Letter of Intent to acquire Highwood Oil Company Ltd. as a Qualifying Transaction

/NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, Nov. 9, 2018 /CNW/ - Predator Blockchain Capital Corp. ("Predator")(TSXV: PRED.P), a capital pool company under TSX Venture Exchange ("TSXV" or the "Exchange") Policy 2.4 (the "CPC Policy"), is pleased to announce that it has entered into an amended letter of intent (the "LOI") dated November 7, 2018 with Highwood Oil Company Ltd. ("Highwood"), whereby the parties have agreed to negotiate a definitive agreement related to a proposed acquisition by Predator  (the "Acquisition") of all of the issued and outstanding securities of Highwood (the combined entity hereinafter referred to as the "Resulting Issuer") for purposes of completing a Qualifying Transaction under the CPC Policy. It is anticipated that upon completion of the Acquisition, the Resulting Issuer will meet the Tier 2 listing requirements of the TSXV for an oil and gas issuer. As Stephen J. Holyoake is a director and shareholder of both Predator and Highwood, the Acquisition constitutes a Related Party Qualifying Transaction, as defined in the CPC Policy. 

About Highwood

Highwood is a private Alberta based oil and gas exploration and production company which is currently focused in the Red Earth and Jarvie/Nipisi areas of Alberta. Highwood has three core business units:

• Oil Resource Play (Keg River at Red Earth)
• Shallow Oil Resource Play (Clearwater at Jarvie/Nipisi)
• Oil transportation (Wabasca River Pipeline at Red Earth)

Highwood's current land base is 376 sections (277 net) or 240,640 acres (177,280 net).  Included in this land position is 177 gross (89 net) sections of Clearwater rights which will constitute Highwood's core growth focus over the coming years.  Current production is 100% oil mainly from the Keg River zone in Red Earth producing roughly 1,200 bbls/day.  3 gross (1.5 net) wells were drilled in October and November 2018 in the Clearwater and Highwood is currently awaiting well completion results.

Summary of Acquisition

The terms of the Acquisition contemplate a share consolidation of the 10,000,000 outstanding common shares of Predator at a ratio of approximately 1:53 and the issuance of 5,744,204 post-consolidation common shares to Highwood shareholders at a deemed value of $9.00 per share, which implies an entity value for Highwood of approximately $51,697,836. Accordingly, if the Acquisition is completed, it is expected that the Resulting Issuer will have approximately 5,932,883 post consolidation common shares issued and outstanding (on a non-diluted basis).

Financial and Reserve Information Concerning Highwood

Highwood has obtained a third-party independent reserve report effective March 31, 2018 from GLJ Petroleum Consultants Ltd. ("GLJ") on all of its major oil and gas reserves in accordance with National Instrument 51-101 - Standard of Disclosure for Oil and Gas Activities,("NI 51-101") which is summarized below. GLJ is a qualified reserve evaluator in accordance with NI 51-101.  Highwood has prepared audited financial statements for the year ended December 31, 2017 and is currently undergoing a review of its financials for the three and six-month period ended June 30, 2018.

Summary of Oil and Gas Reserves

		Light & Medium Oil				Heavy Oil					Conventional Natural Gas				Shale Gas				Natural Gas Liquids
Reserves Category		Company Gross Mbbl		Company Net Mbbl		Company Gross Mbbl		Company Net Mbbl			Company Gross MMcf		Company Net MMcf		Company Gross MMcf		Company Net MMcf		Company Gross Mbbl		Company Net Mbbl
Proved
	Producing	3,388		3,014		0		0			0		0		0		0		0		0
	Developed Non-Producing	1,473		1,332		0		0			0		0		0		0		0		0
	Undeveloped	1,077		964		19		18			2,171		2,032		1,920		1,939		352		298
Total Proved		5,938		5,310		19		18			2,171		2,032		1,920		1,939		352		298
Total Probable		3,183		2,805		84		80			1,045		953		2,015		2,004		302		240
Total Proved Plus Probable		9,121		8,116		103		98			3,216		2,985		3,935		3,944		654		538

Reserves Category			Oil Equivalent
			Company Gross Mboe		Company Net Mboe
Proved
	Producing		3,388		3,014
	Developed Non-Producing		1,473		1,332
	Undeveloped		2,130		1,942
Total Proved			6,991		6,288
Total Probable			4,079		3,618
Total Proved Plus Probable			11,070		9,906

