CALGARY, June 24, 2015 /CNW/ - Montana Exploration
Corp. ("MTZ") (TSXV:MTZ) and Gale Force Petroleum Inc.
("Gale Force" or "GFP")) (TSXV:GFP) (OTCQX:GFPMF) are
pleased to announce that they have entered into an arrangement
agreement (the "Arrangement Agreement") pursuant to which
MTZ will acquire all of the issued and outstanding common shares
(the "GFP Common Shares") and Series III preferred shares
(the "GFP Preferred Shares") of Gale Force by way of a
statutory plan of arrangement under the Canada Business
Corporations Act (the "Arrangement"). The purpose
of the Arrangement is to combine the Shaunavon oil and Eagle gas exploration and
development potential on MTZ's substantial land base in
Montana with the cash resources of
Gale Force.
Under the Arrangement, securityholders of Gale Force will
receive: (i) 0.465 common shares of MTZ (the "MTZ Common
Shares") for each GFP Common Share; and (ii) 0.555 MTZ
Common Shares for each GFP Preferred Share. In connection with the
Arrangement, all outstanding vested and unvested options of Gale
Force ("GFP Options") shall be exchanged for replacement
options of MTZ on equal terms (collectively, the GFP Options, the
GFP Common Shares and the GFP Preferred Shares are referred to as,
the "GFP Securities"). The consideration offered for
the GFP Common Shares pursuant to the Arrangement represents an
86% premium to the closing price of the GFP Common Shares on
the TSX Venture Exchange ("TSXV") on June 23, 2015 of $0.025 per share and a premium of
115% to the 30 trading day volume weighted average trading
price.
Upon closing of the Arrangement, approximately $360,000 of Gale Force's short-term debts
(including directors' fees, trade accounts payable and severance
pay) shall be paid by the issuance of MTZ Common Shares at a price
of $0.10 per share (the "Gale
Force Debt Conversion").
The completion of the Arrangement is conditional on MTZ entering
into lock-up agreements with the MTZ shareholders to convert debt
of approximately $8,900,000 into MTZ
Common Shares on the closing of the Arrangement at a price of
$0.10 per share (the "MTZ Debt
Conversion"). In aggregate, Gale Force shareholders will
hold approximately 19% of the combined entity upon completion of
the Arrangement (not inclusive of the effects of the separate
Acreage Acquisition described below). There will be no bank
indebtedness in the combined entity that will seek to fund its
future drilling program with new equity.
Acreage Acquisition & Prospects
Parallel to the negotiation of the Arrangement, MTZ has also
entered into an agreement to acquire approximately 46,000
additional undeveloped acres on the Shaunavon oil trend, which is all of the lands
in Montana held by its joint
venture partner for $700,000 payable
by way of $200,000 in cash and
$500,000 in MTZ Common Shares (at a
price based upon the 10-day weighted average share trading price of
the MTZ Common Shares on the TSXV prior to the date of closing of
the acquisition). Closing is expected to occur on or about the same
date as the closing of the Arrangement (the "Acreage
Acquisition"). MTZ's total acreage on the Shaunavon oil trend in Montana will be approximately 135,000 net
acres upon completion of the Acreage Acquisition.
MTZ has identified 13 Shaunavon oil prospects following a 54
square mile proprietary 3D seismic program and proposes to embark
upon a $5 million, 10 well
conventional drilling program comprised of 5 Shaunavon oil wells
and 5 Eagle gas wells. To fund this program, MTZ shall seek
additional equity funding of approximately $5 to 10 million in conjunction with implementing
the Arrangement.
The combined property base following completion of the
Arrangement and the Acreage Acquisition will consist of
approximately 135,000 net acres in Montana, a 20% carried working interest in
Gale Force's Pine Mills property
in Wood County, East Texas and a 15% membership interest in a
limited liability company, which owns producing wells and drilling
rights to a 10,000 acre prospect operated by a major oil and gas
company in the Marcellus, West Virginia. MTZ also holds
minority working interests in Canadian oil and gas leases located
in the Viking Kinsella area of Alberta. The activity of the combined company
will be focused upon conventional Shaunavon oil prospects and conventional Eagle
gas prospects within the company's large land base in Montana.
Arrangement Approvals
Gale Force Meeting
The Arrangement will be carried out by way of a court approved
plan of arrangement and is subject to customary conditions for a
transaction of this nature, which include court approvals,
applicable regulatory and TSXV approvals, and will require the
approval of the holders of at least 66⅔% of the GFP Common Shares
and 66⅔% of the GFP Common Shares and GFP Options (voting together
as a single class), present in person or represented by proxy, at a
special meeting of GFP security holders (the "Gale Force
Meeting") to be called to consider the Arrangement and a
"majority of the minority" as required by Multilateral Instrument
61-101 – Protection of Minority Security Holders in Special
Transactions after excluding the votes cast in respect of
shares held by certain interested parties.
