Dixie Energy Trust Announces Agreement to Acquire Additional Interests in the Black Warrior Basin, $13,500,000 Bridge Financing and Certain Management Changes
CALGARY, July 31, 2014 /CNW/ - Dixie Energy Trust ("Dixie" or the "Trust") is pleased to announce that its indirect wholly-owned subsidiary, Dixie Energy Holdings (US), Inc. ("Dixie US") has entered into a purchase and sale agreement (the "PSA"), effective July 1, 2014, with a group of vendors (collectively, the "Vendors") including Fletcher Exploration, LLC ("Fletcher"), pursuant to which Dixie US has agreed to acquire the Vendor's interests in certain oil and gas leases, wells, surface contracts and equipment in the Black Warrior Basin in Mississippi for US$8 million (prior to customary purchase price adjustments) (the "Acquisition") and pursuant to which Fletcher will transfer operatorship of the wells that are jointly owned by (among others) Dixie and Fletcher in the Maple Branch prospect in Mississippi, to Dixie US.
Pursuant to the PSA, the Vendors have agreed to, among other things, sell to Dixie US: (i) an additional 5,000 net acres in certain oil and gas leases in Monroe and Lowndes Counties, Mississippi (the "Maple Branch Prospect") resulting in approximately 16,355 gross acres and an average working interest of 71% in the prospect; (ii) an additional 40% working interest in certain oil and gas leases in Monroe County, Mississippi (the "Strong Field Prospect") with a gross acreage of approximately 3,800 acres, increasing Dixie's overall working interest (subsequent to the Acquisition) to 100% in the Strong Field Prospect; (iii) an additional 700 net acres in certain oil and gas leases in Monroe County, Mississippi (the "Hamilton West McKinley Creek Prospect") resulting in approximately 2,500 gross acres and an average working interest of 81% in the prospect (iv) an additional 50% working interest in the McKinley Creek gas gathering system which consists of approximately 10 miles of pipeline.
The purchase price for the Acquisition will be funded from the proceeds of the Britannia Loan (as defined and described below). Dixie expects closing of the Acquisition to occur on or about July 31, 2014.
On completion of the Acquisition, Dixie's approximate net acreage position will be as set forth below:
|Prospect||Net Acreage Acquired||Pro-Forma Net Acreage|
|Hamilton & West McKinley Creek||700||2,000|
Additionally, post-acquisition Dixie is increasing its net royalty interest by approximately 2% in the undeveloped Maple Branch, Strong Field and Hamilton West McKinley lands.
Key attributes of the Acquisition:
|Purchase Price (1)||US$8MM|
|Production (2)||22 BBL/d (100% oil and liquids)|
|Total Proved Developed Producing Reserves (3)||231 MBOE (57% oil and liquids)|
|Total Proved Reserves (3)||1,057 MBOE (54% oil and liquids)|
|Proved plus Probable Reserves (3)||1,402 MBOE (54% oil and liquids)|
|Undeveloped Land||7,220 net acres|
|(1)||Assuming total purchase price for the Acquisition of US$8 million prior to any purchase price adjustments.|
|(2)||Estimated average production volume is based on field estimates for the month of June 2014.|
|(3)||Gross reserves before deduction of royalties. Based on a mechanical update to Dixie's year-end independent reserve report effective December 31, 2013 prepared by DeGolyer and MacNaughton Canada Limited ("DMCL") with an effective date of December 31, 2013 in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the COGE Handbook, which adjusts Dixie's year-end reserves to include the additional interests to be acquired pursuant to the Acquisition. Such mechanical update does not consider further technical reserve adjustments related to capital and operating activities since December 31, 2013.|
In connection with the Acquisition, DMCL prepared a mechanical update to its year-end reserve report evaluating Dixie's reserves as at December 31, 2013, which adjusts Dixie's year-end reserves to include the additional interests to be acquired pursuant to the Acquisiton occurring on or about July 31, 2014. Such mechanical update does not consider further technical reserve adjustments related to capital and operating activities since December 31, 2013. A summary of the mechanically adjusted reserves data in such report are set forth below:
