Silk Road Energy Inc. Announces Letter of Intent for the Acquisition of Oil and Gas Assets in Alberta
November 07 2013 - 3:10PM
Marketwired Canada
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VIOLATION OF U.S. SECURITIES LAWS.
Silk Road Energy Inc. (the "Corporation" or "Silk Road") (TSX VENTURE:SLK.P) is
pleased to announce that the Corporation has entered into a letter of intent
dated effective October 28, 2013 (the "Letter of Intent") with Gold Note
Resources Inc. (the "Vendor"), whereby the Corporation has agreed to acquire
certain oil production, oil and gas reserves, lands, leases and miscellaneous
interests (the "Significant Assets") held by the Vendor in the Bashaw, Columbia
and Thornbury areas of Alberta (the "Proposed Acquisition").
The Corporation was incorporated under the provisions of the Business
Corporations Act (Alberta) and has a head office in Calgary, Alberta. Silk Road
is a capital pool company under the policies of the TSX Venture Exchange (the
"Exchange") and it is intended that the Proposed Acquisition will constitute the
"Qualifying Transaction" of the Corporation as such term is defined in the
policies of the Exchange. The completion of the Qualifying Transaction is
subject to Exchange approval. Silk Road is a "reporting issuer" in the provinces
of British Columbia, Alberta and Ontario.
The Vendor is a private corporation incorporated under the provisions of the
Canada Business Corporation Act with its registered and head office in Montreal,
Quebec. Michael Judson of Westmount, Quebec is the sole director and shareholder
of the Vendor.
The Qualifying Transaction will be carried out by parties dealing at arm's
length to one another and therefore will not be considered to be a Non-Arm's
Length Qualifying Transaction, as such term is defined in the policies of the
Exchange. As a result, a meeting of the shareholders of the Corporation to
approve the Proposed Acquisition is not a condition required to complete the
Qualifying Transaction. It is expected that upon completion of the Qualifying
Transaction, the Corporation will meet the Initial Listing Requirements for a
Tier 2 oil and gas issuer under the policies of the Exchange.
The Proposed Acquisition
Subject to any regulatory, shareholder, director or other approval that may be
required, the completion of satisfactory due diligence by the Corporation and
other terms and conditions contained in the Letter of Intent, it is intended
that the Corporation will acquire the Significant Assets from the Vendor at an
aggregate purchase price of $500,000 inclusive of applicable taxes and in
Canadian funds (the "Purchase Price"), payable by way of 2,352,941 common shares
of Silk Road and $100,000 cash.
Sproule Associates Limited ("Sproule") prepared an evaluation (the "Sproule
Report") of the petroleum and natural gas reserves of the Significant Assets
located in Alberta, Canada with an effective date of August 31, 2013. Annual
production was forecast taking into account historical production trends of the
producing wells, applicable regulatory conditions, existing or anticipated
contract rates, and by comparison with other wells in the vicinity producing
from similar reservoirs.
The following table summarizes the undiscounted value and the present value,
discounted at 5%, 10%, 15% and 20%, of the Significant Assets' estimated future
net revenue based on forecast price and cost assumptions as of August 31, 2013.
