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CALGARY,
AB, Jan. 12, 2023 /CNW/ - Horizon Petroleum
Ltd. ("Horizon" or the "Company") (TSXV: HPL.H) is
pleased to announce that it has entered into a letter of intent
dated December 9, 2022 (the
"LOI") with a private European company (the "Vendor")
under which Horizon will acquire all of the outstanding shares of
its European oil and gas subsidiary company ("SUB") (the
"Transaction") through the issuance of common shares and
preferred shares of Horizon to the Vendor's shareholders. SUB has
interests in certain onshore oil and gas properties in Europe with significant oil reserves and
resources and potential access to a large delineated but
undeveloped natural gas resource.
Additional information on the Transaction will be provided in a
subsequent news release upon execution of the definitive agreement
for the Transaction.
Highlights
- Acquisition of all outstanding shares of SUB. SUB owns the 100
% working interest of the Project A oilfield under a Production
Sharing Agreement which is currently producing and selling heavy
oil in Europe.
- SUB has executed Heads of Agreements to acquire three
additional onshore PSAs in the same country. All three of the
additional PSAs have historically produced oil and natural gas and
Horizon believes there are significant undeveloped natural gas
resources also associated with the additional PSA's.
- This acquisition greatly enhances Horizon's strategy to
establish Horizon as a European oil and gas production company with
assets in Poland and Europe that have significant potential to
increase oil and gas production over the next few years.
- Combined Management and Board with extensive international
experience and expertise including Co-founders of Canacol Energy
the second largest natural gas producer in Colombia.
Strategic Rationale
Our strategy is to evaluate, acquire and develop previously
discovered gas and oil resources in the proven natural gas and oil
basins located onshore Europe with
an initial focus of developing the Lachowice natural gas field in
south-western Poland and with the
proposed transaction, further development of oil and gas reserves
in Europe.
The current energy crisis in Europe has underscored the importance of
natural gas in the energy matrix. Natural gas has been recognised
by the European Union as a key source of energy during the
transition to cleaner sources of energy. The Company sees
significant opportunity in Eastern and Central Europe to develop previously
discovered natural gas and oil accumulations thereby increasing
domestic production and reducing dependence on imports of Russian
hydrocarbons and the use of coal in power generation.
We think it is important to build a diversified portfolio of
assets with reserve and production potential that can build the
company's asset value and cashflows which will generate high rates
of return for our shareholders. We are actively screening,
evaluating and pursuing business development opportunities to add
reserves and production potential in Europe and also in the greater Mediterranean
region. We aim to reduce geopolitical and operational risk by
targeting assets in a number of jurisdictions and geological
basins.
The proposed transaction fits this strategy bringing significant
oil production, reserves and resources with large gas development
upside potential.
The Transaction
The Transaction is an arm's length transaction and when
completed, is intended to be a "reverse takeover" for the purposes
of the requirements of the TSX Venture Exchange (the
"TSX-V") and to enable the Company to qualify as a Tier 1
Oil & Gas Issuer on the TSX-V. None of the directors and
officers of Horizon or their associates and affiliates have any
interest in the business of the Vendor or SUB, or is otherwise an
insider of, or has any relationship with, the Vendor and SUB or
their direct or indirect shareholders.
The Horizon shares to be issued to the shareholders of the
Vendor in the Transaction will be issued pursuant to exemptions
from the prospectus requirements of applicable securities
legislation, and may be subject to escrow conditions as required by
the TSX-V.
The parties have agreed to use their best efforts to complete
the Transaction documents by late February, 2023. Both Horizon and
the Vendor intend to hold shareholders' meetings in Q1, 2023 to
approve the Transaction. Trading in the common shares of the
Company is currently halted and will remain halted until further
notice in accordance with the policies of the TSX-V.
Upon completion of the Transaction, the Company will have its
head office located in Calgary,
Alberta. SUB will become a wholly owned subsidiary of the
Company.
Name Change
The Company plans to change its name to Megas Energy Ltd.
subject to approval of the TSX-V and shareholders. The common
shares of the Company are expected to be listed on the TSX-V under
a new trading symbol.
Conditions to the Completion of
the Transaction
The obligations of Horizon and the Vendor to consummate the
Transaction shall be subject to, among other things: (i) the
receipt of all necessary regulatory, Horizon Shareholder approval
and TSX-V approval, including, without limiting the generality of
the foregoing, the approval of the Transaction in accordance with
the TSX-V policies; (ii) the receipt of all necessary shareholder
and board of director approvals; (iii) the confirmation of the
representations and warranties of each party to the LOI; (iv) the
absence of any material adverse effect on the financial and
operational condition or the assets of each of the parties and SUB
(v) the delivery of standard completion documentation; and (vi)
other conditions precedent customary for a transaction such as the
Transaction. The conditions listed above are for the benefit of,
and may be waived by, Horizon and the Vendor as it
relates to the obligations of the other party to perform or obtain
the same.
