CONCERNED SHAREHOLDERS REQUISITION BLACKSTEEL SHAREHOLDERS' MEETING

Associated Press

21-03-2025

CALGARY, AB, March 21, 2025 /CNW/ - A group of shareholders (collectively, the 'Concerned Shareholders') of Blacksteel Energy Inc. ('Blacksteel' or the 'Corporation'), collectively holding more than 5% of the issued and outstanding shares of Blacksteel, have today requisitioned (the 'Requisition') the board of directors of Blacksteel (the 'Board') to call a meeting of shareholders of Blacksteel (the 'Meeting') for the principal purpose of reconstituting the Board by removing each of Eugene Chen, Bettine Pierre-Gilles, and Arthur Madden, and electing four (4) new directors to fill the vacancies created by their removal, namely Jeff Callaway, Shubham Garg, Michael Schnell and A. Paul Gill (collectively, the 'Nominees').
The Concerned Shareholders desire to reconstitute the Board on an expedited basis in order to ensure that the Corporation manages its business and affairs in a manner that benefits all of its stakeholders, including, but not limited to, the shareholders of Blacksteel (the 'Shareholders'). Accordingly, the Concerned Shareholders have demanded the Board call the Meeting on or before May 20, 2025. If Blacksteel does not call a meeting of Shareholders, the Concerned Shareholders will send notice of the Meeting to all Shareholders.
The Concerned Shareholders believe that the Nominees will work with all stakeholders, along with participants in the Canadian capital markets, to bring about positive change at Blacksteel to enhance value for all Shareholders.
The Concerned Shareholders believe that the Board, as currently constituted, has failed to be responsive to Shareholder expectations, has not adequately undertaken a process to consider strategic alternatives, and has no coherent strategy to enhance value for the Shareholders. Specifically, the Concerned Shareholders believe the proposed sale of the Corporation's Girouxville oil and gas producing assets (the 'Girouxville Assets'), which was announced by the Corporation in a news release dated March 4, 2025 the 'Proposed Transaction'), will result in the shares of Blacksteel having little to no value after all of the Corporation's accounts payable to trade creditors, debts and liabilities are first paid from the proceeds of the Proposed Transaction.
Pursuant to the terms of Proposed Transaction, it is the Concerned Shareholders understanding that the shallow natural gas wellbores (the 'NG Wellbores'), which will not be included as an asset sold in the Proposed Transaction, generate only a few thousand dollars in revenue for Blacksteel per month, which the Concerned Shareholders believe is not sufficient to cover the overhead costs of Blacksteel necessary to run the business on a day-to-day basis. It is the Concerned Shareholders understanding that the NG Wellbores were acquired by Blacksteel for nominal consideration on account of their significant abandonment liability, and have no development potential. Furthermore, there is no additional land or drilling locations to develop with respect to the NG Wellbores.
The Concerned Shareholders have noted that Blacksteel production has declined 83% from 100 boe/d between November 2023 to 17 boe/d in January 2025, while the Concerned Shareholders estimate that net cash obligations owed by Blacksteel have grown over 100% to approximately $2.6 million. In addition, the Corporation's shares have been subject to a cease trade order since November 2023, restricting the Corporation's ability to raise capital, other than debt. Additionally, the Corporation's audited consolidated financial statements for the year ended April 30, 2023, were filed nearly fifteen (15) months late and Corporation's audited consolidated financial statements for the year ended April 30, 2024, have not yet been filed, meaning they are at least six (6) months late. Also, the Corporation has failed to file updated reserves information as required by applicable securities law.
The Nominees have strong depth of knowledge of the Girouxville Assets, having been part of their growth to 100 boe/d, including the rebuilding of the battery and reactivation of the wells. Mr. Callaway, in his capacity as a former director and executive officer of Blacksteel from 2020 to 2023, was responsible for raising over $2 million in equity capital for the Corporation, while also securing the joint venture partner for the Girouxville Assets on terms advantageous to Blacksteel. Mr. Callaway also revised the geological model for the Girouxville Assets, and increased the value of the reserves on a boe/share basis by 205% on Proven Reserves at a 10% discount before tax Net Present Value basis, while completing six annual audits for the Corporation and the joint venture partner. The increase in value referenced in the preceding sentence is evidenced in the independent valuation of the Corporation's reserves data as prepared by GLJ Ltd. as at April 30, 2023, which was dated May 31, 2023 (the 'GLJ Reserves Report').
Energize Natural Resources Ltd. ('Energize'), of which Jeff Callaway, one of the Concerned Shareholders, is Chairman, CEO and majority shareholder, has submitted offers to the Board, the first being on December 11, 2024, in an effort to purchase the Girouxville Assets, at a price and for consideration which the Concerned Shareholders consider to be superior in value to the Proposed Transaction. Energize received little to no response from the Board in relation to the offers made by Energize.
