Admiral Bay Resources, Inc. Announces Closing of Foreclosure Action Filed by Secured Lenders
Market Wire, July, 2010
Admiral Bay Resources Inc. (TSX VENTURE: ADB) (“Admiral Bay” or the “Company”) today announced the completion of the foreclosure proceedings previously disclosed. As a result, Admiral Bay and its former lenders agreed to settle its debt obligations by ceding certain corporate assets in exchange for forgiveness of approximately $42.5 million in debt and a fund established by lenders to satisfy outstanding trade obligations.
Upon completion of the foreclosure, Admiral Bay is debt free, has positive working capital and retains its Ft. Scott Property in Bourbon County, Kansas. As of July 31, 2009, Ft. Scott had proved reserves of approximately 4.2 Bcf and is presently producing approximately 50 Mcfgpd. The Company has also retained a 25% working interest in the Revloc Project located in Cambria County, Pennsylvania.
While the foreclosure process eliminated all of Admiral Bay’s outstanding debt, it also significantly reduced cash flow limiting the Company’s current ability to develop and expand production. As a result of the foreclosure, Admiral Bay’s field personnel were transferred to the lender’s entity operating the foreclosed assets. In addition, the Company will likely eliminate key financial personnel upon conclusion of the annual meeting in September.
The foreclosure exchanged Company proved reserves of approximately 45 Bcf (as of July 31, 2009) of natural gas for the forgiveness of approximately $42.5 million in debt as well as a fund to satisfy the Company’s other credit obligations. The foreclosed assets had net, after royalty, production in the quarter ended April 30, 2010 of approximately 2,400 Mcfgpd and is over 50% undeveloped. With the transfer of assets in the foreclosure, the Company also mitigated its future plugging and abandonment liability. The Company also provided the lenders with a warrant to purchase up to 17.5% of the common equity of Admiral Bay at a fixed price of approximately $0.039 (CDN) per share over the next five years.
As a result of the foreclosure action, Admiral Bay has significantly increased its financial flexibility with a host of options available to attempt to increase shareholder value. The Company is considering a number of strategic options including the sale of additional assets, the purchase of or combination with other oil and gas assets to create a company with additional scale and growing the Company through intrinsic drilling and development of existing assets. Some options may require the Company to seek additional capital. While all of these alternatives are available and being reviewed by the Company, there are no guarantees the Company will be successful in executing on new strategic initiatives.
“Given the anemic gas price environment, especially in the Cherokee Basin, and the economic morass that has acutely impacted the energy exploration industry, this result – while personally disappointing – is among the best outcomes available to Admiral Bay stakeholders,” said Admiral Bay Chief Executive Officer Steve Tedesco.. “The ability to eviscerate over $42 million in secured debt and satisfy our trade creditors without a formal bankruptcy allows Admiral Bay to keep a core asset and consider a number of options to rebuild shareholder value, a task on which management and the Board of Directors are keenly focused.”
About Admiral Bay Resources
Admiral Bay Resources Inc. ( www.admiralbay.com ) is an unconventional gas production company focused on the development of projects in the Cherokee Basin in southeast Kansas and the Appalachian Basin in Pennsylvania. Admiral Bay is listed on the TSX Venture Exchange under the symbol ADB.
Statements in this release that are not historical facts are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such statements are not guarantees of future performance and that actual developments or results may vary materially from those in these “forward-looking statements”.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Admiral Bay Resources Inc.
Steven Tedesco
President & C.E.O.
(303) 350-1255
(303) 617-8956 (FAX)
stedesco@admiralbay.com
Admiral Bay Resources Inc
foreclosures