Blacksteel signs LoI for business combination with Drakkar Energy

Canadian oil and gas company Blacksteel Energy has signed a letter of intent (LoI) for a business combination with Drakkar Energy.

The companies reached an agreement on a ‘commercially reasonable’ efforts financing to support an agreed upon capital and business plan.

Additionally, the parties agreed on an extension of the maturity date of the Blacksteel unsecured convertible debentures.

Blacksteel and Drakkar are focused on completion of a reserve report on their jointly owned property.

Under the business combination deal, each Drakkar shareholder would receive one common share of the post-transaction entity in exchange for each Class A common share of Drakkar.

Each shareholder would receive one common share of the post-transaction entity for each 3.25 common shares.

Currently, Blacksteel has 36,227,416 common shares issued and outstanding, while Drakkar is expected to have around 21,114,040 Drakkar common shares outstanding prior to completion of the transaction.

The combined entity will have 100% ownership in producing oil and gas lands in the Girouxville area in NW Alberta, with Blacksteel contributing its 30% working interest and Drakkar its 70% working interest.

This is expected to offer additional flexibility and alternatives to secure funds for future development and growth.

Blacksteel expects to realise synergies from the combination, including consolidated financing focus, drilling programmes, stronger fulltime management and administration.

Comprising 18 sections of contiguous lands, the Girouxville asset has five horizontal wells and a saltwater disposal well, with two of them producing 110 to 125 barrels of oil a day.

Blacksteel Energy president Les Treitz said: “The business combination will result in the consolidation of a 100% working interest in the Girouxville oil and gas asset providing additional flexibility and alternatives to funding future growth and development.

“We look forward to realising on a consolidated financing focus, drilling potential, administration efficiencies and the efforts of the new management team.”

The transaction is conditional upon certain conditions, including due diligence, and the signing of a definitive agreement.