Under the Arrangement, if approved by at least 66⅔% of the
holders of GFP Preferred Shares (the "GFP Preferred
Shareholders") in a separate class vote, MTZ will also acquire
the outstanding GFP Preferred Shares. However, closing of the
Arrangement is not conditional upon approval by the GFP Preferred
Shareholders. If the requisite GFP Preferred Shareholder approval
is not obtained, the GFP Preferred Shares will be excluded from the
Arrangement and will remain outstanding following completion of the
Arrangement, and the holders of GFP Preferred Shares will
ultimately receive MTZ Common Shares upon conversion of their GFP
Preferred Shares.
At the Gale Force Meeting, in addition to the approval of the
Arrangement outlined above, the holders of GFP Common Shares will
also be asked to approve a resolution to reduce the legal stated
capital account in respect of the GFP Common Shares in order to
permit the conditions necessary for the implementation of the
Arrangement to be satisfied (the "GFP Stated Capital
Reduction").
MTZ Meeting
At the annual and special meeting of the holders of MTZ Common
Shares (the "MTZ Meeting"), holders of MTZ Common Shares
will be asked to approve: (i) the fixing of the number of directors
of MTZ; (ii) the election of the board of directors of MTZ; (iii)
the appointment of the auditors of MTZ; and (iv) the ratification
of MTZ's stock option plan in accordance with TSXV Policy 4.4
(collectively, the "MTZ Resolutions").
Arrangement Details and Closing
Further information regarding the Arrangement and the respective
shareholders' meetings will also be contained in the respective
information circulars that MTZ and Gale Force will each prepare,
file and mail in due course to their respective securityholders in
connection with the MTZ Meeting and the Gale Force Meeting.
It is expected that the MTZ Meeting and the Gale Force Meeting will
take place in early August, with closing of the Arrangement
expected to occur in August.
All shareholders are urged to read the applicable information
circular once it becomes available as it will contain additional
information concerning the Arrangement, the GFP Stated Capital
Reduction and the MTZ Resolutions.
The complete details of the Arrangement are set out in the
Arrangement Agreement, which will be filed by each of MTZ and Gale
Force with SEDAR and will be available for viewing under each
company's respective profile at www.sedar.com.
Benefits of the Arrangement
The board of directors of Gale Force believes that the company's
remaining oil and gas assets, for which the development has already
been funded, will grow in value, and that deploying the company's
cash resources towards the development, de-risking and proving-up
of Montana's large acreage position provides the Gale Force
shareholders with an excellent opportunity for substantial
additional value creation.
The board of directors of MTZ believes that the combined entity,
with its significantly improved balance sheet and extensive
prospects in Montana, will have
the ability to access additional capital to pursue a low risk
balanced program of conventional oil and gas exploration and
development.
MTZ's Shaunavon acreage is an
extension of the Shaunavon play
from Saskatchewan. More than 350 million barrels has been
produced from both the Upper and Lower Shaunavon North of the
border and only 20 million barrels has been produced from acreage
offsetting MTZ from the Shaunavon
in Montana. MTZ has identified 13 separate prospects to date
based upon 54 square miles of 3D seismic conducted on MTZ's
acreage. MTZ will focus primarily on prospects in the Upper
Shaunavon that can be drilled and completed conventionally through
vertical wells at a casing point cost of approximately $350,000 and a fully tied in cost of
approximately $550,000. MTZ
will also pursue shallow Eagle gas prospects identified on 3D
seismic. Gas fields in the Bearspaw Uplift area of Montana
have produced in excess of 0.8 Tcf of gas to date.
Conventional gas prospects can be drilled for under $150,000. MTZ projects a 10 well
exploration and development program for approximately $5 million.
Pro Forma Operational and Financial Data
- Total Montana Acreage (net) of 135,000 acres
- Approximately 240 million MTZ common shares outstanding
following the completion of the Arrangement
Management intends to set a formal drilling and development
program upon the closing of the Arrangement. The specific budget
for this capital program will be dependent on the cash position of
the combined entity following closing and upon completion of
additional private placement equity financing.
The capital program is expected to be focused on development and
exploration opportunities in Montana, to grow production and de-risk the
Shaunavon play.
Additionally, MTZ expects to continue looking for opportunities to
pursue strategic acquisitions targeting undervalued asset bases
that complement MTZ's business.
Recommendations of the Board of Directors of Montana and
Gale Force
The board of directors of Gale Force has unanimously approved
the Arrangement and, based in part on the fairness opinion from
Roche Securities Limited (as discussed below), unanimously
determined that the Arrangement is in the best interests of Gale
Force and recommends that Gale Force securityholders vote at the
Gale Force Meeting in favor of the GFP Stated Capital Reduction and
of the Arrangement.
The board of directors of MTZ has unanimously approved the
Arrangement and unanimously determined that the Arrangement is in
the best interests of MTZ and recommends that MTZ shareholders vote
at the MTZ Meeting in favor of the MTZ Resolutions. Each of
the directors (or their holding company through which they hold MTZ
Common Shares), officers and controlling shareholders of MTZ,
representing in aggregate approximately 70% of the issued and
outstanding MTZ Common Shares (on a non-diluted basis), has agreed
to vote their MTZ Common Shares in favor of the MTZ Resolutions to
be considered by shareholders of MTZ at the MTZ Meeting.
