Zodiac Exploration Inc. Announces Acquisition of Muskwa Resources Ltd.
Filing Services Canada via COMTEX - Wed Oct 09, 07:30AM EDT
Zodiac Exploration Inc. (ZEX - TSX Venture), announces that it
has entered into a definitive agreement (the "Acquisition Agreement")
with Muskwa Resources Ltd. ("Muskwa") whereby Zodiac has agreed, subject
to certain conditions, to acquire all of the issued and outstanding
common shares ("Muskwa Shares") of Muskwa (the "Acquisition"). Muskwa
is a private oil and gas company incorporated in 2008 with approximately
54,240 acres of land in central Alberta, primarily in the Duvernay and
Nordegg formations, and pending asset acquisitions in Montana from
Jackfish Exploration Inc. ("Jackfish") and Tanglewood Energy Inc.
("Tanglewood") that will add up to approximately 24,000 net acres of
land upon satisfaction of certain conditions under the agreements
relating to the Jackfish and Tanglewood acquisitions, including
satisfaction of the earning conditions under the Jackfish Farmin
Agreement (as defined herein).
The Acquisition is expected to be completed by way of an amalgamation
and is subject to customary approvals, including approval by Muskwa
shareholders and the approval of the TSX Venture Exchange. Closing of
the Acquisition is expected to occur on or prior to November 30, 2013.
Transaction Highlights:
Alberta Assets of Muskwa:
* Muskwa is a top holder of Duvernay rights in Alberta with a total
of 54,240 acres of land in central Alberta, primarily in the Duvernay
and Nordegg formations (49,760 contiguous 100% working interest acres in
the Duvernay light oil resource window) plus an option to acquire up to
an additional 6,880 acres
* Muskwa's land position has significant stacked resource potential
in the Duvernay, Nordegg, Montney and Beaverhill Lake formations
* GLJ Petroleum Consultants Ltd. ("GLJ") has provided Muskwa with an
evaluation (the "GLJ Report") dated October 25, 2012 and effective as of
June 30, 2012 in accordance with the requirements of National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities
("NI 51-101") on the undiscovered petroleum initially-in-place on the
39,680 acres of lands held by Muskwa at such time. Using the same
methodology as GLJ utilized in the preparation of the GLJ Report, a
member of Muskwa's management team, who is a qualified reserves
evaluator for the purposes of NI 51-101, has provided an estimate of the
undiscovered petroleum initially-in place effective as of December 31,
2012 for the additional 11,520 acres acquired by Muskwa since the date
of the GLJ Report, which estimates are set forth as follows:
Notes:
1. Undiscovered Petroleum Initially-in-Place is that quantity of
petroleum that is estimated, on a given date, to be contained in
accumulations yet to be discovered. There is no certainty that any
portion of the resources will be discovered. If discovered, there is no
certainty that it will be commercially viable to produce any portion of
the resources. Further sub-categorization of the reported resources
volumes was not possible at the time the foregoing estimates were made
as a recovery project could not be defined for such resource volumes.
See "Cautionary Statements" below.
2. The GLJ Report is dated October 25, 2012 and effective as of June 30, 2012.
3. The Muskwa internal estimate was prepared on January 15, 2013 with
an effective date as of December 31, 2012 and was prepared by a member
of management who is a qualified reserves evaluator for the purposes of
NI 51-101, using the same methodology as utilized by GLJ in its
preparation of the GLJ Report.
4. STB = stock tank barrels. Figures reported in thousands of stock tank barrels of oil.
5. See "Cautionary Statements" below for further information in
respect of the definitions of "low estimate", "best estimate" and "high
estimate".
