PanWestern Energy Inc. Announces Details of Reorganization Transaction, New
Management Team and Recapitalization
CALGARY, Feb. 22 /CNW/ - PanWestern Energy Inc. ("PanWestern" or the "Corporation") (TSX-V: "PW") is pleased to provide details concerning a definitive amended and restated reorganization and arrangement agreement dated February 18, 2010 (the "Agreement"), which contemplates the following (collectively, the "Transaction"):
- A new management team will be appointed led by Jim McFarland as
President & Chief Executive Officer, Steve Bjornson as Chief
Financial Officer, Lyle Martinson as VP Operations and Don Shepherd
as VP Engineering (the "New Management Team");
- A new board of directors will be comprised of Bill Fanagan
(Chairman), Abby Badwi, Claudio Ghersinich, Jim McFarland, Ken McKay
and Ron Royal (the "New Directors") together with Johannes Kingma, a
current director of PanWestern;
- The Corporation will be recapitalized with a non-brokered equity
private placement of $6.0 million (the "Private Placement"); and
- PanWestern will acquire all of the issued and outstanding shares of a
private oil and gas company, Northern Hunter Energy Inc. ("Northern
Hunter"), by way of a plan of arrangement (the "Arrangement").
Following completion of the Transaction, which is expected to occur on or around March 29, 2010, the Corporation is expected to be debt free with a cash balance of approximately $5.0 million.
The Corporation will pursue a new international oil and gas exploitation and development growth strategy under the proposed future name of "Valeura Energy Inc." The international growth strategy will be underpinned by the planned expansion of the Canadian operations. The New Management Team is evaluating a number of potential second stage domestic and international transactions consistent with this new corporate strategy.
Trading of PanWestern shares has been halted pending finalization of the terms of the Transaction. The Corporation applied for and has been granted a sponsorship exemption pursuant to Section 3.1 of Exchange Policy 5.2 and trading of PanWestern shares is expected to resume on February 24, 2010. The Transaction will constitute a reverse take-over transaction for the purposes of Exchange Policy 5.2.
New Management Team
The New Management Team (see below for biographical information) brings a long and successful track record of creating shareholder value in the international and Canadian oil and gas sector. This experience spans all areas of the upstream oil and gas business, including conventional and unconventional resource plays, and recognized success in numerous countries worldwide, including Canada, USA, Trinidad, UK, France, Germany, the Netherlands, Norway, Libya, Saudi Arabia, Australia and Indonesia. The New Management Team has demonstrated the ability to build a successful startup international oil and gas company by exploiting and creating value from under-developed resources through the effective application of people, operational expertise, North American technologies and capital.
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Jim McFarland, P.Eng. Jim McFarland is a professional engineer with
President & CEO more than 37 years of oil and gas experience.
Most recently, Jim was President, CEO, director
and co-founder of Verenex Energy Inc., a
successful oil & gas company with assets in
Libya which was sold to the Libyan Investment
Authority in December 2009. He has served in
senior executive roles as Managing Director of
Southern Pacific Petroleum NL in Australia
(shale oil), President & COO of Husky Oil
Limited (heavy oil) and in a wide range of
upstream engineering, project management,
operations and corporate HSE and research
functions in an earlier 23-year career with
Imperial Oil Limited (conventional oil & gas and
oil sands) and other Exxon affiliates in Canada,
USA and Western Europe. He is a director of
Pengrowth Corporation and Northern Hunter Energy
Inc. and a past director of Verenex Energy Inc.,
Vermilion Energy Trust, Aventura Energy Inc.,
Southern Pacific Petroleum NL and Central
Pacific Minerals NL. He also serves on the
Program Committee of the World Petroleum
Council. In 2003, he was awarded the Australian
Centenary Medal for outstanding service to the
nation through business and commerce.
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Steve Bjornson, CA Steve Bjornson is a chartered accountant with
CFO more than 20 years of finance, business
development, strategic planning and tax
experience, operating in Canada, France and
Trinidad. He is currently interim-CEO and
director of Northern Hunter Energy Inc. He has
held the position of CFO at Vermilion Resources
Ltd., Clear Energy Inc. and Sound Energy Trust.
In addition, Mr. Bjornson has served on the
Board of Directors of Bulldog Resources Inc. and
a private oil and gas corporation.
