New acreage and production
Calgary-based Manitok Energy (ticker: MEI) announced today that it will acquire Raimount Energy (ticker: RMT) in an all-stock transaction.
Under the terms of the agreement, Manitok will acquire issued and outstanding common shares of Raimount through its wholly owned subsidiary 197746 Alberta Inc. (Acquireco). Each Raimount shareholder will receive six common shares and one and one-half common share purchase warrants for each Raimount share held.
Raimount’s assets include $5.3 million in cash, 65 BOEPD (95% gas) of production near Innisfail, Alberta, and approximately 20,000 acres of land in the Woolford area of Southern Alberta, including over 12,500 freehold acres within a unit agreement entitled Woolford Unit No. 1, 6,955 freehold acres within a unit agreement entitled Woolford Unit No. 2 and 797 non-unitized Crown acres.
The acquisition fits well into Manitok’s strategy, which is focused toward growth, MEI CEO Mass Geremia told Oil & Gas 360® in March. The company monetized its hedges and paid down debt in order to set the stage for possible acquisitions.
“Cleaning up the balance sheet lets us get on track for growth,” said Geremia. “We have the flexibility to grow while our competitors are worried about survival.”
In its press release, MEI said it expects to issue approximately 41.2 million common shares and 10.3 million warrants priced at $0.30 per warrant. Given Manitok’s stock price today of $0.15 per share, and the $0.30 per warrant, the total value of the issuance for the Raimount acquisition works out to $9.3 million.
The warrants will have a term of two years and two forced conversion provisions, Manitok said in its release. The first forced conversion provision is exercisable if Manitok common shares trade at a 140% premium to the warrant exercise price for 20 trading days based on a volume weighted average price and the second forced conversion is exercisable if Manitok issues equity at a 130% premium to the warrant exercise price.
The deal still requires court and regulatory approvals, including a vote of approval of 66 2/3% of Raimount shareholders at a meeting to be called to consider the acquisition on or about August 17, 2016.
As part of the deal, both parties agreed to a mutual breakup fee of $700,000 subject certain conditions.
Manitok announces $1.5 million offering and credit facility redetermination
In addition to the Raimount acquisition announced today, Manitok also announced that it intends to conduct a non-brokered private placement offering of subscription receipts for its common shares at a price of $0.18 per receipt, for gross proceeds of $1.5 million. Manitok anticipates closing the offering on or before July 8, 2016.
The gross proceeds from the closing of the offering will be held in escrow by a subscription receipt agent to be appointed by Manitok in accordance with the terms and conditions of the subscription receipt agreement to be entered into between Manitok and the subscription receipt agent on or prior to the closing of the offering.
Manitok has renewed its credit facility at $45 million, which is $5 million lower than its previous credit facility. Manitok is required to reduce the credit facility by $300,000 per month beginning on June 1, 2016. The facility is subject to a customary review in December 2016. After the closing of the Arrangement Agreement and the Offering discussed below, Manitok anticipates to be drawn by about $37 million on the credit facility on August 31, 2016.
Manitok will present at EnerCom’s The Oil & Gas Conference® in Denver on August 16, 2016. Information on the conference is available here.
