18 Aug 2010 09:48
Quadrise Fuels International Plc
Issue of equity to fund participation in the first 'seed financing' of Sparky Energy Corporation
18 August 2010
Quadrise Fuels International ("QFI" or the "Company") the manufacturer of emulsion fuels as low cost substitutes for heavy fuel oils in power generation, industrial and marine applications, advises that it has secured additional funding and participated in a new issue share offering by Sparky Energy Corporation ("Sparky"). The Company has acquired an additional 2,000,000 ordinary shares in Sparky for a total cost of C$ 1 million (approximately £636,500) to maintain the 16.4% QFI shareholding in this new oil production company.
The Company further announces that it has secured binding commitments from certain existing shareholders to subscribe for 87,500,000 new ordinary shares of 1 pence each at a price of 1 pence per share raising £875,000. 50 per cent. of the subscription monies (£437,500) have already been received by the Company and the balance is to be paid to the Company by 31 August 2010. Once full payment has been received the new shares will be allotted and issued and the subscribing investors will also receive one warrant for every new ordinary share subscribed for. The warrants must be exercised on or before 30 June 2011 and each warrant carries the right to subscribe for one new ordinary share at a price of 1 pence per share. The warrants will not be admitted to trading on AIM. Following allotment and issue, application will be made for the 87,500,000 new ordinary shares to be admitted to trading on AIM and an announcement will be notified to the market accordingly. This placing was undertaken to provide additional funds to cover the cost of the Company's investment to maintain its shareholding in Sparky.
Under the terms of the placing, one of the investors has the right - once the new ordinary shares have been fully paid for and issued - to nominate a director of the Company and an announcement will be made when such appointment is made. The monies raised from the placing will be utilised to cover the cost of the investment in Sparky. The balance after costs (approximately £200,000) will be used for such purposes as are agreed with the nominated director referred to above.
Sparky Energy Corporation
Sparky is a new junior oil company formed to utilize novel proprietary EOR technology developed by Quadrise Canada Corporation (QCC). QFI is the largest shareholder and held a 16.4 % equity interest in Sparky before the present financing. Sparky has a 50/50 joint venture with Optimal Resources Inc. ("Optimal") itself a producing oil company with secured reserves in the Lloydminster area in Alberta, Canada.
The EOR technology, which is designed to increase oil production and ultimate recovery from declining and depleted oil fields, was developed by QCC. All of the intellectual property and specialised know how associated with the EOR technology is owned by QCC. The Sparky/Optimal joint venture holds the exclusive worldwide license from QCC for the use of this technology in clastic oil reservoirs, subject to achievement of certain performance milestones, and will therefore be leading the commercialisation of the EOR technology in this niche business area.
There are many depleted heavy oil pools in Western Canada, the USA and worldwide, for which this technology may be applicable. Sparky has a 50/50 working interest in all field assets and in the associated recovered oil.
Sparky issued letters to shareholders including QFI, on 15 June 2010 and 13 July 2010 advising of the financing to raise funds of C$ 5 million for the early phase programme through a new issue share offering. QFI acquired 2 million new issue shares at the first closing of the Sparky issue and will not be subject to re-allocation in the event of oversubscription. A second tranche of this issue closed on 12 August 2010 by which time Sparky held cash receipts of over C$ 4.3 million being approximately 87 per cent. of the C$ 5 million target. The Sparky Board has agreed to extend the offer to a final close date on 31 August 2010 in response to broker and direct investor requests and expects to be at least fully subscribed for the C$ 5 million at that time.
Information has also been provided on the early phase development plans which are now underway. The key early phases as advised are:
1. A single well injection test scheduled to take place shortly on Block 18 of the Optimal property in the Lloydminster area, following the first financing.
2. A pilot scale "five spot" (four injection wells and one producer) pressurised injection "flood" planned to start in the 4th quarter 2010. This will be based on a 40 acre well spacing and production response is anticipated within a three month period. On success, this will be followed by:
3. The first small scale commercial development programme.
Optimal will be the operator for all projects and the Sparky/Optimal joint venture proposes to establish an Area of Mutual Interest of 6,400 square miles in the Lloydminster area to exploit heavy oil production development using the QCC EOR technology. It is anticipated that the five spot flood phase will provide sufficient cash flow to launch the first fully commercial development.
The EOR technology programme developed out of the extensive QCC emulsion fuels Research and Development programme in which QCC shareholders have invested more than C$50 million over many years. While principally focussed on heavy residue based emulsion fuel products, the knowledge gained helped develop the EOR technology which is unique to QCC and exclusively licensed to the Sparky/Optimal joint venture. More recently QCC, Optimal and Sparky have been progressing a joint programme to migrate the technology from the laboratory phase to field application. The Alberta Research Council has extensive specialised enhanced oil recovery research facilities which have been used in this process and the University of Alberta and other independent facilities have been involved with QCC over the last year in ongoing development and testing programmes.
Sparky estimate that Western Canada alone holds 35 billion barrels of conventional heavy oil resources in place. QCC research revealed that the heavy oil already recovered using primary and 'early' enhanced recovery methods has been in the order of 10% of the oil in place.
The QCC EOR technology may offer to more than double the recovery from existing heavy oil fields.
Corporate review
The QFI corporate structure review mentioned in the announcement made on 14 July 2010 is continuing and a further announcement will be made when this has been concluded.
Commenting on these developments, QFI Chairman, Ian Williams said:
"We are especially pleased to have maintained a leading shareholding position in Sparky through these arrangements. The QCC EOR technology looks promising and the Sparky-Optimal venture is an ideal vehicle to take it to market. A successful Sparky venture should also be significant for the future value of our holding in Quadrise Canada Corporation. QFI could not have maintained its share of this promising venture without securing new equity funds".
Enquiries:
Quadrise Fuels International plc Tel: +44 (0)20 7550 4931
Ian Williams
Hemant Thanawala
Fairfax I.S. PLC Tel: +44 (0)20 7598 5368
Simon Bennett/Katy Birkin