NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES.
RPT Resources Ltd. ("RPT" or the "Corporation") (TSX VENTURE:RPT) is pleased
announce that RPT and ArPetrol Inc. ("ArPetrol") have now entered into a
definitive agreement dated December 23, 2010 (the "Agreement") in connection
with the arm's length business combination of RPT and ArPetrol which was
previously announced on November 22, 2010. The Agreement contemplates the
following (collectively, the "Transactions"):
-- under the terms of the Agreement, a wholly-owned subsidiary of RPT will
amalgamate by way of a plan of arrangement (the "Amalgamation") with
ArPetrol and pursuant thereto RPT will issue 7.494 common shares of RPT
(each an "RPT Share") for each common share of ArPetrol (each an
"ArPetrol Share") at a deemed price of $0.13 per RPT Share for aggregate
deemed consideration of approximately $27.9 million;
-- a new management team will be appointed led by Timothy Thomas as
President and Chief Executive Officer, Ian Habke as Chief Financial
Officer, Ian Moffat as Vice President, Exploration and Troy Wagner as
Vice President, Argentina (the "New Management") (see biographical
information below);
-- a new board of directors will be comprised of five of the current
directors of ArPetrol: Claudio Ghersinich (Chairman), Abdel Badwi,
Jeffrey Boyce, Timothy Thomas and Ronald Williams, as well as Michelle
Gahagan who is a current director of RPT (the "New Directors") (see
biographical information below);
-- RPT will be recapitalized through the previously announced private
placement (the "Private Placement") of up to 207,693,000 subscription
receipts of RPT ("Subscription Receipts") at a price of $0.13 per
Subscription Receipt for aggregate gross proceeds of up to approximately
$27 million which is expected to close on January 11, 2011 and for which
the agents have been granted a 10% option (the "Agents' Option") to
increase the size of the Private Placement prior to closing by up to an
additional 20,769,300 Subscription Receipts or approximately $2.7
million. Notwithstanding the above, the Agreement provides that receipt
of a minimum of $14.3 million in gross proceeds from the Private
Placement is a mutual condition precedent for both parties to the
closing of the Amalgamation (unless amended or waived); and
-- RPT will be continued to the Province of Alberta under the name
"ArPetrol Ltd.".
Trading of RPT Shares has been halted pending finalization of the terms of the
Transactions and this news release describing the Transactions. Trading of RPT
Shares is expected to resume on or about December 29, 2010.
Pro-Forma Highlights
Assuming the completion of the Transactions (which is targeted for on or around
March 15, 2011), the Corporation is expected to have the following attributes
(on a pro forma basis):
Production(1) 375 boepd(4)
Gross Proved Reserves(2) 4.9 MMboe(4)
Gross Proved plus Probable 7.5 MMboe(4)
Reserves(2)
Working Capital(3) Approx. $39 million (net of
transaction costs)
Notes:
1. This is based on year-to-date average daily production of ArPetrol as of
September 30, 2010.
2. Based on the December 31, 2009 Gaffney, Cline & Associates reserves
report for ArPetrol. "Gross Reserves" are ArPetrol's working interest
(operating or non-operating) share before deduction of royalties and
without including any royalty interests of ArPetrol.
3. Assumes completion of the maximum Private Placement and exercise in full
of the Agents' Option for an aggregate of approximately $29.7 million
from the Private Placement. In addition to the Private Placement, this
working capital amount includes $1.2 million raised from the ArPetrol
Convertible Debentures referred to below.
4. This represents natural gas production of 2.1MMcf/d with associated
condensate production of approximately 10 Bbls/d. The term "boe" may be
misleading, particularly if used in isolation. A boe conversion of
6 Mcf:1 bbl is based upon an energy equivalency conversion method
primarily applicable at the burner tip and it does not represent a value
equivalency at the well head.
Upon completion of the Transactions, the Corporation is expected to be debt free
with a working capital position of approximately $39 million (net of transaction
costs and based on the assumptions in note 3 above). In Argentina, the
Corporation will own and operate 100% of approximately 375 boepd of production
from its Faro Virgenes concession. The Corporation's Argentine assets will also
include expected high productivity redevelopment wells, several anticipated high
impact, low cost exploration targets, a strategically located 85 MMcf/d gas
plant (at full capacity) and a 65% working interest in 60,244 gross acres of
undeveloped lands.
Merits of the Transaction and Corporate Strategy
The Transactions will provide the Corporation with an experienced management
team and board of directors to execute a fully-funded capital program on an
inventory of drilling opportunities in Argentina. The Transactions are expected
to provide the resources necessary for growth of ArPetrol's current production
and reserves base.
