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THE UNITED STATES
Latigo Capital Corporation ("Latigo") (TSX VENTURE:LTG), Warnic 1 Enterprises
Ltd. ("Warnic") (TSX VENTURE:WNCP), Valentine Ventures Corp. ("Valentine") (TSX
VENTURE:VVN), Blackwater Capital Corp. ("Blackwater") (TSX VENTURE:BCC), all
capital pool companies and Cumberland Oil & Gas Ltd., a privately held oil and
gas company, are pleased to announce that they have signed an amalgamation
agreement dated December 18, 2009 (the "Amalgamation Agreement") whereby each of
the companies has agreed to combine their respective businesses by way of
amalgamation (the "Amalgamation").
The Amalgamation is an arm's length transaction and is expected to constitute
the Qualifying Transaction (as such term is defined in the policies of the TSX
Venture Exchange Inc. ("TSXV")) for each of Latigo, Warnic, Valentine and
Blackwater (collectively the "CPCs"). The Amalgamation and all related
transactions remain subject to the approval of the TSXV. It is anticipated that
the corporation to be formed on completion of the Amalgamation will be
classified as a Tier 2 Oil and Gas Issuer on the TSXV.
The Amalgamation
Pursuant to the terms of the Amalgamation Agreement, Warnic will be continued
from British Columbia to Alberta, and upon completion of the continuance, the
CPCs and Cumberland (collectively the "Amalgamating Companies") will combine
their respective businesses by way of an amalgamation under the provisions of
the Business Corporations Act (Alberta). Cumberland Oil & Gas Ltd., the company
to be formed on completion of the Amalgamation ("Amalco"), will carry on
Cumberland's current business and operations. The current directors and
management of Cumberland and a director of Latigo will form the board of
directors and management of Amalco.
The shares in the capital of each of the Amalgamating Companies that are issued
and outstanding immediately prior to the time of the Amalgamation will be
exchanged for common shares of Amalco ("Amalco Shares") at a deemed price of
$0.33 per Amalco Share on the following basis: holders of common shares of
Latigo will receive 0.3879 of an Amalco Share for each Latigo share; holders of
common shares of Warnic will receive 0.3032 of an Amalco Share for each Warnic
share; holders of common shares of Valentine will receive either 0.3037 of an
Amalco Share for each Valentine share, or, in the event that the TSXV requires
Valentine to cancel 675,000 Valentine shares issued to founders of Valentine as
a result of Valentine's failure to complete a Qualifying Transaction by January
11, 2010, 0.3474 of an Amalco Share for each Valentine share; holders of common
shares of Blackwater will receive 0.2875 of an Amalco Share for each Blackwater
share; and holders of common shares of Cumberland will receive one Amalco Share
for each Cumberland share.
Based upon the number of shares of each of the Amalgamating Companies
outstanding as at the date hereof, prior to giving effect to the Cumberland
Financing (as defined below), assuming that all of the outstanding options in
the CPCs are cancelled unexercised and assuming that Warnic's and Blackwater's
outstanding agent warrants are exchanged for warrants of Amalco, there will be
approximately 28.8 million Amalco Shares issued and outstanding following
completion of the Amalgamation, with shareholders of Latigo, Warnic, Valentine,
Blackwater and Cumberland holding approximately 9.9%, 9.1%, 5.7%, 3.2% and 72.1%
of the outstanding shares, on a non-diluted basis, respectively. Assuming the
Cumberland Financing are fully subscribed, all of the outstanding options in the
CPCs and Warnic's and Blackwater's outstanding agent warrants are exercised
prior to the completion of the Amalgamation, there will be approximately 33.2
million Amalco Shares issued and outstanding following completion of the
Amalgamation.
Each of the CPCs have agreed that all of their outstanding share options shall
either be exercised or cancelled prior to the completion of the Amalgamation.
Cumberland's outstanding share options will be exchanged for share options in
Amalco pursuant to the Amalgamation Agreement. The exercise price, vesting dates
and the expiry times of the outstanding Cumberland options will remain
unchanged. It is anticipated that upon completion of the Amalgamation, Amalco
will have the following convertible securities issued and outstanding: warrants
to purchase an aggregate of 51,750 Amalco Shares at an exercise price of $0.70
per share and 202,522 Amalco Shares at an exercise price of $0.49 per share;
options to purchase 737,500 Amalco Shares at an exercise price of $0.25 per
share; and options to purchase 750,000 Amalco Shares at an exercise price of
$0.33 per share.
