Dixie Energy Announces Proposed Private Placement Financing and Updates on Proposed Acquisitions and Operations
13 Jun, 2013, 10:52 ET
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CALGARY, June 13, 2013 /CNW/ - Dixie Energy Trust ("Dixie") is pleased to announce a proposed private placement financing and provide an update on its proposed acquisitions and operational activities.
Brokered and Non-Brokered Financings
Dixie has entered into an engagement agreement with Casimir Capital Ltd. ("Casimir") as lead agent on behalf of a syndicate of investment dealers (the "Agents") pursuant to which Casimir has agreed to use its reasonable commercial efforts to solicit subscriptions for trust units ("Units") of Dixie (the "Brokered Financing"). Dixie is also concurrently conducting a non-brokered private placement of Units (the "Non-Brokered Financing", and together with the Brokered Financing, the "Financings"). Pursuant to the Financings, Dixie will issue up to 15,000,000 Units at a price of C$0.80 per Unit for total gross proceeds of up to C$12,000,000. A maximum of 8,750,000 Units will be issued pursuant to the Non-Brokered Financing. Dixie intends to use the net proceeds of the Financings to fund the purchase of additional working interests (the "Additional Working Interests") in certain oil and gas leases located in Mississippi and Alabama in which it currently holds an interest (the "Fletcher Acquisition"), the details of which were announced on May 30, 2013 and are set out below, and to fund Dixie's 2013 capital expenditure program and for general working capital requirements.
The Financings are currently scheduled to close on or before June 28, 2013, subject to customary closing conditions, including the negotiation of an agency agreement, and will close concurrently with the Fletcher Acquisition.
The Units will be sold on a private placement basis in each of the provinces of Canada pursuant to applicable prospectus exemptions and in such other jurisdictions as the Agents and Dixie may agree to. The Units sold pursuant to the Financings will be subject to a statutory hold period in Canada expiring four months and a day after the date the Units are issued. The Units have not been registered under the United States Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United Stated unless registered under the Act or unless an exemption from registration is available.
As announced in Dixie's press release issued on May 30, 2013, Dixie has entered into a non-binding memorandum of understanding (the "MOU") with Fletcher Exploration, LLC ("Fletcher") setting forth the terms on which Dixie intends to acquire the Additional Working Interests for a purchase price of US$5,500,000. Pursuant to the MOU, Fletcher has agreed to sell to Dixie: (i) an additional 20% working interest in certain oil and gas leases in Monroe and Lowndes Counties, Mississippi (the "Maple Branch Prospect") with a gross acreage of approximately 15,100 acres, increasing Dixie's average working interest to approximately 30% in the Maple Branch Prospect; (ii) an additional 15% 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 to approximately 60% in the Strong Field Prospect; and (iii) a 25% working interest in certain oil and gas leases with a gross acreage of approximately 3,940 acres in Conecuh and Escambia Counties, Alabama (the "Queens Prospect", formerly called the Brooklyn Field prospect). No reserves have been assigned to the Additional Working Interests and no production is being acquired pursuant to the Fletcher Acquisition.
Rick Fletcher is the Co-Managing Member of Fletcher and the controlling shareholder, Chief Executive Officer and a director of Fletcher Petroleum Corp. ("Fletcher Petroleum"), Fletcher's operating company. Mr. Fletcher is also a director of the administrator of Dixie (the "Administrator") and the Chief Executive Officer of Dixie Energy Holdings (US), Ltd. (a wholly-owned subsidiary of Dixie) ("Dixie U.S."). Dan Sloan is the Co-Managing Member of Fletcher, a President, director and shareholder of Fletcher Petroleum and the President of Dixie U.S. Ed Hollingsworth is a director of Dixie U.S. and is the Vice President Geology of Fletcher Petroleum and Christen Burkett is the Secretary-Treasurer of Dixie U.S. and the Vice President of Administration of Fletcher Petroleum.
The Fletcher Acquisition is subject to the completion of due diligence, negotiation of a definitive agreement, receipt of board approvals of the Administrator (excluding Mr. Fletcher) and Fletcher, receipt of unitholder approval of Dixie (if required) and shareholder approval of Fletcher (if required), receipt of a fairness opinion and other customary conditions of closing. The Fletcher Acquisition is not contingent on the completion of the PrivateCo Acquisition (defined below).