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Lyle Martinson, P.Eng. Lyle Martinson is a professional engineer with
VP Operations more than 31 years of management, operations and
engineering experience in the oil and gas
industry in Canada and internationally. Most
recently, he held the position of Drilling and
Operations Manager for Verenex Energy Area 47
Libya Limited, based in Tripoli. Prior to
joining Verenex, he had a successful 28 year
career with Chevron Corporation in Canada, the
US Gulf of Mexico, California, Australia and
Indonesia. Most recently, he was Manager of Well
Engineering and Operations at Chevron Canada
Resources. He has experience with both onshore
and offshore operations, gas production, light
oil and heavy oil production, EOR projects and
exploratory well drilling.
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Donald Shepherd, P.Eng. Don Shepherd is a professional engineer with
VP Engineering more than 39 years of management, operations and
engineering experience in the oil and gas
industry in Canada and internationally. Most
recently, he was General Manager of Verenex
Energy Area 47 Libya Limited, based in Tripoli.
Prior to joining Verenex, he held other
internationally focused positions including VP
Engineering & Operations with Calvalley
Petroleum Inc., an oil & gas company with
operations in Yemen, and Asset Management Team
Leader & Senior Engineering Specialist with
Saudi Aramco based in Saudi Arabia. Earlier
roles included senior executive positions with a
number of small independent oil and gas
companies in Canada following an initial career
with Imperial Oil Limited and Exxon, including
an assignment in Libya.
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Board of Directors
The Board of Directors will be comprised of the New Directors and Johannes Kingma, the current CEO and a director of PanWestern, who will remain as a director of the Corporation. The New Directors (see below for biographical information) have strong track records and distinguished careers in the oil and gas industry. The New Directors have held prominent executive and director positions with a number of successful companies with operations in Canada, USA, Europe, Africa, Asia, the Middle East, Australia and South America.
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Abby Badwi, P. Geol. Abby Badwi is an international energy executive
Director and professional geologist with more than 35
years experience in the exploration, development
and production of oil and gas fields in North
America, South America, Europe, Asia and the
Middle East. He is currently President & CEO of
Bankers Petroleum Ltd., an oil & gas company
with heavy oil operations in Albania.
Previously, he served as President & CEO of
Rally Energy Corp. which had heavy oil
operations in Egypt and other assets in Pakistan
and Canada, and which was sold in 2007. He has
been an officer and director of several Canadian
public and private companies and is currently a
director of Bankers Petroleum Ltd., Northern
Hunter Energy Inc. and ArPetrol Inc.
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Bill Fanagan, CA Bill Fanagan is a private businessman, a fellow
Chairman of the institute of Chartered Accountants in
Ireland and a member of the Institute of
Corporate Directors. He was the President & CEO
of Gulf Indonesia Resources Limited from 1998 to
2001. His financial and executive career with
Gulf Canada Resources Limited and its affiliates
spanned 24 years with assignments in Indonesia,
Australia, USA, Russia and Canada. He was the
Chairman of the Board of Directors and Chairman
of the Audit Committee of Verenex Energy Inc.
during the period from its inception in 2004
until its sale in December 2009. He was recently
appointed as a director of Northern Hunter
Energy Inc.
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Claudio Ghersinich, Claudio Ghersinich is an independent businessman
P.Eng. and professional engineer with more than
Director 30 years of oil and gas experience. He is a
co-founder and former Executive VP and VP
Business Development of Vermilion Energy Trust.
He has served on the Board of Directors of
various public companies including Verenex
Energy Inc., Vermilion Energy Trust, Aventura
Energy Inc., Bulldog Energy Inc., Bulldog
Resources Inc. and Pegasus Oil & Gas Inc., as
well as several private and non-profit
organizations. These companies have operated
assets in Canada, Europe, Libya, Trinidad,
Argentina and Australia. He has been Chairman of
Northern Hunter Energy Inc. since its inception
in September 2006.
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Jim McFarland, P. Eng. (See above)
Director*
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Ken McKay, P. Geol. Ken McKay is an independent businessman and a
Director professional geologist with more than 27 years
of industry experience. He is currently
Executive Chairman of Bulldog Oil & Gas Inc.
which has operations in Saskatchewan, Canada. He
has founded, grown and sold a number of
successful oil & gas companies in his career
including Bulldog Energy Inc. and Bulldog
Resources Inc. in 2005 and 2008, respectively,
and has been a director of Northern Hunter
Energy Inc. since 2006.
