Shell Sum­mary for Nov. 9, 2018

Stockwatch Daily - - SHELLS - By Stockwatch Busi­ness Re­porter

THE TSX Ven­ture Ex­change fell 15.64 points to 651.42 Fri­day, but it ended the week up a frac­tion (0.07 point). Arif Shivji’s first cap­i­tal pool shell, Preda­tor Blockchain Cap­i­tal Corp. (PRED: halted), has an­nounced a qual­i­fy­ing trans­ac­tion plan. The pro­posed QT is not a blockchain deal, per­haps to the re­lief of its share­hold­ers, but an oil deal. The shell plans to ac­quire High­wood Oil Com­pany Ltd., a ju­nior oil pro­ducer in Al­berta.

Preda­tor Blockchain Cap­i­tal will roll back 1 for 53, per­haps to the dis­plea­sure of its share­hold­ers. This will leave it with 188,679 shares is­sued, and then it will is­sue 5,744,204 shares to High­wood Oil’s share­hold­ers. High­wood is be­ing val­ued at $51.7-mil­lion.

High­wood pro­duces about 1,200 bar­rels of oil a day, com­pris­ing light and medium oil, in the Red Earth area in North­ern Al­berta. It ex­pects to bring more wells on-line soon. For com­par­i­son, Prairie Prov­i­dent Re­sources Inc. (PPR: $0.315), a ju­nior oil and gas pro­ducer in Al­berta, owns Red Earth prop­er­ties that are pro­duc­ing about 1,100 bar­rels of oil equiv­a­lent a day (com­pris­ing mostly light oil). Prairie Prov­i­dent paid $40.9-mil­lion cash last year to ac­quire those Red Earth prop­er­ties.

Be­sides oil-pro­duc­ing as­sets, High­wood Oil has an in­ter­est in the Wabasca River pipe­line in the Red Earth area. The pipe­line has a ca­pac­ity of about 20,000 bar­rels of oil a day. High­wood also owns an ear­lier-stage oil prop­erty called Clearwater in the Jarvie/Nip­isi area in North­ern Al­berta.

On clos­ing of the QT, the re­sult­ing is­suer will have three di­rec­tors: Greg Mac­don­ald, Trevor Wong-Chor and Stephen Holyoake. Mr. Mac­don­ald, an en­gi­neer, will be the chair­man, pres­i­dent and chief ex­ec­u­tive of­fi­cer. From 2004 to 2012, he worked with Comp­ton Pe­tro­leum Corp., a West­ern Cana­dian oil and gas pro­ducer. Comp­ton traded up to $19.24 on the Toronto Stock Ex­change in early 2006, af­ter which it strug­gled along with other oil and gas com­pa­nies. Its strug­gle was ex­ac­er­bated by the fi­nan­cial cri­sis, and by the end of 2008 its stock had dropped to $1. In Au­gust, 2011, with its stock at 11 cents, Comp­ton rolled back at a de­press­ing ra­tio of 1 for 200. Its stock then opened at $20.01 but closed at $12.55. Fi­nally, in Septem­ber, 2012, poor Comp­ton was ac­quired for $1.25 a share by MFC Ban­corp Ltd. (MFCB: $4.41 (U.S.)).

From March, 2015, to Novem­ber, 2016, Mr. Mac­don­ald was the vice-pres­i­dent of en­gi­neer­ing at Tide­wa­ter Mid­stream and In­fra­struc­ture Ltd. (TWM: $1.42), a nat­u­ral gas in­fra­struc­ture com­pany. Since 2015, he has been the pres­i­dent of a pri­vate Al­berta oil and gas com­pany, Preda­tor Oil Ltd., which used to be the sole owner and op­er­a­tor of the Wabasca River pipe­line. As well as his oil and gas ven­tures, Mr. Mac­don­ald is a di­rec­tor of Mr. Shivji’s sec­ond cap­i­tal pool shell, Hoist Cap­i­tal Corp. (HTE: halted), to which we will re­turn shortly.

