Calgary, Alberta–(Newsfile Corp. – May 4, 2017) – Daniel Gundersen and Kingsway Financial Services Inc. (“Kingsway” and, together with Daniel Gundersen, the “Concerned Shareholders”) have concerns about the future of Eagle Energy Inc. (TSX: EGL) (“Eagle” or the “Company”). In late 2015, Mr. Gundersen negotiated the sale of Maple Leaf Royalties Corp. (“Maple Leaf”) to Eagle. He was the CEO of Maple Leaf at the time. In that transaction, Maple Leaf shareholders received 7,141,815 common shares of Eagle which represents 16.7% of the outstanding shares. The Concerned Shareholders currently exercise control or direction of 1,631,254 common shares of Eagle representing 3.8% of the outstanding shares.
On March 13, 2017, Eagle announced a new plan that included increased debt, suspension of its dividend and an expensive and onerous term loan. This announcement forced the Concerned Shareholders to respond. The Concerned Shareholders have expressed their dissatisfaction with the Company’s plan and recommended changes that would be in the best interests of shareholders. Their requests were rejected. The Concerned Shareholders believe that the Company is in immediate need of a stronger leadership team. Therefore, the Concerned Shareholders have submitted notice to Eagle that it will nominate four new independent directors for election at the upcoming Annual General Meeting to be held on June 14, 2017(the “Meeting”).
Need for Change at Eagle
- Share Performance Has Been Dismal — The trading price of Eagle’s stock is down 70% since October 1, 2015, while the Energy Index is up 15% in the same time period.
- Board and Management Are Not Aligned With All Shareholders — They own only 2.1% of the Company.
- Overhead Costs Are Unsustainably High — Eagle’s general & administrative cash expenses are triple many of their peers.
- The New Term Loan Is Expensive and Onerous — Interest payments will increase significantly under the new term loan which has demanding financial covenants.
- Eagle’s New Plan Is a High-Risk Plan — Increasing capital expenditures and increasing debt levels increases risk to shareholders.
Concerned Shareholders Have A Better Plan
The Concerned Shareholders have developed a business plan to address Eagle’s current problems and maximize value for shareholders.
- Replace the Board of Directors — A change of direction is required. We have nominated four highly-qualified and talented individuals for election.
- Reduce Overhead — Immediate steps will be taken to reduce the cost structure of the business.
- Sell Assets — The most logical and lowest-risk source of capital for Eagle is to sell assets.
- Reduce Debt — Proceeds from asset sales will be used to reduce debt. By reducing debt, we will lower the risk profile of the company, and also decrease interest payment costs.
- Maximize Value of Remaining Assets — Sale of assets will make Eagle a much simpler entity that would be more attractive to prospective buyers.
The Concerned Shareholders intend to file and disseminate an information circular in due course in order to permit shareholders of Eagle to make an informed decision in advance of the upcoming Meeting.
The Concerned Shareholders’ Independent and Experienced Board Nominees
Replacing the current board of Eagle with four independent, aligned and highly qualified business professionals offers shareholders a great opportunity from this point forward. The Concerned Shareholders have the people and a plan to minimize shareholder risk and maximize shareholder value. The proposed nominees of the Concerned Shareholders (the “Nominees”) are as follows:
Daniel Gundersen, P.Eng., CFA
Mr. Gundersen has over 20 years of direct oil and gas industry experience. Since February 2016, Mr. Gundersen has been an independent businessman managing oil and gas assets and providing consulting services to industry. From November 2014 to January 2016, he was CEO and director of Maple Leaf Royalties Corp., a TSXV-listed oil and gas royalties company. From October 2013 to October 2014 he was an independent businessman with active oil and gas interests and also providing consulting services to various industry clients. From January 2011 to September 2013 he was Vice President, Energy Finance for Sandstorm Metals and Energy Ltd., a TSXV-listed commodities streaming company where $33 million was deployed into oil and gas streaming transactions. From 2008 to 2010, he was the Vice President, Engineering for DeeThree Exploration Ltd., a TSX-listed oil and gas exploration and production company. He was Vice President, Engineering at Dual Exploration Inc., a TSX-listed oil and gas exploration and production company from 2005 until the company’s sale in 2006. He also held management roles with Cyries Energy Inc., a TSX-listed oil and gas exploration and production company, from 2007 to 2008, and Devlan Exploration Inc., a TSX-listed oil and gas exploration and production company, from 2002 to 2005. Mr. Gundersen is a professional engineer, a member of APEGA, and is also a Chartered Financial Analyst (CFA) charterholder.
