Petrolifera rolls on desperation financing

Petrolifera rolls on desperation financing
Andrew Willis
RTGAM






Shedding debt can be tough on equity holders, as Petrolifera Petroleum showed with a recent financing.

Petrolifera found itself in a bind after cancelling a planned sale of oil and gas properties in Argentina. The properties went on the block as the junior oil company moved to pay down loans, only to find there no buyers at an acceptable price. Tristone Capital was the financial advisor on the failed sale.

A debt-heavy balance sheet meant a sea change in sentiment on Petrolifera, which was a market darling last summer, selling stock at $9.

This year, the stock has underperformed oil and gas peers, touching lows of 75 cents.

To put its finances back in order, Petrolifera raised $50-million in a deal that closed last week/ The company sold 56.8 million units at 88 cents each. Each unit consists of a Petrolifera share and half a warrant, and the warrant can be converted into stock at $1.20 per share over the next two years.

Thomas Weisel Partners, Cormark Securities and RBC Dominion Securities led the financing. Connacher Oil and Gas, a minority shareholder, bought a portion of the underwriting to maintain a 24 per cent stake in Petrolifera.

"While highly dilutive, the financing materially improves Petrolifera's balance sheet," said a report Monday from CIBC World Markets analyst Robert Par�. He said the company now has considerable financial flexibility, with $50-million available on a $100-million credit facility, and Mr. Par� has a $1 target price on the stock, down from $1.50, to reflect the dilution that came with last week's financing

Gold Bugs AN INTERVIEW WITH BOB HOYE

AN INTERVIEW WITH BOB HOYE AND D. PESCOD

We are here today with Bob Hoye, who writes “Pivotal
Events” and he is one of those guys that had actually pre-
dicted what we’ve gone through for much of the last year.
And was it ugly! Now things seem to be going back to a
little bit of normality, and Bob is still not all that comfort-
able looking forward.

Dave Pescod: Bob, one thing that you do see with a good
future down the road is gold. First of all, how good do
you see it? Secondly, how long?

Bob Hoye: The thing about gold is that it is backwards to
what the gold bugs think. They get this idea that if the
U.S. dollar is going to go to zero, the price of gold will go
to $10,000. The gold miners will make so much money it
will make your head spin. The thing that they are missing
out is that for the last 20 years or so, every time the dollar
has been hit hard, commodities outperform gold on the
way up. If you have commodities such as crude oil out-
performing gold on the way up, then the cost of mining
gold is going up. So the ideal condition for your basic
gold bug is backwards.

What you want to do is watch
what happens and study previous post-bubble contrac-
tions and the evidence is reliable over 300 years. On
every bubble, the real price of gold declines and gold min-
ing underperforms the market because everybody is in
love with base metals, stocks and high-tech stocks.

Once the bubble is over, then the price of gold outperforms eve-
rything else as stocks, corporate bonds and commodities
head down.

That then restores profitability to the gold
mining business. This is where we are now.
With the belated boom our gold divided by commodity
index declined to 143 in May of 2007 and it was that May
and June that we were also expecting the credit market to
reverse eventually to a disaster.

So what you’ve had
since that spring is the real price of gold went up, and the
credit markets went down and commodities went down.

By our index, the real price of gold got up to over 500 and

then we saw that the crash was getting close to ending in
which case things could get rather good until around mid-

With the good stuff coming back into the orthodox world,

our real price of gold then has declined to about 300.

The main thing is on gold is just that increase over the

last two years reflects an increase in operating margins

and it has not been fully priced into the senior stocks

yet. The reason for that on the initial rebound out of the

disaster, we figured that most stock sectors would out-

perform gold stocks. Once this daylight in here rolls

over, then stocks and corporate bonds and commodities

are going to head down. That won’t be good for gold

stocks, but what it is building to is by late in the year,

this could be another disaster in which case it’s time to

be buying your favorite gold stock from the seniors

down to the juniors.

