Latigo Capital Corporation ("LCC") (TSX VENTURE:LTG.P) is pleased to announce
that it has entered into an arms-length letter of intent (the "LOI") dated
effective August 1, 2008 with Flow-Back Oil & Gas Ltd. ("Flow-Back"), an Alberta
company, for the acquisition of all the issued and outstanding securities of
Flow-Back (the "Acquisition"). It is anticipated that the Acquisition will
constitute LCC's Qualifying Transaction as defined under the applicable policies
of the TSX Venture Exchange (the "Exchange").
Flow-Back is a privately held oil and gas exploration and production company
whose assets include proved producing and proved non-producing assets in the
Peoria/Shane, Dimsdale, Hanna and Vulcan areas of Alberta. Flow-Back also has a
Letter of Intention to acquire additional properties in the Dimsdale area of
Alberta (the "Dimsdale Properties"). Flow-Back's focus is aimed at the
exploitation of stranded natural gas, the strategic development of natural gas
projects and the acquisition of gas properties. Michael B. O'Hara, President and
Director is the former co-founder and former President & CEO of Calahoo
Petroleum Ltd. which formerly traded on the Toronto Stock Exchange and had
approximate production of 6,000 barrels of oil equivalent per day, of which
about 85% was natural gas. Flow-Back is majority owned and controlled by Xergy
Processing Inc., a private company. The principal shareholders of Xergy
Processing Inc. are Michael B. O'Hara, Eric Tollefson, Wayne Monnery and AGS
Energy Inc.
The Acquisition will be completed by way of an amalgamation or share exchange
with LCC or a wholly owned subsidiary of LCC. Also, prior to the completion of
the Acquisition, it is intended that, subject to shareholder approval, LCC will
complete a share consolidation (the "Consolidation"), pursuant to which existing
LCC securities will be consolidated on a two-for-one basis, such that existing
LCC shareholders will hold approximately 3,650,000 post-Consolidation common
shares immediately prior to the Acquisition. LCC will also seek shareholder
approval to change its name to "Latigo Energy Inc." or such other name as may be
decided by LCC and Flow-Back (the "Name Change").
Pursuant to the terms of the Acquisition, LCC will acquire all of the issued and
outstanding securities of Flow-Back. For the purposes of the Acquisition,
Flow-Back has been valued at $2,725,694. Pursuant to the terms of the
Acquisition, LCC will acquire from the shareholders of Flow-Back the 1,362,847
common shares of Flow-Back currently issued and outstanding, representing all of
the issued and outstanding shares of Flow-Back. Each Flow-Back common share is
accordingly valued at $2.00. Flow-Back will amalgamate with LCC, or a wholly
owned subsidiary of LCC, and as consideration, subject to Exchange approval, LCC
will issue in exchange for each issued common share of Flow-Back, two
post-Consolidation LCC common shares and $1 in cash consideration, or at the
election of the Flow-Back shareholder, four post-Consolidation LCC common shares
and no cash consideration. The consideration to be paid to Flow-Back common
shareholders may be adjusted if Flow-Back does not complete the acquisition of
the Dimsdale Properties. Each post-Consolidation LCC common share has been given
a deemed value of $0.50.
Prior to the completion of the Acquisition, it is intended that a wholly owned
subsidiary of LCC ("LCC Sub") will complete a brokered private placement (the
"Private Placement") of 6,000,000 preferred shares at a price, subject to the
approval of the Exchange, of $0.50 per preferred share for gross proceeds of
approximately $3,000,000. The preferred shares of LCC Sub issued under the
Private Placement will be exchanged for post-Consolidation common shares of LCC
on a one-for-one basis on the closing of the Acquisition. The net proceeds from
the Private Placement will be used by Flow-Back and LCC to: (a) acquire certain
of the Flow-Back common shares; (b) fund Flow-Back's business plan; (c) pay for
the transaction expenses; and (d) for general working capital. An agent for the
private placement has not yet been retained and LCC will issue a further press
release outlining additional details of the private placement once available.
