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UNITED STATES/
CALGARY,
AB, March 10, 2025 /CNW/ - Westgate
Energy Inc. ("Westgate" or the "Company") (TSXV:
WGT), is pleased to announce that it has entered into an asset
purchase and sale agreement (the "Acquisition Agreement")
with an arm's length, large, well-financed private oil and gas
company for the strategic acquisition of Mannville Stack focused
assets in East-Central Alberta near Frog Lake (the "Acquisition
Lands") for total cash consideration of $7.0 million, before closing adjustments (the
"Strategic Acquisition"). The Company's net cost of the
Strategic Acquisition is expected to be approximately $5.7 million. The Acquisition Agreement was
entered into on March 7, 2025 and is
expected to close in June 2025.
Acquisition Highlights
Pursuant to the Strategic Acquisition, Westgate will acquire
14.5 sections (3,712 hectares) of primarily contiguous mineral
rights, and 58 bbl/d of oil. Up to 57 multi-lateral horizontal well
locations have been internally identified by the Company on the
Acquisition Lands across three stacked oil bearing Mannville zones.
- 240% increase in Mannville Stack land holdings: The
Strategic Acquisition will add to Westgate's existing 6 sections of
Mannville Stack land holdings, for a total of 20.5 sections in the
area.
- 243% increase in Mannville Stack horizontal locations:
The Company has internally identified up to 57 unbooked
multi-lateral horizontal locations on the Acquisition Lands,
primarily in the Mannville Waseca Formation, to complement the
existing up to 40 unbooked locations identified on the Company's
existing lands in the Cold Lake
area.
- 21% increase to corporate production: Westgate is
currently producing approximately 275 boe/d of low decline
production from its existing assets, and the Strategic Acquisition
is expected to add 58 bbl/d of low decline oil production.
- Minimal ARO Acquisition: The Acquisition Lands have very
little asset retirement obligations (ARO) and only one producing
well. The total undiscounted liability is estimated at
approximately $1 million.
- Rationale and timing: The Strategic Acquisition is
consistent with Westgate's strategy of acquiring and subsequently
drilling prospective land within the Mannville Stack fairway. An
upcoming 2025 drilling plan and production guidance will be
provided post-closing of the Strategic Acquisition.
The Strategic Acquisition is subject to, among other
things, customary closing conditions, including the accuracy
of representations and warranties, the performance of covenants in
the definitive agreements and obtaining certain governmental and
third-party approvals are received and the Company entering into a
master development agreement with the Metis Settlement with respect
to the Acquisition Lands.
Financings
Senior Secured
Loan
The Company has signed a non-binding term sheet with a
Texas-based private credit
investment group (the "Lender") in respect of a potential
US$25 million first lien senior
secured loan (the "Senior Secured Loan"). Obtaining
the Senior Secured Loan is subject to, among other things, the
negotiation and execution of definitive agreements in relation
thereto and the receipt of all necessary regulatory approvals,
including the approval of the TSX Venture Exchange (the
"TSXV"). The Senior Secured Loan is expected to carry an
interest rate due quarterly of SOFR plus 7.75%, with an SOFR floor
of 4.25%, and will mature in four years. Subject to TSXV approval,
the Company expects to issue the Lender non-transferable common
share purchase warrants of the Company (the "Loan Warrants")
entitling it to acquire up to 12.5% of the fully diluted common
shares in the capital of the Company (the "Common Shares")
at the time definitive agreements are executed. Each Loan Warrant
will entitle the Lender to acquire one Common Share for five years
at an exercise price equal to the greater of: (1) the 40% premium
to the trailing 30-day weighted average trading price at the time
definitive agreements are executed; and (2) the market price of the
Common Shares at the time definitive agreements are executed.
The Company expects to execute definitive agreements in respect
of the Senior Secured Loan on or about March
25, 2025, subject to successful negotiation. Once obtained,
the Senior Secured Loan is expected to be used to fund drilling on
the Company's existing lands and on the Acquisition Lands.
