TORONTO, Nov. 11 /CNW/ -- Sprott Resource Corp. (TSX: SCP) - Sprott Resource Corp. ("SRC") announced today that its subsidiary Orion Oil & Gas Ltd. ("Orion") will not be proceeding with its previously announced equity financing. On October 15, 2009, SRC announced that Orion had entered into an equity financing agreement, on a best efforts basis, with a syndicate of agents co-led by Cormark Securities Inc., FirstEnergy Capital Corp. and TD Securities Inc. (collectively, the "Agents"), pursuant to which Orion agreed to raise $100,000,000 (the "Offering") from the sale of subscription receipts ("Subscription Receipts") at a price of $5.00 per Subscription Receipt. The Agents have been unable to complete the Offering at the terms set forth above. Accordingly, SRC and Orion have decided to terminate the Offering.
"It is in SRC's best interests to request that the Offering be terminated given that the Agents were unable to complete the Offering at the proposed terms," said Kevin Bambrough, President and CEO of SRC. "We feel that discounting the terms of the Offering would reduce the value creation opportunity for SRC that exists with Orion. As a result, SRC will maintain its 79.3% ownership of Orion and work with Orion's management to develop Orion's assets and pursue accretive acquisitions."
Orion, through its wholly-owned subsidiary Auriga Energy Inc. ("Auriga"), operates in the Kaybob, Redwater and Bigstone areas of Alberta. Auriga has sufficient capital to fully fund the development of its properties. Auriga commenced an accelerated drilling program this week on its Kaybob property and intends to drill two gross wells (1.8 net wells) at Kaybob by the end of this year. In 2010, Auriga intends to drill 16 gross wells (14.5 net wells) at Kaybob and 16 gross wells (16 net wells) at Redwater wells as part of a proposed $80 million capital spending program for next year. The capital spending program for the next year is designed to Auriga's increase production to between 5,000 boe/d and 7,000 boe/d by the fall of 2010.
About Sprott Resource Corp.
SRC is a Canadian based company, the primary purpose of which is to invest, directly and indirectly, in natural resources. Through acquisitions, joint ventures and other investments, SRC seeks to provide its shareholders with exposure to the natural resource sector for the purposes of capital appreciation and real wealth preservation. SRC is well positioned to draw upon the considerable experience and expertise of both its Board of Directors and Sprott Consulting Limited Partnership ("SCLP"), of which Sprott Inc. is the sole limited partner. Pursuant to a management services agreement between SCLP and SRC, SCLP provides day-to-day business management for SRC as well as other management and administrative services.
This press release contains forward-looking statements. More particularly, this press release contains statements concerning future drilling plans, future capital spending plans and potential production levels. Some of the forward-looking statements can be identified by words such as "expects", "anticipates", "should", "believes", "plans", "will" and similar expressions. The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by SRC including, but not limited to, commodity prices, reservoir performance, drilling performance, industry conditions generally, royalty rates, regulation, tax rates and drilling costs.
Although SRC believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because SRC can give no assurance that they will prove to be correct. Since forward-looking statements 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, risks associated with the oil and gas industry in general (e.g., 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 estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.
The forward-looking statements contained in this document are made as of the date hereof and SRC does not undertake any 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.
Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.