ADB.V ALERT

Admiral Bay completes foreclosures

2010-07-20 19:40 MT - News Release
Mr. Steven Tedesco reports
ADMIRAL BAY RESOURCES, INC. ANNOUNCES CLOSING OF FORECLOSURE ACTION FILED BY SECURED LENDERS
Admiral Bay Resources Inc. has completed the foreclosure proceedings previously disclosed. As a result, Admiral Bay and its former lenders agreed to settle its debt obligations by ceding certain corporate assets in exchange for forgiveness of approximately $42.5-million in debt and a fund established by lenders to satisfy outstanding trade obligations.
Upon completion of the foreclosure, Admiral Bay is debt free, has positive working capital and retains its Ft. Scott property in Bourbon county, Kansas. As of July 31, 2009, Ft. Scott had proved reserves of approximately 4.2 billion cubic feet and is presently producing approximately 50,000 cubic feet of gas per day. The company has also retained a 25-per-cent working interest in the Revloc project located in Cambria county, Pennsylvania.
While the foreclosure process eliminated all of Admiral Bay's outstanding debt, it also significantly reduced cash flow, limiting the company's current ability to develop and expand production. As a result of the foreclosure, Admiral Bay's field personnel were transferred to the lender's entity operating the foreclosed assets. In addition, the company will likely eliminate key financial personnel upon conclusion of the annual meeting in September.
The foreclosure exchanged company-proved reserves of approximately 45 billion cubic feet (as of July 31, 2009) of natural gas for the forgiveness of approximately $42.5-million in debt, as well as a fund to satisfy the company's other credit obligations. The foreclosed assets had net, after royalty, production in the quarter ended April 30, 2010, of approximately 2.40 million cubic feet of gas per day and is over 50 per cent undeveloped. With the transfer of assets in the foreclosure, the company also mitigated its future plugging and abandonment liability. The company also provided the lenders with a warrant to purchase up to 17.5 per cent of the common equity of Admiral Bay at a fixed price of approximately 3.9 cents per share over the next five years.
As a result of the foreclosure action, Admiral Bay has significantly increased its financial flexibility with a host of options available to attempt to increase shareholder value. The company is considering a number of strategic options, including the sale of additional assets, the purchase of or combination with other oil and gas assets to create a company with additional scale, and growing the company through intrinsic drilling and development of existing assets. Some options may require the company to seek additional capital. While all of these alternatives are available and being reviewed by the company, there are no guarantees the company will be successful in executing new strategic initiatives.
"Given the anemic gas-price environment, especially in the Cherokee basin, and the economic morass that has acutely impacted the energy exploration industry, this result, while personally disappointing, is among the best outcomes available to Admiral Bay stakeholders," said Admiral Bay chief executive officer Steve Tedesco. "The ability to eviscerate over $42-million in secured debt and satisfy our trade creditors without a formal bankruptcy allows Admiral Bay to keep a core asset and consider a number of options to rebuild shareholder value, a task on which management and the board of directors are keenly focused."
We seek Safe Harbor.