The Concerned Shareholders believe the value of the Girouxville Assets (as evidenced by the GLJ Reserves Report), given prudent capital investment in operations and drilling, will create more value for Shareholders than selling the Corporation's most valuable assets pursuant to the Proposed Transaction, which will do nothing more than pay down Blacksteel debt and leave Shareholders with illiquid shares in a business with nominal assets, no strategy, and no ability to pursue viable strategic alternatives. Provided the Board is reconstituted with the Nominees, the Concerned Shareholders intend to immediately pursue strategic alternatives that can be executed quickly and with the goal of drilling the Girouxville Assets to realize their potential, while providing Shareholders with liquidity by applying for the revocation of the outstanding cease trade order as soon as possible.
The Concerned Shareholders have beneficial ownership of, or control or direction over, an aggregate of 12,002,590 common shares of the Corporation, representing approximately 10.7% of the issued and outstanding common shares of the Corporation.
The Concerned Shareholders include Jeff Callaway, Michael Schnell, Jo-Anne Schnell, Gerald Schnell, Kenneth Schnell, Brad Schnell, Darren Abbott, A. Paul Gill, Abbott Petroleum Consulting Inc., Birchmount Properties Limited and Altan Mehmet.
Information Concerning the Nominees
As set out in the Requisition, the Nominees are Jeff Callaway, Shubham Garg, Mike Schnell, and Paul Gill. Three of the Nominees, including Mr. Schnell, Mr. Garg and Mr. Gill, will be considered 'independent' directors within the meaning of securities laws. Mr. Callaway will not be considered independent given that he was an executive officer of the Corporation within the last three (3) years.
Jeff Callaway, Mr. Callaway has been the CEO and Chairman of Energize Natural Resources Ltd. since March 2024, an Alberta focused oil and gas company. Mr. Callaway has been the CEO of Buffalo Infrastructure Inc. since May 2021, which is an alternative energy development company. Mr. Callaway has been the CEO of Longship Energy Inc. since 2007, an independent consulting services business. From 2019 to 2023, Mr. Callaway was the Founder, Chairman, and CEO of High Ground Medica, a federally licensed cannabis producer. Mr. Callaway spent 20 years in financial services founding, structuring, advising, and raising tens of millions in equity and debt capital, and taking public a number of small cap companies primarily in the energy sector. Mr. Callaway spent three (3) years with Blacksteel Energy Inc. as CEO, Director, EVP and CFO whereupon Blacksteel significantly reduced debt, raised equity capital, grew cash flow, completed financial audits, acquired the joint venture partner, and grew production from 0 boe/d to 100 boe/d and transitioned Blacksteel from a passive non-Operator to an Operator of their assets. Mr. Callaway is very familiar with the assets of Blacksteel and their inherent potential and value.
Shubham Garg, Mr. Garg is a senior executive with extensive experience in the oil and gas industry with a history of successfully growing production, turning around companies, acquisitions, marketing and raising capital. Mr. Garg's experience has been focused across Western Canada with strong experience in the Montney and heavy oil. Mr. Garg has raised private and public capital through a variety of equity and debt instruments to fund oil and gas development programs. Mr. Garg is trained as a Petroleum Engineer. Mr. Garg has significant experience with governance and compliance within the corporate sector both in private and public entities. Mr. Garg has acted as Executive Chairman, Director, and CEO for various private and public companies.
Michael Schnell, Mr. Schnell has been the CEO of Maverick Oilfield Services Ltd. since 1978 with extensive experience in the oil and gas industry with a history of helping companies build, maintain, and operate their pipelines and oil and gas facilities. His experience has been focused across Western Canada with strong experience serving the infrastructure requirements of producers in the Montney, including, but not limited to, for Blacksteel. Mr. Schnell has raised private capital through a variety of equity and debt instruments to fund the growth of Maverick Oilfield Services Ltd. of which he is the Owner and Operator. Mr. Schnell has significant experience with capital programs aimed towards bringing on production efficiently and maintaining their production.
A. Paul Gill: Mr. Gill is a business builder and a financier with over 25 years of experience in creating, restructuring, and growing businesses in various sectors, including mining, energy, automation, and technology. In 2003, Mr. Gill was the founder of Norsemont Mining Corp. and helped guide the company through a rebuilding process to acquire new projects and attract new management in Peru which eventually led to the discovery of a large copper asset that was sold to HudBay Minerals Inc. for $ 512 million in 2011. Mr. Gill is currently the CEO of Triple One Metals Inc., a mineral exploration company in Newfoundland and Quebec. From 2008-2021, he was also the founder of Lomiko Metals Inc., a junior exploration and development company in the mining sector which recently received grants from both the US Department of Defense and the Canadian Natural Resource Ministry totaling $ 18 million Cdn. For the last 20 years, Mr. Gill has worked through AJS Management Corp. as a strategic advisor to support new start-ups and IPOs. To help communicate start-up ideas, he created the website Future Opportunities ( www.future-opportunities.com) which is a newsletter that disseminates news to subscribers on trends in mining, oil & gas and technology. Currently in the technology area, he is the Chair of Promethieus Technologies Inc., a company that invests in new technologies and is focused on the semiconductor industry.