If the Fletcher Acquisition closes on the terms currently contemplated, Dixie anticipates that it would:
- increase its average working interest in the Maple Branch Prospect to approximately 30%, covering approximately 15,100 mineral leasehold acres or 4,530 net acres;
- increase its average working interest in the Strong Field Prospect to approximately 60%, covering approximately 3,800 mineral leasehold acres or 2,280 net acres; and
- acquire a 25% average working interest in the Queens Prospect, covering approximately 3,940 mineral leasehold acres or 985 net acres.
Transactions with Private Company
Proposed Acquisition of Private Company - Amended LOI Terms
As announced on April 25, 2013, Dixie and a private company ("PrivateCo Vendor") have entered into a non-binding letter of intent (the "LOI") setting forth the terms on which Dixie intends to acquire (the "PrivateCo Acquisition") a subsidiary of PrivateCo Vendor ("PrivateCo"). The purchase price has been amended from C$12,100,000 to C$11,812,764, consisting of C$2,500,000 cash and C$9,312,764 in Units to be issued at a deemed price of C$0.80 per Unit, for a total issuance of 11,640,955 Units (the "Acquisition Units").
PrivateCo currently holds a working interest in certain oil and gas leases, wells and related infrastructure, including: (i) a 10% interest in approximately 14,100 acres of oil and gas leases in the Maple Branch Prospect including a 10% working interest in the Holliman #1 and Holliman #2 wells; (ii) a 10% working interest in a producing oil well located in the Brooklyn Field in Conecuh County, Alabama; and (iii) a 25% working interest in approximately 3,940 acres of oil and gas leases in the Queens Prospect, formerly called the Brooklyn Field prospect. The Queens Prospect is located south of existing vertical wells producing out of the Smackover formation. A third party is currently drilling to the south of the Queens Prospect and PrivateCo, in conjunction with other third parties, has recently shot 3D seismic over a 27 square mile area including the Queens Prospect. PrivateCo has indicated to Dixie that it currently has production of approximately 71 boepd (85% oil).
Mr. Ian Atkinson, a director and the Chairman of the Administrator, is the controlling shareholder and a director and officer of the PrivateCo Vendor. The PrivateCo Acquisition is subject to the completion of due diligence, negotiation of definitive agreements (including an escrow agreement pursuant to which the Acquisition Units will be escrowed), receipt of board approvals of the Administrator (excluding Mr. Atkinson) and PrivateCo Vendor, receipt of unitholder approval of Dixie (if required) and shareholder approval of PrivateCo, receipt of a fairness opinion, and other customary conditions of closing. The PrivateCo Acquisition is not contingent on the completion of the Fletcher Acquisition.
If the Fletcher Acquisition and the PrivateCo Acquisition both close on the terms currently contemplated, Dixie anticipates that it would:
- increase its average working interest in the Maple Branch Prospect to approximately 40%, covering approximately 15,100 mineral leasehold acres or 6,040 net acres;
- increase its average working interest in the Strong Field Prospect to approximately 60%, covering approximately 3,800 mineral leasehold acres or 2,280 net acres;
- acquire a 50% average working interest in the Queens Prospect, covering approximately 3,940 mineral leasehold acres or 1,970 net acres; and
- have production of approximately 150 boepd (approximately 84% oil), based on Dixie's average daily production in May and PrivateCo's current production.
Farm-in with Private Company
Subsidiaries of Dixie and PrivateCo Vendor have entered into a "farm-in" agreement (the "Farm-in Agreement") on the next four wells scheduled to be drilled in the Maple Branch Prospect prior to the closing of the PrivateCo Acquisition, whereby Dixie will pay 100% of the costs of drilling, completing and equipping the wells to earn 50% of PrivateCo Vendor's interest in the wells.
Maple Branch Prospect Update
In May, the Holliman #1 well produced an average of 145 boepd (22 boepd net) (95% oil) and the Holliman #2 well produced an average of 235 boepd (47 boepd net) (74% oil). All natural gas production is currently being flared. Readers are cautioned that initial production rates are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons. See "Oil and Gas Disclaimers" below.
In the second half of 2013, Dixie plans to participate in five additional horizontal wells in the Maple Branch Prospect. Under its current agreements (including the Farm-in Agreement), Dixie will have a working interest of 20% in the next two wells, 15% in following two wells and then 10% in the fifth well. If the Fletcher Acquisition closes on the terms currently proposed, Dixie anticipates its working interest will be 35% in the next four wells and 30% in the fifth well. If the Fletcher Acquisition and the PrivateCo Acquisition both close on the terms currently proposed, Dixie anticipates its working interest in the five wells will be 40%.
