Proposed Acquisition of Diaz Resources (DZR-V) Ltd.
On May 17, 2013, Tuscany (TUS-V) and Diaz Resources Ltd. ("Diaz") announced that they had entered into an agreement whereby, subject to certain conditions including obtaining shareholder, court and all necessary regulatory approvals, Tuscany will acquire all of the common shares of Diaz (the "Transaction"). After the acquisition of Diaz, Tuscany plans to reorganize its capital structure by the consolidation of its shares on the basis of 1 new share for every 8 shares outstanding.
It is anticipated that Tuscany will issue approximately 3.7 million post-consolidated common shares for the acquisition of Diaz. Following the Diaz acquisition it is expected that Tuscany will add:
-- Proved plus probable reserves of 1.0 million BOE (2.0 Bcf of natural Gas and 670.8 thousand barrels of oil), a 66% increase in Tuscany's reserves.
-- Net present value of future net revenue attributable to such additional reserves of approximately $12.1 million, using a 10% discount rate, a 42% increase to the net present value of the future net revenue attributable to Tuscany's current reserves.
-- 65.7 thousand acres of undeveloped land, a 320% increase in Tuscany's undeveloped land.
-- Based on Q1 2013 production rates, 382 BOEd (172 Bopd and 1.3 MMcf of natural gas production), a 127% increase in Tuscany's production.
The above reserve information and net present value is based on the independent reserves reports of Diaz prepared by McDaniel & Associates Consultants effective December 31, 2012 in accordance with National Instrument 51-101 and the COGE Handbook. It should not be assumed that the estimate of the net present value of the future net revenue attributable to Diaz's reserves represents the fair market value of the reserves. There can be no assurances that the assumptions contained in such estimate will be attained and variances could be material.
In accordance with the proposed Transaction Tuscany will effectively assume Diaz's net debt, approximately $4.2 million at March 31, 2013.
Tuscany and Diaz have operated together through a joint operating agreement since 2010 and therefore they have common working interests in some heavy oil properties, including the Macklin pool, one of the properties that is expected to be a focus of Tuscany's 2013 development operations.
Tuscany anticipates that the acquisition will result in reduced overhead expenses per BOE and increase management's efficiency and control over the timing of drilling operations.
The Transaction is expected to be completed by way of a Plan of Arrangement and closing is expected to occur by the end of July 2013, subject to satisfaction of certain conditions including standard stock exchange, court and regulatory approvals and the requisite two-thirds majority and majority of minority approval of Diaz's shareholders and majority of minority approval of Tuscany's shareholders. An information circular, prepared jointly by the parties, will be mailed to shareholders of both Tuscany and Diaz in connection with the shareholder meetings of each company expected to be held on July 15, 2013 to consider and approve the Transaction. |