SUMMARY OF OIL AND GAS RESERVES AS OF DECEMBER 31, 2013
FORECAST PRICES AND COSTS(2)
|Light and Medium Oil||Natural Gas(1)|
|Proved Developed Non-Producing||17||12||3||2|
|Total Proved Plus Probable||1,784||1,360||8,814||6,729|
|(1) Estimates of reserves of natural gas include associated and non-associated gas.|
|(2) Figures in table may not add due to rounding.|
Dixie is also pleased to announce that Dixie US has entered into a loan agreement (the "Britannia Loan") with Britannia Capital Ltd. ("Britannia") pursuant to which Britannia has provided Dixie US with a secured bridge loan in the aggregate principal amount of CDN$10,000,000. The Britannia Loan bears interest at a rate of 15% per annum, matures and becomes fully repayable on October 30, 2015 (subject to earlier repayment with the consent of Britannia or at the election of Dixie US at any time on or after the date that is six (6) months from the date of the Britannia Loan Agreement) and requires Dixie US to pay a facility fee equal to 1.75% of the principal amount of the Britannia Loan on closing of the Britannia Loan. The purpose of the Britannia Loan is to provide Dixie US with sufficient capital to complete the Acquisition and undertake certain operational and optimization activities on the Maple Branch assets. Additionally, Dixie Energy Holdings (Canada) Ltd. ("Dixie Canada") has entered into a loan agreement (the "Atkinson Loan" and together with the Britannia Loan, the "Bridge Loans") with The Atkinson Family Trust ("Atkinson Trust") pursuant to which Atkinson Trust has provided Dixie Canada with a secured bridge loan in the aggregate principal amount of CDN $3,500,000. The Atkinson Loan bears interest at a rate of 15% per annum and matures and becomes fully repayable on October 30, 2015 (subject to early repayment, without penalty, at the election of Dixie Canada, at any time during the term of the Atkinson Loan). The Atkinson Loan does not require Dixie Canada to pay a facility fee. The funds from the Atkinson Loan are expected to be used for general corporate purposes. The Bridge Loans are secured by the assets of Dixie US and Dixie Energy Holdings (Maple Branch), LLC. In addition, Dixie reimbursed Britannia and the Atkinson Trust for expenses incurred by each of them in connection with the Bridge Loans.
On the basis that each of Britannia and Atkinson Trust are "related parties" of Dixie pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), each of the above noted Bridge Loans are "related party transactions" for the purposes of MI 61-101. Britannia is owned and controlled by a unit holder of Dixie who has current beneficial ownership and direction over greater than 10% of the outstanding trust units of Dixie. Ian Atkinson is a director and executive officer of Dixie Energy Ltd. ("Dixie Energy"), the administrator of the Trust and Dixie Canada and is a trustee of the Atkinson Trust. Dixie is not required to obtain a formal valuation under MI 61-101 with respect to the Bridge Loans, which are each related party transactions under paragraph (j) of the definition of "related party transaction" in MI 61-101. Section 5.4(1) of MI 61-101 provides that only related party transactions described in paragraphs (a) to (g) of the definition of related party transaction in MI 61-101 are subject to the formal valuation requirement of MI 61-101. Dixie is exempt from the minority approval requirement of MI 61-101 with respect to the Bridge Loans pursuant to Section 5.7(l)(f) of MI 61-101 because (i) the board of directors (the "Board") of Dixie Energy determined that the commercial terms set forth in the Bridge Loans are no less advantageous to Dixie than if such loans were obtained from person(s) dealing at arm's length with Dixie, and (ii) such Bridge Loans do not involve any equity or voting component. The Board's determinations regarding the terms of the Bridge Loan and decision to approve the loans was based on various factors, including advice received from the Board's financial advisor. Mr. Atkinson abstained from approving the Atkinson Loan.