What you end up with in a few years after the top of any

bubble, the gold stocks will be very much up and the rest

of the stock market i.e.: New York and Toronto will be

very much down. This is just not imagination going be-

cause this is the way gold, the real price, and gold min-

ing stocks have performed through and following previ-

ous great bubbles.

D.P: Now according to your issue of August 6th, you

were expecting gold and related shares to start doing

some significant moving, potentially as early as the New

Year. You have these own ratios that you’ve got in the

gold price, but for the average investor out there, what

kind of a gold price and American dollar do you think

we’ll be looking at down the road?

B.H: It’s already gone up significantly in real terms. It

will go up and continue to go up. In previous post-

bubble contractions (can be called Great Depressions)

they’ve lasted for about 20 years and through that period

gold mining became the premier and the most reliable

side of the economy. So this one is what we are shaping

up for. There is very little point in forecasting the price

of gold in dollar terms. For those who want to trade gold

against US dollars or gold against Canadian dollars or

gold against sterling or gold again the Yen, go ahead –

do it. But if you want to invest and make some money

out of the gold mining business, you will watch the real

price of gold.

Most gold-bug clichés are just distraction.

D.P: Another commodity that you have been looking at

as well is oil. I think a lot of peak oil people or people in

Calgary will be a little concerned when you use the anal-

ogy of oil to peak coal?

B.H: Yeah! In a long period of rising prices, intellectu-

als go weird! The 1860’s were the end of a 20-year pe-

riod of rising prices when prices went up and politics

got hysterical.

The leading economist of the day was

Stanley Jevons and he did some important work in eco-

nomics, but he also suddenly came up with a personal

revelation that the world was about to run out of coal.

He calculated all of the reserves and all the mines in

England and Wales and Europe and he assumed a min-

ing depth of 4000 feet and said the world was going to

run out of coal and civilization as they knew it, will end.

We will all go back to hardship and hard labor and all

that sort of stuff. Then he flattered his readers in his

book called “The Coal Question” by saying that you had

to have a special intellect to be able to understand the

disappearance of coal and that is was almost a religious

experience! Now the thing that Jevons didn’t grasp was

that you had exceptionally high prices at the end of a

long period of rapid price inflation.

And then it all goes

away and nature being what it is, there are still ample

reserves of coal. The price will go up and down and I

expect the same parallel would work on the guys who

dressed up this peak oil thing. The work that Jevons did

was painstaking in documenting all of the reserves and

he proved that they were going to run out!

D.P: If you were someone advising Calgary, you’d be

saying that oil could see $50 again or is it worse?

B.H: Probably worse. We had sort of a favorable sea-

son through the summer for crude oil and we had an

overbought (a couple of months ago) at first to $73 and

expected a correction. That’s run its course, but now

what we’ve got is that we are at an important low for the

U.S. dollar index.

It stabilized the last few days, so it’s

not like anybody is going to firm up the U.S. dollar. What

it seems to be is that when the street wants to speculate

in oil or base metals, then the dollar will go down. Then

when that speculation has run its course, then the dollar

goes up. Last year, one of the best calls we did based

on this historical work was that we were expecting the

deterioration in the credit markets would continue. Last

fall, we expected another 1873, 1929 crash which we did

get. We knew that in both of those crashes in the fall,

the price of gold fell with the crash and so did gold

stocks. So it was very easy this time around to say yeah

– if we have another crash, the price of gold is going to

go down…like it did.

So at any rate, the credit markets have been quite

happy lately along with the recovery being quite ani-

mated and is close to running its course, so I think that

you can have another credit crisis and it could get

rather nasty in the fall and I think you will see most

stock sectors go down including the gold sector. What

we do when we see the probability of that is to advise

people to lighten up on the senior gold’s. If you had

some really good joy in some small cap stocks, great –

take some money off the table and short the big silver

stocks. On any hit in a post-bubble credit contraction,

silver will plunge relative to gold.