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Ron Royal, P. Eng. Ron Royal is a professional engineer with more
Director* than 35 years experience with Imperial Oil
Limited and ExxonMobil's international upstream
affiliates. Prior to retiring in 2007, he was
President & General Manager of Esso Chad and
resided in N'Djamena, Chad from 2002 to 2007.
During this period, he oversaw the development
of the Chad Development Project, one of the oil
industry's largest investments in Sub-Sahara
Africa. Previously, he was General Manager &
Production Manager of Esso REP in France. He has
served on the Board of Directors of Esso REP,
Esso Chad, Tchad Oil Transportation Company and
Cameroon Oil Transportation Company. In 2003, he
was awarded the title "Chevalier de l'Ordre
National du Chad" for his contribution to the
economic development of Chad. He was recently
appointed as a director of Northern Hunter
Energy Inc.
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* See comment below regarding timing for election to PanWestern Board.
The existing PanWestern board of directors (other than Mr. Kingma) will resign in connection with the Transaction and a new board will be appointed. Until the next annual general meeting of the PanWestern shareholders (the "AGM"), the new board will initially be constituted with four directors from Northern Hunter, including Messrs. Badwi, Fanagan, Ghersinich and McKay, and Mr. Kingma as PanWestern's nominee as provided under the terms of the Agreement. Messrs. McFarland and Royal will remain on the board of Northern Hunter (or its successor) as a wholly-owned operating subsidiary of PanWestern and will be nominated for election to the PanWestern Board at the AGM which is expected to be held in May or June 2010. At the AGM, the Board of Directors is also expected to seek the approval of the shareholders to change the name of the Corporation to Valeura Energy Inc. (or such other name determined advisable by the Board).
Corporate Strategy
The New Management Team believes that current market conditions in the oil and gas sector provide an optimal opportunity for a new publicly listed oil and gas company to pursue the acquisition, exploitation and development of both Canadian and international opportunities, building from a current base of cash flow generating operations in Canada and a head office in Calgary.
The growth strategy for the Corporation will be led and directed by the New Management Team and Board of Directors, members of which have worked together closely and successfully in the past and have a clear vision of the path forward. The Corporation's growth strategy is expected to have the following elements:
- Build a full-cycle oil and gas company with a portfolio that includes
a core operation and cash-flow base in Canada and larger
international operations in at least two other regions of the world;
- Pursue international acquisition and development opportunities in
selected regions where management and directors have had experience
and success including South America, MENA (Middle East and North
Africa) and the Mediterranean;
- Focus the development of the international portfolio on large
productive basins in countries with attractive fiscal regimes,
limited political and contract risk, established infrastructure and
significant deal flow; and
- Target operated, high working interest, long life onshore assets that
are underexploited, underdeveloped and undercapitalized with
significant potential to grow reserves and production through
exploitation, development, EOR and step-out exploration.
Private Placement
Pursuant to the Agreement, the Corporation will be recapitalized immediately prior to closing the Transaction with proceeds from a non-brokered private placement of up to 30 million common shares of PanWestern ("Common Shares") at a price of $0.20 per Common Share, such price being the last trading price on the TSX Venture Exchange prior to the halting of trading of the shares, for total proceeds of $6.0 million. It is expected that the New Management Team and New Directors will subscribe for up to $3.0 million of the Private Placement with the remaining amount to be issued to certain other qualified third party investors. The Common Shares issued under the Private Placement will be subject to escrow requirements.
Proceeds from the Private Placement will be used to fund drilling on the Corporation's southern Alberta properties and for general working capital purposes in pursuit of the international growth strategy. The Agreement provides that completion of the Private Placement on terms satisfactory to the parties is a condition to the closing of the Arrangement.
Overview of the Arrangement and Required Approvals
Under terms of the Arrangement, each outstanding Northern Hunter share will be exchanged for 4.5 shares of PanWestern (based on a deemed price of $0.20 per PanWestern Common Share and $0.90 per Northern Hunter common share).
PanWestern currently has approximately 47.5 million Common Shares outstanding. PanWestern has approximately 3.6 million options outstanding with a weighted average strike price of approximately $0.76 per Common Share and approximately 22.8 million financial warrants outstanding with a weighted average strike price of approximately $0.97 per Common Share. Under the terms of the Agreement, existing PanWestern options (other than those held by Mr. Kingma) must be exercised within 90 days from closing of the Transaction and existing PanWestern financial warrants will expire on April 22, 2010.
