CUT BANK, MONTANA, January 19, 2012 – Mountainview Energy Ltd. (“Mountainview” or the “Company”) (MVW:TSX-V) is pleased to announce that further to its previously announced proposed acquisitions of:
certain oil and gas assets located in the Williams and Lake Frances areas of Pondera County, Montana, which consist of: (i) 15,520 gross (15,520 net) acres of developed land producing approximately 66 gross (42 net) boe/d of natural gas; and (ii) 40,583 gross (31,593 net) acres of undeveloped land (the “Pondera Assets”);
a certain compressor plant, certain related ancillary equipment and field wellhead equipment and certain pipelines related to the Pondera Assets (the “Pondera Equipment”); and
certain non-producing oil and natural gas assets located in the Medicine Lake prospect in Divide County, North Dakota and Sheridan County, Montana, consisting of approximately 44,181 gross (8,836 net) acres of undeveloped land (the “Medicine Lake Assets” and collectively with the Pondera Assets and the Pondera Equipment, the “Assets”),
the Company has entered into a series of definitive agreements to consummate transactions that will lead to the direct and/or indirect acquisition of the Assets (the “Transaction”).
The Company is also pleased to announce that the board of directors of Mountainview (the “Board”) has approved the continuance of the Company into the Province of Alberta (the “Continuance”).
Both the Transaction and the Continuance are subject to all applicable regulatory, stock exchange and corporate and securities law approvals, including, but not limited to, acceptance by the TSX Venture Exchange (the “Exchange”) and applicable shareholder approvals at a special meeting (the “Meeting”) of holders (“Shareholders”) of common shares of Mountainview (“Common Shares”), which is expected to be held in March, 2012. Complete details of the Transaction and the Continuance will be included in the information circular related to the Meeting (the “Information Circular”), which is expected to be mailed to Shareholders in February, 2012.
Background to the Transaction
On October 4, 2010, Mountainview entered into: (a) letters of intent (the “Pondera LOIs”) with certain vendors of the Pondera Assets (the “Pondera Vendors”) to acquire the Pondera Assets; and (b) a letter of intent (the “Pondera Equipment LOI”) with the vendor of the Pondera Equipment (the “Pondera Equipment Vendor”), to acquire the Pondera Equipment.
On April 1, 2011, Mountainview entered into: (a) definitive purchase and sale agreements with the Pondera Vendors (the “Pondera PSAs”) to acquire the Pondera Assets, which superseded the Pondera LOIs; and (b) a definitive purchase and sale agreement with the Pondera Equipment Vendor (the “Pondera Equipment PSA”) to acquire the Pondera Equipment, which superseded the Pondera Equipment LOI.
On July 26, 2011, Mountainview entered into a letter of intent (the “Medicine Lake LOI”) with the vendors of the Medicine Lake Assets (the “Medicine Lake Vendors”).
Subsequent to the execution of the Pondera PSAs and the Pondera Equipment PSA, the parties thereto separately negotiated revised terms and transaction structures with respect to the transactions contemplated thereby. During the course of such negotiations, it became apparent that including the acquisition of all of the Assets in such a revised structure could be advantageous to the Company. Based on such negotiations the Company developed a revised transaction structure to accomplish the direct and/or indirect acquisition of the Assets. Accordingly, at the conclusion of such negotiations and structuring, on January 19, 2012:
primarily due to a calculation error, Mountainview and the Pondera Equipment Vendor amended the Pondera Equipment PSA to, among other things, change the principal amount of the debentures payable by Mountainview from $1,100,000 (as previously provided in the Pondera Equipment PSA) to $2,377,000, such that the aggregate consideration for the Pondera Equipment is USD$283,000 in cash, which has been paid by Mountainview to the Pondera Equipment Vendor, plus USD$2,377,000 principal amount of debentures of the Company that are payable within one (1) year from the closing date of the Transaction (the “Closing Date”), earn interest at a rate of prime plus 1% per annum and are convertible into Common Shares at a deemed price of $2.50 per Common Share (the “Debentures”);
Mountainview entered into a definitive purchase and sale agreement with the Medicine Lake Vendors (the “Medicine Lake PSA”), which superseded the Medicine Lake LOI pursuant to which Mountainview agreed to acquire the Medicine Lake Assets in exchange for an aggregate of 23,110,020 Common Shares;
the parties to the Pondera PSAs terminated such agreement and Mountainview entered into:
certain share purchase agreements (the “Share Purchase Agreements”) pursuant to which Mountainview agreed to acquire all of the outstanding shares of three separate private Alberta corporations that owned, directly or indirectly, an aggregate interest of approximately 39% in the Pondera Assets in exchange for an aggregate of 5,027,273 Common Shares; and
a contribution agreement pursuant to which, among other things, including certain reorganizational steps involving the Medicine Lake Assets and certain other property, Mountainview agreed to indirectly acquire the remaining 61% interest in the Pondera Assets in exchange for an aggregate of 7,822,727 Class “B” shares (“Class B Shares”) of Mountainview Energy (USA) Ltd. (“New Mountainview USA”).