* Industry has spent over $6 billion on land, corporate acquisitions and wells on the Duvernay play
* Significant interest and activity exists in the area in which
Muskwa holds land with over 90 wells drilled by large producers actively
proving up the Duvernay light oil window with commercial results and
there have been several recent commercial discoveries in the Duvernay
light oil window to the south of Muskwa's land position
Jackfish Assets (Montana)
* Muskwa has entered into a definitive purchase and sale agreement
dated October 3, 2013 with Jackfish whereby Muskwa will acquire, prior
to closing of the Acquisition and subject to customary closing
conditions, the entire interest of Jackfish under a farm-in agreement to
which Jackfish is currently a party (the "Jackfish Farm-in Agreement")
whereby, assuming closing of the transaction with Jackfish, Muskwa will
have the right to farm-in on approximately 12,000 gross acres (9,000 net
acres after earning is completed under the farm-in agreement) located
in southern Montana, USA which management of Zodiac and Muskwa believe
are prospective for light oil in the Grey Bull (Cretaceous) formation
* Zodiac has reviewed the 2D seismic results for the channel play in
the Grey Bull formation at a depth of approximately 1,500 meters and is
encouraged by these results
* Assuming completion of the transactions, Zodiac plans to shoot a 3D
seismic program and drill two evaluation wells by June 30, 2014 and
will be required to do so in order to fulfil the earning requirements
under the Jackfish Farm-in Agreement
* Management of Muskwa and Zodiac believe that the acquisition of the
Jackfish assets is a low cost exploration opportunity (approximately
US$600,000 to drill, test, complete and equip wells on the lands
comprising the Jackfish assets)
Tanglewood Assets (Montana)
* Muskwa has entered into a definitive purchase and sale agreement
dated October 7, 2013 with Tanglewood whereby it is proposed that Muskwa
will acquire, prior to closing of the Acquisition and subject to
customary closing conditions, approximately 30,000 gross acres (15,000
net acres) located in northern Montana
* Zodiac has reviewed the 3D seismic results for a Nisku play at approximately 1,500 meters and is encouraged by these results
* Management of Muskwa and Zodiac believe that the acquisition of the
Tanglewood assets is a low cost exploration opportunity (approximately
US$600,000 to drill, test, complete and equip wells on the lands
comprising the Tanglewood assets) adjacent to existing production in the
prospective Devonian horizons
Pro-forma Highlights
* Large conventional and unconventional light oil asset base across
several regions of North America provides excellent diversification
* Conventional light oil assets offer potential for near term light
oil production and cash flow to maintain financial flexibility
* Based on the GLJ Report and the management resource estimates set
forth above, Muskwa and its assets provide a multi-billion barrel,
unconventional light oil resource opportunity in North America's
prolific shale regions
* Drill-ready prospects in Montana provide potential near-term production catalysts
* Addition of proven technical and management team members to assist in the growth of Zodiac
Detailed Asset Overview:
Alberta Assets (100% working interest)
Zodiac is particularly excited about the acquisition of Muskwa's
material prospective acreage position in the Duvernay formation. Often
cited as Canada's answer to the prolific Eagle Ford shale in the United
States, the Duvernay formation is estimated, as of June 2012, by the
Alberta Geological Survey to have 443 tcf of natural gas and 73 billion
barrels of oil and natural gas liquids in place.
There have been numerous significant commercial results over recent
months in the Kaybob area to the South of Muskwa's land position. In
2012, Athabasca Oil Corporation announced a well into the light oil
window of the Duvernay that had initial 30 day production of 780 boe/d
(Athabasca corporate presentation at Barclays CEO Energy-Power
Conference, September 12, 2013). Encana Corporation recently announced a
well in the area with a production test in excess of 2,000 boe/d
(Encana press release, May 28, 2013). Trilogy Energy Corp. recently
announced exciting results from a four well pad with average production
test rates of 1,940 boe/d (Trilogy press release, September 26, 2013).
There has also been extensive acquisition activity in the area as
well. Previous transactions in the Duvernay include the joint venture
between Encana Corporation and a wholly-owned subsidiary of PetroChina
Company Limited involving 445,000 acres at an implied purchase price of
$9,800/acre (including carry) (Encana press release, December 13, 2012),
Shell's acquisition of 29,760 acres of Duvernay rights from Lightstream
Resources Ltd. (formerly PetroBakken Energy Ltd.) for $82.5 million
($2,772/acre) (Lightstream press release, April 11, 2012) and Sonde
Resources Corp.'s sale of 24,383 acres of Duvernay acreage for $75
million ($3,125/acre) (Sonde Resources press release, February 8, 2012).