Insider Private Placement
In connection with the Strategic Acquisition, the Company closed
a non-brokered private placement offering of 700 units of the
Company ("Private Placement Units") to Art Agolli, a director of the Company, at a
price of $1,000 per Private Placement
Unit for gross proceeds of $700,000
(the "Insider Private Placement"). The Company used the
gross proceeds from the Insider Private Placement to fund a
$700,000 deposit required under the
Acquisition Agreement. Each Private Placement Unit is comprised of
$1,000 principal amount of
convertible unsecured subordinated debentures of the Company (the
"Private Placement Debentures") and 285 common share
purchase warrants of the Company (the "Private Placement
Warrants"). Subject to TSXV approval, the Private Placement
Debentures are convertible at the election of the holder into
Common Shares at a conversion price of $0.25 until August 28,
2025 and each Private Placement Warrant entitles the holder
to acquire one Common Share at an exercise price of $0.27 until March 7,
2026.
The Private Placement Debentures and the Private Placement
Warrants are, and any Common Shares issuance issued thereunder will
be, subject to a hold period expiring four months and one day from
the date hereof. No finders' fees were paid in respect of the
Insider Private Placement.
Operational Update and 2025 Guidance
The Company has commenced lease construction in preparation for
an upcoming two Mannville Stack multi-leg horizontal well program
in the Cold Lake area on the lands
acquired last year within the Elizabeth Metis Settlement. The
Company is currently producing 275 boe/d from its operations at
Killam and Richdale.
Following the closing of the Strategic Acquisition and obtaining
the Senior Secured Loan, Westgate will provide production and
capital guidance for full year 2025. The guidance is planned to
include drilling Mannville
horizontal multi-leg wells on the Acquisition Lands and the
Company's previously acquired Mannville Stack lands near
Cold Lake. The Company's drilling
plans on the Acquisition Lands will be based on, and
consistent with, the proposed master development agreement.
Management expects to provide further details in respect of the
Strategic Acquisition, including a possible growth profile (i.e.
potential production and financial forecasts) assuming a fully
funded capital program and certain analogous information (i.e.
estimated well economics) from other producers in geographical
proximity with Acquisition Lands, in an updated corporate
presentation. The updated corporate presentation will be available
on March 11, 2025 at
www.westgateenergy.ca/investors.
The Company has secured a $1.0
million revolving operating loan with ATB Financial (the
"ATB Facility"). The ATB Facility is repayable on demand,
are available for borrowing and are guaranteed by Westgate Energy
Operations Ltd. (a wholly owned subsidiary of the Company) and
secured by a lien over all present and after acquired property of
Westgate and Westgate Energy Operations Ltd. The commitment letter
amends and restates the prior commitment letter between ATB
Financial and Westgate Energy Operations Ltd. The ATB Facility is
to be used for the Company's general corporate purposes, including
managing working capital, but excluding capital expenditures and
acquisitions.
Management Commentary
Westgate is pleased to be announcing the Strategic Acquisition
within its core area of the Mannville Stack fairway. Upon closing,
we will have more than tripled our land holdings in the area, and
more than doubled our potential horizontal location count. We
believe this is a key step in further establishing our position in
the area and provides us the pathway to significantly grow the
Company through the drill bit and prove up significant reserves via
the stacked nature of the Mannville formations within our new
footprint.
Regulatory Matters
In respect of the Insider Private Placement, Art Agolli, as a director of the Company, is
currently a "related party" of the Company in accordance with
Multilateral Instrument 61-101, Protection of Minority Security
Holders in Special Transactions ("MI 61-101"). As such,
the acquisition of Private Placement Debentures and Private
Placement Warrants by Mr. Agolli is considered a "related
party transaction" pursuant to MI 61-101. Pursuant to MI 61-101,
absent an available exemption, the Company would have been required
to obtain minority approval and a formal valuation for the issuance
of Private Placement Debentures and Private Placement Warrants to
Mr. Agolli. An exemption was available for the issuance pursuant to
Sections 5.5(a) and 5.7(a) of MI 61-101, respectively, because
neither the fair market value of the subject matter of, nor the
fair market value consideration for the transaction insofar as it
involves such related parties, exceeds 25% of the Company's market
capitalization. The Company did not file a material change report
more than 21 days before the expected closing of the Insider
Private Placement as the Company wished to close such on an
expedited basis in order to fund the $700,000 deposit required under the Acquisition
Agreement. If Mr. Agolli converted and exercised all the Private
Placement Debentures and the Private Placement Warrants, he will
own 3,825,904 Common Shares, representing 7.0% of the outstanding
Common Shares (on a partially diluted basis). Westgate's board of
directors approved the Insider Private Placement with Mr. Agolli
abstaining from all discussions and voting in respect thereof.
