DENVER, Aug. 25 /CNW/ -- Falcon Oil & Gas Ltd. (TSXV: FO) ("Falcon" or the "Company") today announced that an independent committee of the Board of Directors ("Independent Committee") has approved entering into binding agreements with PetroHunter Energy Corporation ("PetroHunter") under which Falcon will acquire a 25% working interest in five wells ("Five Wells") located within PetroHunter's 20,000 acre Buckskin Mesa project ("Buckskin Mesa Project") located in the Piceance Basin, Colorado and undertake a completion and testing program in respect of these Five Wells. If testing is successful, Falcon will have an option to acquire a 50% working interest in the Buckskin Mesa Project. Falcon has also entered into agreements to acquire a 50% working interest in PetroHunter's 7 million acre prospect in Northern Territory, Australia (the "Beetaloo Basin").
Marc A. Bruner, the Chairman, CEO and President of Falcon is a significant shareholder of PetroHunter. As a result, the Board of Directors of Falcon formed an Independent Committee, consisting of the 6 independent directors of Falcon, to evaluate and approve the transactions.
"The evolution of our business strategy is to build our portfolio and pursue assets that will enable us to leverage our unconventional resource expertise," stated Falcon's Chief Operating Officer, Rod Wallis. "The Buckskin Mesa Project provides Falcon with the potential for near-term gas production in one of the most productive unconventional gas deposits in the continental U.S. The transaction structure ensures that the commitment to develop the field is only made when there is a high degree of certainty that gas can be extracted on an economically attractive basis. The Beetaloo Basin has numerous conventional structures and a vast resource play that we believe could rival the Mako Trough in Hungary."
Mr. Wallis continued, "We conducted an extensive review of the assets and believe there is considerable upside potential in these two world-class assets. Expanding our asset base and geographic portfolio into other economically and politically stable countries provides an opportunity to transform Falcon into a leading global player in unconventional exploration and production."
Piceance Basin, USA, Buckskin Mesa Project
Pursuant to the agreements, Falcon will acquire a 25% interest in Five Wells in the 20,000 acre Buckskin Mesa Project for consideration of US$7 million which will be used to complete and test the Five Wells. Falcon has up to a 60 day period to review and analyze the test results of the well completions, and will then have an option (the "Buckskin Mesa Option") to acquire an additional 25% working interest in the Five Wells (for a total of 50%) and a 50% working interest in the 20,000 acre Buckskin Mesa Project. The Buckskin Mesa Option requires Falcon to pay additional consideration of US$18 million, subject to adjustments, in spending commitments pursuant to a drilling and development program that will be mutually agreed upon by Falcon and PetroHunter, and US$25 million, payable under certain circumstances, in cash or securities convertible into Falcon shares, or a combination thereof. If Falcon elects to issue securities convertible into Falcon shares, it is required to, among other things, obtain the prior approval of the TSX Venture Exchange.
In addition, Falcon will have an option to become the operator of the Buckskin Mesa Project. If it elects to become the operator, Falcon will pay additional consideration of US$3.5 million in cash or securities convertible into Falcon shares, or a combination thereof.
The closing of the Buckskin Mesa transaction is subject to certain closing conditions including receipt or waiver of TSX Venture Exchange and all other regulatory approvals and settlement of an outstanding PetroHunter litigation regarding the Buckskin Mesa Project.
Beetaloo Basin, Northern Territory, Australia
The agreements provide for the purchase of a 50% working interest in PetroHunter's Beetaloo Basin acreage by Falcon for consideration of US$5 million in cash and US$20 million of securities convertible into Falcon shares on a one for one basis based on the closing price of Falcon shares on August 22, 2008. PetroHunter will remain the operator of the Beetaloo Basin. The agreements provide for a joint operating committee and substantial direct involvement by Falcon managerial, technical and financial personnel. In the event that Falcon's closing share price on the date that a receipt is issued for the final prospectus to qualify the distribution of the common shares underlying the convertible securities is below Falcon's closing share price on August 22, 2008, the convertible securities have an adjustment mechanism which provides PetroHunter with price protection of up to 20%. In addition, the agreements provide for additional price protection, to a maximum of US$7 million, if Falcon's share price is below 70% of Falcon's closing share price on August 22, 2008.
The closing of the Beetaloo Basin transaction is subject to certain closing conditions including receipt or waiver of TSX Venture Exchange and all other regulatory approvals.
Copies of all material agreements relating to the transactions will be available on SEDAR at www.sedar.com.
BMO Capital Markets is acting as exclusive financial advisor to Falcon in connection with these transactions.
Investor Conference Call
Falcon will host an investor conference call on August 25, 2008 at 11 am (EDT) to discuss the transactions. The conference call will be available live via telephone. To participate in the conference call within the U.S. and Canada, dial (866) 688-0039. To participate in the conference internationally, dial (706) 679-3130. The conference call will also be broadcast live on the Internet and may be accessed at www.falconoilandgas.com. The webcast and accompanying presentation will be archived on the Company's website.
The conference call will be available for replay via telephone beginning at 1:00 pm (EDT) on August 25, 2008 until September 8, 2008 at 11:59 p.m. (EDT). To listen to a replay of the conference within the U.S. and Canada, dial (800) 642-1687 or internationally (706) 645-9291. The replay code is 61691017.
About Falcon Oil & Gas Ltd.
Falcon Oil & Gas Ltd. is a British Columbia corporation in the business of oil and gas exploration and production. It has operations in Hungary through its wholly owned subsidiary TXM Oil and Gas Exploration, LLC, and in Romania through its wholly owned subsidiary JVX Energy Corporation. Further information about Falcon is available at www.falconoilandgas.com.
About PetroHunter Energy Corporation
PetroHunter Energy Corporation, through the operations of its wholly-owned subsidiaries, PetroHunter Operating Company, and Sweetpea Corporation Pty Ltd, is a global oil and gas exploration and production company with primary assets consisting of various oil and gas leases and related interests in oil and natural gas properties, including approximately 20,000 net mineral acres in Colorado and over 7,000,000 net mineral acres in Australia.
Contacts:
Investor and Public Relations
Falcon Oil and Gas Ltd:
Alexander Hubbard-Ford
(303) 951-1116
investor@falconoilandgas.com
Falcon Oil & Gas Ltd.
Corporate Address
1875 Lawrence Street, Suite 1400
Denver Colorado 80202 USA
Phone (303) 893-1800,
Fax (303) 572-8927
In the interests of providing Company shareholders and potential investors with information regarding the Company, including the Company's assessment of its and its subsidiaries' future plans and operations, certain statements included in this press release may constitute forward-looking information or forward looking statements (collectively, "forward-looking statements"). All statements contained herein that are not clearly historical in nature are forward-looking, and the words "anticipate", "believe", "expect", "estimate" and similar expressions are generally intended to identify forward-looking statements. In addition, please note that statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described can be profitably produced in the future. Such statements represent the Company's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of capital expenditures, anticipated future debt levels and incentive fees or revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions. Actual events or results may differ materially. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company and the foregoing list of important factors is not exhaustive. These forward-looking statements made as of the date hereof disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise. Company shareholders and potential investors should carefully consider the information contained in the Company's filings with Canadian securities administrators at www.sedar.com before making investment decisions with regard to the Company.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
