Charger Energy Corp. Confirms Recommendation to Vote In Favour of the Proposed Spyglass Plan of Arrangement

Tue Mar 19, 2013 8:30pm EDT

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Marketwire

Charger Energy Corp.

March 19, 2013 - 08:30:00 PM

Charger Energy Corp. Confirms Recommendation to Vote In Favour of the Proposed
Spyglass Plan of Arrangement

CALGARY, ALBERTA--(Marketwire - March 19, 2013) - 

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS. 

Charger Energy Corp. ("Charger") (TSX VENTURE:CHX) continues to believe that
the proposed merger with Pace Oil and Gas Ltd. ("Pace") and AvenEx Energy
Corp. ("AvenEx") to form Spyglass Resources Corp. ("Spyglass") (the "Merger")
is in the best interest of Charger shareholders and recommends that Charger
shareholders vote FOR the arrangement. 

Pace, AvenEx and Charger also announce that they have agreed to set the
initial Spyglass monthly dividend at $0.0225 per share in order to solidify
the sustainability of the Spyglass business model to reflect the current
operating and commodity price environments.

Board Recommendation 

The Board continues to believe the Merger is in the best interest of Charger
shareholders as Spyglass would be a larger entity well suited to sustaining a
dividend model, with approximately 18,000 boe/d of balanced oil and gas
production, a low decline rate and abundant low-risk, light-oil upside.
Spyglass will be led by a management team with a track record of creating
value in a dividend paying entity who also have prior experience managing the
majority of the assets that will form Spyglass. Spyglass has secured a $400
million senior credit facility with a syndicate of lenders that is expected to
have approximately 30% undrawn upon closing. Furthermore, the potential
disposition of certain non-core properties within the combined asset base
would provide a source of financing to further enhance the sustainability of
the model. 

Spyglass Dividend Policy 

The boards of each of Pace, AvenEx and Charger have agreed to set the initial
monthly dividend for Spyglass upon closing of the Merger at $0.0225 per
Spyglass share.  

The dividend initially proposed for Spyglass was determined in November 2012
when the terms of the Arrangement between Pace, AvenEx and Charger were
initially negotiated and the transaction was expected to close in mid
February. Since this time, realized crude prices have declined substantially
with western Canadian medium and heavy oil differentials widening relative to
the WTI benchmark. In addition, delays in closing the transaction have
restricted Spyglass from fully executing on its initially proposed capital
program which was heavily weighted to the first quarter of 2013. The balance
of the capital program will be delayed until after spring break up.  

This adjustment to the initial dividend of Spyglass will increase the
financial flexibility of Spyglass through 2013, with an additional $1.0
million per month available for debt reduction and capital programs. Crude oil
differentials and natural gas prices have strengthened in recent weeks and the
companies have taken advantage of this strength to execute additional crude
oil and natural gas hedges for 2013 and 2014. Spyglass will continue to
actively hedge commodity prices going forward to protect a base level of cash
flow. 

Upon completion of the Merger, Spyglass will target a basic dividend payout
ratio of 25% to 30% of cash flow and an all-in payout ratio (including capital
expenditures) of 90% to 100% of its cash flow. The dividend policy of Spyglass
will be at the discretion of the board of directors and will be reviewed
monthly in the context of a number of factors including current and forecast
commodity prices, foreign exchange rates, an active commodity price hedging
program, status of current operations and future investment opportunities.

Spyglass Outlook 

Each of Pace, AvenEx and Charger believe that Spyglass will create long term
shareholder value through the introduction of an income and growth company of
scale with a low decline, balanced commodity profile and a sustainable
dividend. 

The following projections incorporate $10 - $12 million in annual general and
administrative savings reflecting the efficiencies created by combining Pace,
AvenEx and Charger into a single entity and do not incorporate any potential
non-core asset sales or DRIP proceeds.