The price forecasts that formed the basis for the revenue projections in the
table below (and the Sproule Report) were based on Sproule's August 31, 2013
pricing model. There is no assurance that such price and cost assumptions will
be attained and variances could be material. The recovery and reserve estimates
of crude oil, natural gas liquids and natural gas reserves provided herein are
estimates only and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas liquids and natural gas reserves may be
greater than or less than the estimates provided herein. The information set
forth below is derived from the Sproule Report which has been prepared in
accordance with the standards contained in the COGE Handbook and the reserves
definitions contained in National Instrument 51-101 - Standards of Disclosure
for Oil and Gas Activities ("NI 51-101").(1)
Alberta
SUMMARY OF THE EVALUATION OF THE P.& N.G. RESERVES
(As of Date: 2013-08-31)
Remaining Net Present Values Before
Reserves Income Taxes
------------ -----------------------------
Gross Company
-----------
100% Gross Net @ 0% @ 5% @ 10% @ 15% @ 20%
----- ----- ----- ----- ----- ----- ----- -----
M$ M$ M$ M$ M$
Non-Assoc, Assoc Gas (MMcf)
-----------------------------
Proved Developed Producing 2450 740 703 1848 1413 1130 935 797
Probable Developed Producing 472 108 102 346 196 122 82 59
----- ----- ----- ----- ----- ----- ----- -----
Total Proved + Probable 2921 847 805 2194 1609 1252 1018 856
NGLs (Mbbl)
-----------------------------
Proved Developed Producing 73.6 27.4 17.6 0 0 0 0 0
Probable Developed Producing 7.2 2.8 1.8 0 0 0 0 0
----- ----- ----- ----- ----- ----- ----- -----
Total Proved + Probable 80.8 30.2 19.4 0 0 0 0 0
Grand Total (Mboe)
-----------------------------
Proved Developed Producing 481.8 150.7 134.7 1848 1413 1130 935 797
Probable Developed Producing 85.8 20.7 18.8 346 196 122 82 59
----- ----- ----- ----- ----- ----- ----- -----
Total Proved + Probable 567.7 171.4 153.5 2194 1609 1252 1018 856
Note: (1) Estimated disclosed values of future net revenue do not represent fair
market value.
A copy of the Sproule Report, prepared in accordance with NI 51-101 will be
submitted to the Exchange for review.
Management of the Resulting Issuer
Upon completion of the Qualifying Transaction, it is proposed that the
management team of the Corporation and the board of directors of the Corporation
will be comprised of the individuals outlined below (the "Proposed Management
Team"). The following is a brief description of the proposed position with the
Corporation, background and experience of the proposed officers and directors of
the Corporation as at completion of the Qualifying Transaction:
Vladimir Katic - Anchorage, Alaska - President, Chief Executive Officer and Director
Mr. Katic is currently the Managing Director of Pacific States Energy LLC, a
limited liability corporation formed in the state of California. From May 2000
to September 2009, Mr. Katic was the President, Chief Executive Officer and a
director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. -
listed on the Exchange), an oil & gas company based in California and listed on
the Toronto Stock Exchange. Mr. Katic obtained a Diploma in Petro-Chemical
Engineering in 1966 from the University of Zagreb in Croatia.
Richard Derrick Colling - Sherwood Park, Alberta - Chief Financial Officer and
Director
Mr. Colling is a member of the Society of Certified Management Accountants of
Alberta with more than 25 years of experience in the field of accounting, both
in the banking industry and private practice. He holds a Bachelor of Management
(Commerce) from the University of Lethbridge.
Patrick Devlin - North Vancouver, British Columbia - Corporate Secretary and
Director
Mr. Devlin has over 29 years of experience in the securities industry, as a
lawyer, regulator, certified management accountant and entrepreneur. From March
2004 to April 2009, Mr. Devlin was a Director and then President, Chief
Executive Officer and Director (August 2004 to April 2009) of NEMI Northern
Energy & Mining Inc., a mining company listed on the Toronto Stock Exchange. Mr.
Devlin was also a Director of Pacific Energy Resources Ltd. (formerly Shamrock
Resources Inc. - listed on the Exchange), an oil & gas company, from 1993 to
November 2010. Mr. Devlin obtained a Diploma of Technology in Finance from the
British Columbia Institute of Technology in May 1974, the designation of
Certified Management Account from the University of British Columbia in May
1976, and his Bachelor of Laws from the University of British Columbia in 1981.
Zulfikar Rashid - Calgary, Alberta - Director
Mr. Rashid has been the owner of Rodeo Express Delivery Ltd., a mail and courier
service, since January 1976. He obtained a Bachelor of Engineering in Electrical
and Electronics Engineering from the University of Napier in Edinburgh, Scotland
in 1974. Mr. Rashid has also been a member of the Association of Science and
Engineering Technology Professionals of Alberta (ASET) since 1976.
Michael Judson - Westmount, Quebec - Director
Mr. Judson has 20 years of experience forming, financing and operating private
and public companies. He has raised approximately $185 million for natural
resource exploration and production projects through two public company
vehicles. Mr. Judson graduated from Concordia University in 1986 with a Bachelor
of Arts (Communication Studies), graduated from the Institute of Corporate
Directors (ICD) and the Desautels Faculty of Management, McGill University
Directors Education Program in 2007 and became an Institute-Certified Director
(ICD.D) in 2011.