Cumberland Financing
The CPCs have agreed that Cumberland may, prior to the completion of the
Amalgamation, complete the non-brokered private placement of up to 3,636,364
subscription receipts (the "Subscription Receipts") at a price of $0.33 per
Subscription Receipt for gross proceeds of up to $1.2 million (the "Cumberland
Financing"). Each Subscription Receipt will, upon conversion for no additional
consideration in accordance with their terms, be exchanged for one common share
of Cumberland immediately prior to the completion of the Amalgamation and
subsequently exchanged for one Amalco Share pursuant to the Amalgamation. The
proceeds from the Cumberland Financing will be deposited with an escrow agent
prior to the completion of the Amalgamation at which time they will be
releasable to Amalco and applied to its 2010 capital expenditure program and for
general working capital purposes. The completion of the Cumberland Financing is
not a condition precedent to the completion of the Amalgamation.
Highlights of the Amalgamation and Amalco
Upon completion of the Amalgamation, Amalco will be a publicly listed entity
positioned for future growth with the following:
-- an experienced management team with extensive technical oil and gas
experience;
-- estimated production at closing, assuming normal declines and including
the volumes anticipated from current operations, of approximately 60
Boe/d, 100% weighted to natural gas;
-- an undeveloped land base of approximately 12,000 net acres;
-- a portfolio of development and optimization opportunities in the Peace
River Arch area of Alberta;
-- tax pool balances of approximately $5.9 million;
-- a production base that is 100% operated; and
-- no debt and working capital of approximately $4.1 million, assuming all
of the CPCs' dilutive securities are either cancelled, exercised or
exchanged and prior to the completion of the Cumberland Financing.
Pursuant to the Amalgamation Agreement, the initial directors and officers of
Amalco will be:
Name and
Title Residence Background During the Five Preceding Years
----------------------------------------------------------------------------
Steven Calgary, Independent businessman, Executive Chairman and
Cloutier, Alberta director of Cumberland since January 2008. President
Chairman and and Chief Executive Officer of Rockyview Energy Inc.
Director (a public oil and gas company) from June 2005 until
January 2008. Prior thereto, President and Chief
Operating Officer of APF Energy Inc. (a wholly-owned
subsidiary of APF Energy Trust, a public oil and gas
trust) and prior thereto Executive Vice President and
Chief Operating Officer of APF Energy Inc.
Martin Calgary, Independent businessman since June 2005 including a
Hislop, Alberta director of Cumberland since March 2008. Prior
Director thereto, Chief Executive Officer of APF Energy Inc.
(a wholly-owned subsidiary of APF Energy Trust, a
public oil and gas trust).
Daniel Allan, Calgary, President, Chief Executive Officer and a director of
President Alberta Cumberland since January 2008. Chief Operating
and Chief Officer of Rockyview Energy Inc. (a public oil and
Executive gas company) from June 2005 until January 2008.
Officer and Prior thereto, Vice-President Exploration and
Director Production of APF Energy Inc. (a wholly-owned
subsidiary of APF Energy Trust, a public oil and gas
trust) and prior thereto President and Chief
Executive Officer of CanScot Resources Ltd. (a public
oil and gas company).
Richard Calgary, Independent businessman since July 2008. From 2005
Charron, Alberta until July 2008, Mr. Charron held roles of increasing
Director responsibility at Xtreme Coil Drilling Corp. (a
public oil and gas services company) including the
role of Chief Executive Officer. Prior thereto, Chief
Financial Officer of Itres Research Inc. (a private
investment and service company) from 2003 to 2005.
From 2000 to 2003, President and Chief Financial
Officer of Wrangler West Energy Corp. (a public oil
and gas company).
Alan Calgary, Vice President, Finance and Chief Financial Officer
MacDonald, Alberta of Cumberland since March 2008. Vice President,
Vice- Finance and Chief Financial Officer of Rockyview
President, Energy Inc. (a public oil and gas company) from June
Finance and 2005 until January 2008. Prior thereto, Vice
Chief President, Finance and Chief Financial Officer of APF
Financial Energy Inc. (a wholly-owned subsidiary of APF Energy
Officer Trust, a public oil and gas trust).
David Calgary, Vice President, Engineering of Cumberland since
Oginski, Alberta September 2009. Prior thereto, Chief Operating
Vice- Officer of Welton Energy Corporation (a pubic oil and
President, gas company) from 2004 until 2009.
Engineering
Fred Calgary, Partner, Burnet, Duckworth & Palmer LLP (law firm).
