August 27, 2018 - 8:08 PM EDT
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Front Range Resources Ltd. and Arrow Exploration Ltd. Announce Mailing of Information Circular and Transaction Updates

Front Range Resources Ltd. and Arrow Exploration Ltd. Announce Mailing of Information Circular and Transaction Updates


Calgary, Alberta (FSCwire) - Front Range Resources Ltd. (“FRK” or “Front Range”) (TSXV: FRK) and Arrow Exploration Ltd. (“Arrow”) are pleased to announce that further to the news release dated June 4, 2018, Front Range has mailed the information circular (the “Information Circular”) in connection with its annual general and special meeting to be held on September 21, 2018 (the “Meeting”).


FRK and Arrow entered into an arrangement agreement dated as of June 1, 2018, as amended (the “Arrangement Agreement”) whereby FRK and Arrow will complete a business combination (the “Arrangement”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (Alberta) (the “ABCA”). At the Meeting, shareholders of Front Range will be asked to consider and vote upon the acquisition of all of the issued and outstanding securities of Arrow Exploration Ltd. (“Arrow”) pursuant to the Arrangement. 


In addition, shareholders of Front Range will be asked to approve, among other things: (i) the consolidation of the issued and outstanding FRK Shares on the basis of one (1) post-consolidation FRK Share for every 8.5 pre-consolidation FRK Shares (the “Consolidation”); (ii) the change of name to “Arrow Exploration Ltd.” (the “Name Change”); and (iii) the reduction of Front Range’s share capital, (collectively, the “FRK Meeting Matters”).


Upon completion of the Transaction (as defined below), the resulting entity (“New Arrow, as defined below) will be led by Gary Wine as Chief Executive Officer, John Newman as Chief Financial Officer and Jack Scott as Chief Operating Officer. The board of directors of New Arrow will consist of Bruce McDonald as Executive Chairman, James McFarland, Dominic Dacosta, Steven Smith, Ravi Sharma and Dr. Luis Baena, in addition to Mr. Wine.


Updated Summary of the Plan of Arrangement and Related Transactions


Pursuant to the Arrangement, among other things, each common share of Arrow will be exchanged for 8.5 common shares of FRK (“FRK Shares”) and Arrow will amalgamate with 2118295 Alberta Ltd. (“FRK Subco”), a wholly-owned subsidiary of FRK, to form an amalgamated corporation (“Amalco”), which will be a wholly-owned subsidiary of FRK. The Arrangement will constitute a reverse takeover (“RTO”) of FRK and FRK will carry on the business currently carried on by Arrow and FRK under the name “Arrow Exploration Ltd.” (“New Arrow”). New Arrow expects to be listed on the TSXV as a
Tier 1 Oil and Gas issuer.


In addition, Arrow and Canacol Energy Ltd. (“Canacol”) (TSX: CNE) entered into a share purchase agreement dated as of May 31, 2018, as amended (the “Canacol SPA”), pursuant to which Arrow will acquire Carrao Energy Ltd. (“Carrao”), a Panamanian corporation and wholly-owned subsidiary of Canacol immediately prior to the closing of the Arrangement (“Closing”). As consideration under the Canacol SPA, Canacol will receive US$20 million (by way of cash at closing in the amount of US$15 million, together with a promissory note in the amount of US$5 million to be paid within four months of closing, at an interest rate of 15% per annum) and US$20 million in common shares of Arrow (“Arrow Shares”), subject to customary adjustments. In addition, if within five years of closing the proven and probable reserves associated with Carrao’s oil and gas properties increases to at least 18 million barrels of oil (or, in the case of natural gas, barrels of oil equivalent) subject to certain adjustments, then Arrow shall pay to Canacol a US$5 million bonus. Canacol will participate in the Brokered Financing (defined below) for a subscription of US$5 million, thus bringing Canacol’s total interest in Arrow Shares to US$25 million.


In connection with the Canacol SPA, Arrow and Samaria Exploration & Production S.A. (“Samaria”) have entered into an asset purchase agreement dated as of May 31, 2018, as amended (the “Samaria APA” and together with the Canacol SPA, the “Colombia Acquisitions”), pursuant to which Arrow will acquire a 50% beneficial interest in an undeveloped block in Colombia’s Llanos Basin from Samaria immediately prior to Closing. As consideration under the Samaria APA, Samaria will receive US$10 million in Arrow Shares plus a bonus of 500,000 additional Arrow Shares. In addition, if there is a commercial discovery declared at Rio Cravo Este during the term of the existing contract, Arrow shall pay to Samaria a US$500,000 bonus. In order to facilitate the increased purchase price of Samaria, Mr. McDonald and Mr. Newman have reduced their collective ownership of Arrow by 500,000 shares.


