Shell Summary for Nov. 9, 2018
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.