Jackfish Assets (Montana) (75% working interest after earning)
Muskwa has entered into a definitive purchase and sale agreement
dated October 3, 2013 with Jackfish (the "Jackfish Acquisition") to
acquire the right to farm-in on approximately 12,000 gross acres in
Montana pursuant to the Jackfish Farm-in Agreement which management of
Muskwa and Zodiac believe are prospective for light oil in the Grey Bull
formation. In connection with the Jackfish Acquisition, Muskwa will
issue Jackfish 10,173,324 Muskwa Shares at a deemed value of $0.10 per
Muskwa Share and will pay Jackfish C$385,000 in cash. One hundred
percent of the shareholders of Jackfish have entered into voting support
agreements with Muskwa pursuant to which they have agreed to vote their
shares of Jackfish in favour of the Jackfish Acquisition. Muskwa
anticipates closing the Jackfish Acquisition on or before October 11,
2013. Assuming completion of the Jackfish Acquisition by Muskwa and the
Acquisition by Zodiac and Muskwa, Zodiac plans to execute a 3D seismic
program over the coming months and to drill two evaluation wells to test
a Grey Bull channel sand play on the Jackfish lands. Completion of the
3D seismic program and the drilling, testing and completion of two
evaluation wells by June 30, 2014 will satisfy Zodiac's earning
obligations under the Jackfish Farm-in Agreement and will allow Zodiac
to earn a 75% working interest in 12,000 acres. It is a condition to
closing of the Acquisition, in favour of Zodiac, that Muskwa shall have
completed the Jackfish Acquisition.
Tanglewood Assets (Montana) (50% working interest)
Muskwa has entered into a definitive purchase and sale agreement
dated October 7, 2013 with Tanglewood (the "Tanglewood Acquisition") to
acquire approximately 15,000 net acres in Montana that management of
Muskwa and Zodiac believe to be prospective for light oil in the Nisku
formation. In connection with the Tanglewood Acquisition, Muskwa will
issue Tanglewood 10,000,000 Muskwa Shares and pay Tanglewood C$100,000
in cash. Approximately sixty-seven percent of the shareholders of
Tanglewood have entered into voting support agreements with Muskwa
pursuant to which they have agreed to vote their shares of Tanglewood in
favour of the Jackfish Acquisition. Muskwa anticipates closing the
Tanglewood Acquisition on or before October 31, 2013. It is a condition
to closing of the Acquisition, in favour of Zodiac, that Muskwa shall
have completed the acquisition of the Tanglewood assets. In connection
with the closing of the Tanglewood Acquisition, Muskwa intends to
acquire 3-D seismic ("Tanglewood Seismic") covering thirty-nine square
miles of the Tanglewood assets from a company controlled by the
President and Chief Executive Officer of Zodiac for consideration
consisting of 800,000 Muskwa Shares.
Management and Board Additions:
Lee Pettigrew, a current director of Muskwa, will be joining Zodiac's
Board of Directors upon completion of the Acquisition. Mr. Pettigrew
is currently President and Chief Executive Officer of Mercari Capital
Corp., a private merchant bank, and brings more than 20 years of senior
investment banking experience and capital markets expertise to the
Muskwa Board. Mr. Pettigrew began his career on Wall Street with the
First Boston Corporation. After joining Gordon Capital, he moved to
Calgary in 1992 to co-head Gordon's energy practice. In 1995, he became
one of 9 founding partners of Newcrest Capital Inc., where he headed the
energy group and ran the Calgary office until the firm's $250 million
sale to TD Bank. After serving as a Managing Director of TD Securities
for 2 years, Mr. Pettigrew became a founding partner and largest
shareholder of Orion Securities and played a major part in the growth of
the firm until its sale to Macquarie Bank. After serving as a Managing
Director of Macquarie for 2 years, he left to pursue early stage energy
merchant banking. Mr. Pettigrew is a graduate (with distinction) of the
Richard Ivey School of Business Administration at the University of
Western Ontario.
It is expected that in connection with closing of the Acquisition,
three members of Muskwa's management team, Rick Jackson, Max Zureski and
David Bilenduke, will join Zodiac in management roles.
