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Passport Energy Ltd. Announces Private Placement

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Passport Energy Ltd. Announces Private Placement

Calgary, Alberta CANADA, January 10, 2014 /FSC/ – Passport Energy Ltd. (PPO – TSX Venture),today announced that it intends to complete a non-brokered private placement of common shares of Passport (“Common Shares”) for a minimum offering of $20,000,000 (“Minimum Offering”) and a maximum offering of $30,000,000 (“Maximum Offering”) (collectively referred to as the “Offering”).

Passport has entered into subscription agreements dated January 8, 2014 (the “Subscription Agreements”) with 32 Degrees Diversified Energy Fund II (Canadian) L.P. and 32 Degrees Diversified Energy Fund II (US) L.P. (collectively referred to as “32 Degrees”) for an aggregate of $13,000,000 worth of Common Shares under the Offering. Passport has not yet received commitments for the balance of the Offering. On completion of the Offering, 32 Degrees will become a “control person” of Passport as described further below.

The Subscription Agreements are subject to a number of conditions, including among others:

(a) the aggregate subscription proceeds committed to the Corporation pursuant to the Offering shall be no less than the Minimum Offering;

(b) following the completion of the Offering, the Board of Directors of the Corporation (the “Board”) shall be comprised of the following individuals:

(i) Larry Evans;

(ii) Mitch Putnam;

(iii) Trent Baker;

(iv) Bruce Murray; and

(v) Gregg Smith;

(c) the Corporation shall have entered into executive employment agreements containing terms and conditions satisfactory to 32 Degrees, acting reasonably, with each of:

(i) Bruce Murray -President and Chief Executive Officer;

(ii) Daniel Tiberio – Chief Operating Officer; and

(iii) Jessica Gordon-Metez – Exploration Manager;

(d) 32 Degrees shall have confirmed in writing that it has completed customary due diligence with the results thereof satisfactory to 32 Degrees;

(e) the Corporation shall have settled all deferred salary and consulting fee obligations of the Corporation by the issuance and delivery to the applicable employees and consultants of Common Shares at a deemed price of $0.30 per Common Share (after giving effect to the Consolidation described below);

(f) the Corporation shall have completed a consolidation (the “Consolidation”) of all of the issued and outstanding Common Shares on the basis of ten (10) pre-Consolidation Common Shares for every one (1) post-Consolidation Common Share;

(g) the Corporation shall have obtained all approvals from the shareholders required to complete the Consolidation, the Offering and the other transactions described herein, on terms and conditions satisfactory to 32 Degrees, acting reasonably;

(h) the Corporation shall have obtained all approvals from the TSX Venture Exchange (“TSXV”) required to complete the Consolidation, the Offering and the other transactions described herein, on terms and conditions satisfactory to 32 Degrees, and the Common Shares to be issued in connection with the Offering shall be listed on the TSXV with effect on the closing date of the transaction (the “Closing Date”) (or such later date as may be agreed by 32 Degrees acting reasonably);

(i) the Corporation shall (i) cause each of its officers and directors to execute a voting support agreement (the “Voting Support Agreement”), in form and substance satisfactory to 32 Degrees, under which each such officer or director agrees to vote in favour of each resolution to be placed before the shareholders for their approval in connection with the Offering; and (ii) use commercially reasonable efforts to obtain voting support agreements, that are in form and substance similar to the Voting Support Agreement, from other shareholders of the Corporation which hold in aggregate not less than 10% of the issued and outstanding Common Shares;

(j) the Corporation shall promptly: (i) prepare an information circular and proxy statement (“Information Circular”) for a meeting of the shareholders of the Corporation (the “Shareholders Meeting”) to approve, among other things, the Offering and the Consolidation; and (ii) take necessary steps to call and hold the Shareholders Meeting so that the Closing Date may be effected on a date that is no later than March 31, 2014; and

(k) the Corporation shall have received shareholder approval to change its name to “Powder Mountain Energy Ltd.” or such other name as may be agreed to by the parties.

Messrs. Bruce Murray and Gregg Smith are currently members of the Board. Messrs. Larry Evans, Mitch Putnam and Trent Baker are nominees of 32 Degrees. All nominees to the Board are subject to regulatory and shareholder approval.

The Subscription Agreement also provides that following the Closing Date and until the Subscriber Group (as that term is defined below) holds directly or indirectly less than 20% of the issued and outstanding Common Shares of the Corporation, 32 Degrees, together with (A) any joint investment fund or limited partnership which is managed by the manager of 32 Degrees or an affiliate of the manager of 32 Degrees, and (B) any limited partner of the Subscriber or of any joint investment fund or limited partnership which is managed by the manager of 32 Degrees or an affiliate of the manager of 32 Degrees (collectively, the “Subscriber Group”), shall have a pre-emptive right to participate in any issuance of securities in the capital of the Corporation (or securities convertible into, or exercisable or exchangeable for, such securities) at the same price as the other participants in such financing up to its pro rata Interest determined at the time of such proposed issuance of securities.

