CALGARY, May 14, 2012 /CNW/ - Bowood Energy Inc. ("Bowood") (TSXV: BWD) and Legacy Oil + Gas Inc.
("Legacy") (TSX:LEG) are pleased to announce that they have entered into an agreement (the
"Agreement") providing for: (i) the sale of Legacy's southern Alberta
assets, excluding assets in the greater Turner Valley area, to Bowood
(the "Asset Purchase"); (ii) the appointment of a new management team
(the "New Management") and certain new directors of Bowood; (iii) a
non-brokered private placement of units of Bowood (the "Private
Placement"), and (iv) a rights offering to the Bowood shareholders (the
"Rights Offering").
Asset Purchase
The Asset Purchase will consist of the sale of 68,581 net acres of
Legacy's undeveloped land in southern Alberta, excluding assets in the
greater Turner Valley area, to Bowood for 200,000,000 common shares of
Bowood ("Bowood Shares"). The Asset Purchase includes the
Bowood/Legacy joint venture land, including the Big Valley oil wells
drilled at Kipp and Spring Coulee. The current Legacy farmin agreement
with Bowood will be terminated upon closing of the transaction.
Following the completion of the Asset Purchase, the Private Placement
and the Rights Offering, Legacy will own approximately 37% of the
outstanding Bowood Shares.
New Management
The current officers of Bowood will resign and the New Management will
be appointed immediately following the completion of the Asset
Purchase. The New Management will consist of Trent Yanko as President
and Chief Executive Officer and Matt Janisch as Vice-President, Finance
and Chief Financial Officer, each of whom will retain their current
positions with Legacy. Mark Franko will be appointed Corporate
Secretary.
The board of directors of Bowood will be reconstituted following
completion of the Asset Purchase to be comprised of Trent Yanko as
Chairman, James Pasieka, Chris Bloomer, Jim Welykochy and Neil
Roszell. Chris Bloomer and Jim Welykochy are currently directors of
Bowood.
The New Management has a solid track record of creating value in
high-growth, junior oil and natural gas companies. Trent Yanko has
over 23 years of experience in the founding, technical management and
leadership of a number of private and public oil and natural gas
companies. Mr. Yanko is currently President and Chief Executive
Officer of Legacy, which has grown production from 500 Boe per day to
more than 16,300 Boe per day in less than three years. Mr. Yanko was
previously President and Chief Executive Officer of Mission Oil & Gas
Inc., which grew from 500 Boe per day to more than 7,000 Boe per day in
two years, primarily due to its success in the Bakken light oil
resource play in southeast Saskatchewan. Before Mission, Mr. Yanko was
Vice-President, Production of StarPoint Energy Ltd., helping grow
production from 250 Boe per day to 9,000 Boe per day in 13 months.
Matt Janisch is currently Vice President, Finance and Chief Financial
Officer of Legacy and has over 25 years of oil and natural gas and
financial experience and was previously Executive Vice-President and
Chief Financial Officer of Bow Valley Energy Ltd., an international oil
and gas producer, and has 12 years of investment banking and equity
research experience with BMO Capital Markets.
Mark Franko is a partner with the Calgary office of Heenan Blaikie LLP.
He has practiced securities law since 1998 with a focus on mergers and
acquisitions and private and public financings in the oil and natural
gas sector. Mr. Franko is the Corporate Secretary of Legacy.
James Pasieka is a partner with the Calgary office of Heenan Blaikie
LLP. He has extensive experience in structuring and negotiating
transactions for capital projects, joint ventures, corporate
financings, and mergers, acquisitions, and divestitures. Currently, Mr.
Pasieka practices in all segments of the energy sector; in general
corporate/commercial law; and in corporate finance, including
early-stage and venture capital financing and mergers, acquisitions,
and takeovers. He also has broad experience in Alberta's electricity
sector. Mr. Pasieka is an officer and director of a number of public
energy companies, including Legacy.
Chris Bloomer currently serves as Senior Vice‐President and Chief
Operating Officer of the Heavy Oil Business Unit as well as a Director
of Petrobank Energy and Resources Ltd. Previously, he also held the
position of CFO. Mr. Bloomer has been at Petrobank since 2002. Mr.
Bloomer is also a director of Calmena Energy Services.
