 per Flow-Through Share to
raise aggregate gross proceeds of approximately $28.0 million (the "Offering").
In addition, Triple 8 has also granted the Underwriters an option (the
"Underwriters' Option") to purchase from treasury an additional 50,000,000
Subscription Receipts exercisable at the offering price up to 48 hours prior to
the closing of the Offering for additional gross proceeds of approximately
$3,750,000.
Closing of the Offering is expected to occur on or about October 13, 2010, and
is subject to customary conditions and regulatory approvals, including the
approval of the TSX Venture Exchange. The net proceeds from the sale of the
Subscription Receipts will be used to fund the purchase price payable by Triple
8 for the Acquired Assets. Gross proceeds from the sale of the Flow-Through
Shares will be used to fund ongoing activities that will qualify as Canadian
Exploration Expense, which will be renounced to the subscribers for the 2010
taxation year.
The gross proceeds from the sale of the Subscription Receipts will be held in
escrow pending the completion of the Acquisition. If the Acquisition is
completed on or before November 15, 2010, the proceeds will be released to
Triple 8. If the Acquisition is not completed on or before November 15, 2010, or
the Definitive Agreement is terminated at an earlier time, holders of
Subscription Receipts will receive a cash payment equal to the offering price of
the Subscription Receipts and any interest that was earned thereon during the
term of the escrow.
On the deemed exercise of the Subscription Receipt, each Subscription Receipt
will entitle the holder thereof to receive one Common Share and one-half of one
Common Share purchase warrant ("Warrant"), with each whole Warrant entitling the
holder thereof to acquire one Common Share at an exercise price of $0.10 per
Common Share for a period of thirty months following the closing of Offering.
The Subscription Receipts will be deemed to be exercised on the earlier of: (a)
four months and a day following the closing of the private placement, and (b)
that day on which a receipt is issued by the securities regulatory authorities
in the each of the provinces of Canada where Subscription Receipts are sold,
except Quebec, for a final short form prospectus qualifying the Common Shares
and Warrants to be issued upon the exercise of the Subscription Receipts. Triple
8 shall use its reasonable commercial efforts to obtain such receipt for the
exercise of the Subscription Receipts within 30 days of closing of the
Acquisition (the "Qualification Deadline"). If a receipt is not obtained on or
before the Qualification Deadline, Triple 8 shall issue to each holder of
Subscription Receipts, for no additional consideration and without any further
action on the part of the holder, an additional 0.1 of a Common Share for each
Common Share to be issued to such holder upon the deemed exercise of the
Subscription Receipts. Until the receipt is issued for such prospectus, the
Subscription Receipts as well as the Common Shares and Warrants issuable upon
exercise thereof will be subject to a four month hold period under applicable
Canadian securities laws. The Flow-Through Shares will be subject to a four
month hold period under applicable Canadian securities laws.
SHARE CONSOLIDATION AND NAME CHANGE
As previously announced, the requisite shareholder approval to consolidate the
Common Shares on the basis of one post-consolidation Common Share for up to
every twenty pre-consolidation Common Shares and to change the name of the
Company to "Hyperion Exploration Corp." was received at the annual general and
special meeting of the shareholders of the Company held on September 9, 2010.
The Board of Directors of the Company has determined, upon receiving the advice
of its financial advisors, that it is in the best interests of the Company to
consolidate the Common Shares on the basis of one post-consolidation Common
Share for every twenty (20) pre-consolidation Common Shares.
The Company currently has 200,625,667 Common Shares issued and outstanding and,
assuming the completion of the Offering and exercise in full of the
Underwriters' Option, will have 619,254,667 Common Shares issued and
outstanding. Upon the consolidation being effected, the Company will have
approximately 30,962,733 Common Shares outstanding, including Common Shares
issued pursuant to the Offering.
The share consolidation and name change remain subject to the final approval of
the TSX Venture Exchange. Once effected, the post-consolidation Common Shares
will begin trading on the TSX Venture Exchange under the new trading symbol
"HYX".
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This press release contains certain forward-looking statements (forecasts) under
applicable securities laws relating to future events or future performance.
Forward-looking statements are necessarily based upon assumptions and judgements
with respect to the future including, but not limited to, the outlook for
commodity markets and capital markets, the performance of producing wells and
reservoirs, well development and operating performance, general economic and
business conditions, weather, the regulatory and legal environment and other
risks associated with oil and gas operations. In some cases, forward-looking
statements can be identified by terminology such as "may", "will", "should",
"expect", "projects", "plans", "anticipates" and similar expressions. These
statements represent management's expectations or beliefs concerning, among
other things, future operating results and various components thereof affecting
the economic performance of Triple 8. Undue reliance should not be placed on
these forward-looking statements which are based upon management's assumptions
and are subject to known and unknown risks and uncertainties, including the
business risks discussed above, which may cause actual performance and financial
results in future periods to differ materially from any projections of future
performance or results expressed or implied by such forward-looking statements.