The Corporation's growth strategy is expected to have the following elements:
- Focus on expanding its core operation and cash-flow base in Argentina;
- Drill low cost and high reward exploration wells identified in Argentina;
- Drill low risk and high impact redevelopment wells at Faro Virgenes in
Argentina; and
- Pursue strategic acquisitions in South America.
The Corporation's target for organic growth is projected to be approximately
2,000 boepd by the end of 2011 based on the planned capital program, development
success and other assumptions set forth elsewhere in this press release.
Boards of Directors' Recommendations
The board of directors of each of RPT and ArPetrol has considered the
Amalgamation at length and has, based upon the verbal fairness opinion of its
respective financial advisors and other considerations, unanimously determined
that the Transactions are fair to their respective shareholders and are in the
best interests of RPT and ArPetrol, respectively, and recommends that its
respective shareholders approve the Transactions. The board of directors and
officers of each of RPT (holding approximately 0.4% of the RPT Shares) and
ArPetrol (holding approximately 46% of the ArPetrol Shares) have entered into
support agreements in which they have agreed, among other things, to vote in
favour of the Transactions, subject to certain conditions.
New Management Team
The New Management brings a long and successful track record in the
international and Canadian oil and gas sectors. This experience spans all areas
of the upstream oil and gas business, including conventional and unconventional
resource plays and operational success in numerous countries worldwide,
including Canada, Argentina, Colombia, Peru, UK, the Middle East, Africa and
Indonesia. The New Management has demonstrated operational expertise and helped
build international oil and gas organizations.
Timothy J. Thomas, P.Eng., President & CEO
Mr. Thomas is a professional engineer with more than 32 years of oil and gas
experience. Most recently, Tim was Senior Vice President Canadian Oil and Gas
and an officer at Nexen Inc. (TSX, NYSE), a successful oil & gas company with
assets in Canada, US, UK, Yemen, Nigeria and Colombia. He served in senior
executive roles in Canada, Yemen, UK and Indonesia. During his 18 year career
with Nexen, he was instrumental in identifying and positioning the company in
the Horn River shale gas property and maintaining Canadian production levels
through selective investments. While the President and General Manager in Yemen
he identified and led the capital investments to raise production to a plateau
rate of 230,000 boepd. In addition, he was responsible for a wide range of
upstream exploration and production projects and business development activities
in Nigeria, Colombia, Vietnam, Pakistan and Australia. Prior to Nexen, Tim
worked for Gulf Canada (formerly TSX, NYSE) with a focus on the Arctic and East
Coast areas and Texaco (formerly NYSE) where he worked on both development and
exploration activity in the North Sea.
Ian Habke, CA, CFO
Mr. Habke is a Chartered Accountant with more than 20 years of diverse industry
experience. Most recently Mr. Habke was Director of Supply Management for Nexen
Inc. Other roles with Nexen have included Finance Director for their UK
operations and VP Finance for Yemen. In these positions Mr. Habke was an
integral member of the in-country management groups directing the daily
operations of these assets. His corporate roles have included President of Nexen
Energy Holdings International in the UK and assignments in financial reporting
and budgeting and strategic planning. Mr. Habke has a Bachelor of Commerce from
the University of Alberta.
Ian Moffat, P. Geol., Vice President, Exploration
Dr. Moffat is a professional geologist with more than 30 years of exploration,
exploitation and development experience gained in North and South America,
Africa, Southeast Asia, the former Soviet Union and the Middle East. Prior to
joining ArPetrol, Dr. Moffat was VP Exploration New Ventures at Talisman Energy
Inc. (TSX). In his 17 year career at Talisman, Dr. Moffat played an instrumental
role in significant oil and gas discoveries in Western Canada, Algeria, Sudan,
Peru and Colombia. During this period he led teams that grew Talisman's Latin
American acreage position and played a significant role in its execution of a
global exploration, acquisition and exploitation strategy. Prior to joining
Talisman, Dr. Moffat worked for Gulf Canada both in North America and in
International Exploration and Development.
Troy Wagner, P. Eng. MBA, Vice President, Argentina
Mr. Wagner is a professional engineer and MBA graduate with 18 years of
engineering and management experience. Prior to joining ArPetrol in 2007 as the
in-country manager in Argentina, Mr. Wagner was COO and VP Engineering of
Elmworth Energy/Triangle USA Petroleum (OTC - US), a company focused on
developing domestic and international shale gas projects. Mr. Wagner also spent
10 years at NAL Resources Management Ltd. (TSX) managing assets with combined
production of 36,000 boepd. As the Vice President of Operations at NAL, Mr.