The next pro­posed di­rec­tor, Mr. Wong-Chor, is a part­ner at law firm DLA Piper (Canada) LLP in Cal­gary. He is a for­mer di­rec­tor of Tide­wa­ter Mid­stream.

The fi­nal pro­posed di­rec­tor, Mr. Holyoake, is an en­gi­neer. He is the CEO of Fire­weed En­ergy Ltd., a B.C. Mont­ney nat­u­ral gas ex­plorer which last year planned to go pub­lic with a $40-mil­lion ini­tial pub­lic of­fer­ing at around $5. Fire­weed called off this plan in Jan­uary, 2018, most likely be­cause there is lit­tle in­vestor in­ter­est in West­ern Cana­dian nat­u­ral gas. Any­way, Mr. Holyoake is a di­rec­tor of Tide­wa­ter Mid­stream and Preda­tor Blockchain Cap­i­tal. He pre­vi­ously sat on the board of a pri­vately held oil transloader called Preda­tor Mid­stream Ltd.

Be­cause Mr. Holyoake is a di­rec­tor and share­holder of both High­wood Oil and Preda­tor Blockchain Cap­i­tal, share­hold­ers of both par­ties must ap­prove the QT. Preda­tor Blockchain will hold its spe­cial meet­ing of share­hold­ers on Dec. 20.

Preda­tor Blockchain Cap­i­tal listed in March, 2018, with a $400,000 IPO at 10 cents. Con­sid­er­ing the pro­posed 1-for-53 roll­back, its IPO in­vestors will need $5.30 to break even. The shell’s founder, Mr. Shivji, is an ac­coun­tant in Vic­to­ria, B.C., and is the con­troller of Fire­weed En­ergy. He has been the chief fi­nan­cial of­fi­cer of a hand­ful of oil and gas com­pa­nies, in­clud­ing Preda­tor Mid­stream and Preda­tor Oil.

Mr. Shivji listed his sec­ond shell, Hoist Cap­i­tal, in Au­gust, 2018, with a $400,000 IPO at 10 cents. Last month, Hoist an­nounced its QT plan to ac­quire The Sky Guys Ltd., a com­mer­cial drone-for-hire com­pany. Sky Guys ap­pears to have be­gun as a video pro­duc­tion com­pany, of­fer­ing film­ing ser­vices from its drones. It has since shifted its fo­cus. It now of­fers drone ser­vices such as map­ping, sur­vey­ing and aerial in­spec­tions. It has flown its drones over oil and gas fields, wind tur­bines, and dam in­fra­struc­ture.

The largest es­crow share­holder of Hoist Cap­i­tal is not one of its di­rec­tors but Joel Ma­cLeod, the chair­man, pres­i­dent and CEO of Tide­wa­ter Mid­stream. He holds two mil­lion of Hoist Cap­i­tal’s 7.2 mil­lion es­crow shares.

There have not been many oil and gas QTs (in Al­berta or else­where) in re­cent years, fol­low­ing the oil price crash of late 2014. Last year, how­ever, two Al­berta oil and gas QTs closed. First, Dar­ryl Le­vitt’s cap­i­tal pool shell, Vec­tor Re­sources Inc., launched Ra­zor En­ergy Corp. (RZE: $2.75). Vec­tor’s IPO share­hold­ers, who paid 20 cents a share and then were rolled back 1 for 20, need $4 to break even. They have had no op­por­tu­nity to get out of their in­vest­ment with a profit. Sec­ond, Dev Rand­hawa’s cap­i­tal pool shell, Wolf pack Cap­i­tal Corp ., launched Pulse Oil Corp. (PUL: $0.20). Wolf­pack’s IPO in­vestors, who need only 10 cents to break even, are do­ing fine.

The only other oil and gas QT in progress is by Roger Da­her’s cap­i­tal pool shell, Skyscape Cap­i­tal Inc. (SKY: halted). It is ac­quir­ing Sal­ida En­ergy Inc., which hopes to be­come an oil and gas pro­ducer but does not yet own any oil and gas prop­er­ties. This QT there­fore sounds like there is one shell ac­quir­ing an­other shell.


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