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CALGARY, April 25, 2013 /CNW/ - Dixie Energy Trust ("Dixie") is pleased to announce two proposed acquisitions, proposed private placement financings, a proposed pooling arrangement and management changes, and provides an operational update.
Maple Branch Land Acquisition
A subsidiary of Dixie has entered into a purchase and sale agreement (the "Purchase Agreement") with a third party (the "Vendor") pursuant to which Dixie has agreed to acquire 100% of the working interest in certain oil and gas leases and related assets (the "Maple Branch Land Acquisition"). The purchase price of the Maple Branch Land Acquisition is US$22,932,320 cash, subject to adjustment, and the grant of certain overriding royalty interests to the Vendor. Closing of the Maple Branch Land Acquisition is subject to the completion of due diligence and is scheduled to occur on or before May 23, 2013.
The oil and gas leases to be acquired are contiguous to Dixie's existing oil and gas leases in the Monroe and Lowndes Counties, Mississippi (the "Maple Branch Prospect") where Dixie has successfully drilled two horizontal wells into the Lewis and Sanders formations (the "Holliman #1" and "Holliman #2"). The Maple Branch Land Acquisition would give Dixie access to a significant land base that Dixie believes has multi-zone resource exploration opportunities.
Fletcher Exploration, LLC ("Fletcher") was the original purchaser under the Purchase Agreement. Fletcher assigned the Purchase Agreement to Dixie (the "Assignment") and Dixie reimbursed Fletcher for its expenses, including a deposit Fletcher paid to the Vendor (US$250,000). Rick Fletcher is the Chief Executive Officer, the controlling shareholder and a director of Fletcher. 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."). Ed Hollingsworth is a director of Dixie U.S. and is also the Vice President Geology of Fletcher. The Assignment was approved by the Administrator's board of directors with Mr. Fletcher abstaining. The Assignment is exempt from the valuation and minority approval requirements of Multilateral Instrument 61-101.
Brokered and Non-Brokered Financings
Dixie has entered into an engagement agreement with Raymond James Ltd. ("Raymond James") on behalf of a proposed syndicate of agents (the "Agents") pursuant to which Raymond James 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 a minimum of 31,250,000 Units and a maximum of 43,750,000 Units at a price of C$0.80 per Unit for total gross proceeds of up to C$35,000,000. Dixie intends to use the net proceeds of the Financings to fund the purchase price payable to the Vendor under the Purchase Agreement and related transaction costs, to fund Dixie's 2013 capital expenditure program, and to fund Dixie's working capital requirements.
The Brokered Financing is currently scheduled to close on or before May 23, 2013, subject to customary closing conditions, including the negotiation of an agency agreement, and it will close concurrently with the Maple Branch Land Acquisition. The Non-Brokered Financing is currently scheduled to close on or before May 17, 2013.
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 four month 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.
Proposed Acquisition of Private Company
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 may acquire a subsidiary of PrivateCo Vendor ("PrivateCo") for a purchase price of C$12.1 million (the "PrivateCo Acquisition"), consisting of C$2.5 million cash and C$9.6 million in Units to be issued at a deemed price of C$0.80 per Unit, for a total issuance of 12 million 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 the 14,100 acre 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 4,100 acres of oil and gas leases in the Brooklyn Field prospect area (the "Brooklyn Field Prospect"). The Brooklyn Field 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 Brooklyn Field Prospect and PrivateCo, in conjunction with other third parties, has recently shot 3D seismic over a 27 square mile area including the Brooklyn Field Prospect. PrivateCo currently has production of approximately 96 boepd (97% 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 (excluding Mr. Atkinson), receipt of unitholder approval (if required), receipt of a fairness opinion, and other customary conditions of closing.
Proposed Combination of Interests in the Maple Branch Prospect
Subsidiaries of Dixie and Fletcher have entered into a memorandum of understanding (the "MOU") setting forth the terms on which Dixie, Fletcher and other third party working interest owners in the Maple Branch Prospect who elect to participate may combine and reallocate certain of their respective interests in the Maple Branch Prospect, including the lands to be acquired by Dixie pursuant to the Maple Branch Land Acquisition (the "Maple Branch Pooling Proposal").
The Maple Branch Pooling Proposal is subject to the closing of the Maple Branch Land Acquisition, completion of due diligence, mutual agreement on the structure of the pooling arrangement, negotiation of definitive agreements, receipt of board approvals (excluding Mr. Fletcher), receipt of unitholder approval (if required), receipt of a fairness opinion, and other customary conditions of closing.
If the Maple Branch Land Acquisition and the PrivateCo Acquisition both close and the Maple Branch Pooling Proposal proceeds, in each case on the terms currently contemplated, Dixie anticipates that it would:
- increase its average working interest in the Maple Branch Prospect to approximately 53%, covering approximately 25,249 mineral leasehold acres or 13,386 net acres;
- acquire a 25% average working interest in the Brooklyn Field Prospect, covering approximately 4,100 mineral leasehold acres or 1,025 net acres; and
- have production of approximately 217 boepd (approximately 98% oil).