In connection with the Arrangement Agreement, FRK will complete a private placement of up to one million units of FRK (“FRK Units”) at a price of not less than US$1.00 per FRK Unit, for aggregate gross proceeds of approximately US$600,000 (the “Private Placement”) and Arrow has entered into an agreement, as amended, with Macquarie Capital Markets Canada Ltd. (“Macquarie Capital”) as sole bookrunner and co-lead agent and Haywood Securities Inc. as co-lead agent, on behalf of a syndicate of agents (collectively, the “Agents”), to effect a brokered private placement offering of subscription receipts (the “Subscription Receipts”) on a best efforts agency basis (the “Brokered Financing” and together with the Private Placement, the “Concurrent Financings”) for minimum aggregate gross proceeds of the Concurrent Financings of US$18 million. Each holder of Subscription Receipts will receive one (1) Arrow Share and one (1) common share purchase warrant of Arrow (an “Arrow Warrant”) for each Subscription Receipt held in connection with the Arrangement. The terms of the Concurrent Financings are outlined below under the heading “Concurrent Financings”.


Collectively, the Arrangement, the transactions contemplated by the Colombia Acquisitions and the Concurrent Financings are referred to herein as the “Transaction”. The Transaction is expected to close before the end of September, 2018.


Directors, officers and certain shareholders holding 12.96% of the issued and outstanding FRK Shares have entered into lock-up agreements with Arrow pursuant to which they have agreed to vote their FRK Shares in favour of the FRK Meeting Matters. All of the Arrow Shareholders have entered into lock-up agreements with Front Range pursuant to which they have agreed to vote their Arrow Shares in favour of the Arrangement.


For a description of the benefits of the Arrangement and related transaction and an overview of New Arrow, please refer to the Information Circular filed on Front Range’s SEDAR profile.


In addition to the placements, the management of Arrow has secured a non-binding letter of intent for a senior secured credit facility of US$20-25 million from a globally recognized lender.


“With the US$18 million equity raised and the additional US$20-25 million of credit, Arrow expects to be able to fully fund its long-term business plan” said John Newman, CFO of Arrow.


Operational Update


Arrow’s first exploration well, Danes-1, is expected to be spud by mid-to-late October, 2018. Danes-1 is a lower risk exploration prospect on the Llanos-23 Block. A successful well could be brought onstream almost immediately, owing to the short tie-in to the existing pipeline on the Block. A drilling rig has been sourced and contracted, subject to inspection.


Arrow has identified a number of Llanos-23 wells for new zone recompletion. Five of these wells are in close proximity to the Danes exploration well and will be recompleted with a service rig later this year. New producing horizons have been identified to access previously unproduced oil and production additions are estimated to be a risked 200 bbl/d per well.


At close, production (including Canada) is expected to be approximately 1,500 boe/d.


The Arrangement


FRK entered into the Arrangement Agreement with Arrow and FRK Subco, pursuant to which Arrow and FRK Subco will amalgamate to form Amalco, which will be a wholly-owned subsidiary of FRK and will result in an RTO of FRK. In connection with the Arrangement, FRK intends to effect the Consolidation and Name Change.


The Transaction is an Arm’s Length Transaction and the number of FRK Shares to be issued in connection with the Arrangement was determined pursuant to arm’s length negotiations between each of FRK and Arrow. Pursuant to the Transaction, and assuming the minimum proceeds are raised pursuant to the Concurrent Financings, Arrow Shareholders (including holders of Subscription Receipts), and the insiders of Arrow and other investors who will participate in the Private Placement, will be issued an aggregate of 61,898,305 FRK Shares on a post-Consolidation basis (“New Arrow Shares”) in exchange for their Arrow Shares. In addition, holders of Arrow Warrants will receive an aggregate of 18,000,000 common share purchase warrants, on a post-Consolidation basis, of New Arrow (“New Arrow Warrants”).


Upon the Closing of the Transaction, the amalgamated entity Amalco will be wholly-owned by FRK. The Transaction will result in an RTO and FRK, as New Arrow will carry on the business theretofore carried on by Arrow and FRK.