A portion of the subscription price (the “Subscription Portion”) will be paid by 32 Degrees by the sale and transfer of certain lands owned by a corporation owned and controlled by 32 Degrees (“32 Degree HoldCo”). These lands are the lands described in Passport’s press release dated November 28, 2013 announcing Passport’s right to purchase from an arm’s-length private oil and gas company for $600,000 in cash, lands consisting of approximately 221/4 contiguous sections (5,760 hectares) in the Hardy area of SE Saskatchewan (the “Hardy Lands”). In contemplation of this Offering and entering into the Subscription Agreements, Passport transferred its rights to purchase the Hardy Lands to 32 Degrees HoldCo on December 21, 2013. 32 Degrees HoldCo acquired the Hardy Lands on the same date for $600,000. The Subscription Portion amount will equal $600,000 plus the aggregate amount expended or contributed by the Subscriber Group with respect to the Hardy Lands prior to the completion of the Offering (the “Expenditure Amount”), plus interest equal to 12% per annum (calculated daily in respect of each contribution or expenditure comprising the Expenditure Amount). The acquisition of the Hardy Lands will be a “fundamental acquisition” as such term is in defined in TSXV Policy 5.3 (the “Fundamental Acquisition”). A technical report in respect of the Hardy Lands will be prepared in compliance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities and a summary thereof provided in the Information Circular.

If the Consolidation is approved, the issued and outstanding shares of Passport prior to completion of the Offering will be approximately 11,154,878 Common Shares. The Offering will be completed immediately following the Consolidation at $0.30 per share resulting in 66,666,667 Shares issuable under the Minimum Offering and 100,000,000 Common Shares issuable under the Maximum Offering. If the Offering is completed, 32 Degrees will become a “control person” (as such term is defined in TSXV Policy 1.1) owning in aggregate 43,333,334 Common Shares on a post-Consolidation basis (holding approximately 56% of the outstanding Common Shares in the case of the Minimum Offering and approximately 39% in the case of the Maximum Offering). Accordingly the TSXV requires that Passport obtain disinterested shareholder approval of the Offering and specifically, approval of the new control person, 32 Degrees.

Passport anticipates that the proceeds of the Offering will be allocated as follows:

-***-

————————————————————–

Use of Proceeds Minimum Offering Maximum Offering

————————————————————–

Drilling $ 13,500,000 $ 23,000,000

Land and asset acquisitions $ 3,000,000 $ 3,000,000

Seismic $ 500,000 $ 500,000

Working capital $ 3,000,000 $ 3,500,000

$ 20,000,000 $ 30,000,000

————————————————————–

-****-

There is no assurance that the Minimum Offering will be achieved. If the Offering is completed, a finder’s fee of $200,000 in cash will be paid to arm’s length third party. Additional finder’s fees may be paid by Passport as part of the Offering.

Passport intends to hold an annual general and special meeting of its shareholders by no later than March 28, 2014 where it will seek, among other things, shareholder approval for the Consolidation, the Offering and the resulting new “control person”, the change of name of Passport to “Powder Mountain Energy Ltd.” and the proposed Board.

Trading of Passport’s Common Shares has been halted. Passport anticipates that the Common Shares will not resume trading on the TSXV until after certain conditions under TSXV Policy 5.3 relating to the Fundamental Acquisition have been satisfied.

About 32 Degrees

32 Degrees is part of a group of energy-focused private equity funds managed by 32 Degrees Capital Advisor Ltd. (“32 Degrees Capital”) of 650, 635-8th Avenue SW, Calgary, Alberta T2P 3M3. 32 Degrees has confirmed to Passport that 32 Degrees (i) is at arm’s length to Passport, (ii) does not, as at the date hereof, own or control any shares of Passport, (iii) entered into the Subscription Agreements as a business investment, and (iv) other than the $13,000,000 committed by 32 Degrees to the Offering under the terms and conditions of the Subscription Agreements, 32 Degrees does not presently have any future intention to acquire ownership of, or control over, additional securities of Passport. 32 Degrees confirms that no promoter, officer, director, other insider or control person of 32 Degrees or any associates or affiliates of any such person owns, directly or indirectly, any Common Shares of Passport. Further information regarding 32 Degrees and 32 Degrees Capital can be found at www.32degrees.ca.

General

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release

Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events. All statements other than statements of historical fact are forward-looking statements. The use of the words ”may”, “expected”, “believes” and other words of a similar nature are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Passport believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Such statements include statements with respect to Passport’s anticipated completion of the Offering and the timing thereof, meeting the terms and conditions of the Subscription Agreement and the prospective date for the shareholders meeting to approve, among other things, the Offering and Consolidation. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, receipt of requisite regulatory approvals, and other factors, many of which are beyond the control of Passport. The completion of the Offering is subject to certain conditions of closing and there is no assurance that all conditions will be met in a timely manner or at all. The forward-looking statements contained in this news release represent Passport’s expectations as of the date hereof, and are subject to change after such date. Passport disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.

For further information contact:

Bruce Murray Daniel Tiberio

President & CEO COO

Tel: 403-930-4061 Tel: 403-930-4070

Email: bmurray@passportenergy.com Email: dtiberio@passportenergy.com

Website: www.passportenergy.com

To view this press release as a PDF, please click on the following link:

http://www.usetdas.com/pr/passportenergy01102014.pdf

Source: Passport Energy Ltd. (PPO – TSX-V)

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