Northern Hunter currently has approximately 14.1 million common shares outstanding. The New Management Team and New Directors currently own or control, in aggregate, approximately 3.7 million Northern Hunter common shares excluding any options that may be exercised in connection with closing the Transaction. Under the terms of the Agreement, the Northern Hunter founders' warrants will terminate and the old options must be exercised or will terminate prior to closing of the Transaction.
In conjunction with the Arrangement and the Private Placement, up to 30 million performance warrants (the "Warrants") will be granted to the New Management Team and New Directors. Each Warrant will entitle the holder to purchase one Common Share at a price of $0.20 per share for a period of five years, subject to vesting provisions based on the satisfaction of trading price and time vesting thresholds. One-third of the Warrants will vest and become exercisable in 12 months if at any time after issuance the 20-day weighted average trading price of the Common Shares (the "Trading Price") equals or exceeds $0.40. One-third of the Warrants will vest and become exercisable in 18 months if at any time after issuance the Trading Price equals or exceeds $0.50. The remaining one-third of the Warrants will vest and become exercisable in 24 months if at any time after issuance the Trading Price equals or exceeds $0.60. The issuance and terms of the Warrants will require approval of the majority of the shareholders of PanWestern.
A long term incentive program will also be put in place in the Corporation for directors, officers, employees and service providers. This program will include a stock option plan for up to 10% of the Common Shares outstanding and a performance share unit plan for up to 5% of the shares outstanding, subject to TSX Venture Exchange policies and guidelines.
Following completion of the Transaction and based on the assumption that all PanWestern and Northern Hunter old options and warrants referred to above expire unexercised (other than a minor number of old Northern Hunter options that are "in the money" based on the deal price), PanWestern will have approximately 143 million Common Shares outstanding, of which 29 million Common Shares (approximately 20% of the Common Shares outstanding) will be owned or controlled by the New Management Team and New Directors. On a fully diluted basis, after giving effect to the Warrants and new options granted, the New Management Team and New Directors will own or control approximately 62 million Common Shares (approximately 35% of 179 million fully diluted Common Shares, which excludes old options and warrants that are "out of the money" based on the deal price and any grants of warrants or options to future hires).
Completion of the Transaction is subject to the satisfaction of a number of conditions under the Agreement, including receipt of the approval of the TSX Venture Exchange, approval by a majority of the shareholders of PanWestern, court approval of the Arrangement and approval of two-thirds of the shareholders of Northern Hunter at a special shareholder meeting. PanWestern will seek its 50% shareholder approval by way of written consent (the "Written Consent") within two business days of the date the filing statement is filed with the TSX-V on terms acceptable to the TSX Venture Exchange. In the event that such Written Consent is not obtained, Northern Hunter has the right to terminate the Agreement.
An information circular is expected to be mailed to Northern Hunter shareholders on or about March 3, 2010. Northern Hunter will require a special meeting of shareholders to seek approval of the Arrangement, which is expected to be held on or around March 26, 2010.
It is expected that the Transaction will be closed on or around March 29, 2010 on the assumption that PanWestern receives Written Consent and Northern Hunter shareholders approve the Arrangement. The terms of the Agreement provide for termination of the Agreement and the Transaction if the Arrangement is not completed by an outside date of April 15, 2010, unless extended by the parties.
The Agreement contains reciprocal non-solicitation covenants, customary representations, warranties and conditions and provides for a reciprocal non-completion fee under certain circumstances of $750,000. The complete Agreement will be accessible on SEDAR at www.sedar.com. In connection with completion of the Arrangement, PanWestern's auditor will resign and KPMG LLP, which is Northern Hunter's auditor, will be appointed.
Boards of Directors' Recommendations
The board of directors of PanWestern has determined that the Transaction is in the best interest of PanWestern shareholders and recommends that PanWestern shareholders approve the Transaction and execute the Written Consent. Any shareholder of PanWestern wishing to obtain and execute the Written Consent should contact PanWestern as set out below. The board of directors and officers of PanWestern who, in aggregate, control approximately 34% of the Common Shares, have entered into support agreements in which they have agreed, among other things, to execute the Written Consent.