Other Information Concern the Nominees
The table below sets out, as of the date of this news release and in respect of each Nominee, his name, province, and country of residence; principal occupation, business, or employment within the five preceding years; and the number of common shares of the Corporation beneficially owned, or controlled or directed, directly or indirectly, by the Nominee; which information has been provided by the Nominee.
Jeff Callaway
Alberta, Canada
Chairman and CEO of Energize Natural Resources Ltd., an oil and gas company, since March 2024; former Director, President and CEO of Blacksteel from 2020 to 2023; CEO and Director of High Ground Medica Inc., a cannabis producer, from 2019 to 2023; and CEO of Longship Energy Ltd., an independent consulting business, since 2007.
1,910,490
Shubham Garg
Alberta, Canada
Executive Chairman of Prospera Energy Inc., a publicly-traded oil and gas company, since 2024; Director of WesCan Energy Corp., a publicly-traded oil and gas company, since 2023; President and CEO of White Tundra Petroleum Ltd., an oil and gas company, since 2021; and President and CEO of White Tundra Resources Ltd. from 2019 to 2022.
Nil
Michael Schnell
Alberta, Canada
Chairman and CEO of Maverick Oilfield Services Ltd., an oilfield services company, since 1978.
6,234,807
Cease Trade Orders
Except as stated in the paragraph below, to the knowledge of the Concerned Shareholders, none of the Nominees are, at the date of this news release, or has been, within ten years before the date of this news release: (a) a director, chief executive officer, or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days (each, an 'order'), in each case that was issued while the Nominee was acting in the capacity as director, chief executive officer, or chief financial officer, or (ii) was subject to an order that was issued after the Nominee ceased to be a director, chief executive officer, or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer, or chief financial officer; (b) a director or executive officer of any company that, while the Nominee was acting in that capacity, or within one year of the Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement, or compromise with creditors or had a receiver, receiver manager, or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement, or compromise with creditors, or had a receiver, receiver manager, or trustee appointed to hold the assets of the Nominee.
Mr. Callaway joined the Corporation as a Director and its President and CEO in September 2020. A failure-to-file cease trade order was in effect against the Corporation from October 2020 to December 2020, while Mr. Callaway was President and CEO, due to the time required to complete three concurrent audited financial reports necessary for acquiring the joint venture partner of the Girouxville Assets. In addition, a failure-to-file management cease trade order was in effect against the Corporation from September 2023 to November 2023, while Mr. Callaway was the CFO of the Corporation. The current cease trade order against Blacksteel came into effect on November 8, 2023 after Mr. Callaway departed Blacksteel as a Director, EVP, and CFO.
Securities Law Penalties or Sanctions
To the knowledge of the Concerned Shareholders, as at the date of this news release, none of the Nominees have been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation, or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for the Nominee.
Interest in Material Transactions
To the knowledge of the Concerned Shareholder, neither the Concerned Shareholder, nor any of its directors or officers, nor any of its associates or affiliates, nor the Nominees, nor any of their associates or affiliates, have: (a) any material interest, direct or indirect, in any transaction since the commencement of the most recently completed financial year of the Corporation or in any proposed transaction which has materially affected or will materially affect the Corporation or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of directors.
Additional Information
The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of securities laws. Although the Concerned Shareholders have requisitioned the Meeting, there is currently no record or meeting date set for the Meeting and Shareholders are not being asked at this time to execute a proxy in favour of the Nominees or any other resolution set out in the requisition. In connection with the Meeting, the Concerned Shareholders may file a dissident information circular in due course in compliance with corporate and securities laws.
Notwithstanding the foregoing, the Concerned Shareholders are voluntarily providing the disclosure required under sections 9.2(4) and 9.2(6) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations. This news release and any solicitation made by the Concerned Shareholders in advance of the Meeting is, or will be, as applicable, made by the Concerned Shareholders, and not by or on behalf of the management of the Corporation. All costs incurred for any solicitation will be borne by the Concerned Shareholders, except that, subject to corporate and securities laws, the Concerned Shareholders may seek reimbursement from the Corporation for their out-of-pocket expenses, including proxy solicitation expenses, and legal fees, incurred in connection with a successful reconstitution of the Board.
