OVERVIEW MEMORANDUM Successor Resources Ltd. Strategic Alternatives Review Process October 2014

OVERVIEW MEMORANDUM
Successor Resources Ltd.
Strategic Alternatives Review Process
October 2014
Process Overview
• Successor Resources Ltd. (“Successor” or the “Company”), a private company, has initiated a process to review potential
strategic alternatives which may include, among other things, a corporate sale, merger or other form of business
combination
• Successor has retained Cormark Securities Inc. (“Cormark”) as its financial advisor to assist in this process
• A virtual data room will be available to qualified Interested Parties
• Further details regarding process timing and the submission of proposals will be communicated to Interested Parties who
have executed a confidentiality agreement
Successor Highlights
• Current production of 345 boe/d (29% oil and NGL) consisting of 101 bbl/d of oil and natural gas liquids (“NGL”) and 1.5
MMcf/d of natural gas
• More than 100 boe/d of behind-pipe production volumes awaiting tie-in
• Q2/2014 operating netbacks of $21.05/boe (before G&A and interest expenses)
• Predominately operated and high working interest (~80%) in 54.3 sections (34,734 acres) of land
• 1.8 MMboe of proved plus probable (“P+P”) reserves, as evaluated by McDaniel & Associates Consultants Ltd.
(“McDaniel”) as at December 31, 2013
• P+P PV10% (before taxes) reserves value of $18.5 MM (effective December 31, 2013; January 1, 2014 McDaniel
pricing)
• Clean balance sheet with $2.4 MM of positive working capital and $1.0 MM undrawn credit facility as of Sept. 30, 2014
• Significant value associated with facilities and equipment (current insured replacement cost value of $9.5 MM)
• Tax pools of approximately $15 MM as at June 30, 2014
Core Area Overview
• Successor has three main producing properties
in Alberta:
• Pine Creek
• Watelet
• Atlee
Successor Core Areas
Pine Creek
Watelet
Atlee
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Successor Resources Ltd. | Overview Memorandum | October 2014
Property Highlights
Pine Creek:
• Current production of 102 boe/d (81% gas)
• Primarily producing from the Cardium Formation
• 10.1 net sections of land with average 66% WI
• Recently participated in the drilling and completion of a joint
Cardium horizontal well at 16-35-054-18W5M
• Successor’s net production averaged 77 boe/d for the first 30
days it was on production (on-stream since April 19th)
• Three additional wells are currently shut in as a result of third
party outages
• Combined production capacity in excess of 100 boe/d
• Negotiating opportunity to acquire a pipeline to bring the
shut-in production back on stream
Watelet:
• Current production of 184 boe/d (74% gas)
• Primarily producing from the Ellerslie Formation
• 16.6 net sections of land with average 89% WI
• Recently brought 5 wells back on production as a result of
increased gas prices
• Recently negotiated third party processing arrangements
Pine Creek Area
R18
R16
R14
R12
R10
R8W5
T55
T53
T51
Watelet Area
R1W5
R26
R24
R22
R19W4
T51
T49
T47
T45
T43
Atlee:
• Current production of 60 boe/d (60% oil and liquids)
• Primary producing from the Glauconite Formation
• 17.2 net sections of land with average 85% WI
• Over 30 km² of proprietary 3D seismic covering the majority of
the Atlee lands
• 100% ownership in an oil battery and gas plant
• Insured replacement value of ~$9.5 MM
Atlee Area
R13
R11
R9
R7
R5W4
T26
T24
T22
T20
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Successor Resources Ltd. | Overview Memorandum | October 2014
Production and Reserves Summary
Current Production (1)
Gas
Oil & NGL
Total
Pine Creek
Watelet
Atlee
Total
(Mcf/d)
(Boe/d)
(Boe/d)
494
822
146
1,463
19
47
36
101
102
184
60
345
% Oil & NGL
Total Company Interest P+P Reserves (2,3)
Oil
Gas
NGL
Total
PV10%
(Mbbl)
229
58
118
405
(MMcf)
4,884
1,838
223
6,945
(Mbbl)
184
59
7
249
29%
(Mboe)
($000s)
1,227
423
162
1,812
$14,138
$3,367
$1,009
18,514
36%
Totals may not add due to rounding
(1) “Current production” is estimated field production for the week ending September 27, 2014
(2) Based on the McDaniel report effective December 31, 2013 using January 1, 2014 McDaniel pricing
(3) Includes royalty interest reserves
Land Summary
Pine Creek
Watelet
Atlee
Total
Gross
(acres)
9,760
12,008
12,966
34,734
Total
Net
(acres)
6,448
10,650
11,011
28,109
Avg. W.I.