Davidson, Alberta
Corporate
Secretary
Conditions to Completion of the Amalgamation
The obligations of the CPCs and Cumberland to complete the Amalgamation are
subject to, among other things: (i) receipt of all necessary Amalgamating
Company shareholder approvals of the Amalgamation and, in the case of Warnic,
the continuance from British Columbia to Alberta; and (ii) other conditions
precedent customary for a transaction such as the Amalgamation and a Qualifying
Transaction.
A joint management information circular (the "Information Circular") for the
shareholder meetings of each of the Amalgamating Companies is expected to be
mailed to the respective shareholders in mid January 2010 in connection with
shareholder meetings expected to be held in mid February 2010. Closing of the
Amalgamation is anticipated to occur shortly following the meetings and in any
event before March 31, 2010.
The Information Circular will contain detailed information in respect of each of
the Amalgamating Companies and Amalco, including operational, historical and
pro-forma financial information, and will be accessible on the SEDAR profiles
for each of the CPCs at www.sedar.com shortly following mailing of the
Information Circular to the respective shareholders of each of the Amalgamating
Companies.
The Amalgamation Agreement contains customary representations, warranties and
conditions, and includes non-solicitation covenants and mutual non-completion
expenses payable in certain circumstances. A copy of the Amalgamation Agreement
will also be accessible on the SEDAR profiles for each of the CPCs at
www.sedar.com.
Completion of the Amalgamation is subject to a number of conditions, including
TSX Venture Exchange acceptance and shareholder approvals (including on a
disinterested basis to the extent required). The Amalgamation cannot close until
the required shareholder approvals are obtained. There can be no assurance that
the Amalgamation will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Information Circular to
be prepared in connection with the Amalgamation, any information released or
received with respect to the Amalgamation may not be accurate or complete and
should not be relied upon. Trading in the securities of a capital pool company
should be considered highly speculative.
Recommendations of the Boards of Directors of the Amalgamating Companies
The Board of Directors of each of the Amalgamating Companies have determined
that the Amalgamation is in the best interests of their respective companies and
shareholders and have unanimously determined to recommend approval of the
Amalgamation to their respective shareholders.
Application for Exemption from Sponsorship Requirements
The CPCs have jointly requested that the TSXV waive the requirement for a
Sponsorship Report in connection with the Qualifying Transaction. There are no
guarantees that the TSXV will accept such a request to waive the Sponsorship
Report requirement, in which case the CPCs will engage a Sponsor to prepare such
a report.
Trading Halt of Shares of CPCs
Trading of the shares of the CPCs has been halted and will not resume until the
TSXV has accepted all requisite documentation in connection with the proposed
Qualifying Transaction. It is currently anticipated that trading in the shares
of Latigo, Warnic and Blackwater will remain halted until such time as the
Information Circular, which will contain detailed disclosure on Cumberland, its
operations and Amalco, is filed and accessible on the SEDAR profiles for each of
the CPCs at www.sedar.com. It is currently anticipated that trading in the
shares of Valentine will remain suspended due to its failure to complete a
Qualifying Transaction within the requisite time required by the TSXV.
Subject to all necessary regulatory approvals, including approval of the TSXV,
upon completion of the Amalgamation, it is anticipated that the Amalco Shares
will be listed and posted for trading on the TSXV.
A more comprehensive joint news release which will contain more detailed
disclosure on Cumberland, its operations and Amalco will be issued concurrently
with the mailing of the Information Circular to the shareholders of the
Amalgamating Companies.
About Cumberland Oil & Gas Ltd.
Cumberland, a privately held Alberta corporation, has been engaged in the
business of exploring for, developing and producing and, acquiring oil and
natural gas properties in western Canada since it commenced operations in
October 2008. It has concentrated on the exploitation and development of
drilling prospects in its core areas in the Province of Alberta, including
south-east Alberta and the Peace River Arch. Cumberland's exploration and
development projects are currently directed towards both natural gas and light
oil prospects.
The Cumberland management team most recently led Rockyview Energy Inc., a
TSX-listed oil and gas company that grew to approximately 3,000 BOE/d when it
was sold to Direct Energy in January 2008. Prior to that, they were the
management group at APF Energy Trust, a TSX-listed income trust with daily
production of 18,000 BOE/d, which was sold to StarPoint Energy Trust in 2005.
As at the date hereof, there is no person who directly or indirectly
beneficially holds a controlling interest in or who otherwise controls or
directs Cumberland, other than Steven Cloutier who resides in Calgary, Alberta,
who beneficially owns and controls approximately 19% of the issued and
outstanding common shares of Cumberland.
