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Jan. 24, 2019
HIGHWOOD OIL COMPANY LTD. AND PREDATOR BLOCKCHAIN CAPITAL CORP. ANNOUNCE COMPLETION OF QUALIFYING TRANSACTION AND RELATED MATTERS
NOT FOR DISSEMINATION IN THE U.S. OR THROUGH U.S. NEWSWIRES
Predator Blockchain Capital Corp. (“PBC”) (TSXV: PRED.P) is pleased to announce that further to its news releases dated November 9, 2018, it has successfully completed an amalgamation (the “Amalgamation”) with Highwood Oil Company Ltd. (“Highwood”) to form a new company pursuant to the Business Corporations Act (Alberta) (“ABCA”) also named “Highwood Oil Company Ltd.” (the “Resulting Issuer”). The Amalgamation constitutes the Qualifying Transaction of PBC pursuant to Policy 2.4 (the “CPC Policy”) of the TSX Venture Exchange (“Exchange”).
The Amalgamation was approved by the shareholders of PBC and Highwood on January 22, 2019 and became effective on January 23, 2019, the date the Certificate of Amalgamation was issued in respect of the Amalgamation under the ABCA.
As a condition of the Amalgamation, the PBC common shares (“PBC Shares”) were consolidated at a ratio of fifty-three (53) pre-consolidation PBC Shares for one (1) post-consolidation PBC Share (“Resulting Issuer Share”). Pursuant to the Amalgamation the post-consolidation PBC Shares were exchanged for one (1) Resulting Issuer Share and each outstanding common share of Highwood (“Highwood Share”) was exchanged for one (1) Resulting Issuer Share. Following both the concurrent financing and the Amalgamation, former holders of PBC Shares (“PBC Shareholders”) hold 188,679 Resulting Issuer Shares and former holders of Highwood Shares (“Highwood Shareholders”) hold 5,751,804 Resulting Issuer Shares, each representing 3.2% and 96.8%, respectively, of the outstanding Resulting Issuer Shares. Each Resulting Issuer Share issued to Highwood Shareholders and PBC Shareholders pursuant to the Amalgamation was issued at a deemed price of $9.00 per Resulting Issuer Share.
As a result of the Amalgamation, the Resulting Issuer has 5,940,483 Resulting Issuer Shares issued and outstanding (and 6,192,098 on a fully diluted basis including Options and RSUs granted on January 23, 2019).
Pursuant to the terms of a Tier 2 Value Security Escrow Agreement among the Resulting Issuer, Odyssey Trust Company and certain escrowed security holders, an aggregate of 4,530,670 Resulting Issuer Shares held by certain officers, directors and insiders of the Resulting Issuer have been placed in escrow, whereby 10% will be released on issuance of the Final Exchange Bulletin (as such term is defined in the CPC Policy), and the balance of such shares will be released in tranches over the next 36 months.
In addition, an aggregate of 25,030 Resulting Issuer Shares will be subject to a resale restriction for a period of 36 months pursuant to the Exchange’s resale matrix.
Management of the Resulting Issuer
The board of directors of the Resulting Issuer consists of Stephen Holyoake (Chairman), Arif Shivji, Greg Macdonald and Trevor Wong-Chor.
The management team of the Resulting Issuer is comprised of Greg Macdonald as President and Chief Executive Officer, Graydon Glans as Chief Financial Officer and Corporate Secretary and Kelly McDonald as Vice-President Exploration.
Granting of Stock Options and Restricted Share Units
An aggregate of 88,100 options to purchase Resulting Issuer Shares exercisable at a price of $9.00 for a period of five (5) years have been issued to directors, officers and certain employees of the Resulting Issuer in connection with the Amalgamation.
An aggregate of 88,100 Restricted Share Units to acquire Resulting Issuer Shares have been issued to directors, officers and certain employees of the Resulting Issuer in connection with the Amalgamation.
