Helius Minerals Ltd press release
Ketchum Capital Corporation announces proposed qualifying transaction
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CALGARY, Nov. 7 /CNW/ - Ketchum Capital Corporation ("Ketchum" or the "Corporation") (TSXV: KET.P) is pleased to announce that it has entered into a formal, definitive agreement (the "Acquisition Agreement") to acquire (the "Acquisition") all of the issued and outstanding common shares (the "Ammonite Shares") of Ammonite Energy Ltd. ("Ammonite"), a private Alberta company actively engaged in oil and gas development and exploration activities in Alberta and Saskatchewan. The Acquisition Agreement is dated as of November 7, 2008. The Acquisition is expected to constitute the Qualifying Transaction of Ketchum as defined in the policies of the TSX Venture Exchange Inc. ("TSXV") and the Acquisition and all related transactions remain subject to the approval of the TSXV.
Ammonite is a Calgary based emerging, junior, privately-held petroleum and natural gas exploration, development and production company. Ammonite's assets include proved producing and proved non-producing properties in the Provost, Wembley, Countess and Grand Forks areas of Alberta and in the Flaxcombe area of Saskatchewan. Since incorporation in March 2006, Ammonite has grown its production to over 300 boe/d through strategic acquisitions and drilling. Ammonite was founded by Stephen N. Ewaskiw, who is the President and Chief Executive Officer of Ammonite and John Gee, Vice President Engineering and Chief Operating Officer of Ammonite. Steve Ewaskiw and John Gee bring over 62 years of combined oil and gas exploration and development experience to Ammonite. Upon acquiring Clearwater Energy Inc. in July 2008, Ammonite added Tony Boogmans to its management team as Vice President Operations. Mr. Boogmans has over 35 years of technical oil and gas exploration and development experience. Most recently, Ammonite has added Ms. Pat Taguchi, a CA with over 28 years of financial and accounting experience in the oil and gas industry, as its Chief Financial Officer.
Steve Ewaskiw and John Gee are the former co-founders and senior officers of Storm Energy Inc. and were instrumental in growing Storm's production from nil at inception to over 1,500 boe/d prior to introducing the current management team into Storm. Mr. Ewaskiw and Mr. Gee also co-founded Wave Energy Ltd. in 2003. Wave is a significant full cycle exploration and production company operating in Western Canada and Montana.
Summary of the Proposed Qualifying Transaction
Ketchum will create a wholly-owned subsidiary ("AcquisitionCo") and Ammonite and the AcquisitionCo will amalgamate and continue as a new corporation ("Amalco") which will be wholly owned by Ketchum. On the Acquisition, the shareholders of Ammonite will receive 4.4 (the "Exchange Ratio") common shares of Ketchum ("Ketchum Shares") in exchange for each issued and outstanding Ammonite share owned. For the purposes of the Acquisition, Ammonite has been valued at approximately $17 million. In the Acquisition, Ketchum will acquire from the shareholders of Ammonite the 24,332,875 Ammonite Shares currently issued and outstanding. Each currently issued and outstanding Ammonite Share is accordingly valued at $0.70 per share. Ketchum will also acquire all Ammonite Shares issued in the Private Placement discussed below, and thereby shall acquire all of the then issued and outstanding Ammonite Shares. Ketchum will also issue replacement warrants for the existing Ammonite share purchase warrants based on the Exchange Ratio and the exercise prices shall be amended accordingly. All outstanding share purchase options of Ammonite and Ketchum will be terminated or exercised in connection with closing of the Acquisition. In particular, it is expected that the holders of all "in-the-money" Ammonite options will exercise such options on a "cashless" basis, and thereby receive, in aggregate, 2,790,857 Ammonite Shares on such exercise. Further, it is expected that the holders of the "out-of-the-money" Ammonite options and all holders of the Ketchum options shall agree to terminate such options for nominal consideration. Based on the Exchange Ratio, and including the acquisition of the Ammonite Shares issued on exercise of the "in-the-money" Ammonite options and the Ammonite Shares and Ammonite Flow-Through Shares issued in the Private Placement discussed below (assuming the maximum offering amounts are raised), it is expected that Ketchum will issue an aggregate of 159.6 million Ketchum Shares at a deemed price of $0.159 per share and issue common share purchase warrants to purchase an aggregate of 9.38 million Ketchum Shares at prices ranging from $0.17 to $0.193 per share, in exchange for the similar Ammonite securities. Ketchum shall issue new share purchase options after closing to the ongoing officers, directors, employees and consultants of the Corporation pursuant to the option plan of the Corporation, with the exercise price of such options being determined based on the market price of the Ketchum Shares at the time of granting.
