FSC / Press Release
Saccharum Energy Corp. Announces Proposed Acquisition of
Petroleum and Natural Gas Assets in Alberta
Not for Dissemination in the United States or Through U.S. News Wires
Calgary, Alberta CANADA, March 09, 2010 /FSC/ - Saccharum Energy Corp. (SHM.P - TSX Venture), ("Saccharum" or the "Corporation"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), is pleased to announce that it has entered into a purchase and sale agreement dated March 4, 2010 effective January 1, 2010 (the "Agreement") in respect of the acquisition of certain oil and natural gas assets (the "Assets") from the Vendors (as such term is hereinafter defined). Subject to the terms and conditions of the Agreement, Saccharum intends to acquire the Assets from the Vendors for an aggregate purchase price of $1,137,000 by way of issuance of 14,212,500 common shares in the capital of the Corporation ("Common Shares") at a deemed price of $0.08 per Common Share. The Corporation intends that the acquisition of the Assets shall constitute its Qualifying Transaction (the "Qualifying Transaction") as such term is defined in the policies of the Exchange.
The Vendors of the Assets include 756453 Alberta Ltd. (a private Alberta company owned and controlled by Johannes Kingma, currently President, Chief Executive Officer and a director of the Corporation), 296936 Alberta Ltd. (a private Alberta company owned and controlled by David Ragan, a director of the Corporation) and David Pinkman, currently Chief Financial Officer, Secretary and a director of the Corporation, and Davis Holdings Ltd. (a private Alberta company owned and controlled by Christopher Davis, an independent owner) (collectively, the "Vendors"). Messrs. Kingma, Pinkman, Ragan and Davis are all residents of Alberta.
The Qualifying Transaction is considered to be a Non-Arm's Length Qualifying Transaction, as such term is defined under the policies of the Exchange. The Corporation has also determined that the Qualifying Transaction is a "related party transaction" pursuant to Multilateral Instrument 61-101 Protection of Minority Holders in Special Transactions ("MI 61-101") and will be subject to the requirements of same. Accordingly, the Qualifying Transaction will be subject to the approval by a majority of the votes cast by the minority shareholders of the Corporation.
The following table sets out the number of Common Shares to be issued to each of the Vendors in connection with the acquisition of the Assets:
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Name of Vendor Number of Common Shares
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756453 Alberta Ltd. 7,952,500
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296936 Alberta Ltd. 1,555,000
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David Pinkman 3,360,000
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Davis Holdings Ltd. 1,345,000
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Total 14,212,500
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The Common Shares issued to the Vendors, with the exception of the Common Shares issued to Davis Holdings Ltd., will be deposited in escrow pursuant to the terms and conditions of an Exchange Form 5D Escrow Agreement.
Each member of the board of directors of the Corporation (the "Board"), having declared their respective interests in the Qualifying Transaction, have determined that the Qualifying Transaction is fair to the shareholders of the Corporation and is in the best interests of the Corporation and its shareholders. Accordingly, the Board has approved the Qualifying Transaction and will recommend that shareholders vote in favour of the Qualifying Transaction. In connection with the Board's approval of the Qualifying Transaction, Messrs. Kingma, Ragan and Pinkman declared their respective interests in the Qualifying Transaction and abstained from voting on the Qualifying Transaction.
Saccharum will convene a shareholders' meeting (the "Meeting") to seek shareholder approval for, among other things, the Qualifying Transaction, and will prepare an information circular detailing the Qualifying Transaction and related matters in the near future.
It is expected that upon completion of the Qualifying Transaction, Saccharum will be classified as a Tier 2 Oil and Gas Issuer under the policies of the Exchange and will be engaged in the production, exploration and development of prospective oil and gas properties.
Description of the Assets
The Assets consist of 11 non-operated oil and gas wells (10 producing) located in the Redlaw, Mikwan, Twining, Garrington, Grand Prairie, Morinville, TeePee Windfall and Cindy areas of Alberta. Subject to a more detailed analysis in the reserve report referenced below, the wells are currently producing (in the aggregate) approximately 15.5 boepd.
The financial statements pertaining to the Assets are in the process of being audited. Once the aforementioned audit is complete, Saccharum will issue a press release providing selected financial information on the Assets.
Saccharum has retained Sproule Associates Limited to provide a reserve report on the Assets. Saccharum will issue another press release which will provide selected reserve and resource information on the Assets.
Note: "Boe" means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. "Boepd" means barrel of oil per day.