That’s what we had

last year. So you can make some nice money being

short silver stocks and then reposition in gold stocks

on the next low.

D.P: All this is rather depressing. Are you suggesting

down the road we are going to see 15% unemployment

and businesses going bust all over?

B.H: You know that last fall the establishment was very

quick to defend itself by saying this is not another de-

pression because in the last depression, unemploy-

ment got to 25%. Unemployment didn’t get to 25% until

1933, so what you are interested in is what the rate of

unemployment is the year after the stock market had

its high. It was 9% in 1930 and now it’s around 9%, but

that’s on a new calculation of unemployment. I just

saw one today by John Williams and if you use the old

method of 15 years ago, we are already at 12% or 14%

in the U.S.

D.P: So an average person these days should be

what? And once again, the key work is “average” per-

son…

B.H: The average person’s portfolio whether it is in an

RRSP or not will have had a very good appreciation

since the disaster ended in early March.

Time to take

some money off the table on most stock groups. On

corporate bonds – they have had a fabulous rally. Junk

bonds were yielding 10% at the high of the market in

October 2007 and early March they were yielding 42%.

A bond at par would have fallen to about $28.00 and

now it has rallied all the way to a 17% yield.

The whole

world is playing it leveraged so if you have any of these

lovely corporate bonds, long-dated, it is time to get out.

If you are long commodities, it’s time to get out and

then I would apply that money to your mortgage and

your house to get rid of debt.

Delphi Energy to Acquire Fairmount Energy

Delphi Energy to Acquire Fairmount Energy


09:00 EDT Friday, August 21, 2009

CALGARY, ALBERTA--(Marketwire - Aug. 21, 2009) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Delphi Energy Corp. ("Delphi") (TSX:DEE) and Fairmount Energy Inc. ("Fairmount") (TSX VENTURE:FMT) are pleased to announce that they have entered into an acquisition agreement (the "Acquisition Agreement") pursuant to which Delphi has agreed, subject to the terms of the Acquisition Agreement, to make an offer to acquire all of the outstanding common shares of Fairmount (the "Offer") on the basis of 0.3571 of a common share of Delphi for each common share of Fairmount. The total consideration paid by Delphi for Fairmount is approximately $14.5 million, including the assumption of approximately $7.3 million of net debt and transaction costs of approximately $1.4 million.

The Offer will be made pursuant to a take-over bid and will be conditional on not less than 66 2/3% of the outstanding Fairmount common shares (calculated on a fully-diluted basis) being tendered to the Offer and will be subject to other customary conditions. Fairmount has approximately 16.3 million common shares outstanding. The take-over bid circular is expected to be mailed to Fairmount shareholders on or about August 28, 2009 and will expire 35 days thereafter.

All of the directors and senior officers of Fairmount (holding approximately 23.43% of the issued and outstanding common shares of Fairmount on a diluted basis), have entered into lock-up agreements with Delphi pursuant to which they have agreed to tender their common shares to the Offer.

Transaction Highlights

The acquisition of Fairmount is a strategic addition to the natural gas and infrastructure asset acquisition announced on August 4, 2009 by Delphi, adding to its focus area of North West Alberta. With the Fairmount acquisition, Delphi furthers its position as one of the leading junior producers in this attractive, multi-zone resource region. The acquisition of Fairmount provides several benefits to Delphi shareholders:

- The acquisition of proved reserves of 872,000 barrels of oil equivalent (boe) and proved plus probable reserves of 1,596,000 boe, effective March 31, 2009, in accordance with NI 51-101, as estimated by GLJ Petroleum Consultants Ltd.;

- Incremental liquids-rich natural gas production of 330 boe/d and productive capacity of 400 boe/d;

- Attractive reserves and production acquisition costs as follows:


Adjusted Acquisition Metrics(1)
Proved Reserves $14.49 per boe
Proved Plus Probable Reserves $7.92 per boe
Production - current $38,300 per boe/d
Production - capability $31,600 per boe/d


(1) Adjusted for undeveloped land value of $1.9 million,
calculated as $110 per acre on 17,300 net acres of undeveloped
land.