About SUB
SUB is a limited liability company incorporated in Switzerland and is engaged in exploration,
development and production of oil in Europe.
SUB holds the Project A production sharing agreement
("PSA") with a state company ("Stateco" and a
national government agency ("GovAgency") which covers the
producing large Project A oilfield.
SUB is the operator of the Project A onshore oil field with a
100% working interest and operates the field through its
wholly-owned operating subsidiary SUB A.
In 2018, the Stateco, executed the Heads of Agreement with SUB
for three additional onshore oil fields with existing production of
medium to heavy oil with significant undeveloped natural gas:
Project B, Project C and Project D (together, the "New
Fields").
Upon the finalization and signing of the PSAs for the New
Fields, SUB will hold 100% interest in four onshore oil fields in
Europe. The PSAs are under final
review by GovAgency and SUB expects to complete the PSAs for the
New Fields and to takeover operations by mid 2023. Finalization of
the current financing and the takeover of the New Fields is
expected to provide significant increases to SUB's production and
reserves.
Current gross production in the Project A field totals
approximately 280 bopd of heavy oil. The fields are formed by large
thrust anticlines involving highly-fractured and karstified
carbonate reservoirs of Late Cretaceous to Eocene age. The
producing assets in this region typically deliver medium to heavy
oil and natural gas.
SUB is in the process of obtaining a report prepared in
compliance with National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities on the reserve and resource
estimates in respect of the Project A oilfield. The report is
currently being undertaken by RPS Group PLC., an independent
qualified resource evaluator.
Financial Information of
SUB
The following table summarizes selected financial information
for SUB as at December 31, 2021
(audited) and December 31, 2020
(audited):
Income Statement
Data
(US$)
|
|
|
12 Months Ended
December 31, 2021
(audited)(Thousand US$)
|
|
12 Months Ended
December 31, 2020
(audited)(Thousand US$)
|
Total
Revenues
|
|
|
3,426
|
|
2,013
|
Operating Cash
flow
|
|
|
(3,303)
|
|
(5,595)
|
Operating
Expenses
|
|
|
(2,777)
|
|
(2,875)
|
Net (Loss) and
Comprehensive Loss
|
|
|
(3,944)
|
|
(6,498)
|
Balance Sheet
Data
(US$)
|
|
|
As at December 31,
2021
(audited)(Thousand US$)
|
|
As at December 31,
2020
(audited)(Thousand US$)
|
Current
Assets
|
|
|
5,406
|
|
4,705
|
Net Tangible
Assets
|
|
|
31,743
|
|
28,373
|
Total Assets
|
|
|
54,333
|
|
51,627
|
Total
Liabilities
|
|
|
(22,590)
|
|
(23,254)
|
Shareholders'
Equity/
(Deficiency)
|
|
|
31,743
|
|
28,373
|
Transaction Terms and Private
Placement
The Vendor currently holds approximately 51% of the shares of
SUB. By closing, the Vendor expects to complete a share exchange
with the remaining shareholders of SUB whereby it will hold a
minimum 90 % plus one Share up to 100% of the shares of SUB. The
purchase price for SUB shares will be satisfied by the issuance of
approximately 240,000,000 common shares of Horizon to the Vendor
at a deemed price of $0.08 per Common
Shares, which is based on the most recent closing price of Horizon
on the NEX prior to its halt for the Transaction. As a condition of
the Transaction, Horizon will also issue the Vendor an additional
30,000,000 preferred shares of the Company which will convert into
listed shares for no additional consideration upon the final
signing of the Project B (15,000,000 common shares), and Project C
(15,000,000 common shares) PSAs by the GovAgency.
Horizon currently has 109,857,176 common shares outstanding.
Further, Horizon has 43,333 stock options outstanding with an
exercise price of $0.90 per share,
expiring on August 4, 2023 and
50,000,000 warrants with an exercise price of $0.05 per warrant share, with 24,000,000 expiring
September 30, 2023 and the remainder
expiring on October 6, 2023. Horizon
also has 2,220,000 compensation warrants outstanding with an
exercise price of $0.02 per warrant
unit, expiring September 20, 2023.
Each warrant unit comprises a common share and a warrant
exerciseable at a price of $0.05 per
share until September 20, 2023.