Executive Leadership Changes
Dixie has accepted the resignation of Mr. Rick Fletcher as Chief Executive Officer of the Administrator. Mr. Fletcher will be focusing on Dixie's US operations and will remain Chief Executive Officer of Dixie U.S. and a member of the Administrator's board of directors. Mr. David Anderson remains President of the Administrator and will oversee the day-to-day operations of Dixie. The Board has appointed Mr. Ian Atkinson as Chairman of the Administrator to assist Mr. Anderson and Dixie's executive team.
Operations Update and Asset Overview
Maple Branch Assets
Dixie's current interests in the Maple Branch Prospect include a 10% working interest in 14,100 acres of oil and gas leases and the opportunity to earn: (i) a 15% working interest in the first, third and fourth wells; (ii) a 20% working interest in the second well; and (iii) a 10% working interest in subsequent wells drilled in the Maple Branch Prospect.
Between October 2012 and February 2013, Dixie participated in the drilling and completion of two horizontal oil wells, the Holliman #1 and Holliman #2, in the Maple Branch Prospect. The Holliman #1 well, in which Dixie has earned a 15% working interest, commenced production on March 28, 2013, and the Holliman #2 well, in which Dixie has earned a 20% working interest, commenced production on March 22, 2013. The Holliman #1 well has produced an average of 236 bopd since it commenced production, and is currently producing approximately 300 bopd. The Holliman #2 well has produced an average of 359 bopd since it commenced production, and is currently producing approximately 295 bopd. 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, Dixie will have an average working interest of 12% in these wells. If the Maple Branch Land Acquisition, the PrivateCo Acquisition and the Maple Branch Pooling Proposal all close on the terms currently proposed, Dixie anticipates its average working interest in the five wells will be approximately 33%.
Strong Field Prospect
Dixie has a 45% working interest in 3,801 acres (1,710 net acres) of undeveloped mineral leases in the Strong Field prospect area in Monroe County, Mississippi. Dixie does not currently anticipate drilling a well in the Strong Field prospect area until 2014.
Hamilton & West McKinnley Creek Prospect
Dixie has a 57.5% working interest in 1,208 acres (695 net acres) of undeveloped mineral leases in the Hamilton & West McKinnley Creek prospect area in Monroe County, Mississippi. Dixie does not currently anticipate drilling a well in the Hamilton & West McKinnley Creek prospect area until 2014.
Godwin 31-3 Oil Well
In January 2013, Dixie purchased a 5% working interest in the Pruet Godwin 31-3 well in Brooklyn Field, Conecuh County, Alabama. The Pruet Godwin 31-3 well has produced an average of 336 boepd since it commenced production in April 2011, and as of January 31, 2013 it was producing approximately 277 boepd (93% oil).
White Castle Dome Prospect
Dixie is participating in the drilling of the Forest Homes #1 well in the White Castle Dome prospect area in Iberville Parish, Louisiana. Dixie has a 9.9% working interest in the White Castle Dome prospect area.
Production and Financial Update
Dixie's current production is approximately 121 boepd (99% oil).
Dixie currently has 30,156,410 Units outstanding and working capital of approximately C$3.0 million. If the Financings are fully subscribed Dixie will have 73,906,410 Units outstanding. If the Financings are fully subscribed and the PrivateCo Acquisition proceeds on the terms set forth in the LOI, Dixie will have 85,906,410 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
"boepd" means barrels of oil equivalent per day. "bopd" means barrels of oil 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 Maple Branch Land 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 Maple Branch Land Acquisition and PrivateCo Acquisition; the effect of the proposed Maple Branch Pooling Proposal on Dixie's ownership and working interests in certain prospect areas (based on the anticipated closing of each of the Maple Branch Land Acquisition and PrivateCo Acquisition); matters in relation to the Financings, including the anticipated closing dates and use of proceeds thereof; the anticipated resources potential of the Maple Branch Prospect; Dixie's plans to participate in five additional horizontal wells in Maple Branch in the second half of 2013; Dixie's anticipated pro-forma working interest in certain wells provided the Maple Branch Land Acquisition, the PrivateCo Acquisition and the Maple Branch Pooling Proposal are all completed on the terms presently contemplated; Dixie's current intentions and plans not to drill any wells in the Strong Field and Hamilton & West McKinnley Creek prospect areas until 2014; 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 Maple Branch Land Acquisition, the PrivateCo Acquisition and the Maple Branch Pooling Proposal are all completed in the manners and on the terms described herein; the resources potential of the Maple Branch Prospect; 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; the waiver of third party rights to exercise rights of first refusals (or similar rights) in relation to the properties subject to Dixie's proposed acquisitions; the number of and price of Trust Units issued pursuant to the Financings; 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 on adequate terms to complete the acquisitions 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, 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.
© 2013 Dixie Energy Trust
All rights reserved. All other trademarks are the property of their respective owners.
SOURCE: Dixie Energy Trust
For further information:
David G. Anderson
T: 403 232 1010