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Pro Forma Financial & Operating Information                                
                                                               approx. 129 
Shares Outstanding                                                 million 
Credit Facility Capacity                                   $   400 million 
Estimated Net Debt at Closing (1)                          $   293 million 
Expected Credit Facility Availability                      $   107 million 
Estimated Tax Pools                                        $   900 million 
Estimated Production at Closing                               17,500 boe/d 
 % Oil & Liquids                                                        49%
---------------------------------------------------------------------------
2013 Outlook(2)                                                            
Exit Production Forecast                                      18,000 boe/d 
 % Oil & Liquids                                                        52%
Average Production Forecast(2)                                16,000 boe/d 
 % Oil & Liquids                                                        51%
Cash Flow Forecast(2)(3)(4)                                $   104 million 
                                                                  70 - $80 
Capital Expenditures(2)                                    $       million 
Dividends                                                  $    26 million 
Net Debt to Annualized Exit Cash Flow                                 2.1x 
Basic Payout Ratio(2)                                                   25%
All-in Payout Ratio(2) (5)                                       95% - 100%
---------------------------------------------------------------------------
Preliminary 2014 Outlook(3)(4)                                             
                                                            approx. 18,000 
Average Production Forecast                                          boe/d 
 % Oil & Liquids                                                  53% - 55%
                                                                 90 - $100 
Capital Expenditures                                       $       million 
Dividends                                                  $    35 million 
Net Debt to Cash Flow                                                 1.7x 
Basic Payout Ratio                                          less than 25%
All-in Payout Ratio(5)                                            80% - 85%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Notes:                                                                      
------                                                                      
------                                                                      
(1)   Pro forma net debt incorporates estimated transaction costs and       
      excludes risk management assets and liabilities as of the closing date
      of the transaction.                                                   
(2)   Assumes transaction closes March 31, 2013 with Pace as continuing     
      issuer. 2013 outlook reflects one quarter of Pace projections and     
      three quarters of pro forma Spyglass projections.                     
(3)   Commodity price assumptions: 2013 - Edm Light C$88.89, corporate      
      realized crude oil and liquids price C$74.23 at the wellhead, AECO    
      $3.39 / Mcf. 2014 - Edm Light C$88.54, corporate realized crude oil   
      and liquids price C$79.42 at the wellhead, AECO $3.79 / Mcf.          
(4)   Commodity price sensitivities: 2013 - a $1.00/bbl change in realized  
      crude oil prices, results in a $0.9 million change in annualized cash 
      flow; a $0.50/Mcf change in natural gas prices, results in a $6.0     
      million change in annualized cash flow. 2014 - a $1.00/bbl change in  
      realized crude oil prices, results in a $2.5 million change in cash   
      flow; a $0.50/Mcf change in natural gas prices, results in a $8.0     
      million change in cash flow.                                          
(5)   All-in Payout Ratio is defined as Capital Expenditures plus Dividends 
      divided by Cash Flow.                                                 



Special Meetings of Shareholders 

The directors of each of Pace, AvenEx and Charger have unanimously approved
the Arrangement and continue to recommend that their respective shareholders
vote in favour of the Arrangement. Shareholders of Pace, AvenEx and Charger
are encouraged to review the joint information circular and proxy statement
(the "Information Circular") of Pace, AvenEx and Charger dated January 18,
2013, which is available on SEDAR at www.sedar.com. 

The special meetings of the shareholders of each of Pace, AvenEx and Charger
to approve the Arrangement will be re-convened on March 26, 2013, as
scheduled, in the Livingston Club Conference Centre, Livingston Place, South
Tower, +15 Level, 222 - 3rd Avenue S.W., Calgary, Alberta commencing at 9:00
a.m. (Calgary time) for the holders of common shares of AvenEx, at 10:00 a.m.
(Calgary time) for the holders of common shares of Pace and at 11:00 a.m.
(Calgary time) for the holders of common shares of Charger. 

