Pieridae Closes Shell Foothills Deal

In addition to acquiring production, Pieridae is also picking up three deep cut, sour gas processing plants, including this one at Caroline.

Pieridae Energy Limited has closed its acquisition of all of Shell Canada Energy’s midstream and upstream assets in the southern Alberta Foothills for $190 million.

Further to the $10 million deposit paid at signing the PSA, on closing, Pieridae paid Shell $165 million of the purchase price of the acquisition in cash (net of adjustments) which Pieridae funded through the issuance of term debt and equity. Pieridae satisfied the balance of the purchase price of $15 million by the issuance to Shell of 15.2 million common shares of the company having an aggregate value of $15 million determined in accordance with the PSA.

 “We are very pleased to close this transformational acquisition as it secures the majority of the natural gas needed, once developed, to supply the first train at our Goldboro LNG facility for at least 20 years,” said Pieridae’s chief executive officer Alfred Sorensen. “We will now complete our negotiations with Kellogg Brown & Root Limited for a fixed price contract to construct the Goldboro LNG facility so that we can then proceed to complete the project financing and final equity raise and make a final investment decision.”

Pieridae now has an extensive drilling inventory encompassing multiple dry gas and liquids-rich gas reservoirs within the Foothills area. The company has engaged professionals, many of whom are transitioning from Shell, who have strong experience managing the four major processing facilities and associated midstream assets.

Together with existing Foothills drilling and development experience within the company, Pieridae said it is is well positioned to leverage the US$1.5 billion of the government-backed guarantees for conventional gas supply development which the German government approved in principle. This amount is in addition to the US$3 billion of government-backed guarantees for the construction of the Goldboro LNG facility which the German government has also approved in principle.  Certain aspects of the asset retirement obligation with respect to the Jumping Pound and Waterton gas plants remain with Shell.

 “There are additional opportunities to develop our liquids-rich areas, process the sour gas, strip out the liquids, store the dry gas and then further develop our dry gas resources down the road,” added Sorensen.

In addition to implementation of certain cost savings initiatives, Pieridae anticipates taking full advantage of the gas plant processing capabilities and other associated upstream services developed by Shell.

Moving forward, Pieridae is committed to working with the communities surrounding its newly acquired assets, including continuing to build trust with the Treaty 7 Nations through respectful engagement and collaboration.

Equity private placement

On Oct. 11, 2019, Pieridae announced that it had closed the first tranche of its brokered private placement of subscription receipts for gross proceeds of $12.8 million and a non-brokered private placement of subscription receipts for gross proceeds of $600,000. The second and last tranche of the brokered offering closed concurrently with the closing of the acquisition, with Pieridae issuing 23.26 million common shares to Erikson National Energy Inc., a portfolio company of Third Eye Capital Corporation, at a price of 86 cents per common share for gross proceeds of $20 million. Haywood Securities Inc. acted as sole agent with respect to the brokered offering.

The closing of the brokered offering and the non-brokered offering, together with the issuance of the common shares to Shell described above, fulfilled the equity commitment associated with the debt financing.

With the close of the acquisition, each subscription receipt issued under the subscription receipt offering is automatically exchanged on a one-to-one basis for common shares of Pieridae.

Pieridae used net proceeds of the brokered offering and the non-brokered offering towards the acquisition purchase price and for working capital purposes. The securities issued as part of the brokered offering and non-brokered offering are subject to a statutory four-month hold period from the applicable closing date and applicable U.S. resale restrictions. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States unless registered under the act or unless an exemption from registration is available.

Haywood Securities acted as financial advisor to Pieridae for the acquisition.

Conversion of AIMCo secured convertible debenture

As previously disclosed, Alberta Investment Management Corporation (AIMCo), on behalf of certain of its clients, subscribed for a secured convertible debenture of the company for an aggregate principal amount of $10 million. The principal amount of the debenture plus all interest accrued was converted into common shares of the company at a deemed priced of 86 cents per common share.

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