Private Placement Financing
In conjunction with or prior to the closing of the Qualifying Transaction, Saccharum intends to complete a non-brokered private placement (the "Private Placement") of subscription receipts ("Sub Receipts") at a price of $0.08 per Sub Receipt for gross proceeds of $400,000. Although not contemplated currently, certain of the existing and proposed directors and officers may participate under the Private Placement, subject to the receipt of all necessary regulatory and Exchange approvals.
Each Sub Receipt will entitle the holder to receive, for no additional consideration and without further action on the part of the holder, one Common Share at the time described herein and provided the QT Notice (as hereinafter defined) is delivered to the escrow agent on or before 5:00 pm on May 27, 2010 (the "Termination Time"). The Private Placement is conditional upon the closing of the Qualifying Transaction.
The gross proceeds from the Private Placement will be held in escrow and will only be released to the Corporation upon delivery of a notice (the "QT Notice") to the applicable escrow agent by the Corporation, on behalf of the subscribers, indicating that the following conditions have been satisfied:
1)there have been no material amendments of or waiver of any material conditions or breaches of the Agreement by the Vendors or the Corporation and neither the Corporation or the Vendors is in breach of or default under the Agreement as of the date of the QT Notice; and
2)the Qualifying Transaction has been completed.
In the event the QT Notice is not provided to the escrow agent at or before the Termination Time, the Agreement is terminated at any earlier time, or the Corporation, prior to the Termination Time, announces to the public that it does not intend to proceed with the Qualifying Transaction, the funds from the Private Placement will be reimbursed to the holders of the Sub Receipts, without interest or deduction.
Proceeds from the Private Placement will be used by the Corporation for ongoing capital expenditures to develop and expand its core area of operations and for general corporate purposes.
Promissory Note
In conjunction with or prior to the closing of the Qualifying Transaction, it is intended that Saccharum will issue an unsecured promissory demand note for $500,000 at 8% interest accrued annually (the "Note") to Johannes Kingma (the "Holder"), a current and proposed director and officer of the Corporation. The Note shall be payable on demand by the Holder but will not be payable by the Corporation until at least one year from the date of issuance.
Proceeds from the Note will be used by the Corporation for ongoing capital expenditures to develop and expand its core area of operations and for general corporate purposes.
The Note, when issued by the Corporation, will constitute a related party transaction for the purposes of MI 61-101 (the "Related Party Transaction"). The Corporation is relying on the exemption from the minority shareholder approval requirement contained in Section 5.7(f) of MI 61-101 as the loan is on reasonable commercial terms and is not convertible into or repayable in equity or voting securities of the Corporation. The disinterested directors of the Corporation have determined that the terms of the Related Party Transaction are fair and reasonable insofar as the Corporation's shareholders are concerned and have approved the loan.
Board of Directors and Management
Upon completion of the Qualifying Transaction, the directors and senior officers of Saccharum are expected to be:
Johannes Kingma (Calgary, Alberta) - Current and Proposed President, Chief Executive Officer and Director
Mr. Kingma has been the President of PanWestern Energy Inc. since December 2003. He is also President and a director of Primera Energy Inc., a TSX Venture Exchange-listed company. Mr. Kingma was the President and Chief Executive Officer of Powermax Energy Inc., a TSX Venture listed oil and gas issuer, from May 2001 to September 2005. Prior thereto, Mr. Kingma was a registered investment advisor with IPO Capital Corp., Canadian Western Capital Limited and its predecessor Charlton Securities Ltd.
David Pinkman (Calgary, Alberta) - Current and Proposed Chief Financial Officer, Secretary and Director
Mr. Pinkman is currently a director of PanWestern Energy Inc., and Vice-President and a director of Red Rock Energy Inc., both of which are TSX Venture Exchange-listed companies. Mr. Pinkman was the Vice President and a director of Powermax Energy Inc., a TSX Venture listed oil and gas issuer, from January 2001 to September 2005. Prior thereto, Mr. Pinkman was the Vice President, International Maxim Power Corp. (formerly Jupiter Power International Inc.) (TSX Venture listed) from January 2001 to November 2001.
David Ragan (Calgary, Alberta) - Current and Proposed Director
Mr. Ragan is a Professional Petroleum Engineer and has been the President of 296936 Alberta Ltd., a private investment/consulting company, since 1984.
Judy Leverington (Calgary, Alberta) - Current and Proposed Director
Ms. Leverington is currently providing consulting accounting services to PanWestern Energy Inc., an Exchange listed company active in the oil and gas industry. She is also a consulting accountant to Lochaird Energy Inc., a private oil and gas company, and Lochaird Capital Corp.