The common shares of LCC to be issued to the shareholders of Flow-Back will be
issued pursuant to exemptions from the prospectus requirements of the applicable
securities legislations, will be subject to resale restrictions as required
under the applicable securities legislation and may be subject to escrow
conditions as required by the Exchange.
Following the completion of the Acquisition and the Consolidation, LCC is
expected to have between 12,375,694 and 15,101,388 common shares outstanding on
a non-diluted basis. The principal shareholder of LCC following the completion
of the Acquisition and the Consolidation will be Xergy Processing Inc. holding
between 2,262,874 and 4,525,748 common shares of LCC or 18.3% to 30% of the
issued and outstanding LCC common shares, assuming completion of the Private
Placement and assuming that Xergy Processing Inc. does not participate in the
Private Placement.
Prior to the Consolidation, LCC will also have outstanding director and employee
share options to acquire 730,000 common shares at an exercise price of $0.20 per
share (the "LCC Options"). It is expected that the holders of the LCC Options
will retain such options subsequent to the completion of the Acquisition in
accordance with the current share option plan subject to adjustments. In
addition, prior to the Consolidation, LCC will have outstanding agent's options
to acquire 425,000 common shares at an exercise price of $0.20 per share that
were issued in connection with LCC's initial public offering (the "LCC
Warrants"). Post-consolidation, there will be outstanding, 365,000 LCC Options
and 212,500 LCC Warrants, each with an exercise price of $0.40. LCC intends to
issue options to directors and officers following completion of the Acquisition,
however, details of the option grants have not yet been determined.
The completion of the Acquisition is subject to a number of conditions
including, but not limited to, the following:
1. the execution of a definitive agreement with respect to the Acquisition (the
"Definitive Agreement");
2. the approval of the Consolidation and Name Change by the majority of the
votes cast by the shareholders of LCC at a properly constituted meeting of the
common shareholders of LCC;
3. the approval of the Acquisition by the 2/3 of the votes cast by the
shareholders of Flow-Back at a properly constituted meeting of the common
shareholders of Flow-Back;
4. if the amalgamation or share exchange is with LCC instead of a wholly owned
subsidiary of LCC, then the approval of the amalgamation by 2/3 of the votes
cast by the shareholders of LCC at a properly constituted meeting of the common
shareholders of LCC;
5. the completion of the Private Placement;
6. the receipt of all necessary regulatory, corporate and third party approvals,
including the approval of the Exchange, and compliance with all applicable
regulatory requirements and conditions in connection with the Acquisition;
7. the maintenance of LCC's listing on the Exchange;
8. the confirmation of the representations and warranties of each party to the
Definitive Agreement as set out in such agreement;
9. the absence of any material adverse effect on the financial and operational
condition or the assets of each of the parties to the Definitive Agreement;
10. the delivery of standard completion documentation including, but not limited
to, legal opinions from counsel, officers' certificates and certificates of good
standing; and
11. other conditions precedent customary for a transaction such as the Acquisition.
The completion of the Acquisition is intended to occur on the tenth business day
following the satisfaction or waiver of the conditions precedent or such other
date as is mutually agreed to by the parties, but in any event no later than
October 31, 2008. If the Acquisition is not completed on or before October 31,
2008, the terms of the LOI or the Definitive Agreement (if applicable) will be
terminated. Each of LCC and Flow-Back will be responsible for the payment of its
own costs and expenses incurred in connection with the Acquisition. LCC will
also be responsible for the payment of 50% of the costs related to the
preparation of the financial statements of Flow-Back and the expenses of any
third party engineers required to comply with the applicable policies of the
Exchange, such expenses to be approved by LCC prior to being incurred by
Flow-Back.
LCC expects to call a shareholders' meeting to be held in September 2008 to
consider the Consolidation and the Name Change and, if required, the
amalgamation of LCC. It is expected that the principal shareholders of LCC,
including Ric Charron, Warren S. Coates, Scott Harkness and J.G. (Jeff) Lawson
will enter into a voting support agreement to approve the Consolidation and the
Name Change at the meeting of the LCC shareholders.
