NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES.
Questfire Energy Corp. ("Questfire" or the "Company") (TSX VENTURE:Q.A) (TSX
VENTURE:Q.B) provides the following update on the previously announced
acquisition of approximately 5,900 boe/d of producing assets ("the Assets")
effective November 1, 2012 from Advantage Oil & Gas Ltd. ("Advantage).
Transaction Terms:
The previously announced transaction terms have been modified as follows:
-- The acquisition is now anticipated to close on or before April 30, 2013
and is subject to satisfaction of customary closing conditions.
-- The total consideration will consist of $40 million of cash, a $44
million Convertible Senior Secured
Debenture (the "Debenture") and 1.5 million class B shares. All net
revenues accruing as part of customary closing adjustments between the
effective date of November 1, 2012 and the closing date will be paid to
Advantage thereby reducing the principal amount of the debenture.
Closing adjustments are estimated to be in the $10 million range.
-- Advantage is given the option to appoint up to two board members to the
Board of Directors of Questfire. The appointees are to be mutually
agreed to by Questfire and Advantage.
Financing Arrangements:
The Credit Facilities
Questfire will fund the cash portion of the purchase price by entering into
Credit Facilities with National Bank of Canada ("NBC"). These Credit Facilities
will provide for a revolving operating demand loan of $60 million, subject to
closing conditions. In addition to other customary banking fees, Questfire has
agreed to pay National Bank Financial Inc. a success fee conditional on closing
of the Asset purchase and the Credit Facilities.
The Debentures
The Debentures will have a three-year term and will be secured but will be
subordinate to the Credit Facilities. Interest will be payable quarterly in
arrears at the following per annum rates commencing June 30, 2013:
-- 6% for the period from closing to April 30, 2014;
-- 7% for the period from May 1, 2014 to April 30, 2015;
-- 9% for the period from May 1, 2015 to maturity.
The Corporation may elect, from time to time, subject to applicable regulatory
approval, to satisfy its obligation to pay interest on the Debentures (i) in
cash; (ii) by delivering freely tradable Class A Shares to the debenture
trustee, for sale, to satisfy the interest obligations in which event holders of
the Debentures will be entitled to receive a cash payment equal to the interest
payable, from the proceeds of the sale of such Class A Shares; or (iii) any
combination of (i) and (ii) above.
The Debentures will be convertible into Class A Shares at the 20 day
volume-weighted average trading price at the option of the holder for a period
of 30 days following the occurrence of any of the events listed below:
i. if the Corporation chooses to pay interest by delivering shares to the
debenture trustee as described above;
ii. any event of default;
iii.any conversion by the Corporation of Class B Shares into Class A Shares;
iv. the date 30 months from closing;
v. upon the occurrence of a Change of Control; or
upon an equity financing by the Corporation whereby the holder of a
Debenture has the option of conversion (at the financing price), up to a
maximum of 50% of the total shares issued in the financing, unless
mutually agreed to otherwise.
Production and Reserves Data
Production
The current productivity of the Assets based on field estimates is approximately
5,700 boe/d comprised of 27.4 MMscfd of natural gas, 485 bbls/d of light oil and
650 bbls/d of NGLs. Production at closing is anticipated to be in the 5,600 to
5,700 boe/d range, consistent with an overall production decline rate of
approximately 10% per year.
Reserves
Sproule Associates Limited has prepared for Advantage a September 30, 2012
computer recalculation of its December 31, 2011 reserves report to isolate the
Assets from the other oil and gas assets evaluated in the December 31, 2011
reserve report and using the Sproule August 31, 2012 price forecasts (the "
Sproule September 30, 2012 Report"). The reserves have been estimated
independently in accordance with the standards contained in the COGE Handbook
and the reserve definitions contained in National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities and the COGE Handbook. An excerpt from the
Sproule September 30, 2012 Report showing the reserves associated with the
Assets to be acquired by Questfire is set forth below:
SUMMARY OF OIL AND GAS RESERVES
as at September 30, 2012
--------------------------------------------------------
LIGHT AND NATURAL NATURAL GAS TOTAL OIL
MEDIUM OIL HEAVY OIL GAS(1) LIQUIDS EQUIVALENT
--------------------------------------------------------
Gross (2) Gross (2) Gross (2) Gross (2) Gross (2)
RESERVES CATEGORY (Mbbl) (Mbbl) (MMcf) (Mbbl) (Mboe)
----------------------------------------------------------------------------
PROVED Developed
Producing 1,121.2 3.9 79,612 1,953.7 16,347.4
----------------------------------------------------------------------------
TOTAL PROVED 1,207.5 3.9 99,694 2,245.4 20,072.5
----------------------------------------------------------------------------
TOTAL PROVED PLUS
PROB. 2,026.8 9.4 144,509 3,199.3 29,320.3
----------------------------------------------------------------------------
(1) Estimates of Reserves of natural gas include associated and non-
associated gas.