The Chairmen of each of the meetings has determined that it is in the best
interest of all shareholders to extend the proxy deadline until 9:00 am
(Calgary time) on March 25, 2013. 

Shareholders of Pace, AvenEx and Charger who have not voted or wish to change
their vote may do so by following the instructions set forth on the proxy or
voting instruction form provided to them. A shareholder may also revoke a
previously voted proxy with an instrument in writing, including another proxy,
signed by the shareholder and delivered to Pace, AvenEx or Charger, as
applicable. In order to revoke a proxy previously delivered by an intermediary
or its agent, on their behalf, beneficial shareholders should carefully follow
any revocation instructions set forth on the voting instruction form provided
to them by their intermediary or agent.

Questions Concerning The Special Resolutions Contained Within The Information
Circular Or Voting Procedures Can Be Directed As Follows: 

Charger shareholders: contact CST Phoenix Advisors, by email at
inquiries@phoenixadvisorscst.com, by telephone at 1-866-822-1240 (toll-free
within Canada or the United States) or 1-201-806-2222 (banks, brokers and
collect calls outside Canada and the United States) or by fax at
1-888-509-5907 (North American Toll Free Facsimile) or 1-647-351-3176.

New Proxies Or Changes To Previously Submitted Proxies Must Be Deposited As
Follows: 

Charger shareholders: Alliance Trust Company at #450, 407 - 2nd Street S.W.,
Calgary, Alberta T2P 2Y3, Attention: Proxy Department, not later than 9:00
a.m. (Calgary time) on March 25, 2013.

Reader Advisory and Note Regarding Forward Looking Information 

This press release contains forward-looking forward-looking information within
the meaning of applicable securities laws and is based on the expectations,
estimates and projections as of the date of this news release, unless
otherwise stated. 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. More particularly and without
limitation, this press release contains forward-looking information
concerning: the anticipated benefits of the Merger to the shareholders of each
of Charger, Pace and AvenEx, including anticipated synergies; potential
financing sources; anticipated future production, cash flow, capital
expenditures, dividends, payout ratios, decline rates, hedging programs, net
debt to cash flow and credit facility availability; the receipt of and
anticipated outcomes of alternative transaction proposals; the holding of the
shareholder meetings of each of Charger, Pace and AvenEx and; the anticipated
dividend payments of Spyglass following closing and the closing of the Merger.
Such forward-looking information is provided for the purpose of providing
information about management's current expectations and plans relating to the
future. Investors are cautioned that reliance on such information may not be
appropriate for other purposes, such as making investment decisions. 

In respect of the forward-looking information and statements concerning the
anticipated benefits and completion of the proposed Merger and the anticipated
timing for completion of the Merger, each of Charger, Pace and AvenEx has
provided such in reliance on certain assumptions that it believes are
reasonable at this time, including assumptions as to the ability of each of
Charger, Pace and AvenEx to receive, in a timely manner, the necessary
regulatory, court, shareholder, stock exchange and other third party
approvals; the ability of each of Charger, Pace and AvenEx to satisfy, in a
timely manner, the other conditions to the closing of the Merger; and
expectations and assumptions concerning, among other things: commodity prices
and interest and foreign exchange rates; planned synergies, capital
efficiencies and cost-savings; applicable tax laws; future production rates;
the sufficiency of budgeted capital expenditures in carrying out planned
activities; and the availability and cost of labour and services. The proposed
dividend of Spyglass may change as a result of fluctuations in commodity
prices, production levels, capital expenditure requirements, debt service
requirements, operating costs, royalty burdens, and the satisfaction of the
liquidity and solvency tests imposed by the Business Corporations Act
(Alberta) for the declaration and payment of dividends.  Depending on these
and other factors, many of which will be beyond the control of Spyglass, the
dividend policy of Spyglass may change from time to time and, as a result,
future cash dividends could be reduced or suspended entirely.