Net Present Value of Future Net Revenue

		Net Present Values of Future Net Revenue Before Income Taxes Discounted At (%/year)										Net Present Values of Future Net Revenue After Income Taxes Discounted At (%/year)										Unit Value Before Income Tax Discounted at 10%/year
Reserves Category		0% M$		5% M$		10% M$		15% M$		20% M$		0% M$		5% M$		10% M$		15% M$		20% M$		$/boe		$/Mcfe
Proved
Producing		112,923		94,198		80,084		69,533		61,522		102,134		85,507		72,843		63,334		56,102		26.57		4.43
Developed Non-Producing		45,137		36,652		30,108		25,200		21,485		39,272		32,008		26,285		21,957		18,671		22.61		3.77
Undeveloped		32,051		21,471		14,302		9,375		5,907		28,027		18,372		11,816		7,319		4,165		7.37		1.23
Total Proved		190,110		152,321		124,493		104,107		88,915		169,433		135,888		110,944		92,610		78,938		19.80		3.30
Total Probable		139,530		87,852		58,921		41,993		31,473		122,878		77,242		51,549		36,513		27,183		16.28		2.71
Total Proved Plus Probable		329,640		240,173		183,415		146,101		120,388		292,312		213,130		162,493		129,124		106,121		18.52		3.09

The reserves are provided on a net before royalty basis in units of thousands of barrels of oil equivalent using a forecast price deck for gas and oil, adjusted for crude quality, in Canadian dollars.  The estimated net present value of future net revenues attributable to reserves do not represent fair market value. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

"Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. "Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

Forecast pricing is based on GLJ's pricing as at April 1, 2018.

Selected Financial History

	As at and for the six months ended June 30, 2018 (unaudited)		As at and for the year ended December 31, 2017 (audited)
Financial ($000s)
Total Assets	105,359		79,807
Total Shareholders' Equity	24,705		26,864
Total Liabilities	80,654		52,943

Selected Historical Financial and Operational Information

	As at and for the period ended June 30, 2018 (unaudited)		As at and for the year ended December 31, 2017(audited)		As at and for the year ended December 31, 2016 (audited)		As at and for the year ended December 31, 2015 (audited)
Production
Crude Oil and NGLs (Bbls)	210,940		495,731		453,986		444,981
Natural Gas (Mcf)	8,189		876,946		48,693		71,344
Oil equivalent (Boe)	212,304		641,889		462,101		456,872
Financial ($000s, unless otherwise noted) (audited)
Petroleum and natural gas sales	$ 14,489		$ 28,289		$ 20,961		$ 23,014
Less: Royalties	(2,404)		(3,137)		(1,680)		(1,670)
Transportation pipeline revenues	1,664		-		-		-
Processing and road use revenues	1,065		1,132		1,434		1,534
Realized gain (loss) on commodity contracts	(644)		1,465		7,629		6,745
Unrealized gain (loss) on commodity contracts	(2,164)		545		(8,757)		(2,840)
Revenue	12,006		28,294		19,587		26,783
Operating and transportation	(9,879)		(16,629)		(12,744)		(12,908)
General and administrative	(1,190)		(3,727)		(1,811)		(2,101)
Exploration and evaluation	-		(206)		(707)		(1,073)
Depletion and depreciation	(2,986)		(5,409)		(6,099)		(6,216)
Other	(92)		(260)		(316)		(918)
Operating Income (Loss)	$ (2,141)		$ 2,063		$ (2,090)		$ 3,567

Management of Resulting Issuer

Upon completion of the Acquisition, the individuals indicated below will be appointed as the officers and directors of the Resulting Issuer.

Greg Macdonald – Proposed Chairman, President, CEO and Director, Calgary AB

Mr. Macdonald has more than 18 years of experience in both Canada and the U.S. and holds a Bachelor of Science degree in Oil & Gas Engineering from the University of Calgary.  Previously, Mr. Macdonald was the VP, Engineering of Tidewater Midstream & Infrastructure Ltd., a public oil & gas midstream company.  Prior thereto, Mr. Macdonald worked in various engineering roles at both private and public oil and gas companies.  Mr. Macdonald has been actively involved in more than 30 oil and gas acquisitions ranging in size from $100,000 to $200 million. 

Graydon Glans – Proposed Chief Financial Officer, Calgary AB

Mr. Glans is a Chartered Accountant and CFA Charterholder with over 10 years of financial and management experience with public and private companies. He obtained a Bachelor of Commerce degree from the University of British Columbia in 2009, received his Chartered Accountant designation in February 2012 and became a CFA Charterholder in August 2015. Prior to becoming the Chief Financial Officer of Predator in April 2015, Mr. Glans has held the positions of Controller, PRD Canada, with Secure Energy Services and Manager Financial Reporting, Predator Midstream Ltd. Mr. Glans articled and was a former manager with Collins Barrow Calgary LLP.

