CALGARY, AB – PetroShale Inc. (“PetroShale” or the “Company“) (TSXV: PSH) (OTCQB: PSHIF) is pleased to announce the appointment of a new management team (the “New Management Team“) led by Brett Herman as President & Chief Executive Officer, Jason Skehar as Chief Operating Officer, Marvin Tang as Vice President, Finance & Chief Financial Officer, Sandy Brown as Vice President, Geosciences, Kristine Lavergne as Vice President, Engineering, and Shane Manchester as Vice President, Operations.
The New Management Team has a successful track record of creating shareholder value through a disciplined and long term integrated strategy of acquiring and developing assets, most recently at TORC Oil & Gas Ltd. (“TORC“). TORC grew from nil production to more than 28,000 Boepd through the successful execution of several strategic acquisitions, combined with a low risk development drilling and exploitation program that advanced the prolific Bakken resource play in the southeast Saskatchewan region of the Williston Basin.
In addition to the New Management Team, one new independent director, Dale O. Shwed has been appointed to the board of directors of PetroShale (the “PetroShale Board“), which continues to include M. Bruce Chernoff, David Rain, Gary Reaves, Jacob Roorda and Brett Herman. The expanded PetroShale Board has a solid track record of building, financing and directing oil and gas companies and brings a wide range of experience, knowledge and innovation to the recapitalized entity. It is anticipated that additional directors will be appointed at the next shareholder meeting of the Company. Syd Abougoush, a partner with Burnet, Duckworth and Palmer LLP, will continue to act as Corporate Secretary.
In connection with the appointment of the New Management Team, PetroShale intends to complete (i) a non-brokered private placement of units of PetroShale (the “Units“) with the New Management Team for gross proceeds of $9.5 million (the “Non-Brokered Private Placement“), and (ii) a brokered commercially reasonable efforts private placement of common shares of PetroShale (“Common Shares“) for gross proceeds of up to $45.0 million (the “Brokered Private Placement“), and combined with the Non-Brokered Private Placement (the “Private Placements“), gross proceeds of up to $54.5 million will be raised. Due to strong demand, PetroShale agreed to increase the size of the Brokered Private Placement from its initial target of $30 million.
It is anticipated that the shareholders of PetroShale will be asked to approve a change of the Company’s name to “Lucero Energy Corp.” at the next annual general meeting of shareholders.
NEW MANAGEMENT TEAM AND BOARD MEMBER
Brett Herman |
Mr. Herman has extensive oil and gas experience in leadership roles at public oil and gas companies. Most recently, Mr. Herman was the President & CEO of TORC Oil & Gas Ltd., and previously, President & CEO of Result Energy Inc. and TriStar Oil & Gas Ltd. Prior thereto, Mr. Herman was the Vice President, Finance & CFO of StarPoint Energy Ltd. and StarPoint Energy Trust. |
Jason Skehar |
Mr. Skehar has extensive oil and gas experience in leadership and operational roles, most recently as the President & CEO of Bonavista Energy Corporation (“Bonavista”). Prior thereto, Mr. Skehar was the President & Chief Operating Officer of Bonavista and its predecessor, Bonavista Energy Trust. |
Marvin Tang |
Mr. Tang has over 17 years of oil and gas experience in various financial and compliance related roles, most recently as the VP & Controller of TORC Oil & Gas Ltd. Prior thereto, Mr. Tang was the Manager of Financial Reporting of Result Energy Inc. and TriStar Oil & Gas Ltd. |
Sandy Brown |
Mr. Brown has significant geological oil and gas experience, particularly in the Williston Basin, and most recently was the VP Geosciences at TORC Oil & Gas Ltd. Previously, Mr. Brown was the New Ventures Manager/Senior Geological Advisor of Apache Canada, and prior thereto, the Vice President, Exploration of Rock Energy. |
Kristine Lavergne |
Ms. Lavergne has over 18 years of oil and gas engineering experience, particularly in the Williston Basin, and most recently was the Engineering Manager of TORC Oil & Gas Ltd. Prior thereto, Ms. Lavergne specialized in various engineering roles at Legacy Oil + Gas Inc., TriStar Oil & Gas Ltd., and Harvest Energy Trust. |