Production and Financial Update
Dixie's average daily production for the month of May was approximately 79 boepd (82% oil). If the PrivateCo Acquisition closes on the terms currently proposed, Dixie's pro forma production would be approximately 150 boepd (84% oil), based on Dixie's average daily production in May and PrivateCo's current production.
Dixie currently has 30,156,410 Units outstanding and cash reserves of approximately C$2.4 million. If the Financings are fully subscribed Dixie will have 45,156,410 Units outstanding. If the Financings are fully subscribed and the PrivateCo Acquisition proceeds on the terms set forth in the LOI, Dixie will have 56,797,365 Units outstanding.
Further information in respect of Dixie can be accessed via the SEDAR website at www.sedar.com.
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.
Oil and Gas Disclaimers
"boe" means barrels of oil equivalent. "boepd" means barrels of oil equivalent per day. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
Any references in this news release to initial, early and/or test or production/performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Dixie. The initial production rate may be estimated based on other third party estimates or limited data available at this time. In all cases in this news release initial production or test are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
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 Fletcher Acquisition, including the anticipated purchase price and closing date thereof; the PrivateCo Acquisition including the anticipated purchase price and closing date thereof; the anticipated assets to be acquired pursuant to each of the Fletcher Acquisition and PrivateCo Acquisition; Dixie's pro-forma acreage ownership and working interests in certain prospect areas (based on the anticipated closing of each of the Fletcher Acquisition and PrivateCo Acquisition) and the net production attributable to Dixie provided such acquisitions are completed; matters in relation to the Financings, including the anticipated number of Units to be issued pursuant thereto as well as the anticipated closing date and use of proceeds thereof; the anticipated conditions to closing each of the Fletcher Acquisition and the PrivateCo Acquisition; Dixie's plans to participate in five additional horizontal wells in the Maple Branch Prospect in the second half of 2013; Dixie's anticipated pro-forma working interest in certain wells provided the Fletcher Acquisition and the PrivateCo Acquisition are all completed on the terms presently contemplated; Dixie's future obligations and earning potential in relation to its Farm-in Agreement with the PrivateCo Vendor; and the number of trust units Dixie expects will be outstanding, provided the PrivateCo Acquisition and the Financings are completed on the terms set forth herein.
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 Fletcher Acquisition and the PrivateCo Acquisition are all completed in the manners and on the terms described herein; the Financings are completed in the manner and on the terms described herein; the timely receipt of any required third party and regulatory approvals; the ability of Dixie to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability of the operator of the projects which Dixie has an interest in to operate the field in a safe, efficient and effective manner; the ability of Dixie to obtain financing on acceptable terms (including to finance the acquisitions described herein); field production rates which productions estimates are based on, including pro-forma production estimates, will remain consistent; the number of and price of Trust Units issued pursuant to the Financings; Dixie fulfills its obligations with the PrivateCo Vendor in relation to its Farm-in Agreement with such party; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Dixie operates; and the ability of Dixie to successfully market its oil and natural gas products. 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: the ability of management to execute its business plan; the inability of Dixie to secure financing (including the Financings) on adequate terms to complete the acquisitions and farm-in obligations described herein; the risk that the acquisitions and other transactions described herein may be amended or terminated as a result of due diligence outcomes, or otherwise; the risk that management's assessment of the resource potential of its properties, including the Maple Branch Prospect, the Strong Filed Prospect and the Queen's Prospect is incorrect; the risk that Dixie or other third parties may not be able to satisfy the conditions to close the transactions described herein; the risk that Dixie may not complete the Financings in the manner described herein, or at all; general economic and business conditions; the risk of instability affecting the jurisdictions in which Dixie operates; the risks of the oil and natural gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas and market demand; risks and uncertainties involving geology of oil and natural gas deposits; the ability of Dixie to add production and reserves through acquisition, development and exploration activities; Dixie's ability to enter into or renew leases; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and natural gas prices, foreign currency exchange rates and interest rates; risks inherent in Dixie's marketing operations, including credit risk; health, safety and environmental risks; risks associated with existing and potential future law suits and regulatory actions against Dixie; and uncertainties as to the availability and cost of financing. Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.
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.
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© 2013 Dixie Energy Trust
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SOURCE: Dixie Energy Trust
For further information:
David G. Anderson
T: 403 232 1010
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