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CALGARY, Sept. 30, 2016 /CNW/ - DualEx Energy
International Inc. ("DualEx" or the "Company") (TSXV:
DXE) announced today that it has entered into an Alberta oil and gas asset purchase and sale
agreement, entered into two private Alberta oil and gas company share purchase
agreements, launched a non-brokered private placement offering of
units at a price of $0.01 per unit,
appointed Mr. Ken Tompson, P.Geol,
as President and CEO of DualEx and will seek shareholder approval
to undertake a 10 for 1 consolidation of the Company's common
shares.
The Asset Acquisition
DualEx has entered into an asset purchase and sale agreement
executed on September 28, 2016 (the
"Asset Purchase Agreement") to acquire producing oil and gas
assets in the Peace River Arch area of northwest Alberta (the "Asset Acquisition") from
a private company (the "Vendor"). The consideration
paid to the Vendor will consist of $285,000 cash (subject to final adjustments) and
the issuance of two million non-interest bearing, non-voting series
I preferred shares (the "Preferred Shares"). The
Vendor may, at any time and at its option, convert all or part of
the Preferred Shares into units ("Asset Acquisition
Units") of DualEx. Each such Asset Acquisition Unit
will be comprised of one (1) common share in the capital of DualEx
(each a "Common Share") and one-half (1/2) of a Common Share
purchase warrant (each whole such warrant, an "Asset
Acquisition Warrant"). The number of Asset
Acquisition Units issuable upon the conversion of the Preferred
Shares is equal to the number of Preferred Shares to be converted
multiplied by $1.00 and divided by
the volume weighted average of the trading price of the Common
Shares on the TSX Venture Exchange (the "TSXV") during the
immediately prior twenty (20) consecutive day period prior to
conversion, subject to TSXV minimum pricing rules (the "Market
Price"). Each whole Asset Acquisition Warrant will
entitle the holder to purchase one (1) Common Share during the
period expiring on the five year anniversary of closing date of the
Asset Acquisition upon payment of the Asset Acquisition Warrant
exercise price which shall equal the Market Price. No
conversions of Preferred Shares may occur within 30 days of a prior
conversion, and no conversion of Preferred Shares may occur when,
after such conversion into Asset Acquisition Units, the Vendor
would own (including shares owned prior to the conversion) 10% or
more of the outstanding Common Shares after conversion. In
addition, the terms of the Preferred Shares allow DualEx to redeem,
at any time from the date of issuance, the whole of the then
outstanding Preferred Shares on payment for each Preferred Share to
be redeemed of (a) $1.00 plus (b)
that number of Asset Acquisition Warrants equal to the quotient of
the number of Preferred Shares to be redeemed multiplied by
$1.00 divided by the Market Price
divided by two. The exercise price for such Asset Acquisition
Warrants issued on the redemption of the Preferred Shares shall be
the Market Price and such Asset Acquisition Warrants will expire on
the five year anniversary of the closing date of the Asset
Acquisition.
Conditions to the Asset Acquisition
The Asset Acquisition is not a related party transaction but is
subject to TSXV acceptance. The Asset Acquisition is not
conditional on the completion of the Private Company Acquisitions,
but is conditional on the completion of the Offering (both
discussed below). In addition to the above conditions, the
obligations of both the Company and the Vendor to complete the
closing of the Asset Acquisition are subject to the satisfaction of
other customary closing conditions for oil and gas asset
acquisitions.
The Oil and Gas Assets Being Purchased Pursuant to the Asset
Acquisition
The oil and gas assets to be acquired pursuant to the Asset
Acquisition consist of 330 BOE/day (20% light oil and liquids),
from Cretaceous and Triassic reservoirs predominantly in the
Rycroft, Valhalla and Gordondale areas of northwest
Alberta, and include associated
gathering systems and a 50% owned and operated natural gas
processing plant. The Vendor's independent reserve report
prepared by Sproule Associates Limited ("Sproule"), dated
effective December 31, 2015 (the
"Reserve Report"), identifies total proved reserves of
904,200 BOE (including 630,500 BOE of proved developed producing;
141,800 BOE of proved developed non-producing; 131,900 BOE proved
undeveloped) and proved plus probable reserves of 1,400,000
BOE. Before tax net present values discounted at 10%
contained in the Reserve Report equal $5,600,000 for total proved reserves and
$8,900,000 for proved plus probable
reserves. The assets include approximately 37,000 net acres of
land, 12,000 of which are undeveloped.