Accordingly, readers are cautioned that events or circumstances could cause
results to differ materially from those predicted.
In the interest of providing Triple 8 shareholders and potential investors with
information regarding the Company, including management's assessment of Triple
8's future plans and operation, certain statements throughout this press release
constitute forward looking statements. All forward-looking statements are based
on the Company's beliefs and assumptions based on information available at the
time the assumption was made. The use of any of the words "anticipate",
"continue", "estimate", "expect", "may", "will", "project", "should", "believe"
and similar expressions are intended to identify forward looking statements. By
its nature, such forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in such forward looking statements.
Triple 8 believes the expectations reflected in those forward looking statements
are reasonable but no assurance can be given that these expectations will prove
to be correct and such forward looking statements contained throughout this
press release should not be unduly relied upon. These statements speak only as
of the date specified in the statements.
In particular, this press release may contain forward looking statements
pertaining to the following:
-- the Offering;
-- the Acquisition and the Acquired Assets;
-- the performance characteristics of the Company's oil and natural gas
properties;
-- oil and natural gas production levels;
-- capital expenditure programs;
-- the quantity of the Company's oil and natural gas reserves and
anticipated future cash flows from such reserves;
-- projections of commodity prices and costs;
-- supply and demand for oil and natural gas;
-- expectations regarding the ability to raise capital and to continually
add to reserves through acquisitions and development; and
-- treatment under governmental regulatory regimes.
The material assumptions in making these forward-looking statements include
certain assumptions disclosed in the Company's most recent management's
discussion and analysis included in the material available on this press
release.
The Company's actual results could differ materially from those anticipated in
the forward looking statements contained throughout this press release as a
result of the material risk factors set forth below, and elsewhere in this press
release:
-- volatility in market prices for oil and natural gas;
-- liabilities inherent in oil and natural gas operations;
-- uncertainties associated with estimating oil and natural gas reserves;
-- competition for, among other things, capital, acquisitions of reserves,
undeveloped lands and skilled personnel;
-- incorrect assessments of the value of acquisitions and exploration and
development programs;
-- geological, technical, drilling and processing problems;
-- fluctuations in foreign exchange or interest rates and stock market
volatility;
-- failure to realize the anticipated benefits of acquisitions;
-- general business and market conditions; and
-- changes in income tax laws or changes in tax laws and incentive programs
relating to the oil and gas industry.
These factors should not be construed as exhaustive. Unless required by law,
Triple 8 does not undertake any obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.
Barrels of oil equivalent (boe) may be misleading, particularly if used in
isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural
gas to one barrel (bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a value
equivalency at the wellhead. All boe conversions in this press release are
derived by converting natural gas to oil in the ratio of six thousand cubic feet
of natural gas to one barrel of oil. Certain financial amounts are presented on
a per boe basis, such measurements may not be consistent with those used by
other companies.
Readers are further cautioned that the preparation of financial statements in
accordance with Canadian generally accepted accounting principles ("GAAP")
requires management to make certain judgements and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses. Estimating
reserves is also critical to several accounting estimates and requires judgments
and decisions based upon available geological, geophysical, engineering and
economic data. These estimates may change, having either a negative or positive
effect on net earnings as further information becomes available, and as the
economic environment changes.
Cash flow from operations and operating netbacks are not recognized measures
under GAAP. Management of Triple 8 believe that in addition to net income, cash
flow from operations and operating netbacks are useful supplemental measures as
they demonstrate an ability to generate the cash necessary to repay debt or fund
future growth through capital investment. Readers are cautioned, however, that
these measures should not be construed as an alternative to net income
determined in accordance with GAAP as an indication of Triple 8's performance.
Triple 8's method of calculating these measures may differ from other companies
and, accordingly, they may not be comparable to measures used by other
companies. For these purposes, Triple 8 defines cash flow from operations as
cash provided by operations before changes in non-cash operating working capital
and defines operating netbacks as revenue less royalties and operating expenses.
Readers are also cautioned that this press release may contain the term reserve
life index, which is not a recognized measure under GAAP. Management believes
that this measure is a useful supplemental measure of the length of time the
reserves would be produced over at the rate used in the calculation. Readers are
cautioned, however, that this measure should not be construed as an alternative
to other terms determined in accordance with GAAP as a measure of performance.
The method of calculating this measure may differ from other companies, and
accordingly, they may not be comparable to measures used by other companies.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy the securities in any jurisdiction. The Subscription Receipts
offered and the underlying Common Shares have not and will not be registered
under the United States Securities Act of 1933, as amended (the "U.S. Securities
Act") or any state securities laws and many not be offered or sold in the United
States except in certain transactions exempt from the registration requirements
of the U.S. Securities Act and applicable states securities laws.
Triple 8 Energy Ltd. (TSXV:TEE)
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