Some of the key terms to the Class B Shares are as follows:
for 7 years following the Closing Date, the holders of Class B Shares may elect to convert all or a portion of the Class B Shares held into Common Shares on a one for one basis; such rights may only be exercised on: (i) 1/3 of such Class B Shares held commencing on the one year anniversary of the Closing Date; (ii) an additional 1/3 of such Class B Shares held commencing on the two year anniversary of the Closing Date; and (iii) the remaining 1/3 of such Class B Shares held commencing on the three year anniversary of the Closing Date;
commencing 7.5 years following the Closing Date and expiring on the 10 year anniversary of the Closing Date, the New Mountainview USA may, at its election, the Class B Shares to Mountainview Shares on a one for one basis; and
upon the exercise of such exchange rights referenced above, New Mountainview USA can elect to deliver Common Shares or cash (pursuant to a formula based on the 20-day volume weighted average trading price of the Common Shares).
In addition, pursuant to the Contribution Agreement in the event Mountainview develops production of oil, gas or other hydrocarbons on the Pondera Assets from horizons or depths below the base of the Dakota Formation, Mountainview shall pay one of the vendors of the Pondera Assets the additional sum of US$100.00 per acre per spacing unit of each such well productive of hydrocarbons in paying quantities (the “Additional Consideration”).
Complete details of the Transaction will be included in the Information Circular, which is expected to be mailed to Shareholders in February, 2012.
Benefits of the Transaction
The Board believes that the consummation of the Transaction is in the best interests of Mountainview and the Shareholders and provides a number of benefits primarily relating to an improved ability to enhance value to Shareholders, including:
the Transaction is anticipated to enhance the value for Shareholders through the acquisition of extensive tracts of undeveloped lands in two of the Company’s primary areas of focus;
the assets to be acquired pursuant to the Transaction are expected to provide the Company with significant upside in two emerging plays;
the Transaction will provide an increase to corporate oil and gas production levels; and
the consideration to be paid for by the Company pursuant to the Transaction is extremely attractive based on recent land sales in the relevant areas and will require minimal use of cash.
Conditions to the Transaction
The respective obligations of the parties to the Share Purchase Agreements, the Medicine Lake PSA and the Contribution Agreement to complete the transactions contemplated thereby are subject to a number of conditions as set forth in such agreements that must be satisfied in order for the Transaction to become effective, including, but not limited to, acceptance by the Exchange and applicable shareholder approvals at the Meeting.
Interests of Related Parties
Mr. Carter Stewart owns 9,690,555 Common Shares (approximately 16.39% of the outstanding Common Shares) and Mr. James Arthaud owns 9,490,555 Common Shares (approximately 16.06% of the outstanding Common Shares). Accordingly, by virtue of their respective shareholdings of Mountainview being each greater than 10% of the issued and outstanding Common Shares, each of Mr. Stewart and Mr. Arthaud is a “related party” of the Company, as such term is defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101″). An entity controlled by Mr. Stewart owns an approximately 29.95% interest in the Medicine Lake Assets; pursuant to the Medicine Lake PSA, such entity will receive 6,921,867 Common Shares for its interest in the Medicine Lake Assets. An entity controlled by Mr. Arthaud owns an approximately 25.07% interest in the Medicine Lake Assets; pursuant to the Medicine Lake PSA, such entity will receive 5,794,377 Common Shares for its interest in the Medicine Lake Assets. Following the consummation of the Transaction: (i) Mountainview is expected to have 87,245,442 Common Shares outstanding; (ii) Mr. Stewart is expected to beneficially own or control 16,612,422 Common Shares (approximately 19.04% of the issued and outstanding Common Shares post-Transaction); and (iii) Mr. Arthaud is expected to beneficially own or control 15,284,932 Common Shares (approximately 17.52% of the issued and outstanding Common Shares post-Transaction).