The Private Company Acquisitions
Concurrent with the above described Asset Acquisition, DualEx
has entered into share purchase agreements executed on September 28, 2016 (the "Share Purchase
Agreements") to purchase two private oil and gas companies for
the collective consideration of $550,000 paid by the issuance of 55,000,000 units
of the Company (each a "Private Company Acquisition
Unit") at a deemed value of $0.01
per Private Company Acquisition Unit (collectively, the "Private
Company Acquisitions"). Each Private Company Acquisition
Unit will consist of one (1) Common Share and one-half (1/2) of a
Common Share purchase warrant (each such whole warrant, a
"Private Company Acquisition Warrant"). Each
whole Private Company Acquisition Warrant will be convertible into
one (1) Common Share at the exercise price of $0.015 per Common Share, for a period of two
years from the closing date. Collectively, these two private
companies have assets consisting of approximately 7 barrels per day
of light oil production in central Alberta, $500,000 of cash, approximately $336,000 of restricted cash (AER deposits) and
approximately $336,000 of future
abandonment liabilities. The private companies have no other
material assets or liabilities.
The Private Company Acquisitions are related party transactions
and are subject to TSXV acceptance. The Private Company
Acquisitions are conditional on the closing of the Asset
Acquisition, the closing of each of the Private Company
Acquisitions and the closing of the Offering (discussed
below). In addition to the above conditions, the obligations
of both the Company and the private companies to complete the
closing of the Private Company Acquisitions are subject to the
satisfaction of other customary closing conditions for oil and gas
share purchase acquisitions.
The Offering
In conjunction with the Asset Acquisition and the Private
Company Acquisitions discussed above, subject to the final
acceptance of the TSXV, DualEx will undertake a non-brokered
private placement offering to qualified investors consisting of a
minimum of 50,000,000 units (each an "Offering Unit")
at a price of $0.01 per Offering Unit
for gross proceeds of a minimum of $500,000, and a maximum of up to 100,000,000
Offering Units for gross proceeds of up to a maximum of
$1,000,000 (the
"Offering"). Each Offering Unit will consist of one
(1) Common Share and one-half of a (1/2) Common Share purchase
warrant (each such whole warrant, an "Offering
Warrant"). Each whole Offering Warrant is exercisable
into one (1) Common Share at a price of $0.015 per Common Share for a period of two years
from the issuance of such Offering Warrant. The proceeds of
the Offering will be used for working capital and general corporate
purposes.
Parties interested in participating in the Offering are
encouraged to contact the Company.
The Consolidation
As a condition to the TSXV conditionally accepting the Offering,
the Company has provided an undertaking to the TSXV to seek
approval of the holders of its Common Shares for a consolidation of
its Common Shares on the basis of one post-consolidation Common
Share for every 10 pre-consolidation Common Shares no later than
the earlier of its next annual general meeting and six months from
the date of completion of the Offering, and to give effect to the
share consolidation as expeditiously as possible after receiving
the requisite shareholder approval (the
"Consolidation"). Shareholders of the Company holding
an aggregate of 5,914,169 Common Shares representing approximately
5.2% of the current issued and outstanding Common Shares have
signed or have confirmed that they will sign confirmations prior to
the closing of the Transactions (as defined below) that they will
vote in favour of the Consolidation. In addition,
shareholders issued Common Shares pursuant to the Private Company
Acquisitions will hold in aggregate approximately 25.11% of the
issued and outstanding Common Shares after the completion of the
Private Company Acquisitions and the Offering (assuming that no
warrants are exercised and assuming no Preferred Shares are
converted) and such shareholders have signed confirmations that
they will vote in favour of the Consolidation. Furthermore,
potential subscribers of Offering Units under the minimum Offering
will hold in aggregate approximately 22.83% of the issued and
outstanding Common Shares after the Private Company Acquisitions
and the minimum Offering (assuming that no warrants are exercised
and assuming no Preferred Shares are converted) and such
subscribers will have signed confirmations that they will vote in
favour of the Consolidation as part of their subscription
agreements to the Offering.
