CALGARY, ALBERTA–(Marketwired – Dec. 29, 2016) – Vector Resources Inc. (“Vector“) (NEX:VCR.H) and Razor Energy Corp. (“Razor“) are pleased to announce that they have entered into an arrangement agreement dated December 29, 2016 pursuant to which Vector and Razor will complete a business combination (the “Proposed Transaction“). Pursuant to the Proposed Transaction, each common share of Razor (“Razor Share“) will be exchanged for 2,042.13 common shares of Vector (“Vector Shares“). The Proposed Transaction is intended to be the “Qualifying Transaction” of Vector pursuant to the policies of the TSX Venture Exchange (the “Exchange“) and is subject to the acceptance of the Exchange. Vector is at arms’ length to Razor.
Vector is a capital pool company created to identify potential acquisitions of commercially viable businesses and assets that have the potential to generate profits and add shareholder value.
Razor, a company incorporated under the laws of Alberta, is a private junior oil and gas exploration, development and production company formed for the purpose of acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta. Razor currently has no production and has not conducted active operations since its incorporation.
The current directors and officers of Razor are: Doug Bailey (President, CEO and Director), Frank Muller (Senior Vice President, COO and Director), David Derkat (Vice President, Engineering), Steven Sych (Vice President, Production), Sony Gill (Director), Vick Saxon (Director) and Sonny Mottahed (Director).
Razor has entered into a purchase and sale agreement dated as of November 25, 2016 (the “PSA“) with an arm’s length public company to acquire certain oil and gas interests in the Swan Hills area of Alberta (the “Assets“) for aggregate cash consideration of $15 million (the “Acquisition“). The Assets consist of producing oil and gas assets in the Swan Hills area of Alberta and approximately 15,000 net acres of associated undeveloped land. The Acquisition is expected to close concurrently with the closing of the Proposed Transaction.
The Assets have the following characteristics:
|Commodity mix||86% oil and natural gas liquids|
|Net undeveloped land||15,088 acres|
The development of the Assets will continue to be focused on oil production from the Beaverhill Lake formation. Reactivations and optimization of existing primary and secondary recovery schemes are expected to be the emphasis of near term capital activity.
Information with respect to Razor’s work program and the Assets will be included in the management information circular or filing statement filed on SEDAR in connection with the Proposed Transaction.
Summary of the Acquisition
|Total purchase price(1)||$15 million|
|Estimated production (at closing)||2,300 boe/d|
|Forecasted annual decline rate on base production||12%|
|Land||15,088 net acres|
|Proved developed producing (“PDP”) reserves(2)||5.6 MMboe|
|Proved reserves(2)||8.3 MMboe|
|Proved plus probable (“P+P”) reserves(2)||10.6 MMboe|
|P+P RLI(3)||12.9 years|
|Reserves Value Before Tax / After Tax(4)(PV10)|
|PDP reserve value(2)||$49.9 million / $38.6 million|
|Proved reserve value(2)||$73.6 million / $55.6 million|
|P+P reserve value(2)||$89.1 million / $70.0 million|
Notes to the table above:
|1.||The purchase price will be subject to normal adjustments for a transaction of this nature.|
|2.||Working interest reserves before the calculation for royalties, before the consideration of royalty interest reserves, and before the effect of corporate taxes.|
|Reserves estimates are based on a reserves report prepared by Sproule Associates Limited (“Sproule“) on the Assets dated as of November 28, 2016 and effective as of October 31, 2016. The reserves were prepared in accordance with the Canadian Oil and Gas Evaluation Handbook by Sproule, an independent qualified reserves evaluator, in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities. Reserve values are based on Sproule’s October 31, 2016 price forecast.|
|3.||The reserve life index (“RLI“) is calculated by dividing P+P reserves estimated at October 31, 2016 with estimated production at closing.|
|4.||Assuming availability of $15 million of tax pools as at October 31, 2016.|
The table below presents selected financial information for the Assets for the year ended December 31, 2015 and for the nine month period ended September 30, 2016.
|Nine Month period ended September 30, 2016(1)||Year ended December 31, 2015(2)|
|Operating Income (Loss)||$(3,413,470||)||$(2,344,025||)|
Notes to the table above:
- Based on the unaudited operating statements prepared in respect of the Assets for the nine month period ended September 30, 2016.
- Based on the audited operating statements prepared in respect of the Assets for the year ended December 31, 2016.
As at September 30, 2016, Razor had $19,445 of total assets, $20,000 of total liabilities and $(555) of shareholder’s equity. Razor has not conducted active operations since incorporation. Information with respect to Razor’s financial statements and the operating statements of the Assets will be included in the management information circular or filing statement to be filed on SEDAR in connection with the Proposed Transaction.
