Riverstone backed Pipestone Oil to merge with Blackbird Energy

Blackbird Energy Inc. (TSX-V: BBI) and Pipestone Oil Corp. have entered into an arrangement agreement for the merger of Blackbird and Pipestone Oil. The combined company will operate under the name Pipestone Energy Corp.

Pipestone Energy will be the operator of a pure-play condensate-rich Montney asset in the Pipestone area near Grande Prairie with proved plus probable reserves of ~165 MMboe (~36% condensate / oil + ~11% NGLs) and risked best estimate contingent resources of ~221 MMboe (~36% condensate / oil + ~10% NGLs) booked on only ~58% of total lands, as evaluated by McDaniel & Associates Consultants Ltd.

The issued and outstanding common shares of Blackbird will be converted to common shares of Pipestone Energy and effectively consolidated on a 10:1 basis. Pipestone Oil’s sole shareholder Canadian Non-Operated Resources, L.P. (CNOR LP) will be entitled to receive 103.75 million new shares.

Upon completion of the arrangement and proposed financings, Blackbird shareholders would own approximately 45.1% of Pipestone Energy shares to be outstanding (or approximately 50.8% on a fully diluted basis including all existing Blackbird dilutive securities).

Canadian Non-Operated Resources, LP is owned by Riverstone Energy Limited, a closed-ended investment company managed by Riverstone Holdings LLC.

The board of directors of Pipestone Energy will be comprised of seven members: two Blackbird nominees, Garth Braun (Chairman, CEO, and President of Blackbird) and Bill Lancaster (President of GMT Exploration Company LLC); three Pipestone Oil nominees, Geeta Sankappanavar (Co-Founder & President of Grafton Asset Management), Robert Tichio (Partner at Riverstone Holdings LLC), and Paul Wanklyn (President and CEO of Pipestone Energy); and two additional independent nominees, one of whom will serve as the Chairperson of the Pipestone Energy board of directors.

Concurrent with the transaction, Blackbird and Pipestone Oil intend to raise $111 million of equity on a committed basis, with the new directors and officers of Pipestone Energy anticipated to contribute an additional amount up to $4.4 million.

Blackbird has entered into subscription agreements with GMT Exploration Company LLC and certain funds and accounts managed by its principal shareholder GMT Capital Corp., pursuant to which GMT will invest approximately $26 million in Blackbird shares on a subscription receipt basis at a pre-consolidation price of $0.34 per subscription receipt. GMT currently holds 11% of the Blackbird Shares. It is anticipated that on the closing of the Transaction, insiders of Pipestone Energy will subscribe for up to $4.4 million of New Shares at a price of $3.40 per share.

Pipestone Oil has a commitment from CNOR LP to invest $85 million in common shares of Pipestone Oil on or prior to closing of the transaction.

The closing of each of the GMT and CNOR financing is conditional on the closing of the transaction. Proceeds will be used for Pipestone Energy’s 2019 capital expenditure program.

In conjunction with the transaction, Pipestone Oil has been provided a binding commitment letter and term sheet for a $198.5 million two-year first lien credit facility, which will be used to fund a portion of the 2019 capital expenditure program and repay existing indebtedness.

The transaction is anticipated to be closed in early January 2019.

Full release: http://pipestoneoilcorp.com/pipestone-announcement/

photo credit: Pipestone Oil Corp.

Ted Liu

Ted Liu, M.Sc. (Mining), MBA (Finance), is the Editor of Private Capital Journal and CanadaMetals.ca, and former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA). Ted was the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, the most sophisticated and advanced all private capital and public market financing database.