(2) "Gross Reserves" are Corporation's working interest share of remaining
reserves before the deduction of royalties owned by others.
SUMMARY OF NET PRESENT VALUES OF FUTURE NET
REVENUE
as at September 30, 2012
FORECAST PRICES AND COSTS
Before Income Tax Discounted at (%/year)
--------------------------------------------------
RESERVES 0% 5% 10% 15% 20%
CATEGORY ($000's) ($000's) ($000's) ($000's) ($000's)
----------------------------------------------------------------------------
PROVED
Developed
Producing 291,047 202,080 154,170 124,488 104,439
Developed
Non-Producing 6,481 4,946 3,879 3,111 2,544
Undeveloped 41,672 24,633 13,963 6,941 2,152
--------------------------------------------------
TOTAL PROVED 339,200 231,659 172,012 134,540 109,135
PROBABLE 255,100 124,985 75,442 51,466 37,815
--------------------------------------------------
TOTAL PROVED PLUS PROB. 594,300 356,645 247,454 186,006 146,950
--------------------------------------------------
SUMMARY OF NET PRESENT VALUES OF FUTURE NET
REVENUE
as at September 30, 2012
FORECAST PRICES AND COSTS
After Income Taxes Discounted at (%/year)
--------------------------------------------------
RESERVES 0% 5% 10% 15% 20%
CATEGORY ($000's) ($000's) ($000's) ($000's) ($000's)
----------------------------------------------------------------------------
PROVED
Developed
Producing 241,167 169,482 130,821 106,782 90,472
Developed
Non-Producing 4,860 3,685 2,871 2,289 1,860
Undeveloped 31,254 17,442 8,787 3,098 (769)
--------------------------------------------------
TOTAL PROVED 277,281 190,610 142,479 112,169 91,563
PROBABLE 189,884 93,451 56,277 38,222 27,937
--------------------------------------------------
TOTAL PROVED PLUS PROB. 467,165 284,061 198,756 150,391 119,500
--------------------------------------------------
Notes:
(1) Values are calculated by considering estimated tax pools to be earned
by Questfire from successfully completing the acquisition of the
Assets, and take into account current federal tax regulations. Values
do not represent an estimate of the value at the business entity
level, which may be significantly different.
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS(1)
as at August 31, 2012
FORECAST PRICES AND COSTS
Light
Sweet
Crude Oil
at Medium
Edmonton Crude Oil Hardisty NATURAL
WTI 40 29 Heavy 12 GAS AECO-
Cushing degrees degrees degrees C Spot
Oklahoma API API API ($Cdn/)
Year ($US/bbl) ($Cdn/bbl) ($Cdn/bbl) ($Cdn/bbl) MMBtu)
----------------------------------------------------------------------------
2011 95.00 95.16 87.86 69.10 3.72
Forecast(3)
2012 92.25 88.03 80.99 61.62 2.74
2013 93.57 94.36 86.81 71.71 3.28
2014 91.20 91.97 84.61 69.90 3.68
2015 91.79 92.57 85.16 70.35 4.45
2016 99.37 100.21 92.19 76.16 5.82
2017 101.35 102.21 94.03 77.68 5.94
2018 103.38 104.25 95.91 79.23 6.06
2019 105.45 106.34 97.83 80.82 6.19
2020 107.56 108.47 99.79 82.43 6.32
2021 109.71 110.64 101.79 84.08 6.45
2022 111.90 112.85 103.82 85.77 6.59
+2.0% +2.0% +2.0% +2.0% +2.0%
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS(1)
as at August 31, 2012
FORECAST PRICES AND COSTS
NATURAL GAS NATURAL GAS
LIQUIDS LIQUIDS
Edmonton Edmonton INFLATION EXCHANGE RATE
Pentanes Plus Butanes RATES (2)
Year ($Cdn/bbl) ($Cdn/bbl) %/Year ($US/$Cdn)
----------------------------------------------------------------------------
2011 104.12 70.93 1.5 1.012
Forecast(3)
2012 98.36 65.62 2.0 0.992
2013 101.03 70.33 2.0 0.992
2014 98.47 68.55 2.0 0.992
2015 99.11 68.99 2.0 0.992
2016 107.29 74.69 2.0 0.992
2017 109.44 76.18 2.0 0.992
2018 111.62 77.71 2.0 0.992
2019 113.86 79.26 2.0 0.992
2020 116.13 80.85 2.0 0.992
2021 118.46 82.46 2.0 0.992
2022 120.83 84.11
+2.0% +2.0%
Notes:
(1) This summary table identifies benchmark reference pricing schedules
that might apply to a reporting issuer.