Share Capital Structure
As of the date of this press release, 97,941 Razor Shares are issued and outstanding.
As a group, the directors and senior officers of Razor own or control (directly or indirectly) 48,541 Razor Shares representing approximately 49.6% of the outstanding Razor Shares.
In conjunction with the closing of the Proposed Transaction, Razor anticipates it will complete an offering of senior secured notes to a certain arm’s length lender for aggregate gross proceeds of up to $30 million on terms to be agreed upon by Razor and the lender (the “Financing“). It is currently anticipated that the proceeds of the Financing will be used to fund the purchase price in respect of the Acquisition, to fund Razor’s development program following completion of the Proposed Transaction and for general corporate purposes.
There can be no assurance that the Financing will be completed, which is necessary in order for Razor to fully fund the purchase price for the Assets. In the event Razor is unable to complete the Financing on satisfactory terms, Razor will need to find additional sources of financing to complete the Acquisition. There can be no guarantee that Razor will be able to secure such additional financing or obtain it on satisfactory terms. If Razor is unable to complete the Financing or obtain other sources of financing on satisfactory terms, it will not be able to complete the Acquisition.
Vector intends on issuing a press release disclosing further information about the Financing once such information is available.
Management Team and Board of Directors
The board of directors of Vector currently consists of Darryl Levitt, Steve Poad, Richard Molyneux and Jeremy Wyeth. It is anticipated that all such directors will resign from the board of directors of Vector following completion of the Proposed Transaction and will be replaced by the current directors of Razor, whereby the board of directors of Vector following completion of the Proposed Transaction (the “Resulting Issuer“) would be comprised of Doug Bailey, Frank Muller, Sony Gill, Vick Saxon and Sonny Mottahed. None of the current directors or officers of Vector are directors, officers or shareholders of Razor and none of the directors, officers of Razor are directors, officers or shareholders of Vector.
Subject to and following the closing of the Proposed Transaction, the directors and officers of the Resulting Issuer are expected to be the following individuals.
Doug Bailey, President, Chief Executive Officer and Director (Calgary, Alberta)
Doug Bailey is a designated accountant with over 20 years of commercial experience from heavy infrastructure construction to oil and gas exploration and production. Having been born and residing in Alberta, Mr. Bailey has been engaged in the oil and gas industry since the early 2000’s. Starting with various restructuring mandates, Mr. Bailey evolved into a founder of Canadian Phoenix, which sold to Renegade Petroleum, and Hyperion Exploration. Most recently, Mr. Bailey co-founded Striker Exploration Corp. (“Striker“), which amalgamated with Gear Energy Ltd. in July 2016. Mr. Bailey is currently a member of the Chartered Professional Accountants of Alberta.
Frank Muller, Senior Vice President, Chief Operating Officer and Director (Calgary, Alberta)
Frank Muller is a professional geoscientist with 32 years of experience in Western Canada, primarily Alberta. Mr. Muller’s technical foundation was built while employed with Chevron Canada, Hillcrest Resources and Jordan Petroleum. Mr. Muller co-founded Real Resources and WestFire Energy where he held increasingly senior managerial/executive roles. Most recently, Mr. Muller co-founded Striker, which amalgamated with Gear Energy Ltd. in July 2016. Mr. Muller is currently a member of APEGA, APEGS and the CSPG.
David Derkat, Vice President, Engineering (Calgary, Alberta)
Dave Derkat is a professional engineer with 25 years of experience in Western Canada. Mr. Derkat began his career in field operations involving production, fracturing, coiled tubing, acidizing, well testing, and drilling. He then shifted into GLJ Petroleum Consultants as Partner conducting resource, corporate and A&D evaluations. Mr. Derkat then moved into various senior and executive roles in engineering, A&D and business development with Centrica, NEP Canada and Canadian Discovery. Most recently, he founded Mechanized Energy Resources with a mandate to raise capital to deploy in the Montney. Mr. Derkat is currently a member of APEGA and SPE.
Steven Sych, Vice President, Production (Calgary, Alberta)
Steve Sych is a certified engineering technologist with over 25 years of oil and gas experience throughout Western Canada. Growing up in Alberta and in the oil and gas industry, Mr. Sych has had the opportunity to develop a very strong background in production and operations management. Mr. Sych began his career in the field and has held increasingly managerial roles with various oil and gas companies, including Zargon Oil and Gas, MGV Energy, and most recently with Arsenal Energy, which amalgamated with Lone Pine Resources. Mr. Sych is currently a member of ASET.