The Ketchum Shares to be issued to the shareholders of Ammonite in the Acquisition will be issued pursuant to exemptions from the prospectus requirements of applicable securities legislation, may be subject to resale restrictions as required under the applicable securities legislation and may be subject to escrow conditions as required by the TSXV.
Ammonite Private Placement
In connection with the Acquisition, Ammonite will complete a non-brokered private placement financing (the "Non-Brokered Financing") of 4,000,000 Ammonite Shares issued on a "flow-through" basis (the "Ammonite Flow-Through Shares") pursuant to the Income Tax Act (Canada) at a price, subject to the approval of the TSXV, of $0.75 per Ammonite Flow-Through Share for gross proceeds of $3,000,000. In addition, Ammonite has entered into an agreement with a syndicate of investment dealers, lead by Acumen Capital Finance Partners Limited and including Union Securities Ltd. (the "Agents") whereby the Agents will undertake to complete a $4,000,000 private placement financing (the "Brokered Financing") on a reasonable best efforts basis for gross proceeds of up to $4,000,000. The Brokered Financing shall consist of the offering of up to 2,666,667 Ammonite Flow-Through Shares priced at $0.75 per share for gross proceeds of up to $2,000,000 and up to 3,333,333 Ammonite Shares priced at $0.60 per Common Share for gross proceeds of up to $2,000,000. A cash commission equal to 6% of the gross proceeds of the Brokered Financing shall be payable to the Agents on the closing of the Brokered Financing. The Non-Brokered Financing and the Brokered Financing (together, the "Private Placement") are scheduled to close shortly before the closing of the Acquisition. The proceeds from the Private Placement from the issuance of the Flow Through Shares, being a minimum of $3,000,000 and a maximum of $5,000,000, will be used to incur, on or before December 31, 2009, Canadian Exploration Expenses ("CEE") or Canadian Development Expenses that qualify as CEE, associated with Ammonite's exploration and development programs, which expenses shall be renounced to the purchasers of Ammonite Flow Through Shares effective on or before December 31, 2008. The proceeds from the Private Placement from issuance of the Ammonite Shares, being a maximum of $2,000,000, will be used to: (a) fund Ammonite's business plan; (b) pay for the transaction expenses; and (c) for general working capital. It is a condition of closing the Acquisition that at least the Non-Brokered Financing shall have closed.
Shortly after completion of the Acquisition, Ketchum is expected hold an annual and special meeting to seek shareholder approval to change its name (the "Name Change") to "Ammonite Energy Ltd.", or such other similar name as may be determined by Ketchum, and to consolidate all of the then outstanding Ketchum Shares on a proposed 5 for 1 basis (the "Consolidation"). In addition, by virtue of the contractual provisions attached to the convertible securities of Ketchum, all then outstanding convertible securities of the Corporation shall also be consolidated on the same 5 for 1 basis and the exercise or conversion prices shall be amended accordingly. As a result, upon completion of the Acquisition and the Consolidation (and assuming the maximum amounts are raised in the Private Placement) but prior to the exercise of any securities convertible into Ketchum Shares or the issuance of any share purchase options, it is expected that there will be issued and outstanding approximately 32.4 million Ketchum Shares, of which approximately 94% will be owned by Ammonite shareholders and warrants to purchase up to 1.88 million Ketchum Shares at prices ranging from $0.748 to $0.965 per share.
It is anticipated that following completion of the Acquisition, the Corporation would be classified as an Tier 1 Oil and Gas Issuer on the TSXV.
Conditions to the Completion of the Qualifying Transaction
The obligations of Ketchum and Ammonite to consummate the Acquisition shall be subject to, among other things: (i) the receipt of all necessary regulatory and TSXV approval, including, without limiting the generality of the foregoing, the approval of the Acquisition as a Qualifying Transaction in accordance with the TSXV policies; (ii) the receipt of all necessary shareholder and board of director approvals; (iii) the completion of the Non-Brokered Financing; (iv) the confirmation of the representations and warranties of each party to the Acquisition Agreement; (v) the absence of any material adverse effect on the financial and operational condition or the assets of each of the parties; (vi) the delivery of standard completion documentation; and (vii) other conditions precedent customary for a transaction such as the Acquisition. The conditions listed above are for the benefit of, and maybe waived by, Ketchum and Ammonite as it relates to the obligations of the other party to perform or obtain the same.