It is anticipated that after the Private Company Acquisitions,
the completion of the minimum Offering (assuming no warrants are
exercised) and the completion of the Consolidation, and assuming no
Preferred Shares are converted, DualEx will have, on a
post-Consolidation basis, approximately 21.9 million Common Shares
issued and outstanding.
Unless otherwise stated, all Common Share, Unit, warrant and
other securities figures in this news release are pre-Consolidation
figures.
Management Changes
Effective immediately, Garry
Hides has resigned as President and Chief Executive Officer
of DualEx. Going forward, Mr. Hides will advise the Company
on land, business development and general corporate matters.
Mr. Ken Tompson, P.Geol, has
replaced Mr. Hides as President and CEO of DualEx. Mr.
Tompson has been Executive Vice President and Chief Operating
Officer of DualEx since inception, and is a director of the
Company.
It is anticipated that effective upon closing of the
Transactions, Mr. Jason Schoenfeld,
P.Eng, will be appointed Vice President, Engineering of the
Company. Mr. Schoenfeld is a professional engineer with
twenty years of diverse operations experience in the western
Canadian oil and gas industry.
Closing of the Transactions and Comments from Ken Tompson, CEO
The Asset Acquisition, the Private Company Acquisitions and the
Offering are anticipated to close in October
2016, and it is anticipated that the Consolidation will
occur after the next annual general meeting of the Company which is
expected to occur in the fourth quarter of 2016.
Ken Tompson, DualEx's CEO,
commented: "These transactions are the first stage of the Company's
operational return to Western
Canada, and in themselves provide opportunities for growth
going forward. The Peace River arch region of the Western
Canadian Sedimentary Basin provides multi-zone potential for both
light oil and natural gas, with solid access to infrastructure and
is an area where the management team has enjoyed success in the
past."
Other Information
Completion of the Asset Acquisition and the Private Company
Acquisitions are subject to a number of conditions as disclosed
above, and as set forth in the Asset Acquisition Agreement and the
Share Purchase Agreements, respectively, including, but not limited
to, TSXV acceptance, satisfactory due diligence and completion of
the Offering. There can be no assurance that the Asset
Acquisition, the Private Company Acquisitions, the Offering or the
Consolidation (collectively, the "Transactions") will be
completed as proposed or at all. The TSXV has in no way
passed upon the merits of the Transactions and has neither approved
nor disapproved the contents of this news release.
The Private Company Acquisitions are considered "related party
transactions" under MI 61-101 and TSXV Policy 5.9 as approximately
20% of the shares of both private companies are held or controlled,
directly or indirectly, by a director of the Company. The
Company is relying on exemptions from the formal valuation and
minority approval requirements of MI 61-101 and TSXV Policy 5.9, in
respect of these acquisitions, pursuant to Section 5.5(b) (Issuer
Not Listed on Specified Markets) and Section 5.7(a) (Fair Market
Value Not More Than 25% of Market Capitalization) of MI 61-101,
respectively.
No new insiders will be created, nor will any change of control
occur, as a result of the Transactions.
"BOE" means barrels of oil equivalent using a conversion factor
of one barrel of oil equaling 6 thousand cubic feet of natural
gas. This conversion ratio is based on an energy equivalency
conversion method, primarily applicable at the burner tip and does
not necessarily represent a value equivalency at the
wellhead. It should be noted that the use of BOE might be
misleading, particularly if used in isolation. The Reserve
Report has been prepared by Sproule Associates Limited in
accordance with National Instrument 51-101 and COGEH reserve
definitions. The forecast cost and price assumptions used in
the Reserve Report assume increases in wellhead selling prices and
take into account inflation with respect to future operating and
capital costs. Light crude oil, conventional natural gas and
natural gas liquids benchmark reference pricing, inflation and
exchange rates utilized by Sproule in the Reserve Report were
Sproule's forecast as at December 31,
2015. Net present value of reserves do not represent fair
market value.