Mr. Patrick Montalban is the President, Chief Executive Officer and a Director of Mountainview and is accordingly a related party of the Company. An entity controlled by Mr. Montalban indirectly owns an approximately 61% interest in the Pondera Assets; pursuant to the Contribution Agreement, such entity will receive 7,822,727 Class B Shares for its interest in the Pondera Assets as well as the Additional Consideration in the event of certain development on the Pondera Assets. Mr. Montalban also owns 50% of the voting shares of the Pondera Equipment Vendor; pursuant to the Pondera Equipment PSA, the Pondera Equipment Vendor has received USD$283,000 in cash and will receive USD$2.377 million of principal amount of Debentures for its interest in the Pondera Equipment. Mr. Montalban has declared his interest in the acquisition of the Pondera Assets and the Pondera Equipment and refrained from voting to approve the acquisition of the Pondera Assets and the Pondera Equipment, respectively, at the meeting of the Board approving the Transaction.
The direct and/or indirect participation in the Transaction of Mr. Stewart, Mr. Arthaud, Mr. Montalban and/or the respective entities that they control, makes such transactions, as they relate to such parties, “related party transactions” pursuant to MI 61-101, which has been adopted by the Exchange pursuant to Policy 5.9 of the Corporate Finance Manual of the Exchange. Pursuant to MI 61-101, absent an available exemption, Mountainview would be required to obtain minority shareholder approval and a formal valuation for the Transaction, as such transactions relate to the related parties. Such an exemption is available pursuant to Sections 5.5(a) and 5.7(a) of MI 61-101, respectively, because at the time the Transaction was agreed to, neither the fair market value of the subject matter of, nor the fair market value consideration for such transaction, exceed 25% of Mountainview’s market capitalization.
However, due to the non-arm’s length nature of such transactions, the Policies of the Exchange may require disinterested Shareholder approval of the Transaction. Accordingly, the Company expects to conduct the vote at the Meeting such that the Common Shares held by the aforementioned related parties and the respective entities that they control will not be counted to approve the Transaction.
Some of the directors of the Company presently reside in Calgary, Alberta, and many of the Company’s advisors and business relationships are located in Calgary, Alberta. This being the case, the Board has determined that it is both practical and cost-effective to continue the Company into the Province of Alberta.
The proposed Continuance can only proceed if the Company meets a number of requirements set out under the Business Corporations Act (British Columbia) and under the Business Corporations Act (Alberta), including, but not limited to, approval of the Continuance by 662/3% of Shareholders present in person or by proxy at the Meeting.
Complete details on the Continuance will be included in the Information Circular, which is expected to be mailed to Shareholders in February, 2012.
U.S. Securities Laws Matters
This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and may not be offered or sold within the United States (as defined in the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws, or unless an exemption from such registration is available.
Information about the Company
Mountainview Energy Ltd. is a public oil and gas company listed on the Exchange, with a primary focus on the exploration, production and development of the Bakken and Three Forks Shale in the Williston Basin and the South Alberta Bakken play.
For further information, please contact:
Patrick M. Montalban
President & Chief Executive Officer
MOUNTAINVIEW ENERGY LTD.
PO Box 200
Cut Bank, MT 59427
Web Site: www.mountainviewenergy.com
Phone: (406) 873-2235 Fax: (406) 873-2835
Forward Looking Statements, BOE Equivalents and Cautionary Statements
This press release contains forward looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “approximate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions. More particularly, this press release contains statements concerning the acquisition of the Assets, the anticipated timing of the Transaction, the anticipated timing of the Meeting and the mailing of the Information Circular, the contents of the Information Circular, the benefits of the Transaction, the conduct of the Shareholder vote to approve the Transaction and certain related matters. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s control, and may be based on assumptions that could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Although Mountainview believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Mountainview can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Mountainview may not be able to obtain the necessary shareholder, regulatory and stock exchange approvals on the timelines it has planned or at all. The Transaction and the Continuance will not be completed at all if these approvals are not obtained. Accordingly, there is a risk that the Transaction and the Continuance will not be completed within the anticipated time or at all.
The forward looking statements contained in this press release are made as of the date hereof and Mountainview 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.
All calculations converting natural gas to barrels of oil equivalent (“boe”) have been made using a conversion ratio of six thousand cubic feet (six “Mcf”) of natural gas to one barrel of oil, unless otherwise stated. The use of boe may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.Back to top