The anticipated dates provided may change for a number of reasons, including
unforeseen delays in preparing meeting materials, inability to secure
necessary shareholder, regulatory, court or other third party approvals in the
time assumed or the need for additional time to satisfy the other conditions
to the completion of the Merger. Accordingly, readers should not place undue
reliance on the forward-looking information contained in this press release.
In respect of the forward-looking information, including the anticipated
dividend payments of Spyglass following closing, each of Charger, Pace and
AvenEx has provided such in reliance on certain assumptions that it believes
are reasonable at this time, including assumptions in respect of: prevailing
commodity prices, margins and exchange rates; that each of Charger's, Pace's
and AvenEx's future results of operations will be consistent with past
performance and management expectations in relation thereto; the continued
availability of capital at attractive prices to fund future capital
requirements relating to existing assets and projects, including but not
limited to future capital expenditures relating to expansion, upgrades and
maintenance shutdowns; the success of growth projects; future operating costs;
that counterparties to material agreements will continue to perform in a
timely manner; that there are no unforeseen events preventing the performance
of contracts; and that there are no unforeseen material construction or other
costs related to current growth projects or current operations. 

Since forward-looking information addresses future events and conditions, such
information by its very nature involves 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 industries in which each of Charger, Pace and AvenEx
operates in general such as: operational risks; delays or changes in plans
with respect to growth projects or capital expenditures; costs and expenses;
health, safety and environmental risks; commodity price, interest rate and
exchange rate fluctuations; environmental risks; competition; failure to
realize the anticipated benefits of the Merger and to successfully integrate
each of Charger, Pace and AvenEx; ability to access sufficient capital from
internal and external sources; and changes in legislation, including but not
limited to tax laws and environmental regulations. Risks and uncertainties
inherent in the nature of the Merger include the failure of each of Charger,
Pace and AvenEx to obtain necessary shareholder, regulatory, court and other
third party approvals, or to otherwise satisfy the conditions to the Merger,
in a timely manner, or at all. Failure to so obtain such approvals, or the
failure of each of Charger, Pace and AvenEx to otherwise satisfy the
conditions to the Merger, may result in the Merger not being completed on the
proposed terms, or at all. 

Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on other factors that could affect the operations or
financial results of each of Charger, Pace and AvenEx, and the combined
company, are included in reports on file with applicable securities regulatory
authorities, including but not limited to; the Annual Information Form for the
year ended December 31, 2011 for each of Charger and AvenEx and for the year
ended December 31, 2012 for Pace which may be accessed on their respective
SEDAR profiles at www.sedar.com. 

Any financial outlook or future oriented financial information in this press
release, as defined by applicable securities legislation, has been approved by
management of Charger, Pace and AvenEx. Such financial outlook or future
oriented financial information is provided for the purpose of providing
information about management's reasonable expectations as to the anticipated
results of Spyglass and its anticipated business activities for the twelve
months following the closing of the Merger. 

The forward-looking information contained in this press release is made as of
the date hereof and each of Charger, Pace and AvenEx undertake no obligation
to update publicly or revise any forward-looking information, whether as a
result of new information, future events or otherwise, unless so required by
applicable securities laws. 

Boes are presented on the basis of one Boe for six Mcf of natural gas.
Disclosure provided herein in respect of Boes may be misleading, particularly
if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead. 

Given that the value ratio based on the current price of crude oil as compared
to natural gas is significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an indication of
value. 

This joint news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities within the United States. The
securities to be offered have not been and will not be registered under the
U.S. Securities Act of 1933, as amended, or any state securities laws, and may
not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of such Act or other
laws.

FOR FURTHER INFORMATION PLEASE CONTACT: 
Charger Energy Corp.
Tom Buchanan
Chairman and CEO
(403) 457-1612
info@chargerenergy.com


Charger Energy Corp.
Dan O'Byrne
President
(403) 457-1612
info@chargerenergy.com




        

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nor disapproved the contents of this press release.