CALGARY, ALBERTA--(Marketwire - Oct. 19, 2011) -
NOT FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW
Rain Resources Inc. (the "Corporation" or "Rain") (TSX VENTURE:RAN.H), today announced additional details concerning its proposed business combination with Octant Energy Ltd. ("Octant") and Propel Energy Corp. ("Propel") (Octant and Propel, collectively referred to herein as the "Target Companies"), which was first announced in the Corporation's news release on September 6, 2011.
Rain intends for the Proposed Transaction (as defined below) to constitute its Qualifying Transaction, as such term is defined in the policies of the TSX Venture Exchange (the "Exchange"), and the Proposed Transaction is subject to Exchange approval.
Octant is a private oil and gas company incorporated in Alberta with its head office located in Calgary, Alberta. Octant is engaged in the evaluation of international petroleum assets. Octant currently has no interest in any oil and gas properties.
Propel is a private oil and gas company incorporated in Alberta with its head office located in Calgary, Alberta. Propel is engaged in the acquisition, exploration, and development of petroleum and natural gas properties in Western Canada, and has working interests in oil and gas properties in Saskatchewan and Alberta.
Summary of the Qualifying Transaction
On September 2, 2011, Rain, Octant and Propel entered into a non-binding, non-arm's length letter of intent (the "LOI"). The LOI contemplates Rain, Octant and Propel entering into a business combination (the "Proposed Transaction"). It is currently anticipated that: (i) the holders of shares of Octant will receive $0.00000005 Cdn. for each of the 20,000,000 common shares held in Octant, for a total payment of $1; (ii) the holders of shares of Propel will receive 1 common share of Rain ("Common Share") for each common share held in Propel; and (iii) there will be no other securities convertible into shares of Octant or Propel at the time of completion of the Transaction. The parties agree, however, that the final structure of the Transaction is subject to receipt of tax, corporate and securities law advice for each of Rain, Octant and Propel. The Proposed Transaction is subject to approval of the Exchange. The Proposed Transaction is a non- arm's length transaction as Murray Atkins, a director of Rain, owns 1,536,634 shares of Propel representing an ownership interest of 2.8%, and a convertible debenture for $400,000 that converts into Propel shares at $0.10 per share. If the debenture were converted, Mr. Atkins would own 5,536,364 common shares of Propel (10%).
It is currently contemplated that Rain will transfer to the shareholders of Propel an aggregate of 59,252,583 common shares of Rain. As a result of the Proposed Transactions, the current shareholders of Propel will hold approximately 93% and the current shareholders of Rain will hold approximately 7% of the resulting publicly traded issuer (the "Resulting Issuer").
At the Corporation's request, trading in the Rain common shares has been halted by the Exchange. Trading is expected to remain halted until the conditions set out in the Exchange Policy 2.4, section 2.3(b) have been satisfied. Rain, Propel and Octant intend to enter into a definitive agreement or agreements (the "Definitive Agreement(s)") in respect of the Proposed Transaction on or before October 31, 2011, which will require each party to complete its respective due diligence investigation. To complete the Proposed Transaction, Propel will also be required to provide Rain with a complete NI 51-101 technical report on its material resource properties, and each of Octant and Propel, and any related subsidiary companies, will be required to provide such financial statements as may be required by the Exchange.
As part of the otherwise non-binding LOI, Rain, Octant and Propel have agreed not to solicit or negotiate with any other entities in regard to a transaction similar to the Proposed Transaction. Each of Rain, Octant, and Propel shall bear their own costs in respect of the Proposed Transaction.
The LOI contemplates that Rain, Octant and Propel will execute the Definitive Agreement(s) in regard to the Proposed Transaction and the parties will satisfy various other conditions, as summarized in this Press Release. There can be no assurance that the Proposed Transaction would be completed on the terms proposed above, or at all.
Closing of the Qualifying Transaction
It is contemplated that closing of the Proposed Transaction would be subject to a number of terms and conditions including:
a. execution of the Definitive Agreement(s) by all parties by October 31,
2011 (or such later date as the parties may agree upon in writing);
b. receipt of all required third party and regulatory approvals for the
Transaction;
c. the completion of due diligence by Rain on the financial condition,
assets, corporate records, business operations and affairs of Octant and
Propel, and due diligence by Octant and Propel on the financial
condition, assets, corporate records, business operations and affairs of
Rain;
d. absence of material adverse change, material litigation, claims,
investigations or other matters affecting Rain, Octant or Propel; and
e. approval of the Proposed Transaction by the shareholders of Rain
including, but not limited to, the change of name of the Resulting
Issuer to Octant Energy Ltd.
About Octant Energy Ltd.
All information in this Press Release relating to Octant is the sole responsibility of Octant. Management of Rain has not independently reviewed this disclosure nor has Rain's management hired any third party consultants or contractors to verify such information.