Wagner was responsible for leading all technical and operations staff with
annual Capital and Operating budgets of over $175 million and $110 million per
year, respectively.
Board of Directors
The New Directors have strong track records in the oil and gas industry. The New
Directors have held executive and director positions with a number of successful
companies with operations in Canada, USA, Europe, Africa, Asia, the Middle East,
Australia and South America.
Claudio A. Ghersinich, P.Eng., Chairman
Claudio Ghersinich is an independent businessman and professional engineer with
more than 30 years of oil and gas experience. He is a co-founder and former
Executive VP and VP Business Development of Vermilion Energy Trust (TSX). He
serves or has served on the Board of Directors of various public companies
including Verenex Energy Inc. (formerly TSX), Vermilion Energy Inc. (TSX),
Aventura Energy Inc. (formerly TSX), Bulldog Energy Inc. (TSX), Bulldog
Resources Inc. (formerly TSX) and Pegasus Oil & Gas Inc. (formerly TSXV), and
Valeura Energy Inc. (TSXV), as well as several private and non-profit
organizations. These companies have operated assets in Canada, Europe, Libya,
Trinidad, Argentina and Australia. He has been Chairman of ArPetrol since its
inception.
Abdel F. Badwi, P. Geol., Director
Abby Badwi is an international energy executive and professional geologist with
more than 35 years experience in the exploration, development and production of
oil and gas fields in North America, South America, Europe, Asia and the Middle
East. Mr. Badwi has been a director of ArPetrol since its inception. He is
currently President & CEO of Bankers Petroleum Ltd. (TSX, London-AIM), an oil &
gas company with heavy oil operations in Albania. Previously, he served as
President & CEO of Rally Energy Ltd. (formerly TSX, Frankfurt) which had heavy
oil operations in Egypt and other assets in Pakistan and Canada, and which was
sold in 2007. He has been an officer and director of several Canadian public and
private companies and is currently a director of Bankers Petroleum Ltd. (TSX,
London-AIM), Valeura Energy Inc. (TSXV) and ArPetrol.
Jeffrey S. Boyce, Director
Mr. Boyce is Chairman & CEO of Sure Energy Inc. (TSX). Previously, Mr. Boyce was
the President & CEO of Clear Energy Inc. (formerly TSX) and prior thereto,
President & CEO, co-founder of Vermilion Resources Ltd. As one of the founders,
Mr. Boyce was directly involved in stewardship of Vermilion Resources Ltd. which
grew from having $200,000 in the bank in 1994 to a business with a current
enterprise value exceeding $3 billion. Mr. Boyce has more than 30 years
experience in public financial markets, corporate planning, negotiating,
developing land and exploration strategies, and managing oil and gas companies.
Mr. Boyce has served on the Board of Directors of various public, private and
non-profit organizations. These companies have operated assets in Canada,
Europe, Trinidad, Argentina, Colombia and Australia. Mr. Boyce has been a
director of ArPetrol since its inception.
Michelle Gahagan, Director
Ms. Gahagan is currently a principal in a privately-held merchant bank based in
Vancouver and London. Prior to the commencement of her involvement in merchant
banking five years ago, Ms. Gahagan graduated from Queens University Law School
and practiced corporate law for 20 years. Ms. Gahagan has extensive experience
advising companies with respect to international tax-driven structures, mergers
and acquisitions. Ms. Gahagan has successfully completed the Investment
Management Certificate course and is a Qualified Person under the Financial
Services Authority (UK) regime. Ms. Gahagan has been the president of RPT
Resources Ltd. since the fall of 2009 and is currently the managing director of
Northern Rand Resource Corp. and a director of Bowood Energy Corp.
Timothy J. Thomas, P. Eng., Director (See above)
Ronald A. Williams, CA, Director
Mr. Williams is Vice President Finance and Chief Financial Officer of Questfire
Energy Corp., a private oil and gas company. Prior thereto he was the Vice
President Finance and Chief Financial Officer of Stonefire Energy Corp (formerly
TSXV), a public company sold in 2010, and prior thereto, Director, Finance for
Vermilion Energy Trust (TSX). He joined the ArPetrol Board in June 2007 and
brings over 19 years of domestic and international oil and gas industry
experience. Mr. Williams has an extensive background in the areas of audit,
finance, and taxation as well as property and corporate acquisitions.
The New Directors will become the board of directors of the Corporation
immediately following the effective time of the Amalgamation.