It is anticipated that the issued and outstanding capital of New Arrow, assuming the minimum proceeds are raised pursuant to the Concurrent Financings, will consist of 68,351,842 New Arrow Shares, on a post-Consolidation basis. As a result: (i) existing FRK Shareholders will hold an aggregate of 6,453,537 New Arrow Shares representing approximately 9.4% of the outstanding New Arrow Shares; and (ii) former Arrow Shareholders (including former holders of Subscription Receipts) will hold an aggregate of 61,898,305 New Arrow Shares representing approximately 90.6% of the outstanding New Arrow Shares.


Completion of the Arrangement is subject to the satisfaction of a number of conditions, including, but not limited to: (a) completion of the Concurrent Financings; (b) completion of the Colombia Acquisitions; (c) approval of the FRK Meeting Matters by FRK’s shareholders by the requisite threshold, all in accordance with the applicable provisions of the ABCA and the policies of the TSXV; and (d) all necessary third party and regulatory and governmental approvals, including the approval of the Plan of Arrangement by order of the Court of Queen’s Bench of Alberta.


Trading of FRK Shares are currently halted pending review by the TSXV.


Concurrent Financings


It is a condition to the Closing of the Colombia Acquisitions and the Arrangement that the Concurrent Financings be completed at a price of not less than US$1.00 per Subscription Receipt or US$1.00 per FRK Unit, as applicable, for minimum aggregate gross proceeds of US$18 million.


Each FRK Unit subscribed for under the Private Placement will be comprised of eight and one-half (8.5) pre-Consolidation FRK Shares and eight and one-half (8.5) pre-Consolidation FRK Share purchase warrants, eight and one-half (8.5) of which FRK Units will entitle the holder, upon completion of the Arrangement, to one New Arrow Share and one New Arrow Warrant.


Each Subscription Receipt shall evidence the right to receive one (1) unit of Arrow (each, an “Arrow Unit”) upon satisfaction of certain escrow release conditions, each Arrow Unit being comprised of one (1) Arrow Share and one full Arrow Warrant, which Subscription Receipts shall automatically convert, without payment of any additional consideration and without further action on the part of a subscriber immediately prior to the Closing of the Transaction. Each Arrow Warrant shall entitle the holder thereof to acquire one Arrow Share at a price per Arrow Share of US$1.30 (or Canadian dollar equivalent) for a period of 24 months following the completion of the Transaction.


The gross proceeds of the Brokered Financing will be held in escrow pending the completion of the Transaction. If all conditions to the completion of the Transaction (other than funding) are satisfied on or before 90 days following closing of the Brokered Financing (the “Escrow Deadline”), the net proceeds from the sale of the Subscription Receipts will be released from escrow to Arrow and each Subscription Receipt will be exchanged for one Arrow Unit, following which the underlying Arrow Share and Arrow Warrant of each Arrow Unit shall be converted into shares and warrants of New Arrow, respectively. If the Transaction is not completed on or before the Escrow Deadline, or is terminated at an earlier time, then the purchase price for the Subscription Receipts will be returned to subscribers, together with a pro rata portion of interest earned on the escrowed funds, if any.


The Agents will be entitled to receive the following consideration from Arrow for agreeing to provide its services to Arrow in respect of the Brokered Financing: a fee in an amount equal to US$40,000 plus 6% of the gross proceeds raised by Arrow under the Transaction (excluding proceeds from Canacol’s US$5 million participation under the Brokered Financing and participation by all subscribers in the Private Placement); compensation subscription receipts (the “Agent SRs”) of Arrow, which shall be automatically exchanged for Agent Options (the “Agent Options”) of Arrow at Closing, entitling the Agents to purchase that number of Units, as the case may be, equal to 5% of the aggregate number of Subscription Receipts issued by Arrow under the Brokered Financing (excluding those subscribed for by Canacol) with an exercise price per Subscription Receipt or Unit, as the case may be, equal to the offering price for the Brokered Financing for a term of 12 months from Closing. The net proceeds of the Concurrent Financings are expected to be used to fund Arrow’s development and exploration program following completion of the Transaction and for general corporate purposes.


Financial, Legal Advisors and Fairness


Fasken Martineau DuMoulin LLP acted as legal counsel to Arrow.


A special committee of FRK’s board of directors engaged Industrial Alliance Securities Inc. to prepare and deliver a fairness opinion to such special committee and provided a written fairness opinion to the effect that, as of August 24, 2018 and subject to the assumptions, qualifications and limitations contained therein, the proposed terms of the Transaction are fair, from a financial point of view, to FRK and the Shareholders. Borden Ladner Gervais LLP acted as legal counsel to FRK.


Macquarie Capital acted as exclusive financial advisor to Arrow with regards to the Arrangement and Colombia Acquisitions. Torys LLP acted as legal counsel to Macquarie Capital.


