06:55:00 EDT Thu 28 Mar 2024
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Crown Point Energy Inc
Symbol CWV
Shares Issued 104,515,329
Close 2015-01-23 C$ 0.16
Market Cap C$ 16,722,453
Recent Sedar Documents

Crown Point rebuts dissident, mails shareholder letter

2015-01-24 00:59 ET - News Release

Mr. Murray McCartney reports

CROWN POINT FILES LETTER TO SHAREHOLDERS AND MANAGEMENT INFORMATION CIRCULAR FOR FEBRUARY 24 SHAREHOLDER MEETING

Crown Point Energy Inc. is filing on SEDAR and is mailing a letter to shareholders and a management information circular for the shareholder meeting scheduled for Feb. 24, 2015.

In the documents, Crown Point presents compelling reasons for its shareholders to vote the white proxy and approve the $8.5-million (U.S.) second tranche private placement of shares with two investors, and vote against the attempt by dissident LAIG Oil Investments to take control of the board of directors and the company.

"The Feb. 24 vote is critical to Crown Point's future. Shareholders need to act now to protect their investment and prevent a disingenuous dissident from taking control of Crown Point. We are asking shareholders to vote the white proxy and give the green light to growth, investment and experience and to halt LAIG's opportunistic plans," said Crown Point chairman, Gordon Kettleson.

"In the course of preparing for the shareholder meeting, we have uncovered many troubling facts that suggest to us that LAIG may not be all that it purports to be. We urge shareholders to read the meeting materials in full to understand LAIG's shortcomings, its self-serving financing plans and the risks it presents to Crown Point. Help us stop LAIG and protect Crown Point's bright future by voting the white proxy against the dissidents and for the second tranche."

The complete letter to shareholders from Crown Point is included at the end of the news release. This document, along with the management information circular, will also be available on the company's website and on SEDAR. The proxy voting deadline is 10 a.m. (Calgary time) on Feb. 20, 2015.

For voting inquiries, or assistance with voting, contact Crown Point's proxy solicitor.

Message from the chair

"Dear Crown Point shareholder,

"You have important choices to make that will affect the value of your investment in Crown Point Energy Inc. At the shareholders meeting on Feb. 24, 2015, or by the white proxy in advance, we recommend that you vote:

  • "For an $8.5-million (U.S.) second tranche private placement of shares with two investors. Among its many benefits, the second tranche will provide essential funds that will allow Crown Point to continue with near-term exploration and development initiatives, which so far have been favourable.
  • "Against an attempt by dissidents, led by LAIG Oil Investments, to take control of the board and the company. Be aware that LAIG has not disclosed all material information to you, especially a demand that Crown Point issue to LAIG a control block of equity and warrants at a price that is well below the second tranche financing price.

"Your company has a highly experienced management team and a strong majority-independent board. We believe that we are poised to increase production, cash flow and reserves by carefully deploying for exploration and development the funds we receive from the second tranche. We are confident that our strategy will create value for the benefit of all shareholders.

"Don't accept what the dissidents are telling you at face value. Read the management information circular to understand why you should be skeptical of LAIG's self-described capabilities. Our research indicates that it may have exaggerated its history and failed to disclose its shortcomings and the inexperience of its dissident nominees as directors of publicly traded companies. LAIG has presented itself to you as Argentine, but elsewhere it admits to being a foreign investor in Argentina.

"We believe that LAIG's agenda is to gain control of Crown Point's board and then pursue a self-serving financing strategy, all of which is designed to gain control of the company at the expense of Crown Point and its other shareholders. We think that LAIG launched this costly and distracting proxy contest to further that agenda.

"Crown Point's strategy is working

"Crown Point's board and management team have carefully navigated the company through a difficult period in Argentina, and now our strategy is working. We designed it to deliver low-risk growth and capitalize on large potential exploration upside in Argentina. Our primary focus at present is to increase production in Tierra del Fuego through exploration and development drilling.

"The evidence of our progress is the 14-well exploration and development program under way in TDF. We have issued operating updates to keep you informed, and on page i and ii of the management information circular, we have provided a summary of the program's results so far.

"The TDF exploration and development program is critical to Crown Point's growth, but of course it comes with a price tag. In 2015, we are budgeting to pay approximately $7.4-million (U.S.) for our 25.78-per-cent share of TDF capital expenditures, the majority of which will occur in the first half of the year. This includes approximately $1.3-million (U.S.) to wrap up our 14-well program and $6.1-million (U.S.) as our share of an anticipated five-well 2015 follow-up program that is currently in the planning stages.

"This is one of the key reasons why we arranged the $8.5-million (U.S.) second tranche private placement with our two investors. We have negotiated the best possible terms for the financing, and we are confident that it is the best source of financing available to finance our growth program.

"We ask that you vote for the second tranche of the financing.

"Our board is focused on enhancing shareholder value

"We urge you to vote against the dissidents, which are seeking 60 per cent of the board seats while owning just 5 per cent of Crown Point's shares. Instead, you should continue to support our incumbent board, which collectively own 22 per cent of Crown Point's shares. LAIG proposes to replace our seven strong and capable non-management directors. Read the management information circular to see why our non-management directors are far superior to LAIG's dissident board nominees.

"Moreover, we believe that LAIG's strategy has severe shortcomings. By closing Crown Point's Calgary head office, LAIG would eliminate the valuable contribution of our Calgary-based executive team in the form of leadership, technical operations experience, financial management and capital markets experience, Canadian corporate governance expertise, and Canadian regulatory compliance and disclosure expertise.

"Then, there is the cornerstone of this entire proxy fight: LAIG's inferior proposal. Given its significance, shareholders should be troubled that LAIG has not disclosed its inferior proposal publicly, particularly since LAIG has criticized our financing.