Kelly McDonald – Proposed Vice President, Exploration, Calgary AB

Mr. McDonald is a Professional Geologist with over 25 years of oil and gas experience in Canada and the US.  Mr. McDonald has been an officer in a number of oil and gas companies over the last 10 years and has been intricately involved in exploration and development of both conventional and unconventional assets across North America.  Mr. McDonald has been actively involved in over 30 oil and gas acquisitions ranging from $100,000 to $150 Million. 

Stephen J Holyoake – Proposed Director, Calgary AB

Mr. Holyoake brings over 20 years of operations, engineering and management experience to the Company. He has worked in all disciplines of the oil and gas business from exploration to midstream operations. Mr. Holyoake is a Professional Engineer and obtained his Degree in Petroleum Engineering from Montana School of Mines in 1997 and a Petroleum Engineering Technology Diploma from the Southern Alberta Institute of Technology in 1993.

Trevor Wong-Chor – Proposed Director & Secretary, Calgary AB

Mr. Wong-Chor has been a Partner of DLA Piper (Canada) LLP (and its predecessor firms) since September 2004. Prior thereto, he was Partner and Associate at Borden Ladner Gervais LLP (and its predecessor firms) from 1998 to 2004. He is a corporate secretary or director of a number of public and private companies. Mr. Wong-Chor obtained a Bachelor of Arts degree from the University of Victoria in 1992 and a Bachelor of Laws degree from the University of Calgary in 1997.

Conditions

Closing of the proposed Acquisition is subject to a number of conditions including, but not limited to, the following:

(a) approval by the board of directors of both Predator and Highwood;

(b) if required by the TSXV and applicable corporate and securities laws, approval by the Predator shareholders and the Highwood shareholders;

(c) satisfactory due diligence by both Predator and Highwood;

(d) no material adverse change having occurred to the assets or share capital of either Predator or Highwood;

(e) Predator having not more than 11,400,000 pre-consolidation common shares issued and outstanding as at the closing of the Acquisition, on a fully diluted basis;

(f) negotiation and execution of a definitive agreement; and

(g) obtaining any requisite regulatory approvals.

Special Meeting of Predator Shareholders

Predator has set December 20, 2018 as the date for a special meeting of shareholders to approve the Acquisition.  The resolution which shareholders will be asked to consider in connection with the Acquisition will be subject to Majority of the Minority shareholder approval in accordance with the Policies of the TSXV and securities laws.

Sponsorship

A general policy of the TSXV requires that a sponsor be retained to prepare a sponsor report in compliance with TSXV Policy 2.2. Predator intends to apply to the TSXV for an exemption from the sponsorship requirements; however, there is no assurance that Predator will obtain such exemption.

Trading in the common shares of Predator will remain halted until certain required documents have been provided to the TSXV.

Oil and Gas Measures

Barrels of Oil Equivalent – This news release discloses certain production information on a barrels of oil equivalent ("boe") basis with natural gas converted to barrels of oil equivalent using a conversion factor of six thousand cubic feet of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at sales point. Although the 6:1 conversion ratio is an industry-accepted norm, it is not reflective of price or market value differentials between product types. Based on current commodity prices, the value ratio between crude oil, NGLs and natural gas is significantly different from the 6:1 energy equivalency ratio. Accordingly, using a conversion ratio of 6 Mcf:1 bbl may be misleading as an indication of value.

Mcfe Conversions: Thousands of cubic feet of gas equivalent ("Mcfe") amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.

Other Warnings

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval.  Where applicable, the transaction cannot close until the required shareholder approval is obtained.  There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon.  Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Statements in this press release may contain forward-looking information including, operating costs, administrative costs, acquisitions and dispositions, capital spending, access to credit facilities, income taxes, regulatory changes, and other components of cash flow and earnings.  Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions.  The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect.  Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Predator.  The reader is cautioned not to place undue reliance on any forward-looking information.  Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated.  Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

The forward-looking statements contained in this press release are made as of the date of this press release, and Predator does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.

This new release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

SOURCE Predator Blockchain Capital Corp.

contact Arif Shivji, Chief Executive Officer of Predator Blockchain Capital Corp. at:[phone] or Greg Macdonald, President of Highwood Oil Company Ltd. at [phone]