Interim Lending to SUB
In connection with the Transaction, Horizon will lend to SUB
US$180,000 (or slightly less than
CAD$250,000) pursuant to a
convertible secured note expected to be finalized during the week
of January 16, 2023. The terms of the
Note are such that SUB will have 365 days to repay the Note, and
will be charged a rate of interest of 7% per Annum, due on
maturity (individually, the "Note", collectively
"Notes").
Furthermore, an arm's length company ("Finco") will lend
SUB, a total of US$2,820,000 pursuant
to two Notes provided over two tranches:
- Tranche A, expected to be finalized during the week of
January 16, 2023, Finco will lend SUB
US$320,000. The terms of the Note are
such that SUB will have 365 days to repay the Note, and will be
charged a rate of interest of 7% per Annum, due on maturity.
- Tranche B will occur upon execution of the necessary definitive
documentation to effect the Transaction. Finco will lend SUB
US$2,500,000 on the same terms as the
first tranche. Half of Finco's legal costs for set up of the loan
will be deducted from the first tranche.
The Vendor will act as guarantor for the Notes. Additionally,
after the Notes are issued, Finco and Horizon may exercise its
option per the Notes to convert into 10.5% of SUB common shares for
the US$3,000,000. Conversion of the
Notes to 10.5% of SUB common shares will also automatically occur
immediately before completion of the Transaction.
Private Placement
In order to finance the transaction costs and interim expenses,
Horizon intends to complete a non-brokered private placement (the
"Offering") of up to 11,250,000 units ("Units") in
the capital of Horizon at a price of $0.08 per Unit for gross proceeds of up to
$900,000, subject to approval from the TSX-V. Each Unit will
consist of one common share and one common share purchase warrant
("Warrant") in the capital of the Company. Each Warrant
will entitle the holder to purchase one Common Share at a price of
$0.16 for a period of twelve (12)
months from the date of issuance.
In connection with the Offering, certain insiders are expected
to purchase Units in the Offering. Each of the insiders is a
related party of Horizon, and as a result, the Offering will be a
related party transaction for purposes of Multilateral Instrument
61-101 – Protection of Minority Shareholders in Special
Transactions ("MI 61-101").
The Company intends to rely on exemptions from the formal
valuation and minority approval requirements of sections 5.5(a)
and 5.7(1)(a) of MI 61-101 in respect of such insider
participation, based on a determination that fair market value of
the participation in the Offering by insiders will not exceed 25%
of the market capitalization of Horizon, as determined in
accordance with MI 61-101.
In connection with the Offering, Horizon may pay finder's fees
of up to 7% cash and up to 7% convertible securities, or a
combination of both, as permitted by the policies of the
TSX-V.
The proposed use of proceeds of the Offering loan to SUB of
$250,000 will be for transaction
costs and for working capital purposes.
Horizon and the Vendor have agreed that Horizon will use its
best efforts to complete a financing of up to CAD$35,000,000 (the "Transaction
Placement"), subject to TSX-V approval, pursuant to the
issuance of subscription receipts on such terms as may acceptable
to Horizon in the context of the market, acting reasonably each
subscription receipt being exercisable concurrent to the completion
of the Transaction for one (1) Horizon Share. The use of proceeds
will be to fund the performance bonds due to the GovAgency on
ratification of the New Fields PSAs; fund the forward work programs
on the four fields; complete the Transformation Process for
Horizon's PSAs in Poland and for
general corporate purposes.
The Transaction Placement is expected to be a brokered private
placement but no investment dealer has been retained to date and
pricing of the Transaction Placement is not determinable at this
time. Horizon expects to pay industry standard fees and commissions
in connection with the Transaction Placement.
Pro forma Reserves and
Resources
The pro forma company will have an oil and gas reserve base with
significant upside potential in the development of contingent
resources and exploration of prospective resources. These will
provide an extensive drilling inventory to increase reserves,
company value, add production and increase cashflow from the
assets:
The reserve and resources of the Lachowice natural gas
development project were described in Horizon's press release dated
December 5, 2022.
With respect to SUB's reserves and resources, a NI 51-101
reserve and resources report for the Project A oilfield will be
prepared and we will update shareholders by press release when it
is completed.
Pro forma Capitalization upon
Completion of the Transaction
Horizon will issue the Vendor approximately, 240,000,000 common
shares and 30,000,000 preferred shares
Not including the Transaction Placement, following completion of
the Transaction, Horizon expects to have a total of approximately
361,107,176 common shares issued, 30,000,000 preferred shares
issued, 65,690,000 common shares reserved for issuance under
warrants, and up to 10% common shares reserved for issuance under
share based compensation arrangements. Of the issued shares,
approximately 60% will be held by the existing Vendor shareholders,
and approximately 40% will be held by Horizon shareholders.