James Welykochy is a Professional Geologist with over 29 years
experience in the oil and natural gas industry including over ten years
experience in the energy capital markets. He is now a self‐employed
financial consultant to the oil and natural gas industry capital
markets. Prior thereto, Mr. Welykochy served as Vice President,
Corporate Development and Director of Ryland Oil Corporation from
August 2008 until the sale of Ryland to Crescent Point Energy in
August, 2010. Prior to joining Ryland, Mr. Welykochy served as Vice
President of institutional sales for PI Financial Corp from February
2007 to August 2008. Prior thereto Mr. Welykochy was an oil and natural
gas research analyst with Genuity Capital Markets from January 2006 to
February 2007.
Neil Roszell is a Professional Engineer with over 20 years of experience
in the oil and gas industry. Mr. Roszell is currently the President and
Chief Executive Officer of Raging River Exploration, a junior oil and
gas company trading on TSXV. Previously, Mr. Roszell has acted as a
founder of four oil and natural gas companies and was instrumental in
the growth of these junior companies from inception to their ultimate
sale. Mr. Roszell was President and CEO of Wild Stream Exploration and
Wild River Resources, President and COO of Prairie Schooner Petroleum
and Vice President of Engineering of Great Northern Exploration.
Bowood Strategic Rationale and Corporate Strategy
The combination of assets with the experienced Legacy team creates a
high impact, light oil exploration focused junior with a dominant
operated position and leverage to the emerging southern Alberta Bakken
play, that is well positioned to emerge as a larger, stronger and
balanced producer with the following attributes:
-
155,974 net acres of undeveloped land in the over-pressured oil window
in the Alberta Bakken fairway, including a contiguous 60,512 net acre
block on the Blood Tribe Reserve
-
Multi-zone potential
-
Production of approximately 500 Boe per day
-
Proven management team with a track record of value creation in junior
companies
-
Well financed, improved access to capital
-
Access to the leading technical capabilities of a much larger company
Bowood will be managed by Legacy's current management team and staff,
under the terms of a Services Agreement, in exchange for a monthly
fee. All key Legacy technical, land, accounting and field staff
involved with the play since inception will continue to work the area.
Legacy and Bowood have also agreed to an Area of Exclusion in which
Bowood will have first priority over Legacy to pursue any potential
acquisition transaction. The Area of Exclusion covers all of southern
Alberta south of Twp. 27, excluding an area around Legacy's Turner
Valley field.
In addition to the two successful wells drilled to-date by Legacy and
Bowood, recent disclosure by competitors in the play has underscored
the potential of the southern Alberta Bakken play to become a
significant multi-zone light oil resource play. New Management
believes as a focused, pure play company, Bowood is well positioned to
benefit from continued industry success while further delineating the
potential of its significant undeveloped land base.
New Management will also pursue a consolidation strategy within Bowood's
core operating area of southern Alberta, increasing exposure to
additional high impact light oil resource plays while also focusing on
opportunities that build an inventory of oil development drilling
locations complementary to the oil resource play exploration program.
Legacy Strategic Rationale
The Agreement consolidates Legacy's interest and control in the emerging
southern Alberta Bakken light oil resource play. Through the
Agreement, Legacy will maintain its exposure to the upside of this
multi-zone play without the promoted drilling obligations under the
Bowood/Legacy farmout agreement.
Legacy's interest in the southern Alberta Bakken play is considerably
undervalued at Legacy's current market valuation. The Agreement
creates the potential for Legacy shareholders to unlock and realize
significant incremental value not currently reflected in Legacy's share
price, through the ownership of the shares in a new pure play, high
impact, light oil exploration company.
Legacy's technical, land, accounting and field operations team will
continue to manage and operate the play, bringing continuity to the
future operations on a cost-effective basis through the fees received
from the Services Agreement.
Private Placement
Pursuant to the Private Placement, Bowood will issue up to 20,833,333
units ("Units") at a price of $0.12 per Unit (Bowood's closing price on
May 11, 2012) for gross proceeds of up to $2.5 million to subscribers
designated by Legacy. Each Unit will be comprised of one Bowood Share
issued on a flow-through basis pursuant to the Income Tax Act (Canada)
and one share purchase warrant ("Warrant") entitling the holder to
purchase one Bowood Share at a price of $0.18 for a period of five
years. The Warrants will vest and become exercisable as to one-third
upon the 20 day weighted average trading price of the Bowood Shares
("Market Price") equaling or exceeding $0.20, an additional one-third
upon the Market Price equaling or exceeding $0.25 and a final one-third
upon the Market Price equaling or exceeding $0.30.
The Units issued under the Private Placement will be issued to the New
Management and other prospective service providers of Bowood and will
be subject to contractual escrow with one-third of such Units released
each six months following the closing date of the Private Placement.
The proceeds of the Private Placement will be used to pay down debt and
for general corporate purposes.