Under the terms of the Arrangement Agreement, each of MTZ and
Gale Force shall not solicit or initiate any inquiries or
discussions regarding any other business combination or sale of
assets, subject to the fiduciary duty of the MTZ or Gale Force
board of directors, respectively, in the event that an unsolicited
superior proposal is received by either MTZ or Gale
Force.
Management
MTZ will continue to be led by its existing management team of
Charles Selby as Executive Chairman
and CEO, Don Foulkes as President,
and Don Jackson as Executive Vice
President and COO. The current CEO of Gale Force, Michael McLellan, will work on a consulting
basis for MTZ (and will act as the interim CFO of MTZ). At
the MTZ Meeting, among other matters, the shareholders of MTZ will
be asked to elect the board of directors of MTZ for the ensuing
year, which will include Charles
Selby, Don Foulkes,
James Collins, Julian McIntyre, and Michael Hibberd, along with Allan Bezanson as the board nominee of Gale
Force.
Advisors to Gale Force
Roche Securities Limited acted as financial advisor to Gale
Force in respect of the Arrangement and has provided the board of
directors of Gale Force with the verbal opinion that, as of the
date hereof and subject to its review of the final form of the
documentation effecting the Arrangement, the consideration to be
received by Gale Force shareholders pursuant to the Arrangement is
fair, from a financial point of view, to Gale Force shareholders.
Blake, Cassels & Graydon LLP acted as legal counsel to Gale
Force.
ABOUT MONTANA EXPLORATION CORP.
MTZ is a Canadian
junior oil and gas exploration and production company focusing on
the Shaunavon oil and Eagle gas
opportunities underlying its extensive land holdings in the state
of Montana. In the United States
the company operates through its wholly owned subsidiary,
Montana Land & Exploration, Inc.
MTZ's common shares are listed on the TSX Venture Exchange under
the trading symbol "MTZ". Additional information regarding MTZ is
available under MTZ's profile at www.SEDAR.com or at
www.MontanaExploration.com.
ABOUT GALE FORCE PETROLEUM INC.
Gale Force is a
public corporation that was focused on acquiring and exploiting
underdeveloped oil and gas reserves in mature basins, investing
capital in lower-risk, development-type projects. Until recently,
Gale Force held producing non-operated oil and gas properties in
Texas, Tennessee and West
Virginia. However, as part of its publicly announced
strategic review process, Gale Force has concluded a process of
selling its oil and gas assets in order to monetize their
value. Gale Force's common shares are listed on the TSX
Venture Exchange under the trading symbol "GFP". Additional
information regarding Gale Force is available under Gale Force's
profile at www.SEDAR.com or at www.GaleForcePetroleum.com.
Forward Looking Statements
This press release contains statements that constitute
"forward-looking information" or "forward-looking" statements"
(collectively "forward-looking information") within the
meaning of applicable securities legislation. Forward-looking
information is often, but not always, identified by the use of
words such as "anticipate", believe", "expect", "plan", "intend",
"forecast", "target", "project", "guidance", "may", "will",
"should" "could", "estimate", "predict" or similar words suggesting
future outcomes or language suggesting an outlook.
Forward-looking statements and information contained in this
press release are based on our current beliefs as well as
assumptions made by, and information currently available to, us.
Although we consider these assumptions to be reasonable based on
information currently available to us, they may prove to be
incorrect.
By their very nature, the forward-looking statements included in
this press release involve inherent risks and uncertainties, both
general and specific, and risks that predictions, forecasts,
projections and other forward-looking statements will not be
achieved. We caution readers not to place undue reliance on these
statements as a number of important factors could cause the actual
results to differ materially from the beliefs, plans, objectives,
expectations and anticipations, estimates and intentions expressed
in such forward-looking statements. These factors include, but are
not limited to, the volatility of oil and gas prices; production
and development costs and capital expenditures; the imprecision of
reserve estimates and estimates of recoverable quantities of oil,
natural gas and liquids; MTZ's ability to replace and expand oil
and gas reserves; environmental claims and liabilities; incorrect
assessments of value when making acquisitions; increases in debt
service charges; the loss of key personnel; the marketability of
production; defaults by third party operators; unforeseen title
defects; fluctuations in foreign currency and exchange rates;
inadequate insurance coverage; compliance with environmental laws
and regulations; changes in tax and royalty laws; MTZ's ability to
access external sources of debt and equity capital; MTZ's ability
to obtain equipment in a timely manner to carry out development
activities; and the obtaining of all judicial, regulatory and
securityholder approvals necessary to allow for the completion of
the Arrangement in accordance with its terms. Readers are cautioned
that the foregoing list of factors that may affect future results
is not exhaustive. When relying on our forward-looking statements
to make decisions with respect to MTZ and Gale Force, investors and
others should carefully consider the foregoing factors and other
uncertainties and potential events. Furthermore, the
forward-looking statements contained in this press release are made
as of the date of this document and we do 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 required by applicable law.
The forward-looking statements contained in this press release are
expressly qualified by this cautionary statement.
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 Gale Force Petroleum Inc.