The board of directors of Northern Hunter has determined that the Transaction is in the best interest of Northern Hunter shareholders and recommends that Northern Hunter shareholders approve the Arrangement. The board of directors and officers of Northern Hunter, who, in aggregate, control approximately 35% of the common shares of Northern Hunter, have entered into support agreements in which they have agreed, among other things, to vote their shares in favor of the Arrangement.
Financial Advisors
Probity Capital Advisors Inc. is acting as financial advisor to PanWestern with respect to the Transaction.
National Bank Financial and Cormark Securities Inc. are acting as advisors to Northern Hunter.
Petroleum & Natural Gas Properties
Upon completion of the Transaction, the Corporation is expected be debt free with a cash position of approximately $5.0 million and is expected to have net working interest production of approximately 200 to 250 boepd. This includes oil and gas net working interest production of approximately 150 boepd in the Grand Forks/Hays area where the Corporation holds a 50% to 100% working interest position in 22.5 gross sections of land with up to eight locations identified for possible vertical and horizontal drilling.
About PanWestern
PanWestern Energy Inc. is a Calgary, Alberta based public company, incorporated under the Business Corporations Act (Alberta), engaged in the exploration, development and production of petroleum and natural gas in Canada. The Corporation's common shares are listed on the TSX Venture Exchange under the trading symbol "PW".
PanWestern has net working interest production rate of approximately 20 to 30 boepd in Alberta and an active farm in agreement in the Milo area of southern Alberta where it has the option to earn 15% in up to 27.5 gross sections of land. PanWestern's previous interests in helium exploration and exploitation have recently been suspended.
About Northern Hunter
Northern Hunter Energy Inc. is a Calgary, Alberta based private company, incorporated under the Business Corporations Act (Alberta), engaged in oil and gas exploration and production in Canada, with its core operations in southern Alberta.
Northern Hunter has two shareholders that own over 10% of its issued and outstanding common shares (the "Northern Shares"). Rally Energy Corp. (a wholly owned subsidiary of Logria Corporation) owns 13.5% of the Northern Shares and Claudio Ghersinich owns or exercises control or direction over 16.7% of the Northern Shares. The balance of the Northern Shares are held by 110 shareholders.
The following is a summary of Northern Hunter's significant financial information derived from its audited financial statements for the years ended September 30, 2008 and 2009:
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2008 2009
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Working Capital $(1,852,974) $(5,019,577)
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Property and Equipment $10,566,811 $11,581,974
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Sales Revenue $3,503,872 $2,974,810
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Net Income (Loss) $8,421 $(2,440,115)
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Forward-Looking and Cautionary Statements
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to: the Corporation's growth strategy, operational decisions and the timing thereof, development and exploration plans and the timing thereof; and future production levels. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although the Corporation believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because the Corporation can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: field production rates and decline rates; the ability of the Corporation to secure adequate product transportation; the impact of increasing competition in or near the Corporation's plays; the timely receipt of any required regulatory approvals, both domestically and internationally; the ability of the Corporation to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; the Corporation's ability to operate the properties in a safe, efficient and effective manner; the ability of the Corporation to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the state of the capital markets; the regulatory framework regarding royalties, taxes and environmental matters; the ability of the Corporation to successfully manage the political and economic risks inherent in pursuing oil and gas opportunities in foreign countries; and the ability of the Corporation to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking information. The material risk factors affecting the Corporation and its business are similar to those of other companies engaged in the business of exploring for and producing oil and gas, both domestically and in foreign countries.
The forward-looking information contained in this press release is made as of the date hereof and the Corporation undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained in this press release is expressly qualified by this cautionary statement.
Completion of the Transaction is subject to a number of conditions, including Exchange acceptance and disinterested Shareholder approval. 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 filing statement to be prepared in connection with the transaction by PanWestern, 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 PanWestern should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed Transaction.
The term "Boe" may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf: 1 bbl is based upon an energy equivalency conversion method primarily applicable at the burner tip and it does not represent a value equivalency at the well head.
Neither the 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 news release.
For further information: Jim McFarland, Director, Northern Hunter Energy Inc., (403) 606-7134, [email protected]; Steve Bjornson, Interim-CEO, Northern Hunter Energy Inc., (403) 265-6734, [email protected]; Johannes Kingma, President & CEO, PanWestern Energy Inc., (403) 237-5535, [email protected]
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