(%)
66%
89%
85%
81%
Gross
(acres)
3,200
8,168
9,606
20,974
Developed
Net
Avg. W.I.
(acres)
(%)
1,584
50%
7,130
87%
7,651
80%
16,365
78%
Gross
(acres)
6,560
3,840
3,360
13,760
Undeveloped
Net
Avg. W.I.
(acres)
(%)
4,864
74%
3,520
92%
3,360
100%
11,744
85%
Corporate Overview
Officers
Monty Bowers
Brenda Mawhinney
Harley Rea
Brian Tompkins
David McGuinness
-
President & CEO
VP Finance & CFO
Chief Operating Officer
VP Exploration
VP Land
Directors
Jim Nieuwenburg (Chairman)
Bruce Allford
Guy Grierson
Monty Bowers
Jason Montemurro
John Brussa
Murray Nunns
Advisors
Auditors
Bankers
Legal Counsel
Engineers
KPMG LLP
National Bank of Canada
Burnet, Duckworth & Palmer LLP
McDaniel & Associates Consultants Ltd.
Capital Structure
Basic Shares Outstanding
Stock Options Outstanding
Performance Warrants Outstanding
Fully Diluted Shares Outstanding
(000s)
23,434
None
None
23,434
Balance Sheet (As of Sept 30, 2014)
Cash
Working Capital Surplus
Bank Indebtedness
Postive Working Capital Balance
($000s)
$797
$1,632
Nil
$2,429
Tax Pools (As of June 30, 2014)
CEE
100%
Non-Capital Losses
100%
CDE
30%
UCC
25%
COGPE
10%
Total
($000s)
$1,022
$615
$671
$1,623
$11,213
$15,144
• Successor is currently being managed by Corex Resources Ltd. under a Management Services Agreement (the “MSA”)
• The MSA is terminable upon 30 days’ notice and there are no associated severance obligations with the agreement
• The Company has no current marketing arrangements
• Management and Directors beneficially own or control 10% of the outstanding shares
• In addition, a single shareholder owns an additional 55.7% of the outstanding shares
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Successor Resources Ltd. | Overview Memorandum | October 2014
Description of the Sale Process
• Successor has retained Cormark as its financial advisor to coordinate all aspects of this process and Cormark will act as
the sole contact for all parties who have expressed an interest in entering into a transaction with the Company (“Interested
Parties”)
• Successor’s preference is for a corporate transaction, however, the Company will entertain all serious proposals including
proposals for one or more of its property areas
Confidentiality Agreements (“CA”)
• Interested Parties should contact one of the Cormark representatives below or visit Cormark’s website to download a copy
of the CA (see www.cormark.com under “Investment Banking” and then “Announced M&A Mandates”)
• Executed CAs should be forwarded by email or courier to Allan Berg of Cormark at the contact information
provided below
Virtual Data Room (“VDR”)
• Qualified Interested Parties that have executed a CA in a form acceptable to Successor will be permitted access to a VDR
Bid Date
• Further details regarding process timing and the submission of proposals will be communicated to Interested Parties who
have executed a CA
Additional Information
• Successor and Cormark reserve the right at any time to amend or terminate the sale process altogether, to decline to
permit an Interested Party to participate in the process, to terminate discussions with any or all proposals submitted by
Interested Parties, or to negotiate with any party with respect to a possible transaction
Contact Information
• Successor personnel should not be contacted directly
• All correspondence and inquiries related to the process should be directed to Cormark by contacting one of the Cormark
representatives below:
Dion Degrand
Allan Berg *
Craig Marchuk
Managing Director, Investment Banking
(403) 750-7203
ddegrand@cormark.com
Vice President, Investment Banking
(403) 750-7212
aberg@cormark.com
Analyst, Investment Banking
(403) 750-7218
cmarchuk@cormark.com
* Primary contact for CAs
Cormark Securities Inc.
Suite 1800, 300 - 5th Avenue S.W.