Private Placement
As previously announced, on December 16, 2010, RPT entered into an agreement
with a syndicate of agents led by Raymond James Ltd. and including Canaccord
Genuity Corp. (the "Agents") providing for the issuance on a private placement
agency basis of up to 207,693,000 Subscription Receipts at a price of $0.13 per
Subscription Receipt for aggregate gross proceeds of up to $27 million. In
addition, RPT has granted the Agents the Agents' Option to increase the size of
the Private Placement by up to an additional 20,769,300 Subscription Receipts or
$2.7 million, exercisable prior to the closing of the Private Placement. Closing
of the Private Placement is expected to occur on or about January 11, 2011 and
is subject to receipt of all necessary regulatory approvals, including the
approval of the TSX Venture Exchange ("TSXV"). Each Subscription Receipt will
represent the right to automatically receive one RPT Share and one common share
purchase warrant ("RPT Financial Warrant"). Each RPT Financial Warrant will
entitle the holder thereof to purchase one RPT Share at a price of $0.26 at any
time prior to the date that is two years after the closing of the Private
Placement.
The Subscription Receipts will be issued pursuant to the terms of a subscription
receipt agreement and the gross proceeds of the Private Placement will be held
in escrow by an escrow agent. Each Subscription Receipt will automatically be
exchanged, without payment of any additional consideration or further action on
the part of the holder thereof, into one RPT Share and one RPT Financial Warrant
upon delivery of a notice to the escrow agent that the escrow release conditions
have been satisfied, including the receipt of any necessary government,
regulatory and shareholder approvals.
Provided that the notice is delivered to the escrow agent on or before March 31,
2011 pursuant to the terms of the subscription receipt agreement, the net
proceeds of the Private Placement will be released from escrow to the
Corporation. If the notice is not provided to the escrow agent on or before
March 31, 2011 pursuant to the terms of the subscription receipt agreement, the
Agreement is terminated, or RPT or ArPetrol advises the Agents or announces to
the public that it does not intend to proceed with the Amalgamation, each
Subscription Receipt will be cancelled and each holder of Subscription Receipts
will be entitled to receive its investment plus interest.
The Agreement provides that receipt of a minimum of $14.3 million in gross
proceeds from the Private Placement is a mutual condition precedent for both
parties to the closing of the Amalgamation (unless amended or waived). The
Agents will receive a commission of 4.5% of the gross proceeds raised under the
Private Placement. The net proceeds from the Private Placement will be used to
fund the Corporation's exploration and redevelopment program and for general
working capital purposes.
In addition, ArPetrol has recently issued to certain board members convertible
debentures in the aggregate principal amount of $1.2 million ("ArPetrol
Convertible Debentures") and 1,231,753 common share purchase warrants ("ArPetrol
Financial Warrants"). In accordance with the their terms, immediately prior to
the Amalgamation, the ArPetrol Convertible Debentures will be converted into
ArPetrol Shares on the basis of one ArPetrol Share per $0.97422 of principal
amount outstanding. Pursuant to the Amalgamation, these ArPetrol Shares will
then be exchanged for RPT Shares at a ratio of 7.494:1. The ArPetrol Financial
Warrants will also be exchanged at a ratio of 7.494:1 on the Amalgamation for
common share purchase warrants of RPT having the same terms as the RPT Financial
Warrants issued pursuant to the conversion of the Subscription Receipts.
Overview of the Transaction, Incentives and Capitalization
Under the terms of the Agreement, each outstanding ArPetrol Share will be
exchanged for 7.494 RPT Shares at a deemed price of $0.13 per RPT Share for
aggregate deemed consideration of approximately $27.9 million. RPT currently has
approximately 117.0 million RPT Shares outstanding and ArPetrol currently has
approximately 28.5 million ArPetrol Shares outstanding. There are no control
persons of either RPT or ArPetrol.
The pro forma capitalization of the Corporation following the Amalgamation is
described in the table below on the basis of both the minimum Private Placement
and the maximum Private Placement. Following the closing of the Transactions,
assuming completion of the maximum Private Placement and exercise in full of the
Agents' Option and the other assumptions set forth below: (i) the Corporation
will have approximately 570 million RPT Shares outstanding, of which
approximately 14% of the RPT Shares will be owned or controlled by the New
Management and New Directors; (ii) on a diluted basis, the New Management and
New Directors will own or control approximately 14% of approximately 835 million
diluted RPT Shares; and (iii) there will be outstanding options representing on
an aggregate basis approximately 4.3% of the issued and outstanding RPT Shares.
The Corporation's options (which are described below) will be subject to a
rolling option plan for up to 10% of the RPT Shares outstanding from time to
time and will be subject to TSXV policies and guidelines.