Robert Fong, CFA
Mr. Fong has had a 23 year career in the area of investments, financial and business analysis and public markets. From 2012 up to September 2016, he was the Director of Equity Capital Markets and Compliance & Disclosure for the TSX Venture Exchange in western Canada. During this period Mr. Fong was responsible for the strategic direction of the public venture markets and all aspects of operations for the TSX Venture Exchange in western Canada; while at all times ensuring and protecting the integrity of the venture capital markets. Prior to this Mr. Fong worked for and represented various independent investment dealer firms as the senior regional executive and business leader overseeing retail brokerage, public venture capital investment banking and compliance functions. Mr. Fong is a graduate of the Alberta School of Business at the University of Alberta and is a holder of the Chartered Financial Analyst (CFA) designation.
Mr. Gilewicz has served as the Chief Financial Officer of Journey Energy Inc. since September of 2012. Previously, Mr. Gilewicz served as Chief Financial Officer and Vice President of Finance at Vero Energy Inc. from November 2005 to August 2012. Previous to that, Mr. Gilewicz served as Vice President of Finance and Chief Financial Officer of Devlan Exploration Inc. and its spinoff company, Dual Exploration Inc., from September 1999 to November 2005. Prior to this Mr. Gilewicz served as a Senior Manager at Deloitte & Touche LLP. Mr. Gilewicz has served as a director of several publicly traded oil and gas and service companies and has also been the chair of the Finance Committee for the Exploration and Producers Association of Canada. Mr. Gilewicz is a Certified Public Accountant and received his Bachelor of Commerce degree from the University of Saskatchewan.
Mr. Porter has over 35 years of diverse oil and gas experience which began with field operations and progressed to senior levels of management. An independent businessman, he has served as a board member for a number of public and private corporations in both the service and producing sectors of the oil and gas industry. Currently he serves on the board of Granite Oil Corp. (formerly DeeThree Exploration Ltd.) and Return Energy Inc. (formerly DualEx Energy International Inc.) Prior to founding DeeThree in January 2007, Bradley was Executive Vice President, COO, and Director of Dual Exploration from July 2005 to the sale of the company in December 2006. From 1996 to July 2005, he was Executive Vice President, COO, Director and Secretary of Devlan Exploration Inc. Prior to founding Devlan, he co-founded Bredal Energy Corp., a private oil and gas company. He served as President and a director of Bredal until its sale in October 2016.
About the Concerned Shareholders
Mr. Gundersen has over 20 years of direct oil and gas industry experience. In late 2015, as CEO of Maple Leaf, he negotiated the sale of Maple Leaf to Eagle. Maple Leaf shareholders received 7,141,815 common shares of Eagle, which represents 16.7% of the Company. In October 2016, Mr Gundersen submitted an offer to Eagle to purchase certain Eagle assets. Eagle declined his offer.
Kingsway is a holding company functioning as a merchant bank with a focus on long term value creation. The company owns or controls stakes in several insurance industry assets and utilizes its subsidiaries, 1347 Advisors LLC and 1347 Capital LLC, to pursue opportunities acting as an advisor, an investor and a financier. The common shares of Kingsway are listed on the Toronto Stock Exchange and the New York Stock Exchange under the trading symbol “KFS.”