Agrotech Greenhouses Inc.
NEX BOARD : AGV.H

July 27, 2009 09:30 ET

Agrotech Greenhouses Inc. to Reactivate With Acquisition of West Texas Oil Property

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 27, 2009) -

NOT FOR DISTRIBUTION IN THE UNITED STATES

Agrotech Greenhouses Inc. (the "Company") (NEX:AGV.H) is pleased to announce that it has entered into an agreement dated July 23, 2009 (the "Acquisition Agreement") to acquire 0856348 B.C. Ltd. a private BC company ("PrivateCo"), which together with PrivateCo's wholly-owned subsidiary, Contact Oil & Gas USA Inc. ("Contact USA"), have entered into an agreement with Maxwell Operating, Inc., a Texas company ("Maxwell"), dated July 23, 2009 pursuant to which Contact USA will purchase an undivided 75% working interest (the "Acquisition") in certain oil and gas leases located in the Sugg Ranch Field in Irion County, Texas (the "Property"). Maxwell will retain a 25% working interest in the Property. Maxwell is arm's length to the Company.

The consideration for the Acquisition is a cash payment of US$2.0 million and the issuance of 400,000 shares of PrivateCo to Maxwell at closing, which is expected to occur on or before September 15, 2009, and a drilling commitment of US$2,500,000 to be incurred within three months of closing on the first five wells to be drilled on the Property. In addition, a finder's fee of 600,000 shares of PrivateCo shall be payable to an arm's length party. Maxwell will act as the sub-contract operator of the joint venture.

In order to provide the US$2.0 million to Contact USA payable at closing and to provide PrivateCo with additional working capital, PrivateCo shall complete a private placement (the "PrivateCo Placement") of 10,000,000 units at Cdn$0.30 per unit to raise Cdn$3,000,000, each unit consisting of one share of PrivateCo and one half of one warrant (the "PrivateCo Warrants"), each full PrivateCo Warrant shall entitle the holder to buy one share of PrivateCo for Cdn$0.45 on or before two years from closing. Currently, PrivateCo has only one share issued. The subscribers to the PrivateCo Placement and the other holders of PrivateCo securities shall agree to exchange their PrivateCo securities for equivalent post-consolidation securities of the Company on a one-for-one basis upon the Company's completion of its Reactivation (the "Reactivation") with the TSX Venture Exchange (the "Exchange") described below, and thereafter PrivateCo shall become a wholly-owned subsidiary of the Company. The warrants of the Company that will be issued in exchange for the PrivateCo Warrants will be listed for trading on the Exchange.

The Company's Reactivation and Financing

In connection with the Reactivation of the Company, Management is pleased to announce that Mr. Robert McMorran has been appointed as a director and as the President of the Company, and Mr. James L. Harris has been appointed as the Company's secretary. Mr. McMorran is a chartered accountant with over 25 years experience in the mining industry. Mr. McMorran has held numerous board positions and senior officer appointments with various public companies.

In addition, at the Company's upcoming annual general meeting to be held on July 30, 2009 (the "Meeting"), Mr. Arni Johannson has been nominated for appointment to the Board and Messrs. Anthony Lau and Vincent Lazuardi are not seeking re-election. Management wish to thank Messrs. Lau and Lazuardi for their service to the Company. Mr. Johannson is a seasoned corporate executive who will bring over 20 years of public market experience to the Board.

As has been previously announced, at the Meeting shareholders will be asked to approve a 1 for 3 consolidation of the Company's shares, which will reduce the Company's issued shares to 15,484,666 shares. In conjunction with the Company's news business and this consolidation, the Company intends to change its name to "Contact Oil & Gas Inc.".

In order to finance the US$2.5 million that Contact USA shall require for its expenditure commitment on the Property after the closing of the Acquisition and to provide working capital, the Company shall conduct a private placement of 12,000,000 post-consolidation shares at Cdn$0.30 each to raise Cdn$3,600,000 at the closing of the Reactivation (the "Company Placement"), subject to regulatory approval. Finders' fees will be payable in connection with the PrivateCo Placement and the Company Placement.

On the completion of the Reactivation, the Company will have issued and outstanding approximately 38,484,666 post-consolidation shares plus any shares to be issued as finders' fees.

The Reactivation is conditional upon receipt of the approval of the Company's disinterested shareholders.

The Property

The Property covers approximately 1,326 gross acres. The leases that make up the Property are located in the Permian Basin of West Texas and the Company expects primarily a crude oil play, with a target formation of the Canyon Sands.

Geologically, the Sugg Ranch Field has sand deposits that vary in thickness and areal extent, generally resulting in an 800' plus section of multi-reservoir deposits at a depth from 6900' to 8000'. Producing sands generally range from 12-16% porosity and 5-40 millidarcies of permeability. To date the Sugg Ranch Field has produced in excess of 57 million barrels of oil equivalents.

Investors should note that BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The Company has identified 32 locations (40 acre spacing) on the Property. There have been 13 recent wells drilled in offsetting acreage creating numerous low risk proved undeveloped locations on the Property.

Colin Bowkett, a Director of the Company stated: "This acquisition in the Permian Basin of Texas demonstrates the Company's new focus in the oil and gas sector. We are excited to invest in one of the most prolific oil basins in North America and in a project with significant low risk development drilling opportunities. We look forward to closing the transaction and beginning immediately on a staged drilling program with potential for significant oil and gas production."

Investors are cautioned that the completion of the transactions are subject to a number of conditions, including Exchange acceptance and disinterested Shareholder approval. In addition, the Acquisition Agreement is subject to a number of conditions, including confirmation of title and other matters. The transactions involving the Company cannot close until the required Shareholder approval is obtained. There can be no assurance that the transactions will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Company's Filing Statement to be prepared in connection with the transactions, any information released or received with respect to the Reactivation may not be accurate or complete and should not be relied upon. Trading in the securities of the Company and of PrivateCo should be considered highly speculative.

The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release.

ON BEHALF OF THE BOARD OF DIRECTORS

Robert McMorran, President & CEO

THIS NEWS RELEASE CONTAINS CERTAIN "FORWARD-LOOKING" STATEMENTS AND INFORMATION RELATING TO THE COMPANY THAT ARE BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. SUCH STATEMENTS REFLECT THE CURRENT RISKS, UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT LIMITATIONS, RESULTS FROM ADJACENT PROPERTIES AND GEOLOGICAL ASSUMPTIONS. SHOULD ANY ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN.

THIS NEWS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES, AND IT WILL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, OR TO A U.S. PERSON, ABSENT REGISTRATION, OR AN APPLICABLE EXEMPTION THEREFROM.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Agrotech Greenhouses Inc.
    Colin Bowkett
    Director
    604-683-7588