Kodiak Energy, Inc. provided an update and clarification to the previously announced binding letter agreement with Brink Energy Ltd. of Calgary, a private Alberta oil and gas corporation.
A binding letter agreement was entered into by Kodiak and Brink in order to secure the transaction value and to ensure confidentiality while definitive agreements were finished. Kodiak, it's auditors and legal teams are currently concluding the due diligence and audit of Brink's records. Once the audit is complete, the definitive agreement will be finalized and a circular published to the Brink shareholders.
Kodiak has recently provided a $1,000,000 secured loan to Brink for the reduction of debt, which may be converted to Brink shares at Kodiak's option.
The details of the circular will also be made public at time of mailing. This will include reserve evaluations, current production volumes. At that time, Kodiak will provide estimates of future operations.
Kodiak intends to optimize the existing production first and concurrently review development and drilling plans for Q3 and Q4 of 2008 and into 2009 before advising of expected production volumes, capital commitments, taking into consideration prevailing commodity prices and cost of services.
The Brink security holders' meeting is expected to be held in August 2008. The completion of the combination is expected shortly thereafter, subject to receipt of necessary regulatory and court approval and satisfaction or waiver of conditions. When the aforementioned conditions are met, Brink will then be a wholly-owned subsidiary of Kodiak, which is expected by September 1, 2008.
The cash portion of the acquisition will be funded by Kodiak mostly with debt.
Bill Tighe, President and CEO of Kodiak, stated, "This acquisition is exciting for Kodiak, because in addition to the many years of development drilling and production growth, with associated high net backs at current commodity prices, available in the Spearfish resource play using primary production techniques, the formation has shown excellent response to secondary oil recovery techniques implemented by other operators in the area. The reserves and the engineering data evaluated the proven, probable from the 30 potential Spearfish wells and the Knopcik gas well property. This was the basis for the price point set on the acquisition."
In addition to the low risk Spearfish development, initial geological mapping has identified several Mississippian and Upper Devonian aged exploration prospects. These prospects will be mapped and defined by using existing trade seismic data and after acquiring some additional seismic over the leased lands, a drilling program will help determine the reservoir characteristics and deliverability potential. In addition to that the Bakken formations are identified on the properties.
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