Blue Parrot Energy Inc.
TSX VENTURE : BPA

Blue Parrot Energy Inc.

October 25, 2007 19:29 ET

Blue Parrot Energy Provides Update on Corporate Activities

CALGARY, ALBERTA--(Marketwire - Oct. 25, 2007) -

(NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)

Blue Parrot Energy Inc. (TSX VENTURE:BPA) (the "Company") is pleased to announce that it intends to complete two private placements for total gross proceeds of up to $15,500,000. If successfully completed, the proceeds from the private placements will provide the Company with sufficient working capital to complete its flow-through CEE capital expenditure obligations and repay a portion of its existing secured senior bank debt, as the Company continues to review and evaluate strategic alternatives to maximize shareholder value through a business combination or other restructuring transaction. Subject to approval of the TSX Venture Exchange (the "Exchange"), both private placements are expect to close on or before November 15, 2007. Successful completion of the Company's restructuring initiatives, including the financings described herein, is also conditional upon the Company establishing a restructuring plan that is acceptable to its lenders and having reached terms of settlement with substantially all of the Company's existing creditors.

The Company intends to issue up to 80,000,000 subscription receipts (the "Subscription Receipts") for common shares of the Corporation ("Common Shares") at $0.05 per share (the "Common Share Offering"). Each Subscription Receipt will entitle the holder, without any payment or further action, to acquire one (1) Common Share upon the receipt of the Conversion Notice (as hereinafter defined) from the Corporation. The proceeds from the Offering shall be held in escrow until issuance of the Conversion Notice, at which time, the escrowed funds shall be released to the Corporation and upon surrender of the Subscription Receipts by the Subscribers to the Corporation, the Corporation will issue certificates representing the Common Shares to the Subscribers. Failing issuance of the Closing Notice by December 31, 2007, the escrowed funds shall be returned to the Subscribers without interest or deduction. The Corporation shall covenant in the Subscription Agreements to be entered into with each subscriber for Subscription Receipts, that it shall enter into an agreement or arrangement that will provide the Corporation with eligible CEE qualifying expenditures, to be expended prior to December 31, 2007. Upon entering into such agreement or arrangement, the Corporation shall send a notice to each Subscriber (the "Conversion Notice"), together with a copy of said agreement or other satisfactory evidence thereof, and thereafter, the Subscription Receipts shall only entitle the Subscribers to the applicable number of Common Shares issuable upon conversion thereof, which shares shall be issued by the Corporation to the Subscribers upon surrender of the Subscription Receipts by the Subscribers to the Corporation.

In addition, the Company intends to issue a minimum of $8,500,000 and a maximum of $11,500,000 principal amount of debenture units ("Debenture Units") of the Corporation (the "Debenture Offering"). Management, employees and directors of the Corporation have committed to purchasing not less than $360,000 of Debenture Units. Under the Debenture Offering, for every $1.00 invested, a subscriber for Debenture Units will be issued (i) a convertible subordinated secured debenture ("Debenture") with a repayment amount of $1.50 (the "Repayment Amount") and (ii) one-half (1/2) of a common share purchase warrant (the "Warrants"). Each whole Warrant will entitle the holder to purchase one Common Share during the period expiring on the 24 month anniversary of the date of the closing of the Debenture Offering (the "Closing") at an exercise price of $0.07 per Common Share. The sum of the Repayment Amount and all accrued and unpaid interest (such sum referred to herein as the "Debt Amount") shall be due and payable in cash on the date that is 6 months following the date of Closing (the "Maturity Date").

Should the shareholders of the Corporation approve the conversion feature of the Debentures at a meeting of shareholders held on or before March 31, 2008 and subject to Exchange approval therefor, the holders of Debentures shall be entitled to convert each $1.00 invested under the Debenture Offering (the "Invested Amount") into twenty (20) Common Shares at any time prior to the Maturity Date and the Corporation shall be entitled to convert each $1.00 of Invested Amount into twenty (20) Common Shares at any time prior to the Maturity Date following the date on which the trading price of the Common Shares has not been less than $0.15 per share for a period of 20 "trading days" ("trading days" being days during which the Exchange or market on which the Common Shares are listed for trading is open for business). In addition, the Corporation has the right to pre-pay the Debt Amount, in whole or in part, in increments of not less than $500,000, at any time prior to March 31, 2008. The Corporation shall be deemed to have elected to exercise its pre-payment right if the shareholders of the Corporation do not approve the conversion feature of the Debentures at a meeting of shareholders held on or before March 31, 2008 or if the Exchange fails to approve the foregoing.

Holders of Debentures shall be given the opportunity to (i) convert each $1.00 of Invested Amount into twenty (20) Common Shares in advance of the completion by the Corporation of a "Business Combination Transaction" or (ii) directly exchange their Debentures for consideration offered by the other party to the "Business Combination Transaction". The approval of holders of not less than two-thirds of the outstanding Common Shares is required in order for the Corporation to complete a "Business Combination Transaction". The payment of the Debt Amount shall be secured by a security interest granted by the Corporation in favour of the holders of the Debentures and such security shall be subordinate only the security interest granted by the Corporation to its principal lender. Commencing on the Closing, interest ("Interest") shall accrue on the Invested Amount outstanding at the rate of 12.0% per annum calculated annually not in advance and shall be due and payable in cash upon Closing and monthly thereafter until all amounts owing to the holders of the Debentures are repaid in full.

Subject to Exchange approval, in the event of the conversion of the Debentures into Common Shares, the accrued and unpaid Interest associated with the converted Debentures shall be due and paid, at the option of the Corporation (i) in cash or (ii) by the issue of such number of Common Shares equal to the amount of Interest due and payable divided by the greater of: (A) the volume weighted average trading price of the Common Shares for the period of 20 trading days (days during which the Exchange or market on which the Common Shares are listed for trading is open for business) ending on the fifth business day prior to the date of the conversion, and (B) $0.05.

Blue Parrot Energy Inc. is an oil and natural gas exploration, development and production company based in Calgary, Alberta.

Advisory: This news release contains statements about future events that are forward looking in nature and, as a result, are subject to certain risks and uncertainties such as changes in plans or the occurrence of unexpected events. Actual results may differ from the estimates provided by management.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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