Expected Pro-Forma
Capitalization Following
Amalgamation Minimum RPT Shares(1) Maximum RPT Shares(2)
--------------------------------------------------------------------------
RPT Equity 116,988,073 116,988,073
ArPetrol Equity (7.494:1)(3) 214,856,374 214,856,374
RPT Shares from Private 119,230,770 237,693,070
Placement(4)
--------------------------------------------------------------------------
RPT Shares for Finder's Fee 2,000,000 2,000,000
(5)
--------------------------------------------------------------------------
RPT Shares Outstanding (basic) 453,075,217 571,537,517
RPT Shares issuable pursuant 119,230,770 237,693,070
to RPT Financial Warrants (6)
RPT Shares issuable pursuant 24,539,615 24,539,615
to stock options (7)(8)
RPT Shares issuable pursuant 2,997,600 2,997,600
to performance warrants
(9)(10)
--------------------------------------------------------------------------
RPT Shares (fully diluted) 599,843,202 836,767,802
Notes:
1. This assumes completion of the minimum of $14.3 million in gross
proceeds under the Private Placement.
2. This assumes completion of the maximum Private Placement and exercise in
full of the Agents' Option.
3. This assumes the exercise of 200,000 existing "in-the-money" options of
ArPetrol prior to completion of the Amalgamation.
4. Includes RPT Shares ultimately issued as a result of the conversion of
the ArPetrol Convertible Debentures and RPT common share purchase
warrants issued for the ArPetrol Financial Warrants pursuant to the
Amalgamation.
5. A finder's fee of 2,000,000 common shares of the combined entity will be
issued to Sam Charanek at a deemed price of $0.13 per share upon
completion of the Transaction. Mr. Charanek is a principal of CEE
Merchant Group and has over 12 years of capital markets consulting
experience.
6. Each RPT Financial Warrant will entitle the holder thereof to acquire
one RPT Share at a price of $0.26 for a period of 24 months.
7. Continuing options: This amount includes an aggregate of 20,703,815 of
options which will be held by persons who will be New Management, New
Directors or employees of the Corporation: 18,517,485 options with an
exercise price of $0.13 (which will expire in 2017), 725,000 options
with an exercise price of $0.20 (which will expire in 2014), 1,124,100
options with an exercise price of $0.27 (which expire between 2015 and
2017) and 337,230 options with an exercise price of $0.24 (which will
expire in 2017). This does not include any option allocations for future
hires.
8. Expiring Options: This amount also includes an aggregate of 3,835,800 of
options which will be held by persons who will not be New Management,
New Directors or employees of the Corporation and which are expected to
be exercised or expire within a certain period following completion of
the Amalgamation as follows: 2,175,000 options with an exercise price of
$0.20, 12,000 options with an exercise price of $0.27 and 150,000
options with an exercise price of $0.40, all of which will be exercised
or expire within 180 days following closing.
9. Continuing Performance Warrants: This amount includes performance
warrants with an exercise price of $0.134 which will be held by one
member of New Management. These RPT performance warrants will be issued
pursuant to the Amalgamation for the existing performance warrants
granted to ArPetrol management around the time of their original
subscription in ArPetrol. One-third of the performance warrants will be
vested and the remainder will be subject to vesting thresholds of $0.400
and $0.534 and will expire on January 10, 2015. These performance
warrants are not expected to be part of the "security based compensation
arrangements" of the Corporation because they were granted at the time
of earlier financings of ArPetrol.
10. Expiring Performance Warrants: This amount also includes 1,498,800 of
performance warrants which reflects the vested portion performance
warrants with an exercise price of $0.134 which will be held by persons
who will not be New Management, New Directors or employees of the
Corporation and which are expected to expire within 30 days following
completion of the Amalgamation. This amount excludes 2,997,600 of
performance warrants which represents the unvested portion of such
persons' performance warrants with the same exercise price but which are
subject to vesting thresholds of $0.400 and $0.534 and which will also
expire within 30 days following completion of the Amalgamation. These
performance warrants are also not expected to be part of the "security
based compensation arrangements" of the Corporation because they were
granted at the time of earlier financings of ArPetrol.
Timing and Required Approvals
Completion of the Amalgamation is subject to the satisfaction of a number of
conditions under the Agreement, including receipt of the approval of the TSXV,
approval of the Amalgamation and election of the New Directors by not less than
50% of the shareholders of RPT who vote at the RPT shareholder meeting, approval
of the Amalgamation by not less than two-thirds of the shareholders of ArPetrol
who vote at the ArPetrol shareholder meeting and approval by the Court of
Queen's Bench of Alberta. RPT has applied for and received a sponsorship
exemption pursuant to the policies of the TSXV. A joint information circular is
expected to be mailed to RPT and ArPetrol shareholders in early-February and the
annual and special meetings of shareholders of each of RPT and ArPetrol are
expected to be held in early-March 2011.