Arm's Length Transaction
The control persons of Ammonite are not (and their associates and affiliates are not) control persons of Ketchum. Accordingly, the acquisition by Ketchum of all the issued and outstanding shares of Ammonite is not a Non-Arm's Length Qualifying Transaction for the purposes of TSXV policies. As a result, the Acquisition will not be subject to approval of the shareholders of Ketchum and therefore no meeting of the shareholders of Ketchum is required as a condition to the completion of the Acquisition. Conversely, the Name Change and the Consolidation will require shareholder approval at a duly convened meeting of the shareholders of Ketchum to be held after closing of the Acquisition.
Proposed Directors and Officers
Concurrent with the completion of the Acquisition, it is expected that Messrs. Newton, Allford, Lobb, Moss and Morrison, being 5 of the 6 current directors of Ketchum, will resign from the Board of the Corporation to allow for the appointment of all the current directors of Ammonite. Mr. Allen Lone, currently a director of Ketchum, will remain as a director of the Corporation. It is expected that the Board of Directors and officers of Ketchum following completion of the Acquisition be composed of the following:
Stephen N. Ewaskiw, P. Geol., President, Chief Executive Officer and Director Calgary, Alberta
Mr. Ewaskiw is currently President and Chief Executive Officer of Ammonite, which company he co-founded with Mr. Gee in March, 2006. Mr. Ewaskiw also served as President and Chief Executive Officer of Wave Energy Ltd. from 2003 to 2006. Prior to this, Mr. Ewaskiw was Vice President Exploration at Rival Energy Ltd. from 2002-2003, co-founder and President of Innovative Energy Ltd. from 2000 to 2002 before it was acquired by Denison Energy Inc. in 2003. Mr. Ewaskiw also co-founded Storm Energy Inc. in 1995 before leaving to start Innovative Energy. Mr. Ewaskiw has co-founded a number of other energy start-up companies, including Winfield Energy and Joss Energy. As part of his 35 years of industry experience, Mr. Ewaskiw has been employed at Amoco, ARCO and Amerada Hess. Mr. Ewaskiw currently serves as a director of Detector Exploration Ltd. a TSXV listed company. Mr. Ewaskiw holds a Bachelor of Science Degree in Geology (Honours) from the University of Saskatchewan in 1973 and is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta.
John Gee, P. Eng., Vice President Engineering and Chief Operating Officer and Director Calgary, Alberta
Mr. Gee is currently Vice President Engineering and Chief Operating Officer of Ammonite, which company he co-founded with Mr. Ewaskiw. From 2003 to 2006 Mr. Gee was employed at Wave Energy Ltd. which company he co-founded with Mr. Ewaskiw in 2003. From 1998 to 2003, Mr. Gee was employed at various oil and gas companies as a petroleum engineering consultant focussing on acquisitions, divestitures and evaluations. From 1995 to 1998, Mr. Gee was employed at Storm Energy Inc., which company he co-founded with Mr. Ewaskiw, as Engineering Manager. Prior to this, Mr. Gee was employed at Paramount Resources Ltd., Atcor Ltd., Fekete & Associates Consulting and Home Oil. Mr. Gee holds a Bachelor of Science Degree in Petroleum Engineering from the University of Alberta in 1981 and is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta.
Tony Boogmans, P. Eng., Vice President Operations and Director Calgary, Alberta
Mr. Boogmans was appointed Vice President Operations and a Director of Ammonite Energy following the amalgamation of Clearwater Energy Inc. with Ammonite Energy Ltd. on July 30, 2008. He was President of Clearwater from December, 2005 until the amalgamation with Ammonite. Mr. Boogmans has over 30 years of experience in both private and public companies in the areas of property evaluation, drilling, completion and workovers, field operations and marketing. Mr. Boogmans has been employed at Gulf Oil Canada, AOSTRA, Canadian Western Natural Gas Company Limited and Northwestern Utilities Limited earlier in his career. Mr. Boogmans was one of the founders of Innovative Energy Ltd., which was purchased by Denison Energy Inc. and was employed in the capacity of Manager, Oil & Gas Operations until its sale to Forte Resources Inc. in March 2004. Mr. Boogmans joined Silverwing Energy Inc. as a consultant in April 2004 and in October 2004 served as Vice President Engineering until December 2005. Mr. Boogmans graduated with a Bachelor of Science Degree in Chemical Engineering from the University of Alberta in 1973. Mr. Boogmans is a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta.
Hank Swartout, Director Calgary, Alberta
Mr. Swartout has been an independent businessman since 2007 with a variety of business interests. Previously Mr. Swartout was the Executive Chairman of Precision Drilling Trust and previous to Precision forming the trust, he served as President and Chief Executive Officer of Precision Drilling Corporation.