Shane Manchester |
Mr. Manchester has significant oil and gas engineering and operations experience, particularly in the Williston Basin, and most recently was the VP Operations of TORC Oil & Gas Ltd. Previously, Mr. Manchester was the Vice President, Operations of Vero Energy Inc., and prior thereto, the Production & Engineering Manager of True Energy Inc. |
Dale O. Shwed |
Mr. Shwed is currently the President and Chief Executive Officer of Crew Energy Inc. Mr. Shwed graduated from the University of Alberta with a Bachelor of Science degree in Geology in 1980, and has held positions of increasing responsibility with various exploration and production companies before founding Baytex Energy Ltd. (“Baytex”) in 1993. He was the President and Chief Executive Officer overseeing the operations of Baytex, growing production to over 40,000 boe/d. In 2003, Baytex was reorganized into Baytex Energy Corp. and Crew Energy Inc. Mr. Shwed served on the Board of Directors of TORC Oil & Gas Ltd. from 2012 to 2021, and is currently on the Board of Directors of Inplay Oil Corp. |
CORPORATE STRATEGY
The New Management Team has a strong track record of disciplined operating and consolidating success in the Williston Basin, where PetroShale’s existing asset base is located (within the prolific North Dakota Bakken). The New Management Team believes PetroShale’s assets, currently producing in excess of 10,000 boe/d (approximately 85% light oil and natural gas liquids) offer compelling economic returns. With the resulting financial returns enhanced by increasingly positive market conditions, the New Management Team is excited to implement a proven disciplined strategy of acquiring and exploiting assets. This entry point, combined with the New Management Team’s experience in consolidating and integrating acquisitions, as well as exploiting and exploring for resource-in-place assets in the Williston Basin, will provide a platform for focused growth through strategic acquisitions and internally generated prospects.
PRIVATE PLACEMENTS
Pursuant to the Non-Brokered Private Placement, the New Management Team, together with additional subscribers identified by the New Management Team, will subscribe for 23,750,000 Units at a price of $0.40 per Unit for total proceeds of $9.5 million. Each Unit will be comprised of one Common Share and one warrant (“Warrant“) entitling the holder to purchase one Common Share at a price of $0.475 per Common Share for a period of 5 years from the issuance date. The Warrants will vest and become exercisable as to one-third upon the 20-day volume weighted average trading price of the Common Shares (the “Trading Price“) equalling or exceeding $0.67 per Common Share, an additional one-third upon the Trading Price equalling or exceeding $0.83 per Common Share and the final one-third upon the Trading Price equalling or exceeding $0.95 per share.
Concurrent with the appointment of the New Management Team and the Non-Brokered Private Placement, PetroShale has entered into an agreement, on a commercially reasonable efforts private placement basis, with a syndicate of agents led by Peters & Co. Limited for 112,500,000 Common Shares at a price of $0.40 per Common Share for gross proceeds of up to $45 million. Closing of the Brokered Private Placement is expected to occur on or about February 2, 2022. Proceeds from the Private Placements will be used to reduce debt and for general corporate purposes, positioning the Company to execute on a disciplined corporate strategy.
All securities issued in connection with the Private Placements will be subject to a Canadian statutory hold period of four months plus one day from the respective date of closing.
The Company’s two largest shareholders, FR XIII PetroShale Holdings L.P. and M Bruce Chernoff, have waived their respective rights to participate in each of the Non-Brokered Private Placement and the Brokered Private Placement in order to maintain their current pro-rata ownership positions and are not expected to acquire any Common Shares as part of the Company’s Private Placements.