It is expected that the Amalgamation will be closed on or about March 15, 2011
on the assumption that RPT and ArPetrol receive the requisite approvals and all
of the conditions to closing are satisfied. In light of the pending shareholder
meeting to vote on the Amalgamation and election of the New Directors, RPT
applied to the British Colombia Registrar of Companies and obtained an extension
of the deadline for its annual general meeting until March 31, 2011.
Termination of the Agreement
The terms of the Agreement provide for termination of the Agreement and the
Amalgamation if the Amalgamation is not completed by an outside date of March
31, 2011, unless extended by the parties. In addition to the terms of the
Agreement discussed above, the Agreement contains reciprocal non-solicitation
covenants, customary representations, warranties, covenants and conditions and
provides for reciprocal non-completion fees under certain circumstances of
$1,000,000 or a reimbursement of costs of up to $750,000 (depending on the type
of break-fee event). The complete Agreement will be accessible under RPT's
profile on SEDAR at www.sedar.com.
Financial Advisors
Raymond James Ltd. is acting as financial advisor to RPT with respect to the
Amalgamation and provided a verbal fairness opinion to RPT's board in respect of
the consideration to be issued by RPT pursuant to the Amalgamation.
Canaccord Genuity Corp. is acting as financial advisor to ArPetrol with respect
to the Amalgamation and provided a verbal fairness opinion to ArPetrol's board
in respect of the consideration to be received by ArPetrol's shareholders
pursuant to the Amalgamation.
Raymond James Ltd. and Canaccord Genuity Corp. are also acting as underwriters
in respect of the Private Placement.
A written fairness opinion of each of the financial advisors is expected to be
included in the joint information circular to be mailed to RPT and ArPetrol
shareholders.
About RPT Resources Ltd.
RPT is a Canadian mineral exploration company based in Vancouver, British
Columbia and incorporated under the Business Corporations Act (British
Columbia). Since August 2009, RPT's principal focus has been to search for
mineral properties, primarily zinc oxide mineralization, which may be suitable
for application of the proprietary mineral processing technology developed by
MetaLeach Limited, a wholly owned subsidiary of Alexander Mining PLC. The RPT
Shares are listed on the TSXV under the trading symbol "RPT".
About ArPetrol Inc.
ArPetrol is a Calgary, Alberta based private company engaged in oil and gas
exploration and production in Argentina. It was incorporated under the Business
Corporations Act (Alberta) on September 17, 2004 and in July 2007 purchased
Geodyne Energy S.A. ("GESA"). GESA (now known as ArPetrol Argentina S.A.) was a
private Argentine oil and gas company with assets in the Province of Santa Cruz.
Through this purchase, ArPetrol owns and operates 100% of the Faro Virgenes
concession which currently produces natural gas and condensate at approximately
375 boepd from two wells in the Springhill formation. ArPetrol has planned a
three well redevelopment program to be conducted in 2011 and 2012 which will
target the underdeveloped crest of the structure. Costs of all three wells are
currently estimated to be approximately $22 million.
In conjunction, ArPetrol's technical team in Argentina has identified a
potential onshore exploration prospect on its 100% owned and operated Faro
Virgenes concession. ArPetrol has planned to test the possible oil accumulation
through an exploration well in 2011 at an estimated cost of $1.8 million.
In addition, ArPetrol's assets include a 100% interest in a 85 MMcf/d gas plant
(at full capacity) strategically located on the Faro Virgenes concession and a
20% operated working interest (with an option to increase to a 50% working
interest at casing point) in the Blanco de Los Olivos Oriental ("BOO") and
Catriel Viejo Sur exploration permits. Both exploration permits are located in
the hydrocarbon rich Neuquen Basin in the province of Rio Negro. ArPetrol has
scheduled an exploitation program of two to three shallow gas wells on its BOO
permit for late 2011. Total costs of the program are currently estimated to be
between $0.5 and $1.3 million (depending on final working interest).
ArPetrol Reserves Data
Gaffney, Cline & Associates Inc. ("GCA") has prepared an audit examination (the
"GCA Report") of the hydrocarbon liquid and natural gas reserves of ArPetrol
dated April 29, 2010. The effective date of the GCA Report is December 31, 2009
and it consists of an audit of the hydrocarbon liquid and natural gas reserves
attributable to ArPetrol's interest in the Faro Virgenes concession as
originally estimated by ArPetrol. The GCA Report has been prepared using
assumptions and methodology guidelines outlined in the Canadian Oil and Gas
Evaluation Handbook and in accordance with National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities.