The Resulting Issuer has determined that exemptions from the various requirements of Exchange Policy 5.9 are available for the grant of these Options and RSUs. The Options and RSUs are subject to Exchange acceptance.
Trading Update and New Symbol
The Resulting Issuer will remain halted pending final materials being reviewed by the Exchange and expects to commence trading on, or about, January 30, 2019 under the new symbol HOCL and CUSIP/ISIN 431277102.
Highwood is an Alberta based oil and gas exploration and production company which is currently focused in the Red Earth and Jarvie/Nipisi areas of Alberta. Highwood has three core business units:
Highwood's current land base is 739 sections (576 net) or 473,008 acres (368,420 net).
Included in this land position is 206 gross (104 net) sections of Clearwater rights which will constitute Highwood's core growth focus over the coming years. Current production is 100% oil mainly from the Keg River zone in Red Earth producing roughly 1,100 bbls/day.
Detailed information concerning Highwood is described in the PBC Management Information Circular dated December 20, 2018 and filed under Highwood’s SEDAR profile.
Credit Facility Update
Highwood has replaced its $38 million uncommitted demand revolving credit facility with a $38 million senior secured term credit facility with the National Bank of Canada (the “New Credit Facility”) comprised of a revolving operating credit facility and an operating credit facility. The New Credit Facility, which matures on June 30, 2020, will be used to replace Highwood’s existing demand credit facility and improve the current working capital position of the Resulting Issuer given the extended maturity date and absence of the demand terms. Interest on the New Credit Facility shall carry an annual interest rate equal to the lender’s prime interest rate plus the applicable pricing margin which will be adjusted quarterly based on the Resulting Issuer’s net debt to cash flow ratio.
Current production is 100% oil mainly from the Keg River zone in Red Earth, Alberta producing roughly 1,100 bbls/day. During the fourth quarter of 2018, Highwood rig released 4 wells (2 net) in the Clearwater Shallow Oil Resource Play in central Alberta. The wells are currently producing 400 (200 net) bbls/day. The Resulting Issuer continues to evaluate production results and views the 206 (104 net) sections in the Clearwater as a significant growth area with large oil in place and significant potential inventory.
1080766 Alberta Ltd. of Calgary, Alberta, an insider and control person of pre-Amalgamation Highwood, held 4,035,120 Highwood Shares and 569,326 PBC Shares. Upon completion of the Amalgamation, 1080766 Alberta Ltd. now beneficially owns and has control over 4,045,862 Resulting Issuer Shares representing 68.1% of the issued and outstanding Resulting Issuer Shares.
A copy of the early warning report filed pursuant to National Instrument 62-103 The Early Warning System and Related Take Over Bids and Insider Reporting Issues can be found at www.sedar.com.
For further information about the Resulting Issuer please contact:
President and Chief Executive Officer
Oil and Gas Measures
Barrels of Oil Equivalent – This news release discloses certain production information on a barrels of oil equivalent ("boe") basis with natural gas converted to barrels of oil equivalent using a conversion factor of six thousand cubic feet of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at sales point. Although the 6:1 conversion ratio is an industry-accepted norm, it is not reflective of price or market value differentials between product types. Based on current commodity prices, the value ratio between crude oil, NGLs and natural gas is significantly different from the 6:1 energy equivalency ratio. Accordingly, using a conversion ratio of 6 Mcf:1 bbl may be misleading as an indication of value.
Mcfe Conversions: Thousands of cubic feet of gas equivalent ("Mcfe") amounts have been calculated by 3
using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf 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 natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.
The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this press release.
This news release contains forward-looking statements relating to the future operations of the Corporation and other statements that are not historical facts. Forward-looking statements are often identified by terms such as "will", "may", "should", "anticipate", "expects" and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding the future plans and objectives of the Corporation, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Corporation's expectations include risks detailed from time to time in the filings made by the Corporation with securities regulations.
The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Corporation. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Corporation will update or revise publicly any of the included forward-looking statements as expressly required by Canadian securities law.