Solara Exploration Ltd. has entered an agreement with Verity Energy Ltd. to merge the two companies into one, becoming Amalco, Solara announced.
The boards of directors for the two companies have approved the transaction subject to certain conditions as set forth the amalgamation agreement. The directors and officers of both companies have agreed to enter lockup agreements committing their support in favor of the transaction.
As part of the agreement, Solara and Verity will each nominate two directors to the board of directors of Amalco and those directors so nominated will mutually agree upon the fifth appointee to the Amalco board. It is intended that the management of Verity will assume the key management positions within Amalco upon closing of the transaction with John Zang, the current president and CEO of Verity, being appointed the president and CEO of Amalco.
The closing of the transaction is subject to a number of conditions, including but not limited to Amalco completing a private placement financing of between US $5 million and $10 million.
Verity currently has production from three properties in Alberta and one property in British Columbia totaling approximately 90 bbls/d of oil and 2,140 Mcf/d of natural gas. Verity's key growth property is its Viking oil lands located in the Veteran (Provost) area of east central Alberta. More than 90% percent of Verity’s oil production comes from the seven gross wells (5.8 net) which Verity owns in the Veteran area. Verity has a total of approximately seven net sections of land in the Veteran (Provost) area.
Solara also has various working interests in lands in the Provost area. The Management of Verity estimates that there are up to 40 additional Viking development drilling locations based on internal technical evaluation. The other projects of Verity include predominantly gas-producing properties located at Helmet, BC, Grande Prairie and Long Coulee, Alberta. Verity currently has total debt of approximately $9 million. Based on the Verity NI 51-101 compliant reserve report prepared by AJM Deloitte (the Verity reserves evaluators) dated Dec. 31, 2011, the 10% discounted value of its proven plus probable basis reserves is $17.8 million.
Upon completion of the amalgamation of Solara and Verity, Amalco will be a newly created junior oil and gas company publicly traded on the TSXV. It will be focused on exploration, development, and acquisition of oil and natural gas in central Alberta, with an emphasis on oil resource plays in the Cardium, Viking, and Sparky formations. Amalco will have three core-producing oil projects located in Buck Lake (Pembina), Veteran (Provost), and Dewberry areas of Alberta.
The combined entities initially will produce approximately 700 boe/d of oil and gas production and have a gross proven plus probable reserve value of approximately $45 million utilizing a 10% discount rate. The proceeds of the financing will be used to implement a development drilling and optimization program on the core oil projects and to pursue additional asset acquisitions as part of an aggressive growth strategy.
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