Trading Halt
Trading in DualEx's Common Shares on the TSXV is halted and will
remain halted until the documentation required by the TSXV in
relation to the Transactions has been reviewed and accepted by the
TSXV.
About DualEx Energy International Inc.
DualEx Energy International Inc. is an oil and gas exploration
and production company with operations in Western Canada.
DualEx's Common Shares trade on the TSXV under the symbol
"DXE".
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.
Forward-Looking Information: This news release contains
"forward-looking information" within the meaning of applicable
Canadian securities legislation. All statements, other than
statements of historical fact, included herein are forward-looking
information. In particular, this news release contains
forward-looking information in relation to: the proposed Asset
Acquisition, the proposed Private Company Acquisitions, the
proposed Offering and the proposed Consolidation and the closing of
these Transactions; the assets of the Vendor being acquired in the
proposed Asset Acquisition and proposed Private Company
Acquisitions; the timing for completion of the proposed Asset
Acquisition, the proposed Private Company Acquisitions, the
proposed Offering and the proposed Consolidation; the use of
proceeds for the proposed Offering; the satisfaction of the
conditions for completion of the proposed Asset Acquisition and the
proposed Private Company Acquisitions; the timing for the next
annual general meeting of DualEx; and the appointment of
Jason Schoenfeld as Vice President,
Operations of the Company upon completion of the
Transactions. This forward-looking information reflects
DualEx's current beliefs and is based on information currently
available to DualEx and on assumptions DualEx believes are
reasonable. These assumptions include, but are not limited
to: the satisfactory fulfilment of all of the conditions precedent
to the proposed Asset Acquisition and the proposed Private Company
Acquisitions; the receipt of all required approvals for the
Transactions including, TSXV acceptance of the Transactions and
DualEx shareholder approval of the proposed Consolidation; market
acceptance of the proposed Transactions; the participants and the
amounts subscribed for by participants in the Offering; the amount
and extent of future abandonment liabilities in the assets being
acquired pursuant to the Private Company Acquisitions; the accuracy
of reserve reports in relation to the Asset Acquisition; equipment
and crew availability for any work that may be conducted in
relation to the assets acquired pursuant to the proposed Asset
Acquisition or the Private Company Acquisitions; and DualEx's
financial capability. Forward looking information is subject
to known and unknown risks, uncertainties and other factors that
may cause the actual results, level of activity, performance or
achievements of DualEx to be materially different from those
expressed or implied by such forward-looking information.
Such risks and other factors may include, but are not limited to:
reservoir performance, labour, equipment and material costs;
interest and currency exchange rates; general business, economic,
competitive, political and social uncertainties; general capital
market conditions and market prices for securities; delay or
failure to receive board, shareholder or regulatory approvals; the
actual results of future operations; competition; changes in
legislation, including environmental legislation, affecting DualEx;
the timing and availability of external financing on acceptable
terms; and lack of qualified, skilled labour or loss of key
individuals. A description of additional assumptions used to
develop such forward-looking information and a description of
additional risk factors that may cause actual results to differ
materially from forward-looking information can be found in
DualEx's disclosure documents on the SEDAR website at
www.sedar.com. Although DualEx has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking information,
there may be other factors that cause results not to be as
anticipated, estimated or intended. Readers are cautioned
that the foregoing list of factors is not exhaustive. Readers
are further cautioned not to place undue reliance on
forward-looking information as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Forward-looking information contained in this news
release is expressly qualified by this cautionary statement.
The forward-looking information contained in this news release
represents the expectations of DualEx as of the date of this news
release and, accordingly, is subject to change after such
date. However, DualEx expressly disclaims any intention or
obligation to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable securities law.
SOURCE DualEx Energy International Inc.