Octant, incorporated in Alberta in 2011 and based in Calgary, Octant is engaged in the acquisition, exploration and development of petroleum and natural gas assets around the world. Octant currently has no interest in any oil and gas properties. The company was founded in June 2011 by Chris McLean and Richard Schmitt.
Summary Financial Information of Octant
Octant was capitalized with $2,000,000, all of which was invested into Propel in August 2011. The sole asset of Octant is its shareholding in Propel.
About Propel Energy Corp.
All information in this Press Release relating to Propel is the sole responsibility of Propel. Management of Rain has not independently reviewed this disclosure nor has Rain's management hired any third party consultants or contractors to verify such information.
Propel, incorporated in Alberta in 2005 and based in Calgary, Alberta, is engaged in the acquisition, exploration, and development of petroleum and natural gas properties in Western Canada.
Propel has various working interests in 3,680 gross acres (2,938 net acres) of lands in the Minard area of eastern Saskatchewan. Propel's interests in the Minard area are in two producing oil wells, six shut-in oil wells, two abandoned oil wells, and one active water disposal well. Current production is 45 barrels per day of light sweet crude.
A summary of Propel's share of reserves and future net revenue before risk for the Minard area based on a DeGolyer and MacNaughton report dated as of December 31, 2010 (the "DeGolyer and MacNaughton Report") is presented below. The Professional Engineers and Engineering Technologist of DeGolyer and MacNaughton certify in the Report that they neither have nor expect to receive any direct or indirect interest in the securities of Propel or its affiliated companies. Propel has sufficient funds allocated for the development of the proved and probable reserves identified in the DeGolyer and MacNaughton Report.
Gross Working Interest
Remaining Future Net Income
Reserves((1)(2)(3)(4))
-----------------------------------
Undis-
counted Discounted
---------------------- ----------------------------
Light
Crude Natural NGLs at 5% at 10% at 15% at 20%
Reserve Category Oil Gas
----------------------------------------------------------------------------
BBL MMCF BBL M$ M$ M$ M$ M$
Proved Developed
Producing 21,674 - - 1,213 1,142 1,079 1,021 969
Non-Producing 12,889 - - 496 468 441 418 396
-------- -----------------------------------
Total Proved 34,563 - - 1,709 1,610 1,520 1,439 1,365
Probable 17,150 - - 850 749 663 589 526
-------- -----------------------------------
Total Proved +
Probable 51,713 - - 2,559 2,359 2,183 2,028 1,891
Possible ((5)) 15,408 - - 773 656 561 484 420
-------- -----------------------------------
Total 67,121 - - 3,332 3,015 2,744 2,512 2,311
((1)) The reserve estimates in the DeGolyer and MacNaughton Report were prepared in accordance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook.
((2))Reserve net present values are based on forecast pricing based on the DeGolyer and MacNaughton Canada Limited Price Forecast - See Appendix "A". The prices in the Forecast were adjusted for transportation differentials and quality in the property based on the lease operating statements provided by Propel.
((3)) Reserve net present values do not necessarily represent fair market value of the reserve estimates.
((4))Capital expenditure of $128,000 is required to develop the proved and probable reserves.
((5)) Possible reserves are those additional reserves that are less certain to be recovered than probably reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Summary Financial Information of Propel
Based on audited financial statements for the year ended December 31, 2010, Propel had revenue of $1,472,397, including $1,030,325 from petroleum and natural gas sales, net of royalties. After expenses of $1,254,034, Propel reported a net income for the year of $218,363. The net income was applied to the existing deficit of $17,310,329.
As at December 31, 2010, Propel had intangible fixed assets of $505,331, tangible fixed assets of $569,198 and liabilities of $1,074,186.
As of the date of this press release, Propel's issued and outstanding and fully diluted share capital consists of 59,252,583 common shares. The major shareholder of Propel is Murray Atkins, who ows 1,536,364 common shares (2.8%), and a convertible debenture for $400,000 that converts into Propel shares at $0.10 per share. If the debenture were converted, Mr. Atkins would own 5,536,364 common shares of Propel (10%).
Insiders and Board of Directors of the Resulting Issuer
Upon completion of the Proposed Transaction, all of the existing directors and officers of Rain will resign and the directors and officers of the Resulting Issuer are anticipated to include the persons identified below:
J. Christopher McLean - Chairman
Mr. McLean is the founder and President of Stonechair Capital Company, a private venture capital firm (since April 2009) focused on international oil and gas exploration assets. Prior to starting Stonechair Capital, he was the Head of Capital Markets and Investment Banking at Wolverton Securities Ltd. (from 2007 to 2009). Mr. McLean currently sits as a director and the chairman of the audit committee of Canadian Overseas Petroleum Ltd XOP.