For the month of June, Dixie's overall production was 102 boepd (94.4% oil and NGL) with production coming from Mississippi (25%), Alabama (69%) and Louisiana (6%). The average production for the second quarter was 110 boepd (95.2% oil and NGL), with production coming from Mississippi (28%), Alabama (65%) and Louisiana (7%).
Mr. Kevin Dumba has resigned as Chief Financial Officer of Dixie Energy and Dixie Energy Holdings (Canada) Ltd. effective July 31, 2014 to pursue other business interests. Mr. Dumba joined Dixie Energy in 2012 and under his guidance Dixie expanded its interests in the southern United States and is well positioned to assume operatorship in Mississippi. Mr. Dumba will assist the incoming CFO to ensure a smooth transition as Dixie assumes operatorship and evaluates the conversion from a trust to a corporate structure. The Board and staff of Dixie Energy would like to thank Mr. Dumba for his contributions over the last several years.
Dixie is pleased to announce the appointment of Mr. Calvin Yau as CFO and Vice President Finance of Dixie Energy Ltd. and Dixie Energy Holdings (Canada) Ltd. effective August 1, 2014. Mr. Yau brings over a decade of financial and accounting experience specifically in the oil and gas industry to his role at Dixie. He began his career in the audit and assurance group at Grant Thornton LLP, received his bachelor of commerce from the University of Calgary and is a member of the Institute of Chartered Accountants of Alberta. Mr. Yau has held several roles of increasing responsibility for publicly traded oil and gas companies, bringing financial experience in all aspects of financial and corporate compliance reporting, treasury and risk management, operational efficiencies, acquisitions and asset divestitures, and corporate restructuring.
Dixie Energy is expanding its technical and leadership team with the appointment of Mr. Chris Birchard as VP Geosciences of Dixie Energy effective August 1, 2014. Mr. Birchard is a professional geologist with 18 years experience in the oil and gas industry and throughout his career has been instrumental in building shareholder value through a combination of exploitation, new pool discoveries and acquisitions.
About Dixie Energy Trust
Dixie is an energy trust created to provide investors with an oil and gas exploration focused investment. The strategy of Dixie is to acquire, exploit and develop, indirectly through its subsidiaries, long-life crude oil and gas prospects and reserves in the United States gulf coast states, primarily in Mississippi and Alabama. Additional information is available on http://www.DixieEnergyTrust.com
Forward Looking Statement Disclaimer
Certain statements included in this news release constitute forward looking statements or forward looking information under applicable securities legislation. Such forward looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this news release include, but are not limited to the anticipated closing date of the Acquisition, the source of financing to complete the Acquisition, the expected attributes of the properties acquired pursuant to the Acquisition, Dixie's pro-forma land and reserve position subsequent to the Acquisition and the anticipated benefits of certain recent management appointments on Dixie. In addition, information and statements herein relating to "reserves" are deemed to be forward-looking information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.
Forward looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although Dixie believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because Dixie can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this news release, assumptions have been made regarding, among other things, the terms of the PSA will remain the same and will not be subject to amendment or termination, the Acquisition will close at the time, and in the manner, described herein and Dixie will realize the benefits from certain new management appointments as described herein. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Dixie and described in the forward looking statements or information. These risks and uncertainties which may cause actual results to differ materially from the forward looking statements or information include, among other things, changes to the terms of the PSA and failure to complete the Acquisition in a timely manner (or at all). Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties. Additional information on these and other factors that could affect Dixie's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
The forward looking statements or information contained in this news release are made as of the date hereof and Dixie undertakes no obligation to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this news release are expressly qualified by this cautionary statement.
Advisory Regarding Oil and Gas Information
Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil 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 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 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
There are numerous uncertainties inherent in estimating quantities of crude oil and natural gas reserves and the future cash flows attributed to such reserves. The reserve and associated cash flow information set forth above are estimates only. In general, estimates of economically recoverable crude oil and natural gas reserves and the future cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For those reasons, estimates of the economically recoverable crude oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. Dixie's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.
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SOURCE Dixie Energy TrustFor further information:
Ian K. Atkinson, President & CEO or David G. Anderson, Chairman T: 403 232 1010