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Share Name | Share Symbol | Market | Type |
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Skywest Energy Corp | TSXV:SKW | TSX Venture | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICESOR DISSEMINATION IN THE UNITED STATES SkyWest Energy Corp. (TSX VENTURE:SKW) ("SkyWest or the "Company") is pleased to announce that it has entered into an arm's length agreement pursuant to which SkyWest will acquire a key strategic operated Cardium asset and operated facility at Willesden Green (the "Asset Acquisition") and a letter of intent with a private company ("PrivateCo") to acquire all of the common shares of PrivateCo (the "PrivateCo Acquisition") (collectively the "Acquisitions"). SkyWest is also pleased to announce a $20 million equity financing ("Financing") and an $8 million credit facility. The Acquisitions and Financing position the Company as a premier Cardium light oil resource company with outstanding growth prospects and financial flexibility. ASSET ACQUISITION Under the terms of the Asset Acquisition, SkyWest will acquire the assets for approximately $8 million cash. The properties to be acquired pursuant to the Asset Acquisition are primarily comprised of a contiguous Cardium land block in the Willesden Green area offsetting SkyWest's recent Willesden Green horizontal well which had an initial test rate of 948 boepd. The contiguous land block also offsets significant Cardium horizontal activity which includes 21 recently licensed Cardium horizontal wells within 2 miles of the acreage. Also included is a key strategic operated compression facility at Willesden Green which has capacity of up to 30 Mmcf/day. The lands include 6 gross (2.175 net) operated Cardium sections on which SkyWest management has identified more than 20 gross (7 net) Cardium light oil locations. The assets being acquired are currently producing over 120 net boepd. The Asset Acquisition is expected to close on or before November 19, 2010 and is not conditional on any financing and can be completed by SkyWest with current cash on hand and available credit facilities. PRIVATE COMPANY ACQUISITION Pursuant to the terms of the PrivateCo Acquisition, SkyWest has agreed to acquire all of the outstanding common shares of PrivateCo for total consideration of $23 million. The PrivateCo lands include a contiguous block of more than 7 gross sections (5 net) in south Pembina where SkyWest had previously entered into a farm-in arrangement with PrivateCo. SkyWest has identified 33 gross (21 net) horizontal Cardium light oil locations. PrivateCo is currently producing approximately 400 boepd with an additional Cardium horizontal well having been drilled and awaiting completion. The Board of Directors of PrivateCo have unanimously approved the transaction and the transaction is anticipated to close on or about December 31, 2010, and completion is subject to certain conditions and the receipt of all regulatory approvals, including approval of the TSXV. The Chief Financial Officer and a Director of SkyWest are shareholders of PrivateCo. TRANSACTION RATIONALE AND METRICS The Acquisitions are a continuation of SkyWest's business plan to grow a top tier Cardium focused company organically with complementary acquisitions that fit the Company's asset base. With the Acquisitions, the Company increases its existing production base to over 1,000 boepd, grows its land position in the heart of its oil focused Cardium play to more than 30 net sections, increases the number of horizontal Cardium drilling locations to more than 90 locations and obtains a working interest and operatorship of key infrastructure in the area which will ensure that SkyWest is able to put its production online and will not be restricted due to facility constraints in the area. The key highlights of the Acquisitions are as follows: Current production 520 boepd Proved plus probable reserves(1) 1,558 mboe Land - Cardium 13.25 (7.2 net) sections (1) Proved plus probable reserves for the Asset Acquisition are effective as of July 1, 2010 and have been prepared by McDaniel & Associates Consultants Ltd. and proved plus probable reserves for the PrivateCo Acquisition are effective as of March 31, 2010 and have been prepared by GLJ Petroleum Consultants Ltd. Based on total consideration for the Acquisitions of $31 million and adjusted for the estimated undeveloped land value of $2.3 million, the expected acquisition metrics are as follows: Production $55,185 per producing boe Reserves $18.42 per proved plus probable boe In addition, the acquisition provides SkyWest with operatorship of key Cardium infrastructure in its core Willesden Green area and will result in future capital savings as a result of acquiring additional working interest in lands which are currently subject to farm-in agreement. The Company expects to complete the Acquisitions with current cash on hand, available credit facilities and the net proceeds of the Offering (as described herein in the section entitled "Equity Financing"). INCREASED GUIDANCE AND OPERATIONS UPDATE SkyWest had previously issued guidance indicating that it would exit 2010 in the range of 900 - 1100 boepd. SkyWest is pleased to announce that, upon completing the Acquisitions on the currently anticipated closing dates, the Company anticipates exiting 2010 with production of 1400 - 1600 boepd. After giving effect to the Acquisitions, SkyWest has over 30 net sections of Cardium lands in