The Strategic Acquisition constitutes a "Reviewable Transaction"
in accordance with TSXV Policy 5.3 - Acquisitions and
Dispositions of Non-Cash Assets (as such term is defined in the
TSXV Corporate Finance Manual) and therefore remains subject to
review and acceptance of the TSXV.
Westgate's Differentiated Strategy
Westgate is focused on the emerging Mannville Stack fairway
located in East-Central Alberta and West Central Saskatchewan. This
fairway is characterized by known accumulations of medium and heavy
oil which are being 'unlocked' via the application of innovative
drilling techniques that utilize multi-lateral horizontal drilling.
Applying these multi-lateral drilling techniques has yielded some
of the strongest oil well economics across Western Canada. The management team and board
of Westgate have extensive experience building and leading
successful energy companies in Canada. The collective successes of the
leadership group share common characteristics: a strategy of
targeting high-quality oil assets with large quantities of
oil-in-place, and driving growth through successful drilling as
well as strategic merger and acquisition opportunities. This proven
blueprint of delivering shareholder value will be foundational to
Westgate's strategy, positioning the Company as one of a select few
pure-play, high-growth, publicly traded junior oil companies
focused on the Mannville Stack Fairway.
For more information, please visit www.westgateenergy.ca.
Abbreviations
bbl
barrel
bbl/d
barrel per day
boe
barrel of oil equivalent
boe/d
barrel of oil equivalent per day
Mcf
thousand cubic feet
Reader Advisories
In this press release, all references to "$" are to Canadian
dollars, unless otherwise stated.
Cautionary Note Regarding Forward-Looking
Statements
Certain information contained in this press release of Westgate
constitutes forward-looking in-formation or forward-looking
statements (collectively, "forward-looking statements")
under applicable securities laws. All statements other than
statements of historical fact are forward‐looking statements.
Forward‐looking statements typically contain words such as
"anticipate", "believe", "confirms", "continuous", "estimate",
"expect", "may", "plan", "project", "should", "will", or similar
words suggesting future outcomes. Forward-looking statements in
this press release include, statements, tables and graphics with
respect to, among other things: the Company's strategy, including
targeting medium and heavy oil opportunities in Eastern Alberta and Western Saskatchewan; statements related to
the potential Strategic Acquisition, including the effect on the
Company's drilling inventory; the effect of the Strategic
Acquisition on the Company's expected production growth; the
rationale for the Strategic Acquisition; the expected terms of the
Senior Secured Loan, including the estimated closing date thereof;
the entry into definitive agreements in respect of the Senior
Secured Loan; the satisfaction of the conditions to obtaining the
Senior Secured Loan, including the receipt, in a timely manner, of
regulatory and other required approvals; the availability of an
updated corporate presentation and its expected contents;
management's assessment of the Mannville Stack fairway in
Eastern Alberta and Western Saskatchewan, including its growth
profile, production capacities and the properties and wells
Westgate believes analogous to its own; the Company's anticipated
capital program, including the number, timing and cost of drilling
new wells; drilling and production forecasts; potential future
drilling locations on the its existing lands and the Acquisition
Lands; the Company's anticipated capital structure and sources and
uses of funds; potential capital investments, including cost
estimates, expenditures and deployment timing; anticipated producer
activity and industry trends; and anticipated and potential
performance.