Sony Gill, Director (Calgary, Alberta)
Sanjib (Sony) Gill is a partner at McCarthy Tétrault LLP and is the Practice Group Lead for the Business Law Group in Calgary. Mr. Gill has dealt with all aspects of a public and private company’s creation, growth, restructuring and value maximization. Mr. Gill has extensive experience in the negotiation, structuring and documentation of a broad range of corporate finance, securities and M&A transactions, including public offerings, private placements, debt financings, recapitalizations, tax motivated restructurings, takeover bids, reverse takeovers, asset and share transactions, plans of arrangement, stock exchange listings and other forms of business combinations and corporate activity. Mr. Gill also acts as corporate secretary for numerous public and private oil and gas companies. Mr. Gill is a member of the Law Society of Alberta and the Canadian Bar Association.
Vick Saxon, Director (Calgary, Alberta)
Vick Saxon is an Oil & Gas professional and serves as a Director of VZFOX Canada Group of Companies. Mr. Saxon is also a co-founder of V’NS Limited, an oil field equipment supply company. Mr. Saxon has experience in facilities, subsurface engineering and environmental and industry regulations in Western Canada. Mr. Saxon is an entrepreneur with a Bachelor of Science degree in Mechanical Engineering (Summa Cum Laude) from the University of North Carolina. Mr. Saxon was awarded life time memberships in many engineering honor societies in the United States.
Sonny Mottahed, Director (Calgary, Alberta)
Shahin (Sonny) Mottahed has more than 20 years of Oil & Gas and Finance experience and is currently the Chief Executive Officer and Managing Partner of Black Spruce Merchant Capital. Prior thereo, Mr. Mottahed was the Managing Director, Investment Banking & Head of International Oil & Gas at Raymond James in Calgary where he created the International Exploration & Production practice and grew it in three years to #1 ranked in Canada by market share. In four years at Raymond James, Mr. Mottahed was involved with $4 billion of capital raised, 75 financings and 34 lead mandates. Mr. Mottahed’s direct oil & gas experience includes business development at Nexen Inc., management consulting at Offshore Management Solutions, business analyst at El Paso and business development at Integrated Logistic Services.
Chief Financial Officer
The officers of Razor, in consultation with the board of directors of Razor, are actively engaged in interviewing a number of strong candidates to act as the Chief Financial Officer of the Resulting Issuer to be effective upon completion of the Proposed Transaction. The directors and officers of Razor are focused on ensuring that the successful candidate has strong qualifications, extensive public company experience and a track record of success. Razor recognizes the value and importance of strong financial reporting and disciplined internal controls in ensuring the future success of the Resulting Issuer.
The Proposed Transaction
Pursuant to the Proposed Transaction:
- subject to the terms of the Arrangement Agreement, each holder of Razor Shares shall be deemed to have exchanged such Razor Shares for Vector Shares and shall receive 2,042.13 Vector Shares for each Razor Share held by such shareholder;
- Vector shall acquire all of the issued and outstanding Razor Shares; and
- Razor will continue as a wholly-owned subsidiary of Vector.
It is anticipated that, concurrently with the closing of the Proposed Transaction or shortly thereafter:
- the Vector Shares issued and outstanding after the completion of the Proposed Transaction shall be consolidated on the basis of one post-consolidation Vector Share for up to every 20 pre-consolidation Vector Shares outstanding (the “Consolidation“);
- Vector will be continued into Alberta from Ontario (the “Continuance“); and
- the name of Vector shall be changed to “Razor Energy Corp.” or such other name as is agreed to by Vector and Razor, acting reasonably (the “Name Change“).
Completion of the Proposed Transaction is subject to the completion of a number of conditions, including, but not limited to: (i) completion of the Financing for minimum gross proceeds of $20 million; (ii) receipt of the approval of the Proposed Transaction by the Razor Shareholders; (iii) approval of the Consolidation, the Continuance and the Name Change by the Vector Shareholders; (iv) receipt of Court approval of the Proposed Transaction; (v) all conditions under the PSA (other than payment of the purchase price necessary to complete the Acquisition) having been satisfied or waived; (vi) receipt of Exchange conditional approval for the Proposed Transaction and the issuance of Vector Shares pursuant to the Proposed Transaction; and (vii) receipt of all required regulatory, governmental and third party approvals.
The proposed management for the Resulting Issuer currently intends to complete a “vertical short form” amalgamation pursuant to the Business Corporation Act (Alberta) whereby the Resulting Issuer and Razor will amalgamate and continue as the Resulting Issuer.
The Vector Shares will continue to be halted until the Proposed Transaction has closed.
Additional information regarding the Proposed Transaction and Razor will be made publicly available by Vector in due course.
Vector will apply to the Exchange for an exemption from the sponsorship requirements in connection with the Proposed Transaction. There is no assurance that such exemption will be granted.
Razor’s work program and other oil and gas information regarding Razor and the Assets will be submitted to the Exchange for its review.