Wellstar Energy (CVE:WSE), an oil and gas company, jumped to two-month high after entering into a letter of intent to acquire certain oil and gas assets in Saskatchewan and Alberta from an arm’s length vendor.
Shares surged 23 percent to 18.5 Canadian cents at 12:20 p.m. in Toronto, after touching 19 Canadian cents, the highest intraday price since July 11.
Wellstar will acquire the assets in consideration for aggregate cash payments of $3.3 million, including $1.5 million upon closing the deal, and the issuance by the company of 4 million warrants, the Vancouver-based company said in a statement today.
Each acquisition warrant will entitle the vendor to purchase one common share at an exercise price of $0.18 for a period of 48 months following the closing of the acquisition.
The Assets consist of operated working interests producing approximately 41 net barrels of oil per day from approximately 6,000 net acres in Saskatchewan and Alberta. This includes 3,500 net acres in Saskatchewan prospective for the Bakken formation, with current production from 3 wells in the Red River and Winnipeg Sand formations.
"Management feels there is significant upside potential to economically produce from the Bakken based on the results from core analysis completed in the most recently drilled well producing from the deeper Red River formation," the company said.
The acquisition includes facilities consisting of a salt water disposal well, 5 x 1,000 barrel oil storage tanks and a fresh water source well.
In connection with the acquisition, the company announced it intends to complete a non-brokered private placement in the aggregate amount up to $1.5 million, consisting of 9 percent convertible debenture units of the company in the aggregate principal amount of up to $1 million and a concurrent placement of up to 6 million equity units at a price of $0.15 per Unit, for gross proceeds of up to $500,000, and together with the CD offering.
Net proceeds from the offering will be applied towards the acquisition, payment of current liabilities, exploration and development of the company’s oil and gas properties and for general working capital purposes.