Latigo Capital Corp.
Latigo, a capital pool company within the meaning of the policies of the TSXV,
was incorporated on April 9, 2007 and was listed on the TSXV on October 10,
2007. Latigo does not have any operations and has no assets other than cash.
Latigo's business is to identify and evaluate businesses and assets with a view
to completing a Qualifying Transaction under the policies of the TSXV.
Warnic 1 Enterprises Ltd.
Warnic, a capital pool company within the meaning of the policies of the TSXV,
was incorporated on November 16, 2007 and was listed on the TSXV on December 15,
2008. Warnic does not have any operations and has no assets other than cash.
Warnic's business is to identify and evaluate businesses and assets with a view
to completing a Qualifying Transaction under the policies of the TSXV.
Valentine Ventures Corp.
Valentine, a capital pool company within the meaning of the policies of the
TSXV, was incorporated on November 28, 2006 and was listed on the TSXV on April
9, 2007. The shares of Valentine have been suspended from trading on the TSXV
due to its failure to complete a Qualifying Transaction within the requisite
time required by the TSXV. If Valentine does not complete a Qualifying
Transaction by January 11, 2010, its shares will be delisted from the TSXV
and/or transferred to the NEX. Valentine does not have any operations and has no
assets other than cash and cash equivalents. Valentine's business is to identify
and evaluate businesses and assets with a view to completing a Qualifying
Transaction under the policies of the TSXV.
Blackwater Capital Corp.
Blackwater, a capital pool company within the meaning of the policies of the
TSXV, was incorporated on October 4, 2007 and was listed on the TSXV on July 30,
2008. Blackwater does not have any operations and has no assets other than cash.
Blackwater's business is to identify and evaluate businesses and assets with a
view to completing a Qualifying Transaction under the policies of the TSXV.
Cautionary Statements
Disclosure provided herein in respect of BOEs may be misleading, particularly if
used in isolation. A BOE conversion ratio of 6 Mcf to 1 Bbl is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. All BOE conversions in
this joint news release are derived by converting gas to oil according to this 6
Mcf to 1 Bbl ratio.
Certain statements contained in this joint news release constitute
forward-looking statements, including, without limitation, Cumberland's
management's assessment of future plans and operations, future financial
position, the performance characteristics of Cumberland's oil and natural gas
properties, potential of resource plays, oil and natural gas production
estimates, expectations of future production rates, drilling programs and
drilling efficiencies, the quantity of undeveloped land and drilling locations
and inventory, operating costs and capital costs, expectations regarding the
ability to raise capital and to continually add to reserves, expectations of
debt levels and credit facilities, Amalco's future plans, operations and
objectives, completion of the Amalgamation and receipt of all required approvals
thereto and the timing thereof, and the completion and use of proceeds of the
Cumberland Financing. By their nature, forward-looking statements are subject to
numerous risks and uncertainties, some of which are beyond the party's control
including the impact of general economic conditions, industry conditions,
volatility of commodity prices, currency fluctuations, environmental risks,
competition from other industry participants, the lack of availability of
qualified personnel or management, stock market volatility and ability to access
sufficient capital from internal and external sources, inability to meet or
continue to meet listing requirements, the inability to obtain required
consents, permits or approvals, including, without limitation, shareholder of
the Amalgamation, failure to realize the anticipated benefits of the
Amalgamation and the risk that actual results will vary from the results
forecasted and such variations may be material. Readers are cautioned that the
assumptions used in the preparation of such information, although considered
reasonable at the time of preparation may prove to be imprecise and, as such,
undue reliance should not be placed on forward-looking statements. Amalco's
actual results, performance or achievement could differ materially from those
expressed in or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do so,
what benefits Amalco will derive therefrom. There is no assurance that the
necessary approvals for completion of the Amalgamation will be obtained or that
some other condition to the closing of the Amalgamation or the Cumberland
Financing will not be satisfied. Even if such conditions are satisfied, there is
risk that closing of the Amalgamation or the Cumberland Financing could be
delayed and may not meet the timelines anticipated.
The forward-looking statements contained in this joint news release are made as
of the date of this joint news release. Except as required by law, the
Amalgamating Companies disclaim any intention and assume no obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable
securities laws.
The TSX Venture Exchange has in no way passed upon the merits of the proposed
Amalgamation and has neither approved nor disapproved the contents of this joint
news release.
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