Rick Jackson, P. Eng., is the current President and Chief Executive
Officer of Muskwa. Mr. Jackson is an experienced engineer and manager,
with over 30 years' industry experience. He spent 28 years with Chevron
Canada managing operations with over 25,000 boe/d of production and
annual operating budgets in excess of $40 million. He has hands on
experience in production, completions, facilities and reservoir
evaluations. Mr. Jackson held key positions in Strategic Planning and
New Ventures at Chevron. With these responsibilities, he identified,
evaluated and closed on several major initiatives. In his final years at
Chevron, Mr. Jackson was the lead negotiator for divestiture of all of
Chevron's Canadian assets.
Max Zureski, CA, CBV, is the current Chief Financial Officer and Vice
President, Finance of Muskwa. Mr. Zureski has 15 years of experience
in accounting and finance. He began his career at Deloitte, obtaining
his Chartered Accountant and Chartered Business Valuator designations.
During his time at Deloitte, Mr. Zureski worked extensively on various
energy assignments, domestically and internationally. Mr. Zureski began
in equity research and later investment banking with BMO Capital
Markets with a focus on the oil & gas, pipeline and power sectors.
He worked on numerous financings and merger and acquisition assignments.
Mr. Zureski later worked as an equity research analyst covering the
junior oil & gas and alternative energy sectors for an independent
Canadian dealer.
Dave Bilenduke is the current Vice President, Exploration of Muskwa.
Mr. Bilenduke has a 15 year career spanning both conventional and
unconventional plays across the Western Canadian Sedimentary Basin. He
has participated in unconventional startups from pilot to commercial
rollout. He has held positions with increasing responsibility with
Canadian Superior, Trident, and NuVista. Through Muskwa, Mr. Bilenduke
went in-house at Daylight to help map that company's unconventional
potential on its lands, and subsequently developed, mapped and
recommended the lands acquired by Daylight that helped establish the
company's Duvernay position. Mr. Bilenduke currently serves as Vice
President, Exploration of Muskwa.
Board Approvals and Recommendations
In connection with Zodiac's review and consideration of the proposed
Acquisition, Zodiac established a special committee (the "Special
Committee") comprised of Mr. Graeme Phipps (Chair) and Mr. John Newman
to oversee and supervise the Acquisition and the negotiation of the
Acquisition Agreement. The Special Committee was formed as a result of
Mr. Robert Cross, Chairman of the Board of Directors of Zodiac, also
holding the position as Chairman of the Board of Directors of Muskwa.
The Board of Directors of Zodiac has resolved, with Mr. Cross
abstaining, based upon the recommendation of the Special Committee and
the verbal fairness opinion of Zodiac's financial advisor as further
described below, that the consideration to be paid by Zodiac pursuant to
the Acquisition is fair, from a financial point of view, to the
shareholders of Zodiac, and is in the best interests of the shareholders
of Zodiac.
The Board of Directors of Muskwa has unanimously approved the
Acquisition, with Mr. Robert Cross abstaining, and Muskwa has resolved
to recommend that its shareholders vote in favour of the Acquisition.
Holders of approximately thirty percent of the outstanding Muskwa
Shares, including all of the directors and officers of Muskwa have
entered into voting support agreements with Zodiac pursuant to which
they have agreed to vote their Muskwa Shares in favour of the
Acquisition.
Terms of the Acquisition Agreement:
Under the terms of the Acquisition Agreement, Muskwa has agreed to
not solicit or initiate discussions regarding any other business
combination or sale of material assets and has granted Zodiac the right
to match any superior proposals. The Acquisition Agreement also provides
for a mutual $300,000 non-completion fee payable to Zodiac or Muskwa,
in certain circumstances, if the Acquisition is not completed.
The exchange ratio for the Muskwa Shares shall be one (1) common
share of Zodiac ("Zodiac Share") for each issued and outstanding Muskwa
Share. Additionally, all stock options ("Muskwa Options") and
performance warrants ("Muskwa Performance Warrants") of Muskwa will be
assumed by Zodiac and entitle the holders thereof to acquire an
equivalent number of Zodiac Shares for a period of twelve months from
the closing date of the Acquisition. All of the outstanding warrants to
purchase Muskwa Shares ("Muskwa Warrants") will entitle holders to
acquire an equivalent number of Zodiac Shares in accordance with their
terms.
