Nov 23 2010
RPT Resources Ltd. (TSX VENTURE:RPT) has announced that, following a period of negotiations, it has entered into a letter of intent dated as of November 19, 2010 which contemplates an arm's length business combination with ArPetrol Inc.
Michelle Gahagan, President of RPT, stated that, "The board of directors of RPT has been working for some time to bring this transaction to the letter of intent stage and is excited to announce the opportunity. The qualifications of the board of directors and management of ArPetrol are outstanding and we look forward to bringing the ArPetrol business plan to fruition."
About the Combined Entity
Upon completion of the Transaction, the combined entity is expected to be classified as an Oil & Gas Issuer under the policies of the TSX Venture Exchange and would focus on expanding ArPetrol's core operations in Argentina and elsewhere in South America. The combined entity is expected to have cash in excess of $25 million, including proceeds from a subscription receipt financing planned in connection with the Transaction, the terms of which are being negotiated and finalized by RPT and ArPetrol. Further information regarding the combined entity will be disseminated in a subsequent news release as soon as further details are available regarding the definitive terms of the Transaction.
Conditions Precedent
The Transaction is subject to a number of conditions precedent including, without limitation, completion of satisfactory due diligence, receipt of all required corporate and regulatory approvals (including the approval of the TSX Venture Exchange), and negotiation and execution of transaction and financing documents.
Proposed Directors and Officers
The combined entity would have a new management team led by Tim Thomas as President and Chief Executive Officer and Troy Wagner as Vice President, Argentina and a new board of directors comprised of Claudio Ghersinich (Chairman), Abby Badwi, Jeff Boyce, Michelle Gahagan, Tim Thomas and Ronald Williams.
Additional members of management, including a new Chief Financial Officer and a VP Exploration, are expected to be identified before completion of the Transaction.
Financial Advisors and Sponsor
Raymond James Ltd. is acting as financial advisors to RPT with respect to the Transaction. If required by the TSX Venture Exchange and subject to the completion of satisfactory due diligence, Raymond James Ltd. has also agreed to act as sponsor of the combined entity in connection with the Transaction.
Canaccord Genuity Corp. is acting as financial advisors to ArPetrol with respect to the Transaction.
Finder's Fee
A finder's fee of 2,000,000 common shares of the combined entity will be issued to Sam Charanek upon completion of the Transaction. Mr. Charanek is a principal of CEE Merchant Group and has over 12 years of capital markets consulting experience.
Annual Meeting of Shareholders
The Transaction is anticipated to constitute a change of business and/or a reverse takeover in accordance with the policies of the TSX Venture Exchange and, as such, it is expected that approval of the shareholders of RPT will be required. As a result, it is anticipated that RPT will cancel its annual and special meeting of shareholders that is currently scheduled for December 3, 2010 and delay the holding of such meeting until such time as it can present the Transaction to shareholders for approval.
Resumption of Trading and Further News
It is anticipated that trading of the common shares of RPT will remain halted pending the dissemination of a comprehensive news release and satisfaction of all applicable requirements of the TSX Venture Exchange. RPT will issue a further new release as soon as further details are available regarding the definitive terms of the Transaction (including the subscription receipt financing) and the resumption of trading.
Oil and Gas Information
ArPetrol's reserve information is taken from an audit examination dated April 29, 2010 prepared by Gaffney, Cline & Associates Inc. (the "GCA Report"). The effective date of the GCA Report is December 31, 2009 and it consists of an audit of the hydrocarbon liquid and natural gas reserves attributable to ArPetrol's interest in the Faro Virgenes concession as originally estimated by ArPetrol. The GCA Report has been prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
"Gross Reserves" are ArPetrol's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of ArPetrol. "Net Reserves" are ArPetrol's working interest (operating or non-operating) share after deduction of royalty obligations plus ArPetrol's royalty interests in reserves.
"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (for example when compared to the cost of drilling a well) to put the reserves on production. "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty. "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production but are shut in and the date of resumption of production is unknown. "Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.
"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
The reserve estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual natural gas and condensate reserves may be greater than or less than the estimates provided herein. The GCA Report includes a number of assumptions made by either Gaffney, Cline & Associates Inc. or ArPetrol as at the date of the report relating to factors such as initial production rates, production decline rates, estimated ultimate recoveries, timing and amount of capital expenditures, marketability of production, future prices of natural gas, operating costs, well abandonment and salvage values, royalties and other government levies that may be imposed during the producing life of the reserves. Many of these assumptions are subject to change and are beyond the control of ArPetrol.
The term "boe" may be misleading, particularly if used in isolation. A boe conversion of 6 million cubic feet:1 barrel is based upon an energy equivalency conversion method primarily applicable at the burner tip and it does not represent a value equivalency at the well head.
Source: RPT Resources Ltd.