Additional Information


Additional information regarding the Transaction is provided in the Information Circular, which will be made publicly available by Front Range at


Front Range has applied to the TSXV for an exemption from the sponsorship requirements in connection with the Transaction. There is no assurance that such exemption will be granted.


About FRK


Front Range is a Canadian public company with natural gas assets in Western Canada. At Pepper, Alberta, Front Range has an operated 100% working interest in 56 contiguous sections (35,840 acres) of prospective Montney land, located at the south end of the Montney trend in Alberta. In addition, Front Range has non-operated production at Fir, Alberta from 13 sections (4.1 net sections), with average daily sales production of 128 boe/d net to Front Range in the second quarter of 2018. As at June 30, 2018, Front Range had no debt and approximately C$2.765 million in estimated working capital.


Further information relating to Front Range is also available on its website at


For further information, please contact:


Malcolm Todd, Chief Executive Officer

Telephone: (403) 237-5700 Email: [email protected]


Peter Cowling, President

Telephone: (403) 262-1700 Email: [email protected]


About Arrow


Arrow, a corporation incorporated under the laws of Alberta, is a private junior oil and gas exploration and development company formed for the purpose of acquiring, and subsequently enhancing and producing oil and gas from properties in Colombia. Arrow currently has no oil or natural gas assets or production and has not conducted active operations since its incorporation.


As of the date of this news release, 9,500,000 Arrow Shares are issued and outstanding.


Further information relating to Arrow is also available on its website at


For further information, please contact:


Frederick Kozak, VP Corporate Development

Telephone: (403) 606-3165 Email: [email protected]


Gary Wine, President & Chief Executive Officer

Telephone: (403) 389-7079 Email: [email protected]


Bruce McDonald, Executive Chairman

Telephone: (403) 606-9784 Email: [email protected]


Reader Advisory


Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable, disinterested shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.


Investors are cautioned that, except as disclosed in the information circular to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of FRK should be considered highly speculative.


The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved of the contents of this news release. This news release is not an offer of the securities for sale in the United States. The securities have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.


Neither the TSXV nor its regulation services provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.


Forward-Looking Statements


This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking statements or information. In particular this news release contains forward-looking statements and information relating to the completion of the Transactions and the timing thereof; the timing of release and the use of proceeds of the Concurrent Financings; the funding of the purchase price of the Colombia Acquisitions; the anticipated benefits to be obtained as a result of the Transaction; the anticipated results of the Danes-1 well; the timing and completion of five existing Llanos-23 wells; the business, operations and development plans of New Arrow and the anticipated directors and officers of New Arrow. Although FRK and Arrow believe that the expectations and assumptions on which the forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because FRK and Arrow cannot give any assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. The forward-looking statements and information is based on certain key expectations and assumptions made by management of each of FRK and Arrow, including expectations and assumptions concerning: the satisfaction of all conditions to the closing of the Transaction and on the time frames contemplated; New Arrow’s ability to develop the assets and obtain the benefits thereof; the ability to efficiently integrate the assets; prevailing and future commodity prices, exchange rate, interest rates, inflation rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserves volumes; anticipated timing and results of capital expenditures in carrying out planned activities; the state of the economy and the exploration and production business; the regulatory framework regarding royalties, taxes and environmental laws; results of operations; performance; business prospectus and opportunities. Actual results could differ materially from those currently anticipated due to a number of factors and risk. These include but are not limited to: failure to complete the Transaction in all material respects; failure to obtain in a timely manner, shareholder, regulatory, stock exchange, court and other required approvals in connection with the Transaction; the failure to realize the anticipated benefits of the Transaction; unforeseen difficulties in integrating the assets in New Arrow’s operations; risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; failure to obtain necessary regulatory approvals for planned operations; health, safety and environmental risks; uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; volatility of commodity prices, currency exchange rate fluctuations; imprecision of reserve estimates; and competition from other explorers) as well as general economic conditions, stock market volatility, and the ability to access sufficient capital. FRK and Arrow caution that the foregoing list of risks and uncertainties is not exhaustive. These risks and other risks are set out in more detail in FRK’s Annual Information Form for the year ended December 31, 2017.


In addition, the reader is cautioned that historical results are not necessarily indicative of future performance. The forward-looking statements and information contained in this news release are made as of the date hereof and FRK and Arrow undertake no obligation to update publicly or revise any forward-looking statement or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Source: Front Range Resources Ltd. (TSX Venture:FRK, OTC Bulletin Board:CSTPF, FWB:C1JS)

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