The Zodiac Shares issued in exchange for the Muskwa Shares pursuant
to the Acquisition (the "Escrowed Shares"), other than Muskwa Shares
issued upon conversion of currently outstanding convertible securities
of Muskwa and Muskwa Shares issuable pursuant to the Jackfish
Acquisition and the Tanglewood Acquisition, will be subject to voluntary
escrow provisions. Upon closing of the Acquisition, 15% of the
Escrowed Shares will be immediately released from escrow with a further
15% of the Escrowed Shares to be released from escrow every three months
thereafter.
Pursuant to the terms of the Acquisition Agreement, Zodiac has agreed
to provide Muskwa with a bridge loan in the amount of $2,000,000 to
assist Muskwa with the funding of certain operational expenses in
connection with its exploration activities as well as certain of its
general and administrative expenses. The bridge loan has a term of 180
days, an interest rate of six percent per annum and is secured against
all of the present and after acquired property of Muskwa.
Closing of the Acquisition is anticipated to occur on or before
November 30, 2013. It is anticipated that Muskwa will obtain approval
for the Acquisition from the shareholders of Muskwa by way of written
consent resolution or, in the alternative, at a special meeting of
shareholders of Muskwa to be called to consider the Acquisition.
Current Capitalization of Muskwa:
Muskwa currently has 55,538,827 Muskwa Shares issued and outstanding,
5,704,000 Muskwa options outstanding at a weighted average exercise
price of $0.20 per Muskwa Share, 2,704,400 Muskwa performance warrants
outstanding at a weighted average exercise price of $0.10 per Muskwa
Share and 30,183,249 Muskwa warrants outstanding at a weighted average
exercise price of $0.37 per Muskwa Share. Muskwa will issue 10,173,324
Muskwa Shares as part of the Jackfish Acquisition and will issue a
further 10,000,000 Muskwa Shares as part of the Tanglewood Acquisition
plus an additional 800,000 Muskwa Shares pursuant to the acquisition of
the Tanglewood Seismic. Muskwa currently has $495,500 due to certain
Muskwa shareholders pursuant to shareholder loans ("Muskwa Shareholder
Loans") and a $250,000 promissory note ("Muskwa Promissory Note") the
aggregate principal amount and all accrued and unpaid interest which
shall be converted into Muskwa Shares immediately prior to closing of
the Acquisition at $0.10 per Muskwa Share. Muskwa also has outstanding
$165,000 aggregate principal amount of convertible debentures which will
convert into Muskwa Shares in accordance with their terms of $0.10 per
unit immediately prior to closing of the Acquisition. Each unit will
consist of one (1) Muskwa Share and one-quarter of one (1/4) share
purchase warrant exercisable at $0.40 per Muskwa Share for a period of
two years from the date of issuance. Additionally, Muskwa has
outstanding $500,000 aggregate principal amount of 10% convertible
debentures due February 5, 2014, which debentures are convertible into
units at $0.30 per unit with each unit comprised of one (1) Muskwa Share
and one-half of one (1/2) share purchase warrant exercisable at $0.60
per Muskwa Share until February 5, 2015. The Muskwa II Convertible
Debentures will be assumed by Zodiac in connection with the closing of
the Acquisition.
In aggregate, immediately before the completion of the Acquisition,
Muskwa will have 84,921,329 Muskwa Shares issued and outstanding,
30,595,749 Muskwa warrants outstanding at a weighted average price of
$0.37 per Muskwa Share, 5,704,000 Muskwa options outstanding at an
exercise price of $0.20 per Muskwa Share and 2,704,000 Muskwa
performance warrants outstanding at an exercise price of $0.10 per
Muskwa Share.
Zodiac Financial Advisor:
In reaching its decision with respect to the recommendation of the
Acquisition, the Special Committee relied on, among other things, a
fairness opinion ("Fairness Opinion") of Canaccord Genuity Corp.
("Canaccord"), the independent financial advisor to the Special
Committee with respect to the Acquisition. The Fairness Opinion provided
by Canaccord indicates that, as at October 3, 2013, and subject to the
certain limitations, assumptions and qualifications as set forth in the
Fairness Opinion, that the consideration to be paid by Zodiac pursuant
to the Acquisition is fair, from a financial point of view, to the
holders of Zodiac Shares.
About Zodiac
Zodiac is a well financed Oil & Gas Exploration company with
headquarters in Calgary, Alberta and offices in Bakersfield, California.