Readers are cautioned not to place undue reliance on the
forward-looking statements, as there can be no assurance that the
plans, intentions or expectations upon which they are based will
occur. Although the forward-looking statements contained in this
press release are based upon assumptions which management of the
Company believes to be reasonable, the Company can-not assure
investors that actual results will be consistent with these
forward-looking statements. With respect to the forward-looking
statements contained in this press release, the Company has made
assumptions regarding the ability of the Company to close the
Strategic Acquisition; the anticipated benefits of the Strategic
Acquisition; the terms of and the ability to obtain the Senior
Secured Loan; the ability of management to successfully implement
and exe-cute its business plan; the timing and success of its
future drilling plans and its ability to identify new drilling
locations; the anticipated benefits of its relationships with the
applicable Metis Settlements; the ability of the Company to
integrate its current and proposed assets; future commodity prices;
activities of producers, competitors and others; future
construction schedules and costs, including the availability and
cost of materials and service providers; inflation expectations;
marketing margins; the Company's ability to generate sufficient
cash flow to meet its current and future obligations; the Company's
ability to access external sources of debt and equity capital;
drilling and production potential from its current and proposed
assets and the Mannville Stack more generally; assumptions
regarding the ability to use multilateral horizontal drilling,
including its expected decreased capital expenses and increased
production bene-fits; timing to increase production; royalty
schemes; the accuracy of land and asset valuations and geological
and geophysical data; the accuracy of reserve estimates; returns on
target pro-jects; and the occurrence and timing of certain events
and their expected impact on the oil and gas market, including the
WCS-WTI spread.
The Company's actual results could differ materially from those
anticipated in the forward-looking statements as a result of known
and unknown risks and uncertainties and other factors, many of
which are outside the Company's control, including but not limited
to: the possible failure to realize the anticipated benefits of the
Strategic Acquisition; the failure to obtain the Senior Secured
Loan; the failure of management to successfully implement its
business plan and/or the failure of such initiatives to yield the
expected benefits and results; the failure of the Company to
successfully implement its future drilling plans and identify new
drilling locations; the accuracy of analogous information; the
failure to realize the anticipated benefits of the Company's
relationships with applicable Metis Settlements; the failure of the
Company to successfully integrate its current and proposed assets;
fluctuations in the supply of and demand for natural gas, NGLs and
crude oil; disruption or unexpected difficulties in developing
assets; the Company's ability to generate sufficient cash flow from
operations to meet its current and future obligations;
non-performance of agreements in accordance with their terms;
general economic, political, market and business conditions,
including fluctuations in interest rates, foreign exchange rates,
stock market volatility, supply and demand trends, armed
hostilities, acts of war, terrorism, cyberattacks, trade
disruptions, diplomatic developments and inflationary pressures;
and other risks and uncertainties associated with the oil and gas
industry.
Readers are cautioned that the foregoing lists of important
factors, risks and assumptions are not exhaustive, and they should
not unduly rely on the forward-looking statements included in this
press release. All forward-looking statements contained in this
press release are made as of the date included on the cover page of
this press release and Westgate 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, other than as required by applicable securities law.
All forward-looking statements contained in this press release are
expressly qualified by this cautionary statement. Further important
factors affecting forward-looking statements and management's
assumptions and analysis thereof is available in filings made by
the Company with Canadian provincial securities commissions
available on SEDAR+ at www.sedarplus.ca.
Oil and Gas Advisories
Barrels of Oil Equivalent
Boe may be misleading, particularly if used in isolation. In
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities, a conversion
ratio for conventional natural gas of 6 Mcf:1 bbl has been used,
which is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. In addition, utilizing a conversion on
a 6 Mcf:1 bbl basis may be misleading as an indicator of value as
the value ratio between conventional natural gas and heavy crude
oil, based on the current prices of natural gas and crude oil,
differ significantly from the energy equivalency of 6 Mcf:1
bbl.
Drilling Locations
Unbooked drilling locations in respect of Westgate's current
assets and the Acquisition Lands are the internal estimates of
Westgate based on the assets prospective acreage and an assumption
as to the number of wells that can be drilled per section based on
industry practice and internal review. Unbooked locations do not
have attributed reserves or resources (including contingent and
prospective). Unbooked locations have been identified by the
Company's management as an estimation of the Company's multi-year
drilling activities based on evaluation of applicable geologic,
seismic, engineering, production and reserves information. There is
no certainty that Westgate will drill all unbooked drilling
locations and if drilled there is no certainty that such locations
will result in additional oil and natural gas reserves, resources
or production. The drilling locations on which the Company will
actually drill wells, including the number and timing thereof is
ultimately dependent upon the availability of funding, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While a certain number of the
unbooked drilling locations have been de-risked by Westgate
drilling existing wells in relative close proximity to such
unbooked drilling locations, the majority of other unbooked
drilling locations are farther away from existing wells where
management of Westgate has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
Neither the TSXV nor its Regulation Services Provider (as
that term is defined in policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this
release.
SOURCE Westgate Energy Inc.
