CALGARY, ALBERTA–(Marketwired – Jan. 31, 2017) – Vector Resources Inc. (“Vector“) (NEX:VCR.H) and Razor Energy Corp. (“Razor” or the “Company“) are pleased to announce the completion of their previously announced business combination which constituted Vector’s qualifying transaction (the “Qualifying Transaction“) pursuant to the policies of the TSX Venture Exchange (the “TSXV“), as described in Vector and Razor’s press release of December 29, 2016.
Continuance, Name Change, Share Consolidation, and Share Structure
Subsequent to the completion of the Qualifying Transaction, Vector also completed, effective today: (i) the change in name of Vector to “Razor Energy Corp.” (the “Name Change“); and (ii) the consolidation of the common shares of Vector (“Vector Shares“) on the basis of one post-consolidation Vector Share for every 20 pre-consolidation Vector Shares (the “Share Consolidation“). Former holders of the common shares of Razor (“Razor Shares“) who are entitled to receive Vector Shares pursuant to the Qualifying Transaction will receive common shares in the name of Razor Energy Corp. on a post-Share Consolidation basis (“New Razor Shares“). The Name Change and Share Consolidation, as well as the continuance of Vector from Ontario into Alberta under the Business Corporations Act (Alberta) (the “Continuance“), were approved at the special meeting of the shareholders of Vector held on January 30, 2017. Vector expects to complete the Continuance on February 3, 2017.
Pursuant to the Qualifying Transaction the outstanding Razor Shares were exchanged for an aggregate of 179,525,708 Vector Shares. In addition, New Razor Shares have been issued to Alberta Investment Management Corporation (“AIMCo“) on behalf of certain of its clients, representing 10.05% of the New Razor Shares outstanding, as additional consideration for the Term Loan Facility described below.
As a result of the Qualifying Transaction and shares issued to AIMCo, the Company has approximately 10,187,224 New Razor Shares outstanding, on a post-Share Consolidation basis. In the event that the number of existing Vector Shares held by a shareholder is not evenly divisible by 20, the number of New Razor Shares issued to such shareholder shall be rounded up to the next greater whole number if the fractional entitlement is equal to or greater than 0.5 and shall be rounded down to the next lesser whole number if the fractional entitlement is less than 0.5.
Haywood Securities Inc., Canaccord Genuity Corp., and Jett Capital Advisors acted as strategic advisors to Razor in respect of the Qualifying Transaction.
Term Loan Facility
In connection with the Qualifying Transaction, Razor has secured a non-revolving term loan facility from AIMCo on behalf of certain of its clients, for a principal amount of $30.0 million (the “Term Loan Facility“). The Term Loan Facility has a 4 year term with an interest rate of 10% and payable semi-annually. A portion of the proceeds of the Term Loan Facility were used by Razor to fund the purchase price in respect of the Acquisition (as described below). The remaining proceeds of the Term Loan Facility will be used by Razor to fund its development program and for general corporate purposes.
Concurrent with the completion of the Qualifying Transaction and Term Loan Facility, Razor completed the previously announced acquisition of certain oil and gas interests in the Swan Hills area of Alberta (the “Assets“) for aggregate cash consideration of $15.0 million (subject to adjustments) (the “Acquisition“).
The Assets consist of producing oil and gas assets and approximately 15,000 net acres of associated undeveloped land. Characteristics of the Assets and a summary of the Acquisition are provided below.
Ongoing development of the Assets will be focused on increasing light oil production from the Beaverhill Lake formation. Reactivations and optimization of existing primary and secondary recovery schemes will be the emphasis of near term capital activity.
As a result of reactivating 17 gross (15.8 net) wells since the effective date of September 1, 2016, production from the Assets was 3,034 boe/d based on sales levels in November, 2016. Management anticipates higher declines near-term from the reactivated wells due to flush production rates as compared to the base production declines. Razor remains encouraged with these results and will continue to focus on similar types of operations in the 2017 budget year. Further information with respect to Razor and the Assets is included in the filing statement filed on SEDAR in connection with the Qualifying Transaction.
Summary of the Acquisition
|Total purchase price(1)||$15.0 million|
|Production (November, 2016 sales)||3,034 boe/d|
|Commodity mix||90% oil and natural gas liquids|
|Forecasted annual decline rate on base production||12||%|
|Net undeveloped land||15,088 net acres|
|Proved developed producing (“PDP”) reserves(2)||5.6 MMboe|
|Total Proved (“TP”) reserves(2)||8.3 MMboe|
|Proved plus probable (“P+P”) reserves(2)||10.6 MMboe|
|P+P RLI(3)||9.6 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 / $67.0 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 $15.0 million of tax pools as at October 31, 2016.|
After completing the Acquisition and Term Loan Facility, Razor’s cash on hand is $12.0 million equating to a net debt position of $18.0 million. Adjusting for net debt, the PDP reserve value before tax is $31.9 million ($3.13 per New Razor Share) and the Total Proved value before tax is $55.6 million ($5.46 per New Razor Share).
Haywood Securities Inc. acted as strategic advisor to Razor in respect of the Acquisition. Haywood Securities Inc. received a fee in connection with the Acquisition.
Razor Management and Board of Directors
The board of directors of the Company upon completion of the Qualifying Transaction consists of six directors, all of whom were the former directors of Razor, namely Doug Bailey, Frank Muller, Sony Gill, Sonny Mottahed, Vick Saxon and Stan Smith. The officers of the Company are Doug Bailey (President and Chief Executive Officer), Frank Muller (Senior Vice President and Chief Operating Officer), Kevin Braun (Chief Financial Officer), David Derkat (Vice President, Engineering), Stephen Sych (Vice President, Operations), Devin Sundstrom (Vice President, Production) and Hass Keshavji (Corporate Secretary). For further information please refer to the filing statement filed on SEDAR.
First Half 2017 Operational Outlook
Subject to board approval, Razor management intends to continue to reactivate certain shut-in light oil wells in the Swan Hills area. Razor intends to initially allocate approximately $2.5 million in respect of this proposed development. Razor also plans to focus efforts on operational cost reductions while further optimizing its significant operated infrastructure and abundant natural resources at Swan Hills. Further information on the first half operational plans and associated budget will be released in mid-February, 2017.
Former holders of Razor Shares who are entitled to receive Vector Shares pursuant to the Qualifying Transaction (“Former Razor Shareholders“) will receive post-Share Consolidation New Razor Shares. Former Razor Shareholders are not required to take any action in order to receive the New Razor Shares to which they are entitled. Letters of transmittal will be mailed to registered holders of Vector Shares (other than Former Razor Shareholders) requesting them to forward the certificates representing their Vector Shares to Alliance Trust Company (“Alliance“) in exchange for certificates representing the number of New Razor Shares to which they are entitled. If a registered shareholder does not receive a letter of transmittal, please contact Alliance at the contact information below.
The TSXV has conditionally accepted the Qualifying Transaction. Subject to final TSXV acceptance, the Company will operate as a Tier 2 Oil and Gas Issuer listed on the TSXV under the trading symbol “RZE”. Trading in New Razor Shares will remain halted until the TSXV issues the final bulletin in connection with the Qualifying Transaction. The Company expects that the TSXV’s final bulletin will be issued on or about February 6, 2017 and trading is currently expected to resume on February 7, 2017.
Razor (“RZE-TSXV“) is a pivotal leading-edge enterprise, balancing creativity and discipline, focused on growing an enduring energy company.
Razor is a publicly-traded junior oil and gas development and production company headquartered in Calgary, Alberta. The Company’s efforts are concentrated on acquiring, and subsequently enhancing, producing oil and gas properties primarily in Alberta.