UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
____________________________
Date of
Report (Date of earliest event reported): January 15,
2019
PETROSHARE CORP.
(Exact
name of registrant as specified in its charter)
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Colorado
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001-37943
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46-1454523
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(State or other jurisdiction of incorporation or
organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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9635 Maroon Circle, Suite 400
Englewood, Colorado 80112
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number including area code: (303) 500-1160
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
[
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[
]
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
[
]
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company ☒
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☒
Item
1.01
Entry Into a Material Definitive Agreement
On
January 15, 2019, PetroShare Corp. (the "Company"), entered into a
purchase and sale agreement (the "Purchase Agreement") with an
independent third party ("Buyer). The Purchase Agreement provides
for the sale by the Company of certain oil and natural gas
interests in the Wattenberg Field of Colorado (“Sale”).
The assets proposed to be sold by the Company consist primarily of
the Company’s interest in all non-operated horizontal wells
in which the Company has an interest. The Sale does not include any
of the Company’s interest in the operated wells comprising
its Shook Pad. The aggregate consideration payable to the Company
for the Sale will be $16.5 million in cash, subject to purchase
price adjustments, including but not limited to adjustments for
certain title, environmental defects and casualty losses asserted
prior to the closing. The Sale has an effective date of January 1,
2019 and closing is scheduled for February 25, 2019.
The
Purchase Agreement provides that the Buyer may conduct due
diligence to assess the aggregate dollar value of any title and
environmental defects, preferential purchase rights and certain
consents. If the value of these matters exceeds 15% of the purchase
price, each party has the right to decline to close. Except for its
termination right, its remedy for a breach of the Company's special
warranty of title and its remedy for a breach by the Company of
certain limited representations, indemnifications and interim
period covenants, Buyer's exclusive remedy for title matters and
environmental matters will be handled through a title or
environmental defect mechanism.
Each
party's separate obligation to consummate the Sale is conditioned
upon, among other things, (i) confirmation of the counterparty's
representations and warranties as of the closing, (ii) the
counterparty's performance, in all material respects, of all
covenants contained in the Purchase Agreement, (iii) the absence of
material legal matters prohibiting the Sale, (iv) the purchase
price condition described above, and (v) the counterparty being
ready to deliver the closing deliverables. The Company's obligation
to consummate the Sale is further conditioned upon the Company
obtaining a consent to the Sale under its secured credit agreement.
There is no financing contingency for the Buyer.
If the Purchase Agreement is terminated by the
Company as a result of Buyer's willful breach of the Purchase
Agreement, and certain other conditions are met, then the Company
will be entitled to damages in an amount equal to five percent of
the Sale price. If the Purchase Agreement is terminated by Buyer as
a result of the Company’s willful breach of the Purchase
Agreement, Buyer will be entitled to seek all remedies available at
law and in equity, including specific performance of the Company to
consummate the Sale.
The Purchase Agreement contains representations,
warranties and covenants customary for a transaction of this
nature. The parties have agreed to indemnify each other from
certain losses resulting from breach of representations,
warranties, or covenants contained in the Purchase Agreement,
subject to limitations and survival periods. The Purchase Agreement
also contains mutual pre-closing covenants, including the
obligation of the Company to conduct its business in all material
respects in the usual, regular and ordinary manner consistent with
its past practices and to refrain from taking certain specified
actions without the consent of Buyer.
The Purchase Agreement is not intended to
provide any other factual information about the Company. The
representations, warranties, and covenants contained in the
Purchase Agreement were made only for purposes of the Purchase
Agreement, including the allocation of risk between the parties,
and as of specific dates, were solely for the benefit of the
parties, and may be subject to limitations agreed upon by the
contracting parties, including being qualified by confidential
disclosures exchanged between the parties in connection with the
execution of the Purchase Agreement.
Cautionary
Statement
This Current Report on Form 8-K includes
forward-looking statements within the meaning of Section 27(a) of
the Securities Act of 1933, as amended, and Section 21(e) of the
Securities Exchange Act of 1934. Forward-looking statements can be
identified by words such as "anticipates," "believes," "forecasts,"
"plans," "estimates," "expects," "should," "will" or other similar
expressions. Such statements are based on management's current
expectations, estimates and projections, which are subject to a
wide range of uncertainties and business risks. These
forward-looking statements include, but are not limited to,
statements regarding the total consideration to be received by the
Company and the timing of the closing of the Sale. Actual results
may differ materially from those included in the forward-looking
statements due to a number of factors, including, but not limited
to: (i) the occurrence of any event, change or other circumstance
that could delay the transaction or give rise to the termination of
the Purchase Agreement related thereto; (ii) the outcome of any
legal proceedings that may be instituted against the Company
following announcement of the transaction; (iii) the inability to
complete the transaction due to the failure to satisfy conditions
to closing in the Purchase Agreement; (iv) the risk that the
proposed transaction disrupts the Company's current plans and
operations as a result of the announcement of the transaction,
including the distraction of the Company's management and
employees; (v) costs related to the transaction; (vi) changes in
applicable laws or regulations; and (vii) the possibility that the
Company or the Buyer may be adversely affected by other economic,
business and/or competitive factors; and the other risks discussed
in the Company's periodic filings with the Securities and Exchange
Commission (“SEC”), including the Risk Factors section
of the Company's Annual Report on Form 10-K for the year ended
December 31, 2017 and other reports filed with the SEC. The Company
undertakes no obligation to publicly correct or update the
forward-looking statements in this news release, in other
documents, or on the website to reflect future events or
circumstances. All such statements are expressly qualified by this
cautionary statement.
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SIGNATURE
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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PETROSHARE
CORP.
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Date: January 22,
2019
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By:
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/s/ Paul
Maniscalco
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Paul
D. Maniscalco, Chief Financial Officer
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