(2) The exchange rate used to generate the benchmark reference prices in
this table.
(3) As at August 31, 2012.
It should not be assumed that the estimates of future net revenues presented in
the tables above represent the fair market value of the reserves. There is no
assurance that the forecast prices and cost assumptions will be attained and the
variances could be material. The recovery and reserve estimates of the crude
oil, NGLs and natural gas reserves related to the Assets provided herein are
estimates only and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas and natural gas liquid reserves may be
greater than or less than the estimates provided herein.
The TSXV has requested, and is currently reviewing, a Filing Statement from
Questfire which discloses further detail on deal terms, financing arrangements,
detailed reserves data and pro-forma financial information. Upon completion, the
Filing Statement will be filed and available for viewing on SEDAR.
Completion of the proposed transaction is subject to a number of conditions
including, without limitation, approval of the TSX Venture Exchange.
Questfire was formed to participate in oil and natural gas exploration,
development and production in Canada. In particular, Questfire intends to
generate and develop its own prospects, acquire oil and natural gas properties
and participate with joint venturers and other industry partners in oil and gas
exploration and development in the Western Canada Sedimentary Basin.
The Class A Shares and Class B Shares are listed on the TSX Venture Exchange
under the trading symbols Q.A and Q.B respectively. The Corporation currently
has 12,813,001 Class A shares and 555,840 Class B shares outstanding.
Reader Advisory
This news release contains certain forward-looking statements, including
management's assessment of future plans and operations, and capital expenditures
and the timing thereof, that involve substantial known and unknown risks,
uncertainties, and assumptions certain of which are beyond Questfire's control.
Such risks, uncertainties, and assumptions include, without limitation, risks
associated with oil and gas exploration, development, exploitation, production,
marketing and transportation, loss of markets, volatility of commodity prices,
currency fluctuations, imprecision of reserve estimates, environmental risks,
competition from other producers, inability to retain drilling rigs and other
services, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources including banking arrangements, the impact of general economic
conditions in Canada, the United States and overseas, industry conditions,
changes in laws and regulations (including the adoption of new environmental
laws and regulations) and changes in how they are interpreted and enforced,
increased competition, the lack of availability of qualified personnel or
management, fluctuations in foreign exchange or interest rates, stock market
volatility and market valuations of companies with respect to announced
transactions and the final valuations thereof, and obtaining required approvals
of regulatory authorities. Questfire's actual results, performance or
achievements could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurances can be given
that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits, including the amount
of proceeds, that Questfire will derive therefrom. Readers are cautioned that
the foregoing list of factors is not exhaustive. All subsequent forward-looking
statements, whether written or oral, attributable to Questfire or persons acting
on its behalf are expressly qualified in their entirety by these cautionary
statements. Furthermore, the forward-looking statements contained in this news
release are made as at the date of this news release and Questfire does not
undertake any obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities laws.
Petroleum and natural gas volumes are converted to an equivalent measurement
basis referred to as a "barrel of oil equivalent" (boe) on the basis of 6
thousand cubic feet of natural gas equalling 1 barrel of oil. This is based on
an energy equivalency conversion method applicable at the burner tip and does
not necessarily represent a value equivalency at the wellhead, which under
current commodity prices is approximately 30 Mcf to 1 bbl. Readers are cautioned
that boe figures may be misleading, particularly if used in isolation.
FOR FURTHER INFORMATION PLEASE CONTACT:
Questfire Energy Corp.
Mr. Richard Dahl
President & Chief Executive Officer
403-263-6691
403-263-6683 (FAX)
Questfire Energy Corp.
Mr. Ronald Williams
Vice President, Finance & Chief Financial Officer
403-263-6658
403-263-6683 (FAX)
Questfire Energy Corp. (TSXV:Q.A)
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