Those shares of the Company to be issued to the Vendor
shareholders who become principals of the Company will be subject
to TSX-V escrow requirements.
Sponsorship
Sponsorship of the transaction is required by the TSX-V unless
exempt in accordance with TSX-V policies. The Company is currently
reviewing the requirements for sponsorship and may apply for an
exemption from such requirements. There is no assurance that
Horizon will ultimately obtain an exemption from sponsorship.
Board of Directors and Executive
Officers on Completion of the Transaction
Subject to any necessary shareholder and regulatory approvals,
the board of directors and officers of the Company upon the
completion of the Transaction will be as follows:
Dr. David Winter, Director, Chief
Executive Officer
Dr. Charle Gamba, Director
Tan Shern Liang, Director
Roger McMechan, Director, President
and COO
Ian Habke, Vice President, Finance
and Chief Financial Officer
Trevor Wong-Chor, Corporate
Secretary
The executives and employees of SUB will hold positions with the
proforma company. They add a great deal of experience and expertise
to Horizon's current Board and executive team. In addition, a
nominee of the Vendor, to be determined, will be added to the board
of directors.
Summary Biographies of the Board
of Directors and Executive Officers
The background of each of the aforementioned persons is as
follows:
Dr. David Winter, of Calgary, Canada, was confirmed by the Board as
the Chief Executive Officer of Horizon. He is a co-founder and a
Director of Canacol Energy Ltd. Previously, Dr. Winter was the
Founder, Chief Executive Officer and Director of Excelsior Energy
Limited, an oil sands focused exploration company. Dr. Winter
brings 37 years of international experience in a variety of
technical, management and leadership roles living and working in
Latin America, Middle East, Southeast Asia and the UK North Sea. His
experience was gained working at British Petroleum, Sun Oil,
Canadian Occidental (now CNOOC), Alberta Energy Company (now
Ovintiv) where he was a member of the leadership team that grew its
international business to over 60,000 barrels of oil equivalent per
day, Calvalley Petroleum and Excelsior Energy Limited. Dr. Winter
holds a BSc (Hons) in Geology from the University of London, a MSc degree in Structural Geology
from Imperial College, University of London and a PhD degree in Structural Geology
from Edinburgh University.
Dr. Charle Gamba, of Bogota, Columbia, is currently a Co-Founder,
Director, President and Chief Executive Officer of Canacol Energy
Ltd. Dr. Gamba has over 30 years of international oil and gas
experience, and has previously worked for Imperial Oil, Canadian
Occidental Oil and Gas, Occidental Petroleum, and Alberta Energy
Company in Southeast Asia, the
Middle East, West Africa, Canada, and Latin America. He has served on the board of
directors of several publicly listed and private oil and gas
companies where he held positions on the ESG, audit, reserves, HSE
and compensation committees. Dr. Gamba currently sits on the board
of the Asociacion Colombiana de Petroleo and Naturgas, two industry
groups that form upstream, midstream and downstream policy for the
oil and gas industry in Colombia.
Dr. Gamba holds a B.Sc., M.Sc. and PhD in Geology.
Tan Shern Liang, of Singapore, has more than 30 years of
experience in both the banking and investment industries. Mr. Tan
is the founder and Chief Executive Officer of One Tree
Partners, a licensed asset management firm in Singapore. One Tree Partners is one of
the longest established fund management firms in Singapore. Over the years, One Tree
Partners has invested in more than US$1bn worth of mining and commercial real estate
deals across the region. Prior to founding One Tree Partners,
Mr. Tan held increasingly senior management and executive roles at
Citibank, UBS and Goldman Sachs in Singapore. Mr. Tan graduated with a Bachelor
of Business Administration (BBA) degree from the University of
Michigan.
Roger McMechan, of Calgary, Canada, has over 40 years of diverse
experience in managing domestic and international oil and gas
operations. He has held senior management positions for
Petro Canada and Burlington
Resources in North Africa and
Canada; was the Executive Vice President and Director of Winstar
Resources with operations in Canada, Tunisia, Hungary and Romania; the Chief Executive Officer and
Director of Iskandar Energy, a private company that operated in
Bulgaria, Georgia, Poland and Ukraine; and more recently was the Technical
Director of Block Energy Plc with operations in the country of
Georgia. Mr. McMechan received a
BSc in Mechanical Engineering from University
of Waterloo.