The following table sets forth the natural gas and natural gas liquid reserve
estimates attributable to ArPetrol's interest in the Faro Virgenes concession as
presented in the GCA Report. The reserve estimates provided herein are estimates
only and there is no guarantee that the estimated reserves will be recovered.
Actual natural gas and natural gas liquid reserves may be greater than or less
than the estimates provided herein. Although the gas structure extends beyond
ArPetrol's concession limits and ArPetrol has made application for a 10-year
extension to the concession term, the reserve estimates provided herein are
based only on the reserves estimated inside the concession limits and during its
primary term (through 2016).
ArPetrol Reserves Summary - December 31, 2009
Natural Gas Natural Gas Liquids
---------------------------------------------------------------------
Gross(1) Net(1) Gross(1) Net(1)
(MMcf)(2) (MMcf) (Mbbl)(2) (Mbbl)
---------------------------------------------------------------------
Proved Developed Producing &
Proved Developed
Non-Producing(3)(6)(7)(8) 4,402 3,874 76 67
Proved Undeveloped(3)(9) 22,031 19,387 382 336
Total Proved(3) 26,433 23,261 458 403
Total Probable(4) 14,229 12,521 246 217
Total Proved Plus
Probable(3)(4) 40,662 35,782 704 620
Total Possible(5) 12,961 11,407 225 197
Total Proved Plus Probable
Plus Possible(3)(4)(5) 53,623 47,189 929 817
Notes:
(1) "Gross Reserves" are ArPetrol's working interest (operating or non-
operating) share before deduction of royalties and without including
any royalty interests of ArPetrol. "Net Reserves" are ArPetrol's
working interest (operating or non-operating) share after deduction of
royalty obligations plus ArPetrol's royalty interests in reserves.
(2) "MMcf" means million cubic feet and "Mbbl" means thousand barrels.
(3) "Proved" reserves are those reserves that can be estimated with a high
degree of certainty to be recoverable. It is likely that the actual
remaining quantities recovered will exceed the estimated proved
reserves.
(4) "Probable" reserves are those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the
actual remaining quantities recovered will be greater or less than the
sum of the estimated proved plus probable reserves.
(5) "Possible" reserves are those additional reserves that are less certain
to be recovered than probable reserves. There is only a 10% probability
that the quantities actually recovered will equal or exceed the sum of
the estimated proved plus probable plus possible reserves.
(6) "Developed" reserves are those reserves that are expected to be
recovered from existing wells and installed facilities or, if facilities
have not been installed, that would involve a low expenditure (for
example when compared to the cost of drilling a well) to put the
reserves on production.
(7) "Developed Producing" reserves are those reserves that are expected to
be recovered from completion intervals open at the time of the estimate.
These reserves may be currently producing or, if shut in, they must have
previously been on production, and the date of resumption of production
must be known with reasonable certainty.
(8) "Developed Non-Producing" reserves are those reserves that either have
not been on production, or have previously been on production but are
shut in and the date of resumption of production is unknown.
(9) "Undeveloped" reserves are those reserves expected to be recovered from
known accumulations where a significant expenditure (for example, when
compared to the cost of drilling a well) is required to render them
capable of production. They must fully meet the requirements of the
reserves classification (proved, probable, possible) to which they are
assigned.
Management of ArPetrol has confirmed that no material work has been performed on
ArPetrol's properties since the date of the GCA Report. ArPetrol will prepare an
updated independent audit examination of its hydrocarbon liquid and natural gas
reserves in accordance with National Instrument 51-101 - Standards of Disclosure
for Oil and Gas Activities and information from such updated report will be
included in the joint information circular to be provided to RPT and ArPetrol
shareholders in connection with the Transactions. Management of ArPetrol does
not currently expect that the reserves estimates in such updated report will
differ materially from the reserve estimates disclosed above. However, ArPetrol
has made application for a 10-year extension to the concession term which, if
received prior to such report, is expected to have a positive impact on the
reserve estimates. Although management of ArPetrol is optimistic that the
extension will be granted on a timely basis, there is currently no certainty as
to whether the extension will be granted or the timing thereof.
Selected Financial Information
The following table sets forth certain unaudited financial information for
ArPetrol as at and for the six months ended June 30, 2010 and audited financial
information for ArPetrol as at and for the year ended December 31, 2009:
Six Months ended Year ended
June 30, 2010 December 31, 2009
(unaudited) (audited)
------------------------------------
Total Assets $21,415,224 $23,019,588
Current Liabilities $1,083,509 $1,998,682
Working Capital $1,135,803 $1,416,923
Property, Plant and Equipment $18,013,893 $18,375,714
Revenue $2,392,078(1) $200,084
Net Loss $1,569,775 $3,139,213
Shareholders' Equity $17,962,560 $18,501,887
Note:
(1) This includes gain on termination of lease
ArPetrol is currently preparing its unaudited financial information as at and
for the nine months ended September 30, 2010, which will be included in the
joint information circular to be provided to RPT and ArPetrol shareholders in
connection with the Transactions. Management of ArPetrol does not currently
expect such financial information to have materially changed from the financial
information set forth above as at and for the six months ended June 30, 2010
except that working capital as at September 30, 2010 is expected to be
approximately $200,000, with a significant portion of the decrease due to the
reclassification of refundable Argentinean taxes from current to long-term.
