Pieridae Energy Merges With Junior Exploration Company
Published May 15, 2017 - 8:11pm Last Updated May 15, 2017 - 8:13pm
In a bid to raise billions of dollars on the equity markets for its Goldboro liquefied natural gas project, Pieridae Energy Ltd. is taking over a publicly-traded junior oil and gas exploration company.
That share swap dea l, worth an estimated $41.2 million , is now before the Superior Court of Quebec . A decision on whether or not it will be approved is expected in July.
“This is the first step in getting us to a final investment decision (on the Goldboro liquefied natural gas project in Guysborough County ) ,” said Alfred Sorensen, president and chief executive officer of Pieridae Energy, in an interview Monday.
“It’s a reverse takeover,” he said. “The merged company will allow Pieridae Energy to go public.
”The top exec at Pieridae is hoping to initially raise $1 billion to $3 billion for the Goldboro LNG project on the equity markets. The company’s plan calls for construction to start in earnest in the first three months of the coming year.
At $8.3 billion , the Goldboro LNG project would be an economic boon for Guysborough County.
“If the flag drops and we have a go, the construction will be spread out over four years and there will be 3,500 jobs at peak,” said Mark Brown, Pieridae Energy’s director of project development, in an interview earlier this month.
Once construction is complete, the project would create 200 permanent jobs.
“In Goldboro, that’s impactful,” said Brown. “These are professional jobs — Red Seal and administrative jobs — at the plant.
Pieridae has already reached a tentative deal with labour, a special needs collective agreement, that was ratified and signed earlier this year by the Nova Scotia Construction Labour Relations Association and 85 per cent of the building trades expected to work on the company’s Goldboro project.
But before the company makes a final decision to go ahead with that project, it first has to raise the money needed to enter into long-term supply agreements for natural gas. The company is hoping to have these in place by the end of this year.
Under the terms of the merger agreement announced Monday, Quebec-based Pétrolia Inc. and Pieridae will merge to form Amalco, a temporary name for the company. Once the merger is completed, the new company is to go under the Pieridae banner and will retain its Calgary head office.
The share swap will leave Pétrolia shareholders, who are to get a 100-per-cent premium on their shares, with 14.7-per-cent ownership of the merged company, whose value is being estimated at just under $300 million.
Pétrolia, which trades on the TSX Venture Exchange under the PEA ticker, has a market capitalization of just under $17.9 million and was last trading at 16.5 cents a share.
Pieridae shareholders would own the remaining 85.25-per-cent stake in the merged company, whose stock is expected to open at $4.56 once trading resumes.
The much-higher anticipated share price is partly due to a 12-1 consolidation of shares, which is part of the agreement.
Although only a junior oil and gas exploration company, Pétrolia is the biggest holder of natural gas land leases in Quebec and could become a supplier for the Goldboro LNG project by as early as 2025, said Sorensen.
“Pétrolia is not going to be our first molecule in the plant but it is a long-term supplier,” he said.
According to Brown, the next big chunk of financing the company needs to enter into long-term supply agreements is in the neighbourhood of $50 million to $200 million.
Pieridae’s financial statements show it has already sunk about $65 million into developing the Goldboro LNG project so far and has liabilities in excess of its current assets of almost $24.3 million. As a part of the merger agreement, the company is obliged to raise $50 million under a private placement.
“It’s $50 million that’s being raised for site preparation and completion of engineering work at Goldboro,” said Sorensen.
Calgary-based Pieridae employs 10 people, including four at its Halifax offices on Argyle Street, and has natural gas resources in New Brunwick.
In December, 2015, the company clinched a deal to buy about 265.5 acres in the Goldboro Industrial Park from the Municipality of the District of Guysborough for $3.2 million. The company has also already sold 50 per cent of its proposed plant’s initial capacity on a 20-year contract to Uniper SE, the biggest utility in Germany, for $35 billion.
Pieridae is forecasting significant growth in the international and domestic markets for liquefied natural gas, as oil is gradually replaced with cleaner natural gas in the electrical generation and transportation sectors.