The Concerned Shareholders are not soliciting proxies in connection with the Meeting at this time, and shareholders of the Corporation are not being asked at this time to execute proxies in favour of the Nominees (in respect of the Meeting) or any other resolution set out in the requisition. Proxies may be solicited by the Concerned Shareholders pursuant to an information circular sent to shareholders after which solicitations may be made by or on behalf of the Concerned Shareholders, by mail, telephone, fax, email, or other electronic means as well as by newspaper or other media advertising, and in person by certain directors, officers, and employees of the Concerned Shareholders, who will not be specifically remunerated therefor. The Concerned Shareholders may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under Canadian corporate and securities laws, conveyed by way of public broadcast, including through news releases, speeches, or publications, and by any other manner permitted under Canadian laws. The Concerned Shareholders may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on behalf of the Concerned Shareholders.
The Concerned Shareholders are not requesting that Shareholders submit a proxy at this time. Once the Concerned Shareholders have commenced a formal solicitation of proxies in connection with the Meeting, proxies may be revoked by instrument in writing by the Shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by the law and the articles of the Corporation.
The Concerned Shareholders have retained MLT Aikins LLP as legal counsel.
A copy of this news release is available on the Corporation's SEDAR+ profile at www.sedarplus.ca.
Forward-Looking Information
This news release contains forward-looking information within the meaning of Canadian securities legislation. In general, forward-looking information refers to disclosure about possible conditions, events, or financial performance that is based on future economic conditions and courses of action, and includes disclosure that is presented as a forecast, plan, or projection. Forward-looking information can often be identified by terms such as 'anticipates', 'expects', 'intends', 'plans' and similar references to future periods. More particularly and without limitation, this news release contains forward looking information about the Concerned Shareholders' plans to quickly fund a drilling program at Girouxville through an earn-out agreement with Energize; restore production at Girouxville; address the accrued cash debts of the Corporation; and provide shareholders of the Corporation with liquidity by applying for the revocation of the outstanding cease trade order as soon as possible.
The forward-looking information in this news release is based on certain key assumptions made by the Concerned Shareholders, including assumptions concerning their business plan; the timing of and success of future drilling, development, and completion activities; the geological characteristics of the Girouxville assets; prevailing commodity prices, price volatility, price differentials, and the actual prices received for the Corporation's products; the availability and performance of drilling rigs, facilities, pipelines, and other oilfield services; the timing of past operations and activities in the planned areas of focus; the drilling, completion, and tie-in of wells being completed as planned; the performance of new and existing wells; the application of existing drilling and fracturing techniques; prevailing weather and break-up conditions; royalty regimes and exchange rates; the application of regulatory and licensing requirements; the availability of equity capital; the ability of debt capital; the availability of skilled personnel; the accuracy of their geological interpretations of drilling and land opportunities, including the ability of seismic activity to enhance that interpretation; and their ability to execute their business plan. Although the Concerned Shareholders believe that the assumptions on which the forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because the Concerned Shareholders cannot give any assurances that they will prove to be accurate.
By its nature, forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed in this news release. These risks and uncertainties include, but are not limited to, an incorrect assessment of the value of benefits to be obtained from the reconstitution of the Board; an incorrect assessment of the value of benefits to be obtained from the proposed drilling program; failure to achieve anticipated benefits from the reconstitution of the Board; failure to achieve anticipated benefits from the proposed drilling program; fluctuations in commodity prices; changes in industry regulations and political landscape both domestically and abroad; the risk that the new U.S. administration imposes tariffs on Canadian goods, including crude oil and natural gas, and that such tariffs (and/or the Canadian government's response to those tariffs) adversely affect the demand or market price, or both, for the Corporation's products or otherwise adversely affects the Corporation; wars, hostilities, and civil insurrections; foreign exchange or interest rates; increased operating and capital costs due to inflationary pressures (actual and anticipated); volatility in the stock market and financial system; impacts of pandemics; the retention of key management and employees; and unplanned third-party pipeline outages, including in respect of safety, asset integrity, and shutting in production. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this news release, and to not use such forward-looking information for anything other than its intended purpose.
The Concerned Shareholders undertake no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by Canadian securities legislation.
Definitions
1P
Proved reserves
2P
Proved plus probable reserves
bbl
Barrel of oil
boe
Barrel of oil equivalent(1)
boe/d
Barrel of oil equivalent per day
boe/share
Barrel of oil equivalent per share
Mcf
Thousand cubic feet
NPV-10%
Net present value of net income discounted at 10%
(1)
All boe conversions in this press release are derived by converting gas to oil at the ratio of six Mcf of natural gas to one bbl. A Boe may be misleading, particularly if used in isolation. A boe conversion rate of 1 bbl : 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio of oil compared to natural gas based on currently prevailing prices is significantly different than the energy equivalency ratio of 1 bbl : 6 Mcf, utilizing a conversion ratio of 1 bbl : 6 Mcf may be misleading as an indication of value.