Calgary, Alberta
T2P 3C4
www.cormark.com
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Successor Resources Ltd. | Overview Memorandum | October 2014
Disclaimer
The purchaser is responsible for its own due diligence. Successor and Cormark make no representation or warranty as to the accuracy or completeness of
this document or the information contained herein. Certain information contained herein regarding reserves, drilling inventory, historical costs, royalties and
netbacks are confidential and are for information purposes only.
This Overview Memorandum is based on information provided by Successor from its own records and from other sources. The Overview Memorandum is
being distributed, on behalf of Successor, by Cormark, the Company’s financial advisor, solely for the use of certain qualified Interested Parties. The sole
purpose of the Overview Memorandum is to assist Interested Parties in determining whether or not to proceed with further investigation of a potential
transaction with Successor. The information contained in this Overview Memorandum and in any data room coordinated by Cormark or Successor in
connection with a possible transaction (“Information”) is for informational purposes only, and does not under any circumstances constitute: (a) an offering or
solicitation for the sale of securities; (b) a recommendation to purchase, sell or hold any securities; (c) an offering memorandum as contemplated by
applicable securities laws; (d) an obligation by Successor to enter into any proposed transaction; or (e) investment, legal, financial, tax, accounting or other
advice of any kind.
The Information has been prepared to assist Interested Parties in completing their own independent evaluation of Successor and its assets, but does not
purport to be all inclusive or to contain all of the information that an Interested Party may desire or that may be required by an Interested Party to properly
evaluate the business, prospects or value of Successor and its assets. Certain statements contained herein may constitute forward-looking information,
including, without limitation, management’s plans and assessments, drilling plans, future operating costs, production estimates, royalties and other burdens
and netbacks. Forward-looking information involves risks and uncertainties that could cause actual events or results to differ materially from the estimated
or anticipated events or results implied or expressed in such forward-looking information. In particular, information concerning oil and gas reserves may
involve the implied assessment that the reserves described can be profitably produced in the future, based on certain estimates and assumptions. Except
as explicitly stated in the Overview Memorandum, no independent third party has reviewed the reasonableness of any such statements, estimates or
assumptions. Neither Successor nor Cormark represents or warrants that such forward-looking statements will be achieved or will prove to be correct.
Actual future results and operations could vary materially from the forward-looking statements. Similarly, no representation or warranty is made that the
assumptions on which the forward-looking statements are based may be reasonable.
Each Interested Party is deemed to acknowledge that neither it nor Cormark intends that Cormark act or be responsible as a fiduciary to the Interested
Party, its management, shareholders, creditors or any other person. Each Interested Party and Cormark, by accepting and providing this Overview
Memorandum respectively, is deemed to disclaim any fiduciary relationship and agree that the Interested Party is responsible for making its own
independent judgments with respect to any transaction and any other matters regarding this Overview Memorandum.
The Information should not be relied upon by any Interested Party in considering the merits of any particular transaction. The Interested Party should
consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessment of the Information, including
obtaining investment, legal, tax, accounting and such other advice as it considers necessary or appropriate.
Cormark has not independently verified any of the Information contained herein. Neither Cormark nor the Company or their respective affiliates make any
representation or warranty (expressed or implied) as to the accuracy or completeness of this Overview Memorandum. Successor and Cormark expressly
disclaim any and all liability and responsibility for and associated with the quality, accuracy, completeness or materiality of the Information. Neither
Successor nor Cormark assumes any obligation to update, revise or correct the Information, except as may be required by applicable securities laws.
Cormark may have interests in the securities and other products referred to herein, including being directors of, or may have or may in the future act in
various roles including as underwriter, dealer, broker, lender or financial advisor to, their issuers and may receive fees, brokerage or commission for acting
in those capacities. Cormark may act as a market maker or buy or sell those securities and other investment products as principal or agent and as such
may effect transactions which are not consistent with this information.
For the purposes of this Overview Memorandum, barrels of oil equivalent (“boe”) has been calculated on the basis of six thousand cubic feet of gas to one
barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel is based on an
energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net
revenue for all properties, due to the effects of aggregation. Estimates of future net revenue do not represent fair market value.
“Current Production” refers to Successor’s estimated field production for the week ending September 27, 2014.
“Operating netbacks” are calculated by subtracting royalties, operating expenses and transportation expenses from the average price received or
forecasted to be received during the period.
Some totals in this Overview Memorandum may not add due to rounding.
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