Rights Offering
The Rights Offering will be conducted by Bowood by way of a rights
offering circular pursuant to which holders of Bowood Shares as at the
record date for the Rights Offering (the "Record Date") will, in
respect of each Bowood Share held, be issued one right. Each ten rights
will entitle the holder to purchase one Bowood Share at an exercise
price, subject to regulatory approval, of $0.12, being equal to the
price of the Units to be issued under the Private Placement. Legacy
and subscribers for Units pursuant to the Private Placement will not be
entitled to participate in the Rights Offering with respect to any
securities acquired under the Private Placement. The Rights Offering is
subject to applicable regulatory approval, including the approval of
the TSXV. Maximum gross proceeds under the rights offering will be
$3.3 million.
The Agreement
The Agreement is an asset purchase and sale and investment agreement
dated May 13, 2012. The Agreement contains a number of customary
representations, warranties and conditions and provides for a mutual
non-completion fee of $1,500,000 payable in certain circumstances. The
Agreement will be filed on SEDAR by Bowood and will be accessible under
Bowood's profile at www.sedar.com.
Shareholder and Stock Exchange Approvals
The completion of the matters provided for under the Agreement is
subject to a number of conditions and approvals, including, but not
limited to, the approval of the TSXV. The completion of the Asset
Purchase and the Private Placement would result in the creation of a
control person under the policies of the TSXV and, accordingly, must be
approved by the shareholders of Bowood. The required disinterested
shareholder approval may be obtained by Bowood either by receipt of
written consents from holders of more than 50 percent of the issued and
outstanding voting shares of Bowood (the "Written Consent") or by
approval of an ordinary resolution passed at a meeting of the
shareholders.
Pursuant to the Agreement, Bowood has agreed to use its best
commercially reasonable efforts to obtain the Written Consent on or
before May 31, 2012. In the event that the Written Consent is not
obtained on or before May 31, 2012, Bowood has agreed to convene and
hold a meeting of its shareholders on or before July 31, 2012 for the
purposes of approving the Asset Purchase and the Private Placement.
It is anticipated that the shareholders of Bowood will be asked to
approve a change of Bowood's name to LGX Oil + Gas Inc. and a
consolidation of the Bowood Shares on a twenty for one basis at the
next meeting of shareholders.
Closing
Provided that all of the conditions to close in the Agreement are
satisfied or waived, it is anticipated that closing will occur by no
later than June 1, 2012 in the event that the Written Consent is
received or July 16, 2012 in the event that Bowood is required to
convene a meeting of its shareholders.
Financial Advisors
GMP Securities L.P is acting as financial advisor to Bowood with respect
to the matters provided for in the Agreement. GMP Securities L.P. has
provided the board of directors of Bowood with an opinion that the
consideration to be received by Bowood through the transaction is fair,
from a financial point of view, to shareholders of Bowood. Haywood
Securities Inc. is acting as strategic advisor to Bowood with respect
to the Agreement.
Macquarie Capital Markets Canada Ltd. and FirstEnergy Capital Corp. are
acting as co-financial advisors and National Bank Financial Inc. is
acting as strategic advisor to Legacy with respect to the Agreement.
Board of Directors Recommendation
The board of directors of Bowood has determined that the transactions
contemplated by the Agreement are in the best interests of its
shareholders and has unanimously approved such transactions and
recommends that the shareholders approve the Asset Purchase and Private
Placement and execute the Written Consent. Any shareholder of Bowood
wishing to obtain and execute the Written Consent should contact Bowood
as set out below.
Each of the directors and officers of Bowood who, in the aggregate,
control approximately 4.7% of the Bowood Shares, have entered into
support agreements pursuant to which they have agreed, among other
things, to approve the Asset Purchase and Private Placement.
Note Regarding Forward Looking Statements
This document contains forward-looking statements. More particularly,
this document contains statements concerning the completion of the
matters contemplated by the Agreement.
The forward-looking statements are based on certain key expectations and
assumptions made by Legacy and Bowood, including expectations and
assumptions concerning timing of receipt of required shareholder and
regulatory approvals and third party consents and the satisfaction of
other conditions to the completion of the matters contemplated by the
Agreement.
Although Legacy and Bowood believe 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
Legacy and Bowood 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, risks that required shareholder,
regulatory and third party approvals and consents are not obtained on
terms satisfactory to the parties within the timelines provided for in
the Agreement and risks that other conditions to the completion of the
transactions are not satisfied on the timelines set forth in the
Agreement or at all.
The forward-looking statements contained in this press release are made
as of the date hereof and neither Legacy nor Bowood undertakes any
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.
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.
