As reported last week, under the new arrangement, Hillcrest will introduce the partner to pre-screened acquisition opportunities and the partner would fund the acquisition and development.
Hillcrest has already compiled a register of potential acquisition targets in Western Canada, based on criteria including positive operating cash flow from current production operations, and the potential to increase the market value of the assets by more than 3 times’.
"The execution of the binding agreements forming this strategic alliance with a funding partner is a substantial development for Hillcrest and one that has the ability to fast track our acquisition and development plans," said Don Currie, Hillcrest chief executive on Tuesday.
"The relationship between the parties will see their capital back our Western Canadian acquisition opportunities, with both parties benefiting as acquisitions are completed and further field development is undertaken to unlock the value in the assets.
"Assuming the partner is successful in its financing activities over the coming weeks, Hillcrest would expect to accrue significant short term value increases, at no cost to Hillcrest, through our carried interest interests in quality oil and gas assets that we have identified and commenced discussions on over the last several months.
"Further value to Hillcrest could be expected as value is delivered from acquired assets through field development activities managed by Hillcrest and from management fees and various bonus structures under the agreements related to the strategic alliance.
"Another significant benefit, is that Hillcrest will no longer have to consider equity capital raises and/or debt to fund acquisition and development opportunities for growth.
"We are excited to be aligned with a financial group who recognize and are prepared to invest based on our management team's extensive experience and track record delivering value from upstream oil and gas projects and who share our belief that this is an excellent time to be acquiring assets in the Western Canadian Sedimentary Basin."
Among the parts of the deal, for any assets which the partner elects to fund, Hillcrest will manage and operate those assets under the terms of joint venture agreements between Hillcrest and the Partner.
Hillcrest will also receive a 25% carried interest in any assets acquired.
Hillcrest will receive a management fee and be entitled to recover its out-of-pocket costs for managing the assets.
In Toronto, Hillcrest shares stand at C$0.060.