Zodiac's core assets are located in California's San Joaquin Basin,
where Zodiac holds approximately 72,000 net acres of land in the
prolific Monterey/Kreyenhagen Oil Shale formations.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
For more information, please contact:
Zodiac Exploration Inc.
Peter Haverson
President and Chief Executive Officer
(403) 444-7844
Or
John Newman
Chief Financial Officer
(403) 444-7850
www.zodiacexploration.ca
Cautionary Statements
Forward-Looking Information and Statements
This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws. The use of any of the words "expect", "anticipate", "continue",
"estimate", "objective", "ongoing", "may", "will", "project", "should",
"believe", "plans", "intends" and similar expressions are intended to
identify forward-looking information or statements. More particularly
and without limitation, this press release contains forward looking
statements and information concerning undeveloped land holdings; future
drilling plans, business strategy, future development and growth
opportunities, prospects, asset base, anticipated benefits from the
Acquisition, the closing date of the Acquisition, closing of the
Jackfish Transaction and the Tanglewood Transaction and the anticipated
benefits therefrom and the attributes of the combined company following
closing of the Acquisition. The forward-looking statements and
information are based on certain key expectations and assumptions made
by Zodiac, including expectations and assumptions concerning prevailing
commodity prices and exchange rates, applicable royalty rates and tax
laws; future well results, reserve and resource volumes; the timing of
receipt of regulatory and securityholder approvals, success obtained in
drilling new wells; the sufficiency of budgeted capital expenditures in
carrying out planned activities; and the availability and cost of labour
and services. Although Zodiac believes that the expectations and
assumptions on which such forward-looking statements and information are
based are reasonable, undue reliance should not be placed on the
forward-looking statements and information because Zodiac can give no
assurance that they will prove to be correct. Since forward-looking
statements and information address future events and conditions, by
their very nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to, the
risks associated with the oil and gas industry in general such as
operational risks in development, exploration and production; delays or
changes in plans with respect to exploration or development projects or
capital expenditures; the uncertainty of reserve and resource estimates;
health, safety and environmental risks; commodity price and exchange
rate fluctuations; marketing and transportation; loss of markets;
environmental risks; competition; incorrect assessment of the value of
acquisitions; failure to realize the anticipated benefits of
acquisitions; ability to access sufficient capital from internal and
external sources; failure to obtain required regulatory and other
approvals; and changes in legislation, including but not limited to tax
laws, royalties and environmental regulations. There are risks also
inherent in the nature of the proposed Acquisition, including failure to
realize anticipated synergies or cost savings; risks regarding the
integration of the two entities; incorrect assessments of the values of
the other entity; and failure to obtain the required securityholder,
regulatory and other third party approvals.
This press release also contains forward-looking statements and
information concerning the anticipated completion of the proposed
Acquisition and the anticipated timing for completion of the
Acquisition. Zodiac has provided these anticipated times in reliance on
certain assumptions that it believes is reasonable at this time,
including assumptions as to the time required to prepare materials for
the obtaining and receipt of Muskwa shareholder approval, the timing of
receipt of the necessary regulatory approvals and the satisfaction of
and time necessary to satisfy the conditions to the closing of the
Acquisition. These dates may change for a number of reasons, including
unforeseen delays in preparing such materials, inability to secure
necessary regulatory approvals in the time assumed or the need for
additional time to satisfy the conditions to the completion of the
Acquisition. In addition, there are no assurances the Acquisition will
be completed. Accordingly, readers should not place undue reliance on
the forward-looking statements and information contained in this press
release concerning these times. Readers are cautioned that the foregoing
list of factors is not exhaustive. Additional information on these and
other factors that could affect Zodiac's, or the combined company's
operations or financial results are included in reports on file with
applicable securities regulatory authorities and may be accessed through
the SEDAR website (www.sedar.com).
The forward-looking statements and information contained in this
press release are made as of the date hereof and Zodiac undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events or
otherwise, unless so required by applicable securities laws.