2022 CAPITAL BUDGET AND PRODUCTION GUIDANCE
PetroShale is pleased to announce the Company’s Board of Directors has approved a 2022 capital budget of US$45 million (CDN$57 million), subject to completing the Private Placements. PetroShale’s strategic objectives associated with the 2022 capital budget are consistent with the New Management Team’s long term objectives of delivering disciplined per share growth in combination with maintaining financial flexibility.
PetroShale’s 2022 capital budget is specifically focused on:
- Investing in higher rate of return, lower risk light oil opportunities across the Company’s high quality, low risk development drilling inventory;
- Maximizing free cash flow through an efficient capital program focused on high graded development drilling opportunities;
- Moderating the Company’s production decline profile;
- Directing the pace of the capital program to maintain spending flexibility throughout the year; and
- Maintaining PetroShale’s strong financial position and flexibility to take advantage of additional growth opportunities as they arise.
PetroShale’s capital program in 2022 is focused on light oil development projects, with the majority of the capital directed to drilling, completions and tie-ins (greater than 85%) with the remainder allocated to operational and facility optimization to maximize production efficiency.
With the strong performance of the Company’s underlying production base, PetroShale anticipates that the US$45 million (CDN$57 million) 2022 capital budget will result in 2022 average production between 10,500-11,000 boepd (85% light oil & natural gas liquids) and exit guidance of 11,000 boepd (85% light oil and natural gas liquids) while improving the production decline profile below 25% by year end.
At current commodity prices, the recapitalized entity is expected to generate greater than $130 million of cash flow in 2022, and combined with the Private Placement proceeds, net debt is expected to be less than $82 million (or 0.6 times net debt/cash flow) at the end of 2022.
STOCK EXCHANGE APPROVALS
Completion of the Private Placements, is subject to certain conditions, including the approval of the TSXV, and is expected to occur on or about February 2, 2022 assuming all conditions have been met by such day. The Private Placements are not expected to materially affect control of PetroShale nor create a new control person of the Company.
ADVISORS
Peters & Co. Limited is acting as exclusive financial advisor to the New Management Team. Burnet, Duckworth and Palmer LLP is acting as counsel to PetroShale, and McCarthy Tétrault LLP is acting as counsel to the syndicate of agents led by Peters & Co. Limited in respect of the Brokered Private Placement.
OUTLOOK
PetroShale has built a sustainable growth platform of light oil focused assets. The stability of the high quality, lower decline, light oil assets in the Bakken resource play in North Dakota positions PetroShale to provide value creation through a disciplined long term focused growth strategy.
PetroShale has the following key operational and financial attributes:
Production Guidance |
2022E Average: 10,500 – 11,000 boepd (85% light oil and liquids) 2022E Exit: 11,000 boepd (85% light oil and liquids) |
Total Proved plus Probable Reserves (1) |
Approximately 72 MMboe (87% light oil and liquids) |
Sustainability Assumptions
|
Corporate production decline: 30% (2022E) Capital Efficiency(2),(3): $17,000/boepd (IP 365) |
2022 Capital Program(3) |
US$45 million (CDN$57 million) |
Year-end net debt (2022E)(4) |
$134 million ($82 million pro forma the Private Placements) |
Common Shares Outstanding (basic) |
521 million (657 million pro forma the Private Placements) |
Notes: |
(1) All reserves information in this press release are gross reserves. The reserve information for PetroShale in the foregoing table is derived from the independent engineering report effective December 31, 2020 prepared by Netherland Sewell & Associates evaluating the oil, NGL and natural gas reserves attributable to all of the Company’s properties. |
(2) Capital efficiency is a measure of forecast capital expenditures divided by forecast production additions. |
(3) Assumes a foreign exchange rate of US$1.00 = CDN$1.2529. |
(4) Year-end net debt (2022E) does not include proceeds from the exercise of any Warrants. |
This press release is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.