Sponsorship
Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange, unless exempt in accordance with Exchange policies. Saccharum will be seeking an exemption from the sponsorship requirements in accordance with Exchange Policy 2.2. There is no assurance that such an exemption will be granted.
Capitalization of the Resulting Issuer
Following the completion of the Qualifying Transaction and the Private Placement, approximately 21,312,500 Saccharum Shares and other securities of Saccharum, exercisable or convertible into approximately 210,000 Saccharum Shares are anticipated to be issued and outstanding.
The following table sets out the number of Common Shares held directly and directly by the directors and officers both before and after completion of the Qualifying Transaction and Private Placement:
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Prior to Giving Effect After Giving Effect
to the Proposed to the Proposed
Qualifying Transaction Qualifying Transaction
and Private Placement(1) and Private
Placement(2)(3)
Name Number of Percentage Number of Percentage
Common Shares Common
Shares
756453 Alberta Ltd.(4) 440,000 20.95% 8,392,500 39.38%
Calgary, Alberta
296936 Alberta Ltd.(5) 170,000 8.10% 1,725,000 8.09%
Calgary, Alberta
David Pinkman 340,000 16.9% 3,700,000 17.36%
Calgary, Alberta
Judy Leverington 50,000 2.38% 50,000 0.23%
Calgary, Alberta
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Notes:
(1) All of these Saccharum Shares are held in escrow pursuant to Exchange Form 2F CPC Escrow Agreement.
(2) Assumes 21,312,500 Saccharum Shares issued and outstanding.
(3) Does not include the 210,000 Common Shares issuable on the exercise of the existing Saccharum Options.
(4) A company wholly-owned by Johannes Kingma.
(5) A company wholly-owned by David Ragan.
Deadline to Complete Qualifying Transaction
On October 7, 2009, the Corporation announced that in accordance with the extended temporary relief measures announced by the Exchange on September 11, 2009, it received an extension for the completion of a qualifying transaction. The new deadline imposed by the Exchange for the completion of a qualifying transaction by the Corporation is March 31, 2010. The Corporation will not meet the deadline.
On or about March 31, 2010, the Common Shares will be suspended and the Corporation will be given 90 days to: either complete the proposed Qualifying Transaction or transfer to NEX (a separate trading board of the Exchange comprised of Exchange listed issuers that do not meet Tier 2 maintenance requirements, including capital pool companies that have not completed a qualifying transaction). If the Corporation does not complete a qualifying transaction or transfer to the NEX within the aforementioned 90 day period, the Corporation will be delisted.
Subject to satisfaction or waiver of the conditions precedent referred to herein, the Corporation anticipates the proposed Qualifying Transaction will be completed prior to May 27, 2010 and that its Common Shares will continue to be listed on the Exchange.
Trading of the Common Shares remains halted pending receipt and review by the Exchange of acceptable documentation regarding the proposed Qualifying Transaction. The proposed Qualifying Transaction has not been approved by the Exchange and remains subject to Exchange approval.
Material Conditions to Completion of Qualifying Transaction
The closing of the proposed Qualifying Transaction is subject to a number of conditions including, but not limited to: (i) obtaining all necessary regulatory approvals, including the approval of the Exchange of the qualification of the acquisition as Saccharum's "Qualifying Transaction"; (ii) obtaining the approval of the majority of the minority shareholders of Saccharum; (iii) satisfactory environmental review of the Assets by the Corporation; (iv) completion of the Private Placement; (v) completion of the Note financing; (vi) each of the applicable Vendors entering into the Escrow Agreement and (iv) the satisfaction of certain closing conditions provided for in the Agreement as are typical of a transaction of this nature.
There can be no assurances that the Qualifying Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the information circular to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Saccharum should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Qualifying transaction and has neither approved nor disapproved the contents of this press release.
ADVISORY: Certain information in this press release110 constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to the closing or completion of the Qualifying Transaction, the Private Placement, the Note and obtaining the requisite shareholder and Exchange approval of the Qualifying Transaction.
Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with oil and gas production, marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; imprecision of reserve estimates; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; inability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters. Readers are cautioned that the foregoing list of factors is not exhaustive.
Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. 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 press release are expressly qualified by this cautionary statement.
The forward-looking statements contained in this press release are made as of the date of this press release, and Saccharum does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.
THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.
For further information, please contact:
Saccharum Energy Corp.
Johannes Kingma
President and Chief Executive Officer
Telephone: (403) 532-5901
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
Source: Saccharum Energy Corp. (TSX-V)
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