CALGARY, Aug. 1, 2014 /CNW/ – Hawk Exploration Ltd. (“Hawk” or the “Corporation“) announces that it has entered into a purchase and sale agreement with TriHawk Energy Ltd. (“TriHawk“) and certain other parties pursuant to which the Corporation has agreed to acquire certain petroleum and natural gas assets (“Assets“) in the plains region of Alberta and Saskatchewan in consideration of a grant to TriHawk of a gross over-riding royalty (the “GORR“) over the acquired assets (the “Acquisition“).
Hawk also announces today that it has entered into a loan agreement with respect to a $13.5 million Operating Demand Loan Facility (“New Facility“) with a Canadian chartered bank for the purposes of financing working capital and the repayment and cancellation of certain existing bank credit facilities of the Corporation.
Hawk and TriHawk have determined the value of the Assets to be $1.2 million. The Assets include interests in 3,260 (2,285 net) acres of land mainly within Hawk’s core area in western Saskatchewan (2,110 (1,870 net) acres of which are undeveloped), six (1.8 net) producing wells (four (0.4 net) of which are operated by Hawk) that produced an average of 24 boe/d (68% heavy oil) in the first quarter of 2014 and total proved plus probable reserves of 75 Mboe.1 The GORR provides for royalty rates ranging from 3 to 20 percent on the Assets. The Acquisition is expected to close on or about August 29, 2014.
The Acquisition will enhance the Corporation’s core land position, consolidate its working interests in a number of its operated wells and increase the Corporation’s current production and cash flow.
Steve Fitzmaurice, the President, CEO and Chairman of the Board of the Corporation is the sole shareholder of TriHawk and is also a director and senior officer of TriHawk. Each of Messrs. Bonnar, Deobald, and DeWiel, all senior officers of the Corporation, are directors and/or officers of TriHawk. Additionally, each of Messrs. Fitzmaurice, Bonnar, Deobald and DeWiel indirectly hold interests in the production, revenues and assets of TriHawk through participation agreements. As such, the Acquisition is considered a “related party transaction” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holdings in Special Transactions (“MI 61-101“). The independent members of the Board of Directors, with the assistance of the non-interested members of the Corporation’s executive team and third-party advisors, examined, reviewed and negotiated the Acquisition and related documentation. Additionally, the Corporation commissioned technical reports from GLJ Petroleum Consultants evaluating the reserves and certain values associated with the Assets and the GORR, both dated effective as at June 30, 2014. Based on the foregoing, the Board unanimously determined, with Mr. Fitzmaurice abstaining, that the fair market value of the Acquisition was $1.2 million, and that it would be in the best interests of the Corporation to enter into the agreement with respect to the Acquisition. The Corporation is relying on an exemption from the minority approval and valuation requirements of MI 61-101 due to the fact that the fair market value of the transaction does not represent greater than 25% of the Corporation’s market capitalization.
|1||Reserves attributable to the Assets were evaluated by GLJ Petroleum Consultants, independent qualified reserves evaluators, in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities, with an effective date of June 30, 2014, and are TriHawk’s working interest reserves before the deduction of royalties and without including any of TriHawk’s royalty interests. Proved developed producing reserves are 18 Mboe, total proved reserves are 50 Mboe, proved plus probable developed producing reserves are 28 Mboe.|
The Acquisition is also a “Reviewable Transaction” within the meaning of TSX Venture Exchange (“TSXV“) Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets and closing of the Acquisition will be subject to the receipt of TSXV approval of the Acquisition.
The New Facility bears interest at the at the bank’s prime rate plus 0.5 percent to 1.0 percent, or at banker’s acceptance rates plus a stamping fee of 1.75 percent to 2.25 percent. A standby fee of 0.20 to 0.30 percent is charged on the undrawn portion of the New Facility. The New Facility is secured by a general security agreement with a floating charge over the assets of the Corporation. The New Facility will replace the Corporation’s existing $12.0 million facility with another Canadian chartered bank.
Hawk is an emerging exploration company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A shares of Hawk trade on the TSXV under the trading symbol HWK.A.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Meaning of boe: When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boe per day or boe/d means a barrel of oil equivalent per day. Boe’s may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas 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 of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 boe to 6 thousand cubic feet of natural gas, utilizing such a conversion ratio may be misleading as an indication of value. Mboe means thousands of boe. 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.
Forward Looking Statements: This press release contains forward-looking statements. More particularly, this press release contains statements concerning: (i) the closing and anticipated dates of closing of the Acquisition; (ii) the receipt of TSXV acceptance of the Acquisition; (iii) the effect of the Acquisition on the Corporation’s business going forward; and (iv) the replacement of Hawk’s existing credit facility with the New Facility. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Hawk, including: (i) with respect to the anticipated closing date of the Acquisition, expectations and assumptions concerning timing of receipt of required regulatory approvals, and third party consents and the satisfaction of other conditions to the completion of the Acquisition, and (ii) with respect to the remaining forward looking statements, expectations and assumptions concerning the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the availability of services, the availability and cost of capital, prevailing commodity prices, prevailing economic conditions, prevailing weather and break-up conditions, and prevailing royalty regimes. Although Hawk believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Hawk can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary approvals or satisfy the conditions to closing the Acquisition, risks associated with the oil and natural gas industry in general. The forward-looking statements contained in this document are made as of the date hereof and Hawk undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE Hawk Exploration Ltd.
For further information:
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Chief Financial Officer
Tel: (403) 264-0191 Ext 234