Kallisto Energy: latest Venture deal to draw the masses

Management teams with proven track records and success working together have begun targeting undervalued and forgotten junior oil and gas companies on the TSX Venture. Kallisto Energy is the latest to be taken over or to enter a “definitive reorganization” and will soon be known as Toro Oil & Gas.

Kallisto was the most liquid energy stock on the TSX Venture Tuesday; it all has to do with yesterday’s press release, which announced a recapitalization financing and new management team.

On September 15th, Kallisto Energy Corp. announced that it had entered into a definitive reorganization and investment agreement with Barry Olson, Donald Sabo, Greg Phaneuf, Elizabeth More, Neil Wilson, Kellie D’Hondt and Paul Storey. The agreement provides for:

“(i) a non-brokered private placement of approximately $25 million in aggregate (the “Private Placement”); (ii) the appointment of a new management team and board of directors (collectively, the “New Management Team”); and (iii) a rights offering (the “Rights Offering”) to current holders of Common Shares of Kallisto (collectively, the “Transaction”). Kallisto will be seeking a discretionary waiver from the TSX Venture Exchange (the “TSXV”) in respect of the minimum pricing requirements for the Private Placement on the basis of a future consolidation to be completed by Kallisto within six months of the date of completion of the Private Placement.”

Click here to read the entire press release.

Despite the solid track record and recent successes of the new management team stepping to the fore, one fact from yesterday’s press release clearly has not gone unnoticed:

Scott Saxberg, President, Chief Executive Officer and Director of Crescent Point Energy Corp., is acting as an advisor to the New Management Team.

Crescent Point had a market cap of just over $18 billion Tuesday morning.

Kallisto had a market cap of roughly $11.5 million Tuesday morning.

Despite the company not having announced any specifics in respect to potential acquisitions, it would not surprise us in the slightest if a move into the Montney formation took place in the coming weeks. The Montney has been receiving heightened interest and investment from junior energy stocks in recent weeks as exploration explodes in the region.

What has been reported is that the “New Management Team has extensive experience in creating shareholder value through the acquisition, exploitation and development of light oil and liquids-rich natural gas reserves in western Canada.”

And that “the recapitalized corporate structure will allow for the exploitation of the current Kallisto drilling inventory and expansion of the Company’s asset base through joint-ventures, farm-ins and/or strategic acquisitions.”

Click here to read more.

The newly formed company is to be led by Barry Olson who was the Country Manager (Canada) for Pacific Oil & Gas Ltd., an independent energy resources development company focused on the exploration, development, and production of oil and natural gas with midstream operations centered on the development of LNG receiving terminals and power plants in China. Previously, Barry was the founder, President & Chief Executive Officer of Orleans Energy Ltd., a TSX-listed entity that grew to 4,700 boepd prior to merging with RMP Energy Inc. in 2011.

Kallisto Current Production

Kallisto consists of approximately 200 boepd of production (60% oil and natural gas liquids) from a diversified asset base with near term development drilling opportunities, including:

• Cardium light oil at Minnehik – Buck Lake and Harmattan, Alberta;
• Elkton light oil and Lower Mannville liquids-rich gas at Crossfield, Alberta; and
• Doe Creek light oil at Valhalla, Alberta.

In an August 21st press release, the company reported it was “targeting to spend up to $9.0 million on these opportunities in 2014 and 2015.”

And that the company was, “continuing its efforts to monetize its Dawson oil transportation pipeline.”

Click here to read the entire press release.

The company’s current assets aside, investors are concerned and focused on one thing: What will Kallisto Energy do with the proposed $25 million it plans to raise?

Kallisto is one of more than a half dozen TSX Venture energy stocks that have followed this initial pattern where a new management team takes over a company and restructures it. Many of those stocks ultimately spent time as the most liquid stocks on the TSX Venture following significant acquisitions.