Allen T. Lone, Director Oakville, Ontario
Mr. Lone is an independent businessman with various real estate and business interests. Since 1991, Mr. Lone has been the President and Chief Executive Officer of Marcon International Inc., an industrial supply contractor serving the oil and gas industry and the US Government (Department of Defense) with offices in Oakville, Texas and London, U.K. Mr. Lone holds an Masters of Business Administration from Lindenwood University, St. Louis, Missouri in 1998 and a Bachelor of Science in Business Administration and General Studies from South East Missouri State University in 1989.
Patricia Taguchi, CA, Chief Financial Officer Calgary, Alberta
Patricia (Pat) Taguchi will serve as the Chief Financial Officer of Ammonite. Ms. Taguchi obtained a Bachelor of Commerce degree from the University of Alberta in 1980. Since obtaining her Chartered Accountant designation in 1982 she has been employed by BHP Petroleum Canada Inc., Carbon Energy Canada Corp and Evergreen Resources Inc as Accounting Manager and Controller, and has consulted for many junior oil and gas companies, both public and private. Most recently she has served as Chief Financial Officer for Seaway Energy Services Inc. and is currently the Chief Financial Officer of Madison Energy Corp., both TSXV listed companies. Ms. Taguchi is a member of the Institute of Chartered Accountants of Alberta and Canadian Institute of Chartered Accountants.
Ammonite Energy Ltd.
Ammonite is an emerging, junior, privately-held petroleum and natural gas exploration, development and production company, incorporated on March 31, 2006 under the laws of Alberta and headquartered in Calgary, Alberta. Ammonite's assets include proved producing and proved non-producing properties in the Provost, Wembley, Countess and Grand Forks areas of Alberta and in the Flaxcombe area of Saskatchewan. Since incorporation, Ammonite has grown its production through strategic acquisitions and drilling.
In January 2007, Ammonite acquired properties located in Bittern Lake, Cessford, Provost, Retlaw and Rosevear from Troodon Energy Ltd. for a total purchase price of $5.2 million, paid through the issuance of 3 million Ammonite shares at $1.00 per share and cash of $2.2 million. On July 30, 2008, Ammonite acquired all of the issued and outstanding common shares of Clearwater Energy Inc., an Alberta based private oil and gas company, in exchange for 4,818,878 Ammonite Shares valued at $2.6 million and "liquidity" share purchase warrants which are exercisable, for no additional consideration, into 164,366 Ammonite Shares if a "liquidity event" of Ammonite does not occur by June 30, 2009. The Acquisition will qualify as a "liquidity event" pursuant to these share purchase warrants, such that these warrants will terminate upon closing.
Ammonite has grown its initial production base from nil at the time of incorporation to its current production of 300 Boe/d in just over two years. Ammonite continues to explore and develop its reserves on a land base of 16,500 net acres with over 9,500 net acres of undeveloped land. Ammonite's production is expected to exit the year end at 400 Boe/d with the upcoming tie-in of its Wembley property in November, 2008.
Alberta Activities
Ammonite has drilling plans at Wembley, Countess and Provost for the upcoming year from its current inventory of up to 15 locations. These drilling locations are on lands that have been identified by seismic and are accessible year round near existing infrastructure. Several of these locations are on freehold lands not affected by the Alberta New Royalty Framework scheduled to be implemented by the Alberta Government on January, 2009. Ammonite continues to evaluate plays that have significant development upside on both Crown and Freehold lands.
Saskatchewan Activities
Ammonite's primary exploration project will be its Flaxcombe, Saskatchewan property located near the town of Kindersley that was acquired in the Clearwater Energy deal. Ammonite has control over 13 sections of land in a multi-zone potential area. This project has the potential to add significant reserves and production to the Corporation. The Flaxcombe area is in close proximity to the Dodsland Viking pool where horizontal drilling and multi-stage fracing technology has yielded tremendous success from this light oil pool for various producers. Ammonite believes that based on similar petrophysical properties of wells located on its lands, the Flaxcombe property has potential for horizontal drilling. Other operators in the area are drilling 4 to 5 horizontal wells per section. Ammonite plans to drill up to 2 or 3 horizontal wells on its Flaxcombe land in 2009 along with shooting seismic. Ammonite continues to evaluate opportunities through farm-ins on other operators in the area.
Budget Summary of Proposed Exploration Programs
Ammonite has a preliminary budget of $5.0 million allocated for the remainder of 2008 and calendar 2009. Ammonite plans to spend up to $3.0 million on drilling exploration and development plays. It is anticipated that Ammonite will drill up to 10 gross wells (6 net wells) in the upcoming year. The remainder of the $2.0 million will be spent on seismic, equipping and facilities.