inventory, which positions the Company for strong growth into 2011. In the next two weeks, SkyWest plans to complete its 2 most recent Cardium horizontal wells and plans to commence drilling operations on its next 2 Cardium horizontal wells. EQUITY FINANCING SkyWest has entered into an engagement agreement with a syndicate of investment dealers led by Wellington West Capital Markets Inc. and including Haywood Securities Inc., FirstEnergy Capital Corp. and Desjardins Securities Inc. (collectively, the "Agents") pursuant to which the Agents have agreed to use their commercially reasonable efforts to complete a private placement offering (the "Offering") of subscription receipts ("Subscription Receipts") to raise proceeds of $20 million. The offering price of the Subscription Receipts will be determined in the context of the market. Each Subscription Receipt will entitle the holder to receive, without payment of additional consideration, one common share of SkyWest (a "Share") on the exercise or deemed exercise of the Subscription Receipt. All unexercised Subscription Receipts will be deemed to be exercised on the later of: (i) the fifth business day after the date a receipt is issued by the securities regulatory authorities for a final short form prospectus qualifying the Shares issuable upon the exercise of the Subscription Receipts (the "Qualification"); and (ii) the closing by the Company of the Acquisitions. The gross proceeds from the Offering will be held in escrow with an escrow agent and will not be released to the Company until the Qualification has been met and concurrently with the closing of the Acquisitions. If the gross proceeds and interest have not been released to the Company on or before 11:59 p.m. on January 31, 2011, the gross proceeds and interest thereon will be returned by the escrow agent to the holders of the Subscription Receipts. The Company has agreed to use its commercially reasonable efforts to file and obtain a receipt for a final prospectus qualifying the distribution of the Shares issuable upon the exercise or deemed exercise of the Subscription Receipts in each of the provinces of Canada, other than Quebec, within 60 days hereof. Completion of the Offering will subject to the successful marketing of the Offering, satisfactory due diligence by the Agents and other customary closing conditions including the receipt of all necessary regulatory approvals and the approval of the TSX Venture Exchange. The Offering is expected to close on or about December 7, 2010. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended, or the securities laws of any state, and may not be offered or sold in the United States unless an exemption from registration is available. This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities in the United States. CREDIT FACILITY The Company has entered into a revolving operating demand loan in the amount of $2,250,000 whereby interest will be floating at the Canadian chartered bank's prime lending rate plus one-half percent. In addition, the Company has entered into a non-revolving acquisition/development demand loan in the amount of $6,000,000 whereby interest will be floating at the Canadian chartered bank's prime lending rate plus three quarters of one percent. The facility is secured by a floating charge debenture of $25 million and a general security interest in all of the present and future acquired property of the Company. The facility will be available for general corporate purposes. SkyWest Energy Corp. is a Cardium focused exploration and production Company based in Calgary, Alberta, Canada. An updated corporation presentation for SkyWest will be available for review at www.skywestenergy.com. SAFE HARBOUR This news release contains certain "forward-looking information" within the meaning of such statements under applicable securities law including estimates as to: future production, operations, operating costs, commodity prices, administrative costs, commodity price risk management activity, acquisitions and dispositions, capital spending, access to credit facilities, income and oil taxes, regulatory changes, other components of cash flow and earnings, the timeline for the achievement of anticipated exploration, anticipated results from any current or projected drilling program and, subject to regulatory approval and commercial factor. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include, but are not limited to, the completion of the transactions contemplated by the Acquisitions, the Financing and the credit facility, the inherent risks involved in the exploration and development of conventional oil and gas properties, and the assets to be acquired pursuant to the Acquisitions, difficulties or delays in start-up and continuing operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. The Company faces risks including those associated with exploration, development, approvals and the continuing ability to access sufficient capital from external sources if required. Actual timelines associated may vary from those anticipated in this news release and such variations may be material. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates including those relating to the Acquisitions, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. SkyWest undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on this forward-looking information. BOEs Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.
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