Razor Energy Corp. Announces Strategic Light Oil Asset Acquisition in the Kaybob Area of West Central Alberta and $18 Million Equity Financing
Razor Energy Corp. ("Razor" or the "Company") (TSX VENTURE:RZE) (www.razor-energy.com) is pleased to announce that it has entered into an agreement to acquire strategic assets in west central Alberta (the "Assets") for cash consideration of $9.6 million, subject to customary adjustments (the "Acquisition"). The Assets, situated within Razor's core area, are characterized by low decline, light oil focused production, which is primarily operated with abundant infrastructure to complement Razor's existing asset portfolio. Razor is also pleased to announce that it has filed and obtained a receipt for a preliminary short form prospectus in connection with an offering (the "Prospectus Offering") of subscription receipts of the Company ("Receipts") co-led by Haywood Securities Inc. and Jett Capital Advisors, LLC. The Prospectus Offering is described in greater detail below.
The Acquisition will be funded with Razor's cash reserves and through proceeds of the Prospectus Offering.
The Acquisition is complementary on a geographic, geological and operational basis and in terms of product mix with Razor's current assets and operations in the Swan Hills areas. On a pro forma basis, using February 2017 field estimated production, the Company is expected to have production in excess of 3,700 boe/d, of which 85% is light oil and natural gas liquids.
The Acquisition enhances Razor's existing asset base with similar reactivation and re-entry opportunities, in addition to future drilling upside with proven deliverability of light oil from the Montney formation. The primary fields within the Assets include Kaybob South Triassic Units No. 1 and 2, Kaybob BHL (Beaver Hill Lake) Unit No. 1 and Simonette/Karr BHL (Beaver Hill Lake) Oil Pools.
With 95,679 (33,542 net) of acres of land, the majority of which is held by production, Razor foresees ample drilling opportunities comprised of both vertical and horizontal wells. Management has currently identified over 15 net drilling locations including the potential for future horizontal targets. The development of these properties is expected to be part of the 2018 capital program.
The Acquisition is expected to close on or before May 24, 2017, with an effective date of January 1, 2017.
2017 CAPITAL BUDGET AND REVISED GUIDANCE
Given the volatility in commodity prices and Razor's ability to grow production through high frequency / low capital intensive projects, Razor expects to take a disciplined and conservative approach to the 2017 budget. The capital budget will be reviewed continuously by management and the board of directors of the Company (the "Board") for changes in commodity price assumptions and project economics. Razor remains steadfast in its conviction to maintain its financial advantage and build a top-tier junior oil and gas company.
For fiscal 2017, the capital expenditure budget of $13.0 million, approved by the Board prior to the Acquisition, remains unchanged. Razor continues to invest in a combination of reactivations, re-entries, optimization activities and waterflood management. These initiatives will be split between Swan Hills and Kaybob areas at management's discretion. In addition, the budget addresses the Alberta Energy Regulator's requirement under the Inactive Well Compliance Program including end of life well and facility spending.
With innovative focus and disciplined capital deployment in its Swan Hills and Kaybob areas, the Company is well positioned to execute on its growth strategy while maintaining financial flexibility.
Razor plans to continue to pursue value-driven acquisitions. Consolidation of land and production within the Company's existing project areas, in addition to complementary shallow, light oil horizons within its Alberta core region, is envisioned. Razor remains focused on adding to its inventory of high quality projects to sustain longer-term growth.
THE EQUITY FINANCINGS
In connection with the Acquisition, Haywood Securities Inc. and Jett Capital Advisors, LLC, as co-lead agents and joint bookrunners, on behalf of themselves and a syndicate of agents (collectively, the "Agents"), have agreed to offer, on a commercially reasonable efforts agency basis, on behalf of Razor, up to 5,000,000 subscription receipts of the Company ("Subscription Receipts") at a price of $3.00 per Subscription Receipt for gross proceeds of up to $15,000,000 pursuant to the Prospectus Offering. Each Subscription Receipt will entitle the holder thereof, without payment of any additional consideration and without further action on the part of the holder, upon the Acquisition closing, to receive one common share of the Company (a "Common Share") and one-half of one Common Share purchase warrant of the Company (a "Warrant"), each whole Warrant being exercisable into one Common Share at an exercise price of $3.50 per Common Share for a period of 12 months following the closing of the Acquisition.