It is the intention of LCC and Flow-Back to establish and maintain a board of
directors with a combination of appropriate skill sets and is compliant with all
regulatory and corporate governance requirements. The board of directors of LCC
currently consists of four members. Upon completion of the Transaction, the
board of LCC will be increased to six members: four of the six members will be
nominated by Flow-Back, and two of the six members will be nominated by LCC, who
are expected to be Ric Charron and Warren Coates. Three of the six members of
the board are expected to be independent directors.
As a result of the Acquisition, Flow-Back will become a wholly-owned subsidiary
of LCC and the business of Flow-Back will become the business of LCC.
LCC will issue a news release in the near future which will provide, among other
things, significant financial information on Flow-Back, information regarding
the insiders of Flow-Back and a summary of Flow-Back's proved producing and
proved non-producing assets.
LCC, a capital pool company within the meaning of the policies of the Exchange,
was incorporated in April 2007 and was listed on the Exchange in October 2007.
LCC does not have any operations and has no assets other than cash. LCC's
business is to identify and evaluate businesses and assets with a view to
completing a Qualifying Transaction under the policies of the Exchange.
LCC intends to apply to the Exchange for an exemption from the sponsorship
requirement in connection with the Acquisition. There is no assurance that the
exemption will be granted by the Exchange.
Trading in the common shares of LCC has been halted on the Exchange since August
5, 2008 and will resume trading on the completion of the Qualifying Transaction.
Except for statements of historical fact, all statements in this news release,
including, but not limited to, statements regarding future plans, objectives and
payments are forward-looking statements that involve various risks and
uncertainties.
Completion of the transaction is subject to a number of conditions, including
but not limited to, TSX Venture Exchange acceptance and, if applicable pursuant
to TSX Venture Exchange requirements, majority of the minority shareholder
approval. Where applicable, the transaction cannot close until the required
shareholder approval is obtained. There can be no assurance that the transaction
will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information
circular or filing statement to be prepared in connection with the transaction,
any information released or received with respect to the 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.
FORWARD LOOKING INFORMATION
Certain information in this news release is forward-looking within the meaning
of certain securities laws, and is subject to important risks, uncertainties and
assumptions. This forward-looking information includes, among other things,
information with respect to LCC's beliefs, plans, expectations, anticipations,
estimates and intentions, the completion of a private placement of preferred
shares by LCC Sub, LCC's acquisition of Flow-Back Shares in exchange for LCC
common shares pursuant to prospectus and registration exemptions, the execution
of a definitive agreement for the Acquisition, the establishment of a new LCC
board of directors, the Consolidation and Name Change and the activities of
Flow-Back after the Acquisition. The words "may", "could", "should", "would",
"suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend",
"plan", "target" and similar words and expressions are used to identify
forward-looking information. The forward-looking information in this news
release describes LCC's expectations as of the date of this news release.
The results or events anticipated or predicted in such forward-looking
information may differ materially from actual results or events. Material
factors which could cause actual results or events to differ materially from
such forward-looking information include, among others, risks arising from
general economic conditions and adverse industry events, risks arising from
operations generally, reliance on contractual rights such as licences and leases
in the conduct of its business, reliance on third parties for sales of product,
reliance on key personnel, the need to protect intellectual property and other
proprietary rights, possible failure of the business model or business plan or
the inability to implement the business model or business plan as planned,
fluctuations in the cost of materials, competition, environmental matters, and
insurance or lack thereof.
LCC cautions that the foregoing list of material factors is not exhaustive. When
relying on LCC's forward-looking information to make decisions, investors and
others should carefully consider the foregoing factors and other uncertainties
and potential events. LCC has assumed a certain progression, which may not be
realized. It has also assumed that the material factors referred to in the
previous paragraph will not cause such forward-looking information to differ
materially from actual results or events. However, the list of these factors is
not exhaustive and is subject to change and there can be no assurance that such
assumptions will reflect the actual outcome of such items or factors.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE
EXPECTATIONS OF LCC AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS
SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON
FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY
OTHER DATE. WHILE LCC MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS
INFORMATION AT ANY PARTICULAR TIME UNLESS REQUIRED TO DO SO BY APPLICABLE
SECURITIES LAWS.
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