Richard Schmitt - President, Chief Executive Officer and Director
Mr. Schmitt has been the President of Propel since June 2011. Previously, he was President & Chief Executive Officer of Black Marlin Energy Holdings Limited and its predecessor company until October 2010. From 2006 to 2009, Mr. Schmitt was the President and Chief Executive Officer of Africa Oil Corp. Mr. Schmitt is currently a board member of a few TSX and Oslo listed companies.
Bill Evaroa - Chief Financial Officer
Mr. Evaroa is a chartered accountant who brings to the company 25 years of oil and gas industry experience, gained while working in 12 international locations. His experience includes setting up operations, systems implementation, policies and procedures and reporting as well as working in a head office environment. It includes 7 years with Nexen beginning with in country Finance Manager for Vietnam, then transferring to Indonesia before being posted to the Calgary head office where he managed the reporting of Nexen's international division, its annual budget and implementation of Sarbanes Oxley. More recently Mr. Evaroa was a key member of Tanganyika Oil's Syria based operation at times heading up Finance, HR, IT and Admin., before the company was acquired by Sinopec. Mr. Evaroa's last position was as VP Finance and CFO with Black Marlin Energy Ltd.
Murray Atkins - Director
Mr. Atkins has been the President of Blur Investments Ltd., a privately held investment company, since 1998. He is also the President and CEO of Restoration Properties, which is involved in real estate development and the management of several revenue-producing properties. Mr. Atkins is currently a board member of a few TSX listed companies.
Scott E. Fleurie - Director
Mr. Fleurie is a Director of Investment Banking for Fraser Mackenzie Limited (since October 2010). He was previously Vice-President & Partner, Energy Banking at Genuity Capital Markets (from 2006 to 2008) and previous to that was Vice-President at MGI Securities Investment Banking (from 2004 to 2006).
Sponsorship of the Qualifying Transaction
Sponsorship of a "Qualifying Transaction" is required by the Exchange unless exempt therefrom in accordance with the Exchange's policies. Rain is currently reviewing requests for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the Exchange. If the exemption is not granted by the Exchange, then Rain would be required to engage a sponsor.
About Rain Resources Inc.: Rain is a Capital Pool Company that completed its initial public offering and obtained a listing on the Exchange in July 2007 (Trading Symbol: "RAN.H"). Prior to entering into the LOI, Rain did not carry on any active business activity other than reviewing potential transactions that would qualify as Rain's Qualifying Transaction.
About Octant Energy Ltd.: Octant is a private oil and gas company incorporated in Alberta with its head office located in Calgary, Alberta. Octant is engaged in the acquisition, exploration and development of petroleum and natural gas assets around the world.
About Propel Energy Corp.: Propel is a private oil and gas company incorporated in Alberta with its head office located in Calgary, Alberta. Propel is engaged in the acquisition, exploration, and development of petroleum and natural gas properties in Western Canada, and has working interests in oil and gas properties in Saskatchewan and Alberta.
Cautionary Note
As noted above, completion of the Proposed Transaction is subject to a number of conditions including, without limitation, approval of the Exchange and approval of the shareholders of Rain. The Proposed Transaction cannot close until the required approvals have been obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the continuous disclosure document containing full, true and plain disclosure regarding the Proposed Transaction, required to be filed with the securities regulatory authorities having jurisdiction over the affairs of the Corporation, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. The trading in the securities of Rain on the Exchange, if reinstated prior to completion of the Proposed Transaction, should be considered highly speculative.
ON BEHALF OF THE BOARD OF DIRECTORS:
Ryan Spong, President
This press release contains forward-looking information. More particularly, this press release contains statements concerning the proposed Qualifying Transaction of the Corporation. The information about the Target Companies contained in the press release has not been independently verified by the Corporation. Although the Corporation believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct. Forward-looking information involves known and unknown risks, uncertainties, assumptions (including, but not limited to, assumptions on the performance and financial results of the Target Companies) and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The terms and conditions of the proposed Qualifying Transaction may change based on the Corporation's due diligence on the respective companies and properties of the Target Companies (which is going to be limited as the Corporation intends largely to rely on the due diligence of other parties of the Proposed Transaction to contain its costs, among other things), the entering into a binding agreement for the Qualifying Transaction and the Proposed Transaction, regulatory and third party comments, consents and approvals and the ability to meet the conditions of the Qualifying Transaction in the required timeframes. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to Exchange acceptance. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.
This press release is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.
Investors are cautioned that, except as disclosed in the management information circular, filing statement or other continuous disclosure document to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
Appendix "A" DeGolyer and MacNaughton Canada Limited Price Forecast: http://media3.marketwire.com/docs/ran_app.pdf
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