Proprietary Industries Acquires Shares of Frontier Holdings
Proprietary Industries Inc. and Loon Energy announced that Proprietary has acquired all of the issued and outstanding shares of Frontier Holdings Limited from Loon and from Nemmoco Petroleum Limited (the "Vendors"). Prior to the acquisition of such shares, each of Loon and Nemmoco owned 50% of Frontier. Frontier, a private Bermuda company, is a party to a series of farm-in agreements, which, subject to the approval of various government agencies, involve the acquisition by Frontier (collectively, with the purchase and sale of the Frontier shares, the "Acquisition") of the following oil and gas interests in Asia:
- a 37.5% interest in a development and production lease (the "Development and Production Lease") covering a gas field; and - a 47.5% to 50% interest in five exploration blocks.As consideration for the shares of Frontier, Proprietary has issued and deposited into escrow, an aggregate of 14,958,838 common shares of Proprietary (the "Proprietary Shares"). The Proprietary Shares will be released from escrow (the "Escrow Release") and distributed to the Vendors, 7,479,419 to each of Loon and Nemmoco, upon receipt of the necessary government approval for the Acquisition which is currently expected to occur within 120 days. In addition, Propriety has agreed to issue to the Vendors an aggregate of an additional 500,000 Proprietary Shares (250,000 to each of Loon and Nemmoco) for each 100 billion cubic feet of reserves of gas proven during the 5 years following the Escrow Release, up to a maximum of an aggregate of an additional 7,681,918 Proprietary Shares, in each case, subject to regulatory approval. In certain circumstances, Proprietary may be required to pay cash to the Vendors in lieu of issuing such additional Proprietary Shares. Proprietary plans to commission a technical report in compliance with National Instrument 51-101 in connection with its interest in the gas field subject to the Development and Production Lease.
In connection with the Acquisition, subject to the Escrow Release, Proprietary has granted options to acquire an aggregate of 4.3 million Proprietary Shares to certain directors, officers and employees of Frontier who will have key roles in the project.
The Frontier agreements call for payments to be made in respect of the reimbursement of prior expenses and finder's fees together with the obligation by Frontier to fund, in varying amounts, 10 exploration wells and 7 development wells over the next 36 months.
Total expenditures by Frontier in respect of the foregoing are currently expected to be approximately US$60 million during such period.
As part of the agreement, Nigel McCue will join the board of Proprietary. Upon receipt of governmental approval for the Acquisition, it is expected that Mr. McCue will be appointed President & Chief Executive Officer of Proprietary.
Mr. McCue has thirty years experience in the upstream sector of the petroleum industry. He is a director and Chief Executive Officer of Nemmoco, a private exploration and production company with interests located principally in Central and Eastern Europe. Prior to this he was a Director and Chief Financial Officer of Lundin Oil Plc., a public company with interests in over twenty countries with specific experience in mergers & acquisitions, equity, corporate and project debt finance, and stock exchange listings including AIM. Prior to this, he held various positions with Chevron Overseas Petroleum Inc. and Gulf Oil Corporation. Mr. McCue is a non-executive director of Dragon Oil Plc. and is Chairman of its audit committee and a member of the remuneration and nomination committees.
In the event the government approvals are not obtained within 120 days, the Acquisition will be unwound, the Frontier shares will be returned to the Vendors and the Proprietary Shares will be returned to Proprietary and cancelled. Further, in such instance, Mr. McCue, has agreed to resign as a director and officer of Proprietary.
Proprietary is a principal merchant bank based in Calgary, Alberta. It is listed on the Toronto Stock Exchange trading under the symbol PPI.
Loon is an internationally focused oil and gas exploration company with offices in Calgary, Alberta & Dubai, United Arab Emirates. Loon, with current projects in Colombia, Slovenia and Brunei, is listed on the TSX Venture Exchange trading under the symbol LEY.
Nemmoco is a private Bermuda company at arms length to Loon and
Proprietary. Tim Elliott, an officer of Loon, owns an approximate 3% interest