Dr. Paul Craig - Anchorage, Alaska - Director
Dr. Craig is a board-certified clinical neuropsychologist with over twenty-five
years of experience. Recognized for his excellence in the field, Dr. Craig has
evaluated and/or treated more than 10,000 patients with a broad array of known
or suspected psychological and neuropsychological conditions. Dr. Craig is a
Clinical Professor in the Department of Psychiatry & Behavioral Sciences at the
University of Washington School of Medicine. He has also served as an elected
member of the Board of Directors of the American Psychological Association and
American Board of Clinical Neuropsychology.
Sponsorship
The Corporation intends to apply to the Exchange for an exemption from
sponsorship requirements in connection with the Proposed Acquisition. There is
no assurance that such exemption will be granted and the Corporation will engage
a sponsor should a sponsorship exemption not be granted.
Trading Halt
In accordance with the policies of the Exchange, the common shares of the
Corporation are currently halted from trading. The Corporation intends that its
common shares will remain halted until completion of the Proposed Acquisition.
Additional Information
Silk Road, the Vendor and the Proposed Management Team will provide further
details in respect of the Proposed Acquisition, in due course once available, by
way of press releases.
A filing statement in respect of the proposed Qualifying Transaction will be
prepared and filed in accordance with Policy 2.4 of the Exchange on SEDAR at
www.sedar.com no less than 7 business days prior to the closing of the proposed
Qualifying Transaction. A press release will be issued once the filing statement
has been filed as required pursuant to Exchange policies.
Completion of the Proposed Acquisition is subject to a number of conditions
including, but not limited to, the satisfaction of the Corporation and of the
Vendor in respect of certain due diligence investigations to be undertaken by
each party, the completion of a definitive agreement setting forth the terms and
conditions set out in the Letter of Intent, closing conditions customary to
transactions of the nature of the Proposed Acquisition, Exchange acceptance and,
if required by Exchange policies, majority of the minority shareholder approval.
Where applicable, the Proposed Acquisition cannot close until the required
shareholder approval is obtained and there can be no assurance that the Proposed
Acquisition will be completed as proposed or at all.
If and when a definitive agreement between the Corporation and the Vendor is
executed, in accordance with the policies of the Exchange, the Corporation will
issue a subsequent press release containing the details of the definitive
agreement and additional terms of the Proposed Acquisition, including
information relating to sponsorship, summary financial information in respect of
the Significant Assets, and to the extent not contained in this press release,
additional information with respect to the proposed directors, officers, and
insiders of the resulting issuer upon completion of the Proposed Acquisition.
Investors are cautioned that, except as disclosed in the management information
circular or filing statement 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 a capital pool company should be considered highly
speculative.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the
Proposed Acquisition and associated transactions and has neither approved nor
disapproved the contents of this press release.
Cautionary Statements:
This news release contains "forward-looking statements" within the meaning of
applicable securities laws relating to the proposal to complete the Proposed
Acquisition and associated transactions, including statements regarding the
terms and conditions of the Proposed Acquisition and associated transactions.
Readers are cautioned not to place undue reliance on forward-looking statements.
Although the Corporation 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 the Corporation can give no assurance that they will prove to be
correct. 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 Proposed Acquisition and associated
transactions, that the ultimate terms of the Proposed Acquisition and associated
transactions will differ from those that currently are contemplated, and that
the Proposed Acquisition 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 statements in this news release
are made as of the date of this release. The Corporation undertakes no
obligation to comment on analyses, expectations or statements made by third
parties in respect of the Corporation, the Properties or their respective
financial or operating results or (as applicable), their securities. Barrels of
oil equivalent (hoe) are calculated using the conversion factor of 6 mcf
(thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes
may be misleading, particularly if used in isolation. A boe conversion ratio of
6 mcf':1 bbl (barrel) 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 crude oil as compared to natural gas is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be
misleading as an indication of value.
Neither TSXV Venture Exchange Inc. nor its Regulations Services Provided (as
that term is defined in the policies of the TSXV Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Silk Road Energy Inc.
Zul Rashid
Director
(403) 240-1821
Silk Road Energy (TSXV:SLK.P)
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