- Increased inventory of growth opportunities between Hythe and Bigstone areas including Nikanassin resource potential;

- Reduced operating and processing costs; and

- Annual general and administrative savings of approximately $1.0 million.

Upon closing on August 31, 2009 of the previously announced property acquisition of Gold Creek/Wapiti assets, Delphi will own working interests in the infrastructure required to transport and process Fairmount's current and shut-in production, providing the opportunity to increase production to approximately 400 boe/d, with the infrastructure capacity to provide further growth on Fairmount lands.

To view the Property Acquisition, please visit the following link: http://media3.marketwire.com/docs/property_acquisition_0821.pdf

Shareholders of Fairmount are expected to benefit from the transaction through the ability of Delphi to transport and process Gold Creek production through equity-owned facilities and infrastructure and an opportunity to participate in a larger oil and natural gas company providing greater liquidity for Fairmount shareholders.

The Offer has the unanimous support of the boards of directors of both Delphi and Fairmount. Fairmount's board of directors, after consulting with its financial and legal advisors, has unanimously determined that the Offer is fair, from a financial point of view, to the holders of Fairmount common shares and is in the best interests of Fairmount and has determined to recommend acceptance of the Offer by holders of Fairmount common shares. Peters & Co. Limited, the financial advisor to Fairmount's board of directors, has provided a verbal opinion that the consideration to be received by the holders of Fairmount common shares under the Offer is fair, from a financial point of view, to such holders.

The board of directors of Fairmount has agreed that it will not solicit, assist, initiate, knowingly encourage or otherwise facilitate any negotiations or discussions with any third party concerning the sale of Fairmount. Fairmount has agreed, under certain circumstances, to pay to Delphi a termination fee of $400,000. Delphi also has the right to match any unsolicited offer or proposal that Fairmount may receive.

Peters & Co. Limited is acting as financial advisor and Macleod Dixon LLP is acting as legal counsel to the board of directors of Fairmount with RBC Capital Markets acting as financial advisor and Osler, Hoskin & Harcourt LLP acting as legal counsel to Delphi.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States or any other jurisdiction outside of Canada, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The common shares of Delphi have not been, and will not be, registered under the U.S. Securities Act of 1933 Act, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act of 1933 Act and applicable state securities laws.

About Delphi:

Delphi is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.

About Fairmount:

Fairmount is a junior oil and natural gas exploration, development and production company with oil and gas properties located in Alberta, Canada.

Conference Call

A conference call is scheduled for 9:30 a.m. Mountain Time (11:30 a.m. Eastern Time) on Friday, August 21, 2009. The conference call number is 800-565-0813 or 416-695-6616. A brief presentation by David Reid, President and CEO and Brian Kohlhammer, VP Finance & CFO will be followed by a question and answer period.

If you are unable to participate in the conference call, a taped broadcast will be available until August 28, 2009. To access the replay, dial 800-408-3053 or 416-695-5800. The passcode is 7086317. An audio version will also be available on Delphi's website at www.delphienergy.ca.

Petrolifera announces pricing of equity offering .88 cents

Petrolifera announces pricing of equity offering


10:49 EDT Friday, August 21, 2009

<< /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/ >>


CALGARY, Aug. 21 /CNW/ - Petrolifera Petroleum Limited (the "Corporation" or "Petrolifera" - PDP - TSX) is pleased to announce that it has priced its previously announced public offering (the "Offering") of units ("Units"). Pursuant to the Offering, the Corporation will issue 56,820,000 Units at a price of $0.88 per Unit. Each Unit will consist of one common share in the capital of the Corporation (each, a "Common Share") and one-half of one Common Share purchase warrant of the Corporation (each whole Common Share purchase warrant, a "Warrant"). Each Warrant will entitle the holder thereof to purchase one Common Share (each a "Warrant Share")

