Oilsands Quest Secures Equity Financing

Oilsands Quest has entered into a $12 million securities purchase agreement with Socius CG II, Ltd., a subsidiary of Socius Capital Group ("Socius"). This financing ensures the Company's near-term liquidity while it pursues the planned sale of the Wallace Creek asset, prepares to advance the Axe Lake pilot project, and continues to assess strategic partnerships and longer-term development plans.

"We are pleased to enter into a flexible financing arrangement with Socius Capital, a partner with a proven track record of successful investments," said Oilsands Quest Chief Executive Officer Garth Wong. "This funding enables us to prepare for the pilot project at our core Axe Lake oil sands property, which we believe will prove the asset's commercial recoverability and increase its value."

Under the agreement, Oilsands Quest has the right over a term of two years, subject to certain conditions, to require Socius to purchase up to $12 million of redeemable preferred shares (the "Preferred Shares"), payable in tranches at the election of the Company. The Preferred Shares bear interest at an annual rate of 10%. With each purchase, Socius will receive warrants to purchase shares of the Company's common stock valued at 35% of the Preferred Stock amount. The exercise price of the warrants will equal the closing bid price of the Company's common stock on the preceding day. In addition, Socius will be obligated to exercise an additional investment right to purchase common stock valued at 100 per cent of the amount of the Preferred Stock, at a per share price equal to the exercise price of the warrants associated with the sale of Preferred Stock. Both the warrant and additional investment right are exercised when the Company elects to sell a tranche of Preferred Stock.

Oilsands Quest is also working to finalize the definitive sale agreement for its Wallace Creek asset, as outlined in the Letter of Intent disclosed on September 27, 2011. The total sale price is $60 million, including $40 million of cash. In addition, if the purchaser either sells the acquired assets or develops them, and certain other conditions are met, a $20 million post-closing additional payment will be due. Completing that transaction is subject to a number of terms and conditions, including board approvals, due diligence, financing and approval by OQI shareholders. Oilsands Quest anticipates that a definitive sale agreement will be concluded by the end of October 2011, and now expects that the transaction will close by the end of January 2012.

In response to a notice of non-compliance received by Oilsands Quest from the NYSE Amex LLC ("the Exchange"), the Company has now submitted a plan explaining how OQI intends to return to full compliance with the Exchange's listing requirements. The Company believes that with the Socius financing and the Wallace Creek asset sale, Oilsands Quest will have secured the necessary capital to move ahead on unlocking the value of its substantial in situ oil sands assets. The Company plans to complete the Axe Lake pilot project and to use the resulting reservoir production data to seek a joint venture partner, strategic investor, or purchaser of the asset or the Company.


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