Petro One Energy (POP-V) Oct 8, '14 has closed its non-brokered private placements announced on July 28, 2014 (PP No. 1), and Aug. 5, 2014 (PP No. 2). On closing, on Oct. 7, 2014, the company issued a total of 13,043,371 units at the price of 25 cents per unit to raise gross proceeds of $3,260,842.75. Each unit comprised one common share and one share purchase warrant entitling the holder to purchase one additional common share at the price of 37.5 cents until Oct. 7, 2016, subject to acceleration at the company's option if its shares close at $2.00 or higher for 10 consecutive trading days at any time after four months after closing.
The company is also pleased to report that it has received written confirmation from Korea Myanmar Development Company Ltd. (KMDC) that it remains committed to meeting its obligation to finance a total of $18-million pursuant to the July 25, 2014, earning and joint venture agreement. Although it did not receive the full $2-million which was due on Oct. 7, 2014, pursuant to its agreement with KMDC, Petro One did receive written confirmation from KMDC that it intends to wire the balance of the funds owing to fulfill its contractual obligations in respect of PP No. 1 within the next 14 days and that it intends to fulfill the balance of its $18-million financing obligation on or before Nov. 5, 2014.
To evidence KMDC's good faith, and as financial confirmation of its intention to meet that commitment, KMDC wired a further $100,000 toward PP No. 1 on Oct. 7. Accordingly, while there can be no assurance that KMDC will meet its remaining obligations, KMDC has provided tangible financial evidence of its serious intentions, and the company has determined it to be in the best interests of the company and its shareholders to afford KMDC a short additional period of time to fulfill its financial obligation in respect of PP No. 1. KMDC's further contractual obligation to finance the $14-million drilling program does not fall due until Nov. 7, 2014.
The difference between the amount raised pursuant to PP No. 1 and PP No. 2, and the $6-million which would have been available to the company had it received the final $2-million for which KMDC was responsible is due to the withdrawal of certain subscribers who participated on the understanding that KMDC would meet its commitment for $2-million by Oct. 7, 2014. KMDC has acknowledged in writing its responsibility for the entire shortfall on PP No. 1. The company plans to review the potential for a further financing at the same price when it has confirmed receipt of additional funds from KMDC. Any such financing will be subject to acceptance by the TSX Venture Exchange.
Proceeds from the financing will be used to finance expenses associated with the development of the company's oil and gas properties, including drilling, completing, equipping and bringing into production oil wells, and for general working capital. Foremost among those projects and currently in the advanced planning stage are drilling a horizontal earning well near Milton, in western Saskatchewan, and a production test on the previously drilled well SR-1 at South Reston, Man. In that regard, the company is pleased to report that it has secured an extension of the time permitted to spud a well on two sections of land from Oct. 31, 2014, to Feb. 28, 2015, as required to earn a 100-per-cent interest in those sections pursuant to a seismic option and farm-out agreement dated April 23, 2012. Those lands are contiguous with the company's existing J5 Milton lands (two sections), which have current Viking production, and are considered to have strong Upper Viking potential.
As reported in the company's May 12, 2014, news release, McDaniel and Associates Consultants Ltd. has provided a National Instrument 51-101 prospective resource estimate of 2.48 million barrels of recoverable oil -- high case (P90), 1.80 million barrels -- best case (P50) and 1,125,000 barrels -- low case (P10) on its J5 Milton property, based on 45 horizontal drilling locations in the Viking. This is in addition to 124,800 bbl of proved plus probable reserves that were reported in the company's May 8, 2014, news release, which included the following summary of the project by the company's president, Peter Bryant:
"We are very pleased to receive this evaluation of recoverable prospective resources in addition to the reserves on our Milton property. Recent horizontal drilling in the newly discovered Marengo field, 3.2 kilometres south of Petro One's J5 property, has a 100-per-cent success rate, with three-month initial production ranging up to 75.5 [barrels of oil per day] and averaging 56 bopd, and licences for 13 new horizontal wells have recently been issued. McDaniel has identified 45 horizontal drill locations in 10-metre-thick Viking sand with strong oil show confirmed in core, and this bodes well for future production. Petro One's Milton property covers more than 2,500 acres, and we look forward to developing this asset with the drill bit."
The company is in the process of obtaining the necessary permits and licences, and securing a drilling rig for the planned drilling at J5 Milton, and should be in a position to spud the earning well on the contiguous property on or before Oct. 31. If the company is not able to spud the well by then, the company must pay $50,000 to the property owner as an advance against the 6-per-cent gross overriding royalty ultimately payable on production from the property and will have until Feb. 28, 2015, to spud the well.
At South Reston, Man., the company plans to carry out a production test on the previously drilled well SR-1 to test the economic potential of the Lodgepole formation. As reported in the company's Feb. 24, 2013, news release, the SR-1 vertical wildcat well drilled pursuant to the company's joint venture with Goldstrike Resources Ltd. (Nov. 26, 2013, news release) encountered a large Waulsortian mound with a strong oil show in a 20-metre interval at the top of the Mississippian Lodgepole formation, which was the targeted formation. Cuttings from 790 to 810 metres drill depth had medium-brown oil stain, vivid fluorescence and fluorescent cut, and emitted a strong petroliferous odour during sample wash. Parameters calculated by an independent petrophysicist for what he has indicated to be a newly discovered reservoir are 17 metres of indicated net pay, 10.34-per-cent porosity, 50.89-per-cent water saturation and 0.63-millidarcy permeability.
Due to the low permeability of the zone, Petro One's consulting geologists, engineers and petrophysicist have suggested that the company run a production test and that, assuming success, horizontal drilling will most likely be necessary to recover oil from the zone encountered. The J4 South Reston property has up to 17 net horizontal drill locations.
The company has agreed to pay to Aberdeen Gould Capital Markets Ltd. and its selling group, in the aggregate, cash finders' fees totalling $256,867.42, which equal 8 per cent of the gross proceeds from a portion of the offerings. In addition, the company has issued 1,027,470 non-transferable finders' warrants, which equal 8 per cent of a portion of the units issued by the company. Each finder's warrant will be exercisable to purchase one share at the price of 37.5 cents until Oct. 7, 2016, subject to acceleration at the company's option if its shares close at $2.00 or higher for 10 consecutive trading days at any time after four months after closing. All shares and warrants issued pursuant to the offering are subject to a four-month hold period expiring at midnight on Feb. 7, 2015. Any shares issued pursuant to the exercise of warrants or finders' warrants will also be subject to a four-month hold period expiring at midnight on Feb. 7, 2015.
The company is pleased to have completed this financing, wishes to thank the investors who have supported it and looks forward to continuing to develop its oil properties. The company will report on further developments as they occur. |