Upon closing of the Prospectus Offering, the gross proceeds from the sale of the Subscription Receipts will be placed in escrow (the "Escrowed Proceeds") and released to Razor (together with any interest earned thereon) upon Haywood Securities Inc., an behalf of the Agents, being satisfied and receiving a certificate from the Company to the effect that: (i) there is no impediment to completion of the Acquisition, other than the payment of the purchase price, in all material respects in accordance with the terms of the acquisition agreement in respect of the Acquisition, without material amendment or waiver adverse to Razor; and (ii) receipt by the Company of all necessary regulatory and other approvals regarding the Prospectus Offering and the Acquisition (together, the "Escrow Release Conditions").
If: (i) the Escrow Release Conditions are not satisfied at or before 5:00 p.m. (Calgary time) on June 30, 2017 (the "Escrow Release Deadline"); (ii) the Company, prior to the Escrow Release Deadline, has provided notice to Haywood Securities Inc. or announced to the public, that it does not intend to proceed with the Acquisition; or (iii) the acquisition agreement in respect of the Acquisition is terminated, then the Escrowed Proceeds will be reimbursed pro rata to each holder of the Subscription Receipts at the original subscription price, plus such holder's pro rata portion of the interest earned thereon, if any (payable out of the Escrowed Proceeds).
The Agents will have an option (the "Agents' Option") to purchase up to an additional 750,000 Subscription Receipts at a price of $3.00 per Subscription Receipt to cover over-allotments, if any, exercisable in whole or in part at any time until 30 days after the closing date. In the event the Agents' Option is exercised after the closing of the Acquisition, the Agents' Option will be exercisable for up to an additional 750,000 Common Shares and 375,000 Warrants.
The net proceeds from the Prospectus Offering will be used to fund a portion of the purchase price of the Acquisition and to fund Razor's capital expenditure program.
The Subscription Receipts issued pursuant to the Prospectus Offering will be distributed by way of a short form prospectus in Alberta, British Columbia and Ontario and on a private placement basis in the United States pursuant to exemptions from the registration requirements of U.S securities laws and certain other jurisdictions as the Company and the Agents may agree on a private placement basis. Completion of the Prospectus Offering is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange ("TSXV") and the securities regulatory authorities, as applicable.
Closing of the Prospectus Offering is expected to occur on or about May 4, 2017.
Directors and officers of the Corporation are expected to participate in the Prospectus Offering in the aggregate amount of approximately $750,000.
Concurrent with the Prospectus Offering, Razor is proposing to complete a private placement of up to 923,077 Common Shares issued on a "flow-through" basis ("CDE Flow-Through Shares") pursuant to which subscribers will be entitled to receive renunciation of amounts qualifying as "Canadian development expenses" within the meaning of the Income Tax Act (Canada) (the "Tax Act") at a price of $3.25 per CDE Flow-Through Share for gross proceeds of up to $3,000,000 (the "Private Placement", and collectively with Prospectus Offering, the "Equity Financings"). The completion of the Private Placement is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSXV. The CDE Flow-Through Shares issued pursuant to the Private Placement will be subject to a hold period under applicable securities laws, expiring four months and one day following the closing of the Private Placement. Closing of the Private Placement is expected to occur concurrently with the closing of the Prospectus Offering.
The use of proceeds from the Private Placement will be used to incur Canadian development expenses.
Haywood Securities Inc. acted as Financial Advisor and Jett Capital Advisors, LLC acted as Strategic Advisor on the Equity Financings.
Canaccord Genuity Corp. acted as Financial Advisor and Eight Capital acted as Strategic Advisor on the Acquisition.
Razor Energy Corp., is a light oil focused company operating predominantly in Alberta. Razor's full-cycle business plan provides an opportunity to reposition the Company as a disciplined and high-growth junior E&P company. With an experienced management team and a strong, committed Board, growth is anticipated to occur through timely strategic acquisitions and operations. Razor currently trades on TSX Venture Exchange under the ticker "RZE".
SOURCE: Razor Energy Corp.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.