CALGARY, Dec. 21 /CNW/ - Sure Energy Inc. (SHR, TSX) ("Sure Energy" or "the Company") is pleased to announce that it has now closed its previously announced $20 million secured subordinated note loan facility (the "Secured Note Facility") with Deans Knight Capital Management Ltd. ("Deans Knight") on behalf of certain investors (the "Note Holders").
At a meeting held on December 20, 2010 Sure Energy shareholders voted 99.7% in favour of the Company entering into the Secured Note Facility with Deans Knight. As Deans Knight is a related party to the Company it was restricted from voting its shares on this transaction.
The drawn portion of the Secured Note Facility bears interest at 6.25 percent per annum, payable quarterly. The undrawn portion bears a standby fee of 0.25 percent. Warrants to purchase 2.5 million common shares at a price of $1.80 per share were issued as additional consideration to the Note Holders. The Company has the ability to force the Note Holders to exercise the warrants if the weighted average price per share of Sure Energy equals or exceeds $2.80 per share for 20 consecutive trading days. The notes mature and the warrants expire 36 months from the date of closing. The Company was required to initially draw down a minimum of $10 million. Additional draws on the Secured Note Facility may be made at the Company's option in minimum tranches of $2.5 million. The Secured Note Facility replaces the Company's existing $5 million non-revolving acquisition/development demand loan. The Company's $15 million revolving operating demand loan will remain in place.
As a result of closing the Secured Note Facility, its recent drilling success and higher oil price the Company has elected to increase its 2010 and 2011 Capital budgets to $20 million for each year.
Sure Energy recently completed drilling the fifth well of its North Redwater program. The well 11-2, which was drilled in the adjacent spacing unit to the Company's Viking oil wells announced in press releases on August 18, 2010 and October 27, 2010, should be production tested prior to Christmas. Sure Energy has two more locations to drill in its current drilling program at North Redwater, one of which will evaluate a less proven land block to the north and one which will be in the core productive area.
The Company currently has four new producing horizontal wells at North Redwater. The 3-2 and 6-2 wells which initially flowed, have recently been converted to pumping oil wells. Production from both of these wells is still being optimized but they are producing from 120 to 150 barrels of oil per day per well. The 5-26 and 6-35 wells flowed intermittently on test so were equipped as pumping oil wells. Both wells have been on production for approximately a week and rates are still being optimized but both project to be "average" wells for the trend at 50 to 60 barrels of oil per day. All the wells are open hole dual lateral horizontal wells.
At Queensdale the Company announced a successful oil well on September 27, 2010. This well came on production on October 3, 2010 and has already produced more than 14,000 barrels of oil. It is currently producing 200 barrels of oil per day. Sure Energy plans to drill a direct offset location in February 2011 and a further follow-up in the third quarter of 2011.
The Company intends to spend all of its 2011 drilling budget on the light oil projects at Redwater and Queensdale. Currently production for the fourth quarter of 2010 is projected to be 1,230 BOE/d of which 500 barrels are light oil and liquids.
Sure Energy Inc. is a publicly traded oil and gas exploration and development company listed on the Toronto Stock Exchange under the symbol "SHR".
In this press release the calculation of barrels of oil equivalent (BOE) is calculated at a conversion rate of 6,000 cubic feet (Mcf) of natural gas for one barrel (bbl) of oil based on an energy equivalency conversion method. 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.
Certain statements contained in this release constitute forward-looking information. These statements relate to future events or Sure Energy's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on Sure Energy's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, statements pertaining to production testing of the Company's fifth well at North Redwater, expected production from the North Redwater wells, drilling intentions at Queensdale, intentions with respect to the Company's 2011 drilling budget and fourth quarter exit production contain forward looking information. Sure Energy's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Sure disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
For further information: For further information: please visit our website at www.sureenergyinc.com or contact: Mr. Jeff Boyce, Chairman and CEO, Mr. Chris Baker, President and COO, Mr. Lance Wirth, Vice President, Finance and CFO, Phone: (403) 410-3100, Fax: (403) 410-3111, Email: [email protected]