However, subsequent to September 30, 2010, ArPetrol completed the issuance of
ArPetrol Convertible Debentures as described above which has resulted in cash
proceeds to ArPetrol of $1.2 million.
For further information with respect to ArPetrol, the Corporation and the
Transactions, please see the contact information below.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy securities in the United States, nor shall there be any sale of
the securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful. The Subscription Receipts to be offered have not been, and
will not be, registered under the U.S. Securities Act of 1933, as amended and
may not be offered or sold in the United States or to a U.S. person absent
registration or an applicable exemption from the registration requirements.
Reader Advisory
Investors are cautioned that, except as disclosed in the joint information
circular to be prepared in connection with the Transactions, any information
released or received with respect to the Transactions may not be accurate or
complete and should not be relied upon. Trading in the securities of RPT should
be considered highly speculative.
The proposed Transactions has not been approved by the TSX Venture Exchange and
remains subject to TSX Venture Exchange approval.
Completion of the Transactions is subject to a number of conditions, including
but not limited to, TSX Venture Exchange acceptance, shareholder approvals and
Court approval. The Transactions cannot close until the required approvals are
obtained. There can be no assurance that the Transactions will be completed as
proposed or at all.
Except for statements of historical fact, this news release contains certain
"forward-looking information" within the meaning of applicable securities law.
Forward-looking information is frequently characterized by words such as "plan",
"expect", "project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions "may" or "will"
occur. In particular, forward-looking information in this press release
includes, but is not limited to, statements with respect to timing and
completion of the Transactions, the merits of the Transactions, timing, size and
completion of the Private Placement, the satisfaction of the conditions
precedent to the Transactions (including receipt of TSX Venture Exchange
approval and shareholder approvals), the timing for calling and holding
shareholders meetings of RPT and ArPetrol, the preparation of reserve reports
and financial statements and the timing and results thereof, the Corporation's
growth and business strategy, operational plans and strategies and the timing
thereof, development and exploration plans and strategies and the timing and
expected costs thereof, and future production levels. Although we believe that
the expectations reflected in the forward-looking information are reasonable,
there can be no assurance that such expectations will prove to be correct. We
cannot guarantee future results, performance or achievements. Consequently,
there is no representation that the actual results achieved will be the same, in
whole or in part, as those set out in the forward-looking information.
Forward-looking information is based on the opinions and estimates of management
at the date the statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or results to
differ materially from those anticipated in the forward-looking information.
Some of the risks and other factors that could cause the results to differ
materially from those expressed in the forward-looking information include, but
are not limited to: general economic conditions in Canada, the United States and
globally; industry conditions, including fluctuations in the prices of oil and
natural gas; governmental regulation of the oil and gas industry, including
environmental regulation; unanticipated operating events or performance which
can reduce production or cause production to be shut in or delayed; failure to
obtain industry partner and other third party consents and approvals, if and
when required; competition for and/or inability to retain drilling rigs and
other services; the availability of capital on acceptable terms; the need to
obtain required approvals from regulatory authorities; stock market volatility;
volatility in market prices for oil and natural gas; liabilities inherent in oil
and natural gas operations; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands, skilled personnel and supplies;
incorrect assessments of the value of acquisitions; geological, technical,
drilling, processing and transportation problems; changes in tax laws and
incentive programs relating to the oil and gas industry; failure to realize the
anticipated benefits of acquisitions and dispositions; the ability of the
Corporation to successfully manage the political and economic risks inherent in
pursuing oil and gas opportunities in foreign countries; and the ability of the
Corporation to successfully market its oil and natural gas products. Readers are
cautioned that this list of risk factors should not be construed as exhaustive.
The forward-looking information contained in this news release is expressly
qualified by this cautionary statement. We undertake no duty to update any of
the forward-looking information to conform such information to actual results or
to changes in our expectations except as otherwise required by applicable
securities legislation. Readers are cautioned not to place undue reliance on
forward-looking information.
The TSX Venture Exchange has in no way passed upon the merits of the proposed
Transactions and has neither approved nor disapproved the contents of this press
release.