at an exercise price of $1.20 per Warrant Share at any time up to 5:00 pm (Calgary time) on the date which is 24 months after the closing date of the Offering. In the event that the 20-day volume weighted average price of the Common Shares on the Toronto Stock Exchange (or such other stock exchange or quotation system on which the Common Shares are listed and where a majority of the trading volume occurs), exceeds $2.50,

the Corporation may, within five business days after such an event, provide notice to the holders of Warrants ("Warrantholders") of early expiry and thereafter the Warrants will expire on the date which is 10 days after the date of the notice to the Warrantholders. The Offering will be conducted through a syndicate of underwriters with Thomas Weisel Partners Canada Inc., Cormark Securities Inc. and RBC Capital Markets as co-lead underwriters and including GMP Securities L.P., Tristone Capital Inc., Scotia Capital Inc., Jennings Capital Inc., Octagon Capital Corp. and D&D Securities Company (collectively, the "Underwriters"). Pursuant to the terms of the Offering, the Corporation has agreed to grant the Underwriters an over-allotment option to purchase additional Units equal to up to 15% of the Units sold pursuant to the Offering, exercisable at any time, in whole or in part, up to 30 days from the closing of the Offering.

Connacher Oil and Gas Limited ("Connacher"), a significant shareholder of the Corporation, has indicated its intention to purchase 13,558,540 Units being offered pursuant to the Offering. Following completion of the Offering, Connacher will continue to own approximately 24 percent of the outstanding Common Shares (approximately 22 percent if the Over-Allotment Option is exercised in full).






The net proceeds of the Offering will be used by the Corporation to fund a portion of its exploration capital expenditure program, primarily in Colombia during the balance of 2009 and into 2010, to reduce indebtedness relating to the Corporation's reserve-backed credit facility and for working capital.

The Units will be sold publicly in each of the provinces of Canada, other than Québec, on a private placement basis in the United States pursuant to exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (the "1933 Act"), in the United Kingdom in accordance with applicable local securities legislation and regulations such that no prospectus, registration statement or similar document is required to be filed in any such jurisdiction and such other jurisdictions as may be agreed to by the Corporation and the Underwriters. The Offering is scheduled to close on or about August 28, 2009 and is subject to certain customary conditions and regulatory approvals, including but not limited to the approval of the Toronto Stock Exchange.


This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States or any other jurisdiction outside of Canada, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Units offered, including Common Shares and Warrants which comprise such Units, have not been, and will not be, registered under the 1933 Act, or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act and applicable state securities laws.


Petrolifera Petroleum Limited is a Calgary-based crude oil, natural gas and natural gas liquids exploration, development and production company with operations in Argentina, Colombia and Peru. The Corporation's main production platform is at Puesto Morales Norte in Argentina. Extensive undeveloped lands are held in all three countries, including three licenses in Peru and three blocks in Colombia.


Forward-Looking Statements: This news release contains certain "forward-looking information" within the meaning of applicable securities law including statements regarding the proposed use of proceeds of the Offering. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the information is provided, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. These factors include the inherent risks involved in the exploration and development of oil and natural gas properties and the possibility of unanticipated costs and expenses. Completion of the proposed Offering is subject to certain risks and uncertainties including receipt of all required regulatory approvals, including from the Toronto Stock Exchange and the satisfaction of all conditions to closing. For a description of the risks and uncertainties facing Petrolifera and its business and affairs, readers should refer to Petrolifera's Annual Information Form for the year ended December 31, 2008. Petrolifera undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. The reader is cautioned not to place undue reliance on forward-looking statements.





For further information: Richard A. Gusella, Executive Chairman, or Gary D. Wine, President and Chief Operating Officer, or Kristen Bibby, Vice President, Finance and Chief Financial Officer, Phone: (403) 538-6201, Fax: (403) 538-6225, inquiries@petrolifera.ca, Website: www.petrolifera.ca

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