CALGARY, ALBERTA–(Marketwired – Nov. 25, 2014) – Toro Oil & Gas Ltd. (TSX VENTURE:TOO) (“Toro” or the “Company”) is pleased to announce that it has entered into a definitive purchase and sale agreement (the “Acquisition”) to acquire high quality, low decline, light crude oil producing assets located in east central Alberta (the “Assets”) from an arm’s length oil and gas producer. The current production of the Assets is approximately 400 boe/d, all from the Viking formation with potential for considerable light oil growth. Total consideration paid for the Assets is approximately C$25 million, of which C$22.5 million will be paid in cash and the issuance of 29,797,378 pre-consolidated common shares of Toro (“Common Shares”), subject to normal adjustments based on an October 1, 2014 effective date. The closing of the Acquisition is subject to customary conditions, including approval of the TSX Venture Exchange (“TSXV”), and is expected to close on or about December 19, 2014 (the “Closing”).
ACQUISITION OVERVIEW
The Acquisition consists of an operated, 100% working interest, largely unitized, low decline, crude oil property located in the Provost Area of east central Alberta. The Assets to be acquired contain large oil- in-place estimates with high light oil and gas net back production. The Assets include more than 60 net sections of land, of which greater than 78% of that acreage has been contributed to a legacy unit. The Assets have conventionally produced over 16 million barrels of oil to date and has been conventionally drilled thus far on a vertical basis at 320 acre well spacings. Through recent advancements in drilling and completion technologies, the Company anticipates to increase production and recovery factors over time, of which only 5% has been recovered to date. The Company has identified over 100 low risk drilling locations on the Assets and believes there is significant long term upside through the application of horizontal drilling, multi-stage fracture stimulations and the re-activation of the waterflood on the Assets.
“This acquisition is a first critical step to building a leading junior oil and gas company,” commented Barry Olson, President and Chief Executive Officer of Toro. “In the midst of today’s market volatility we will continue to be vigilant to source prudently sized transactions, all with the goal of increasing shareholder value.”
Along with a previously acquired asset described below, the Company will hold a total of 93 net sections of land in the prolific Viking light oil fairway.
ACQUISITION METRICS
Highlights of the Acquisition include the following:
The Acquisition is accretive to the Company on a per share basis on all key metrics.
STRATEGIC RATIONALE AND ADDITIONAL VIKING LAND ACQUISITION
Since the closing of the recapitalization of Kallisto Energy Corp. on October 1, 2014, Toro has taken significant strides in executing its stated business plan. In less than 60 days, the Company has sourced a significantly accretive transaction in an increasingly exciting area in the Western Canadian Sedimentary Basin. This Acquisition is expected to provide the basis for the Company to develop and accumulate additional light oil properties with robust economics across a spectrum of underlying commodity prices.
Toro also announces that in an unrelated transaction, it acquired 32.5 net sections of Viking prospective acreage from two companies, of which one was controlled by Don Sabo, Executive Vice President and Director of Toro. The value was independently negotiated and assessed at C$1.6 million and was fully satisfied through a cash payment. The acreage consists of two separate areas; Esther and Consort near the Alberta/Saskatchewan border.
Together, and upon closing of the Acquisition, Toro will own 93 net sections of producing and highly prospective Viking acreage which it believes provides an anchor position in one of the Company’s intended core areas.
PRO-FORMA SHARE CAPITAL
Assuming successful completion of the Acquisition, full take-up of the currently outstanding rights offering, conversion of all warrants outstanding pursuant to the recapitalization financing which closed on October 1, 2014 and excluding outstanding employee share options, on a post consolidated basis using 1 new common share for every 25 old common shares, Toro will have approximately 47.4 million common shares outstanding. Excluding the conversion of existing warrants, Toro will have approximately 35.5 million common shares outstanding. At this point, no stock options have been granted to management and other insiders. Toro trades on the TSXV under the symbol “TOO”.
[expand title=”Advisories & Contact”]
Forward Looking Information
The reader is advised that some of the information contained herein may constitute forward looking information within the meaning of National Instrument 51-102 and other relevant securities legislation. Forward-looking information contained herein includes, but is not limited to, statements with respect to the characteristics of the Assets, the impact on the Company of the Acquisition, the estimated production in respect of the Assets, the expected cash flow of the Company, the number of drilling locations identified by the Company in respect of the Assets, increases in production recovery factors, timing for closing of the Acquisition, receipt of all required consents and approvals in respect of the Acquisition, and the pro forma capitalization of the Company. Such forward-looking information is based on the Company’s current expectations regarding its future business and reflects management’s current beliefs and assumptions based on information currently available to them. Actual results may vary from forward-looking information and readers are cautioned not to place undue reliance on forward-looking information. The forward-looking information contained in this press release are made as of the date hereof and the Company does not undertake any obligation to release publicly any revisions to forward- looking information contained herein to reflect events or circumstances that occur after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information including risks associated with the impact of general economic conditions, industry conditions, governmental regulation, volatility of commodity prices, currency fluctuations, imprecision of reserve and resource estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the Company’s ability to access sufficient capital from internal and external sources. Additional risks and uncertainties are described in the Company’s Annual Information Form dated April 25, 2014 which is filed under the Company’s SEDAR profile at www.sedar.com.
51-101 Advisory
In conformity with 51-101, natural gas volumes have been converted to barrels of oil equivalent (“boe”) using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. In certain circumstances, natural gas liquid volumes have been converted to a thousand cubic feet equivalent (“mcfe”) on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A conversion ratio of one barrel to six 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 based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion ratio on a 6:1 basis may be misleading as an indication of value.
Original Oil in Place (OOIP) is the equivalent to Discovered Petroleum Initially In Place (DPIIP) for the purposes of this press release. DPIIP is defined as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. There is no certainty that it will be commercially viable to produce any portion of the resources. A recovery project cannot be defined for this volume of DPIIP at this time, and as such it cannot be further sub-categorized.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
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 RELEASE.
Toro Oil & Gas Ltd.
Barry Olson
President and Chief Executive Officer
(403) 237-9996
Toro Oil & Gas Ltd.
Greg Phaneuf
Vice President, Finance and Chief Financial Officer
(403) 237-9996
[/expand]