Finance & Investing | Debt | Capital Markets | Drilling Program

Gordon Creek Secures Loan for 14 Well Re-work

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Gordon Creek Energy Inc. has announced that it has closed an interim financing deal with Excalibur Partners XX, LP whereby Excalibur has provided a bridge loan totaling US$3 million that will be focused on re-working and re-activating up to 14 previously drilled development wells in order to increase cash flows and reserves.

• The first tranche of US$1.0 million was announced March 6, 2015 and closed March 2015. The second tranche of US$2.0 million closed in July 2015. This represents an increase to the total bridge loan by US$400,000 from the originally agreed upon US$2.6 million due to greater than initially anticipated interest from investors.
• The Excalibur financing was sourced through Houston Merchant Advisory Partners and the Company is continuing to work with HMEP to source a new senior facility that would re-capitalize the Company, repay the Excalibur bridge financing and fund the continued development of the Gordon Creek field.
• The Excalibur financing consists of a one year term subordinated debt carrying an interest rate of 15% (18% if the Company chooses to accrue interest payments). Excalibur will also receive a 6% gross over-riding royalty on production from the PDNP Wells, which will be expanded to cover all Gordon Creek production if the facility is not repaid within six months. The royalty can be repurchased by the Company at any time for US$1.68 million. Excalibur will also receive, subject to TSX-V approval and subject to anti-dilution adjustments, three year warrants to purchase up to 5,510,971 shares of the Company at a price of $0.06 per share. If the loan is not repaid within six months, Excalibur will receive, until the loan is repaid, an additional 60% gross over-riding royalty on the PDNP wells, the proceeds of which will be applied to the outstanding principal and interest. Each tranche of funding is subject to separate timelines.
• The Company has also confirmed that the previously announced termination of the commodity streaming agreement with Sandstorm Gold Inc., which provided Sandstorm with a streaming interest in 35% of all Gordon Creek production, was finalized in August 2015 and is effective July 31, 2015. In consideration for the termination of the interest, Sandstorm will receive a subordinated two year note for US$4.0 million and a 10% gross over-riding royalty on all Gordon Creek production. The Company will have the right, at any time, to purchase one half (5%) of the Sandstorm royalty for US$6.0 million. As a result of the termination of the Sandstorm streaming interest, the Company will effectively now own, subject to royalties, a 100% interest in the Gordon Creek field and the Company's Gordon Creek reserves and cash flows will be calculated accordingly.

Operations

Since April 2015, the Company has commenced workovers on ten existing gas wells at the Gordon Creek field. While the work is ongoing, the Company is pleased to have seen improvements in the gas volumes from the worked over wells. The workovers have involved replacing worn equipment and installing larger pumps where needed. Some of the existing infrastructure has also been repaired.