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Hawker Energy closes TEG deal

05th February 2015

Hawker Energy has closed its previously-announced acquisition of 100 per cent of the shares of TEG Oil & Gas U.S.A., from Sefton Resources, Inc

Hawker Energy has closed its previously-announced acquisition of 100 per cent of the shares of TEG Oil & Gas U.S.A., from Sefton Resources, Inc
Hawker and its subsidiary have made a number of advances totalling approximately USD 1.65m to TEG beginning April 2014 through the present, pursuant to a secured subordinated note

TEG owns the Tapia Canyon and Eureka oil fields in California.

Hawker purchased all of the shares of TEG by issuing three million shares of Hawker's common stock and a five-year warrant to purchase up to an additional five million shares of Hawker's common stock for USD 0.25 per share.

In addition, Hawker and its subsidiary have made a number of advances totalling approximately USD 1.65m to TEG beginning April 2014 through the present, pursuant to a secured subordinated note. 

This amount constitutes additional consideration for the acquisition, as this loan receivable will not be settled prior to the closing of the acquisition of TEG.

Darren Katic, Chief Executive Officer of Hawker, stated: "This is a transformative event for the company and its shareholders. We have acquired a low-risk development asset capable of producing over 500 barrels per day and in the process filled key spots in our management team.  The company is well positioned to develop these newly acquired assets, to better exploit our legacy portfolio and to capitalise on current market conditions as an opportunistic buyer of reserves in California."

 

Tapia Canyon Oil Field

The Tapia Canyon Oil Field is located about 40 miles north of Los Angeles, California. The field was discovered in 1957, when the Yule No. 2 well tested at 120 barrels per day of 18-degree API oil. The Tapia Canyon Oil Field commenced production in August 1957. Production is from the Yule Reservoir, which is approximately 1,000' deep and, on average, greater than 100' thick over the majority of the oil field.

TEG holds four oil leases covering 280 acres within the Tapia Canyon Oil Field.  Based on information provided by the seller, proved net recoverable reserves are estimated by Hawker to be 3.5 million barrels of oil.

After completion of well repairs currently underway and funded by Hawker through its loan to TEG, 18 active wells are expected to produce between 80 and 120 barrels per day of oil.  Hawker plans to conduct a phased exploitation development program, including the implementation of a steam flood at an estimated cost of $10 million, which is expected to increase production from current levels to over 500 barrels per day.

 

Eureka Oil Field

The Eureka Oil Field covers an area of approximately 1,600 acres located about 25 miles west of the Tapia Canyon Oil Field in Ventura County, California.  Eureka Oil Field production is very small currently but the property has exploration potential.

 

Additional Information Concerning The Acquisition And Related Matters

TEG's senior lender, Bank of the West (BOTW), consented to Hawker's acquisition of TEG and agreed to extend its senior loan until December 31, 2015, provided that several conditions be met including (i) Hawker lend TEG not less than USD 350,000 within the first quarter of 2015, and (ii) interest on TEG's obligations to BOTW be increased to 9 per cent, with a monthly pay rate of 5 per cent and the remaining 4 per cent deferred. The current balance owing on TEG's BOTW loan is USD 4.0m.  All advances made and to be made by Hawker and its subsidiary to TEG are subordinated in all respects to amounts owing by TEG to BOTW.

Additional important information concerning the acquisition, amendments to the secured subordinated note receivable and a related inter-creditor agreement, the BOTW consent and extension, and a proposed amendment to a secured convertible note payable can be found in the Hawker Quarterly Report on Form 10-Q for the three months ended November 30, 2014 filed with the SEC on January 20, 2015.

All acreage and production estimates shown above are gross figures before reduction for royalty interests.

TEG owns a 100 per cent working interest in both fields.

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