Resource Disclosure
Resources encompasses all petroleum quantities that originally
existed on or within the earth's crust in naturally occurring
accumulations, including Discovered and Undiscovered (recoverable and
unrecoverable) plus quantities already produced. "Total resources" is
equivalent to "Total Petroleum Initially-In-Place". Total Petroleum
Initially-In-Place or "TPIIP" is that quantity of petroleum that is
estimated to exist originally in naturally occurring accumulations. It
includes that quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations, prior to production, plus
those estimated quantities in accumulations yet to be discovered.
Undiscovered Petroleum Initially-In-Place ("UPIIP") is that quantity of
petroleum that is estimated, on a given date, to be contained in
accumulations yet to be discovered. The recoverable portion of
undiscovered petroleum initially in place is referred to as "prospective
resources" and the remainder as "unrecoverable." In this press
release, the disclosed UPIIP has not been further subcategorized into
prospective resources and unrecoverable resources as a recovery project
could not be defined for such resource volumes at the time of estimate.
There is no certainty that any portion of the UPIIP disclosed in this
press release will be discovered. If discovered, there is no certainty
that it will be commercially viable to produce any portion of the UPIIP.
A significant positive factor to the resource estimate is positive
historical drilling results by other industry participants within the
same formation of interest. Potential negative factors include access
to the substantial amount of capital which would be required to develop
the resources, low commodity prices that would curtail the economics of
development and the future performance of wells, regulatory approvals,
access to the required services at the appropriate cost and topographic
or surface restrictions. As with any resource estimate, the evaluation
will change over time as new information becomes available.
Uncertainty ranges are described by the Canadian Oil and Gas
Evaluation Handbook as low, best and high estimates for reserves and
resources as follows:
Low Estimate: This is considered to be a conservative estimate of
the quantity that will actually be recovered. It is likely that the
actual remaining quantities recovered will exceed the low estimate. If
probabilistic methods are used, there should be at least a 90 percent
probability (P90) that the quantities actually recovered will equal or
exceed the low estimate.
Best Estimate: This is considered to be the best estimate of the
quantity that will actually be recovered. It is equally likely that the
actual remaining quantities recovered will be greater or less than the
best estimate. If probabilistic methods are used, there should be at
least a 50 percent probability (P50) that the quantities actually
recovered will equal or exceed the best estimate.
High Estimate: This is considered to be an optimistic estimate of
the quantity that will actually be recovered. It is unlikely that the
actual remaining quantities recovered will exceed the high estimate. If
probabilistic methods are used, there should be at least a 10 percent
probability (P10) that the quantities actually recovered will equal or
exceed the high estimate.
Information Regarding Public Issuers
Certain information contained in this press release relating to other
reporting issuers is taken from and based solely upon information
published by those issuers. In addition, certain information contained
in this press release was obtained from public sources. Zodiac has not
independently verified the accuracy or completeness of any such
information and readers are cautioned accordingly. Readers should
review the original sources of such information as provided in the press
release, including the additional cautionary statements and disclosures
included in such sources.
Well Data and Analogous Information
The information set forth concerning the well data and results of
other industry participants and land sale valuations under the heading
"Detailed Asset Overview - Alberta Assets" may constitute analogous
information for the purposes of NI 51-101. The date and source of such
information is set forth proximate to the relevant disclosure. The well
data and results of such other industry participants concern the same
formation in which Muskwa has an interest and in which Zodiac, assuming
completion of the Acquisition, will have an interest. The land sale
valuations of such other industry participants concern land that is in
close proximity to the land in which Muskwa has an interest and in which
Zodiac, assuming completion of the Acquisition, will acquire an
interest. To the extent such information constitutes analogous
information, Zodiac and Muskwa are unable to confirm that such
information was prepared by a qualified reserves evaluator or auditor in
accordance with the COGE Handbook and therefore, the reader is
cautioned that such information set forth in this press release may be
in error and/or may not be analogous to the formation and lands in which
Muskwa has an interest, and in which Zodiac, assuming completion of the
Acquisition, will acquire an interest.
Initial Production Rates
Initial production rates and well test rates of other industry
included in this press release may not be indicative of sustained
production rates from the properties or the reserves recoverable
therefrom.
To view this press release as a PDF, please click on the following link:
http://www.usetdas.com/pr/zodiac10092013.pdf
Source: Zodiac Exploration Inc. (ZEX - TSX-V) http://www.zodiacexploration.ca/