Ian Habke, of Calgary, Canada, was confirmed as the Chief
Financial Officer of the Company. Mr. Habke is a Chartered
Accountant with over 30 years of experience in the oil and gas
industry. He has worked in finance management roles in multiple
countries including Canada, the Middle
East, the UK and Latin
America. Ian has acquired significant knowledge in the areas
of oil and gas operations, strategic planning and budgeting, cost
control, financial reporting, M&A activities, tax planning,
investors relations and supply management. His experience was
gained in both junior and large companies including increasingly
senior financial management roles with Nexen in the UK, Canada and
Yemen. Mr. Habke completed his
Bachelor of Commerce degree from the University of Alberta.
Trevor Wong-Chor, of Calgary, Canada, is a partner in the
Calgary office of DLA Piper
(Canada) LLP and Global Co-Chair of the Energy, and Natural
Resources Sector and a former member of the Canadian firm's
Executive Committee and practices primarily in the areas of
securities, mergers & acquisitions and corporate law. Trevor
acts for a diverse range of issuers and investors, including in the
areas of oil and gas, mining and the life sciences. His practice
involves providing advice on a range of issues, however, particular
emphasis is placed upon advising corporations and investment
dealers with respect to securities and business law matters,
including advising on private and public offerings of securities,
mergers and acquisitions, private equity and securities regulatory
requirements. He is a corporate secretary or director of a number
of public and private corporations.
All information provided in this news release related to the
Vendor and SUB has been provided by management of the Vendor and
SUB and has not been independently verified by management of
Horizon.
Completion of the transaction is subject to a number of
conditions, including but not limited to, Exchange acceptance and
if applicable, disinterested shareholder approval. Where
applicable, the transaction cannot close until the required
shareholder approval is obtained. There can be no assurance that
the transaction will be completed as proposed or at
all.
Investors are cautioned that, except as disclosed in the
management information circular or filing statement to be prepared
in connection with the transaction, any information released or
received with respect to the transaction may not be accurate or
complete and should not be relied upon. Trading in the securities
of Horizon should be considered highly speculative.
The TSX Venture Exchange Inc. has in no way passed upon
the merits of the proposed transaction and has neither approved nor
disapproved the contents of this news release.
Certain information in this press release may contain
forward-looking statements. This information is based on current
expectations that are subject to significant risks and
uncertainties that are difficult to predict. Actual results might
differ materially from results suggested in any forward-looking
statements. The Company assumes no obligation to update the
forward-looking statements, or to update the reasons why actual
results could differ from those reflected in the forward
looking-statements unless and until required by securities laws
applicable to the Company. Additional information identifying risks
and uncertainties is contained in the Company's filings with the
Canadian securities regulators, which filings are available at
www.sedar.com.
All information in this press release relating to SUB has
been provided by SUB and is the sole responsibility of SUB.
Forward-Looking
Statements
This news release contains "forward-looking information" within
the meaning of applicable securities laws relating to the proposal
to complete the Transaction and associated transactions, including
statements regarding the terms and conditions of the Transaction,
and the proposed directors and officers of the Resulting Issuer.
The information about SUB contained in the press release has not
been independently verified by SUB. Although Horizon believes in
light of the experience of its officers and directors, current
conditions and expected future developments and other factors that
have been considered appropriate that the expectations reflected in
this forward-looking information are reasonable, undue reliance
should not be placed on them because Horizon can give no assurance
that they will prove to be correct. Readers are cautioned to not
place undue reliance on forward-looking information. Actual results
and developments may differ materially from those contemplated by
these statements depending on, among other things, the risks that
the parties will not proceed with the Transaction, the appointment
of the proposed directors and officers of the Resulting Issuer and
associated transactions, that the ultimate terms of the
Transaction, the appointment of the proposed directors and officers
of the Resulting Issuer and associated transactions will differ
from those that currently are contemplated, and that the
Transaction, the appointment of the proposed directors and officers
of the Resulting Issuer and associated transactions will not be
successfully completed for any reason (including the failure to
obtain the required approvals or clearances from regulatory
authorities). The terms and conditions of the Transaction may
change based on Horizon's due diligence and the receipt of tax,
corporate and securities law advice for both Horizon and SUB. The
statements in this press release are made as of the date of this
press release. Horizon undertakes no obligation to comment on
analyses, expectations or statements made by third-parties in
respect of Horizon, SUB their securities, or their respective
financial or operating results (as applicable).
The TSX-V 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-V nor its Regulation Services Provider (as
that term is defined in policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this press
release.
SOURCE Horizon Petroleum Ltd.