"What else is LAIG not telling you? As you read our management information circular, we think you will agree with us that no weight should be given to LAIG's claim that it will deliver 'greater transparency and more clarity in communicating to the market.' Our view is that the opposite is more likely, given the shortcomings that we believe exist in LAIG's disclosures to date.

"LAIG is not working for all shareholders

"LAIG is working for itself, not you or the other Crown Point shareholders. The strongest evidence for this is the superiority of the second tranche to the inferior proposal. The second tranche price is 25 U.S. cents, currently equivalent to about 31 Canadian cents: This represents a 55-per-cent premium to the 20-Canadian-cent unit price of LAIG's inferior proposal and a 77-per-cent premium to the Jan. 21, 2015, closing price of Crown Point's shares on the TSX Venture Exchange of 17.5 Canadian cents per share.

"In addition, unlike LAIG's inferior proposal, the second tranche does not include additional dilutive warrants, which under the terms of the inferior proposal would provide LAIG with a right to acquire even more Crown Point shares at a fixed price of 30 Canadian cents per share for an unspecified period of time.

"Put another way, if Crown Point were to work with LAIG under the terms of its inferior proposal to raise the $8.5-million (U.S.) planned under the second tranche, LAIG would get nearly 52.6 million shares, or 18,555,204 more shares than Crown Point proposes to issue under the second tranche. Moreover, LAIG would get warrants to acquire another 26.3 million shares.

"Every vote, no matter how many shares you own, is crucial. If the second tranche is rejected and LAIG's dissident nominees seize control of the board, Crown Point's financial future will be at LAIG's mercy. Don't vote to give LAIG the power to impose the inferior proposal on Crown Point. Vote for the second tranche, the premium financing price, and the advancement of our exploration and development plans.

"Our future looks bright

"We have turned the corner, and we believe that our future looks bright. As you will read in the management information circular, LAIG is well aware of the investment opportunity in Argentina following the 2012 YPF nationalization, which in LAIG's own words caused a drop in the value of oil assets in Argentina of up to 90 per cent. Don't let LAIG bargain shop at your expense.

"To be sure, the past few years have been difficult in Argentina, and not just because of the YPF nationalization. Our board and management team have carefully navigated the company through currency controls, repatriation challenges, strikes and inflation while Argentina suffered a reprimand from the International Monetary Fund, defaulted on its debt and devalued the peso.

"Even if our stock price has not yet rebounded, it appears that Argentina is turning the corner just as we are. We believe the long-term outlook for natural gas prices in Argentina remains favourable. Unlike North America, there is insufficient production in Argentina to meet demand. Argentina imports natural gas at prices above $10 (U.S.) per million cubic feet, which is substantially more than double the average price we received in 2014. Argentina's domestic natural gas shortage is especially important for us, because our production is weighted approximately 80 per cent to natural gas.

"As for Argentina's government-regulated oil prices, oil from our TDF concessions is being priced at approximately $70 (U.S.) per barrel, starting in January, 2015. While that is a decline of approximately 9 per cent from the $77-(U.S.)-per-barrel price in place from May, 2014, to December, 2014, the decline is relatively small compared with the recent sharp price slump in global crude oil markets and is not expected to have a material impact on our cash flows. The January, 2015, TDF price is approximately 43 per cent higher than the closing price on Jan. 21, 2015, of approximately $49.03 (U.S.) per barrel for global benchmark Brent crude.

"Argentina, as a nation, has a priority of reducing its reliance on imports of energy by encouraging growth in domestic oil and gas production. We are already well positioned to benefit from these market conditions through our exploration and development program and by developing our high-quality concessions in Argentina.

"We believe that the recent appointment to our board of nominees of our two investors will further accelerate this growth. We can now leverage their financial capabilities and local business networks to assist our management team. We expect to be able to access new opportunities through acquisitions and farm-ins on assets.

"Don't be swayed by the dissidents

"We believe that the dissidents' shortcomings are significant, their proposed head office closure is reckless and their financing strategy is self-serving. Be aware that the remaining incumbent directors of Crown Point will resign rather than participate in LAIG's self-serving plans.

"By requisitioning a shareholder meeting to put forward dissident nominees with no disclosed experience, managing or directing a Canadian public company, LAIG has forced us to incur significant expenses at a cost to all Crown Point shareholders. If LAIG wins control of the board, Crown Point will have to pay LAIG's expenses too.

"It is unfortunate that Crown Point and its shareholders are being forced to absorb such costs and needless distraction, particularly when at the June 12, 2014, annual general meeting, shareholders voted 96 per cent in favour of five of the directors that LAIG now seeks to remove. Don't reward LAIG for imposing requisition-related costs on Crown Point. Help us avoid the excessive dilution that would result from the inferior proposal that LAIG has demanded and the risks of its nominees' inexperience as directors of a Canadian public company.

"Crown Point has a great future, a highly experienced management team and a strong majority-independent board, reflecting best governance practices. The board owns 22 per cent of the shares and is committed to creating shareholder value for the long term.

"We are confident about our strategy. We have the support of our new investors. With the funds from the second tranche, we will have the capital we need to execute our exploration and development plans.

"I encourage you to read the management information circular and visit our website for further details on the matters raised in this letter. After that, please help us continue with our positive momentum by voting the white form of proxy today for the second tranche and against the dissidents.

"I would like to thank you for your continuing support as we move forward together to build a stronger Crown Point.

"On behalf of the board of directors,

"Gordon Kettleson, chairman of the board of directors"

If you have questions or require voting assistance, please call:

North American toll-free number:  1-877-452-7184

Collect calls outside North America:  416-304-0211

E-mail:  assistance@laurelhill.com

We seek Safe Harbor.

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