Centric Energy Corp.

Centric Energy Corp.

May 02, 2008 12:05 ET

Centric Energy Corp.: Fund-Raising and Divestment of Russian Project

LONDON, ENGLAND--(Marketwire - May 2, 2008) - Centric Energy Corp. ("Centric") (TSX VENTURE:CTE) is pleased to provide an update regarding recent actions to raise funds through the divestment of its projects in southern Russia.

In March 2007, Centric signed binding interim agreements with Arax Energy Inc. ("Arax") and Arax Energy Ltd. and others under which Centric was given the right to earn an indirect shareholding in a Russian private limited liability company, Technoton LLC ("Technoton"). Technoton is the 100 percent owner of the South Temryuk and Protoka hydrocarbon exploration licenses located in the Azov-Kuban petroleum province in south-west Russia. Under the agreements, Centric advanced US$4 million towards the drilling of an exploration well in the South Temryuk license with the option to advance additional funds towards further wells and issue shares to Arax so as to take its indirect interest up to a maximum 45 percent.

However, the corporate structuring required to fully-implement the agreements, and the due diligence investigations carried out by Centric to prepare it to meet all of its reporting obligations under TSX-V rules, have proved far more complex than expected and have demanded a disproportionate amount of management time from all parties. After more than 12 months, these matters have still not been resolved satisfactorily. This has led the Board of Centric to conclude that the continuing diversion of management time was distracting from the task of building business elsewhere and was no longer in the interests of either parties' shareholders. Both companies are extremely disappointed that it was not possible to resolve these matters in a satisfactory manner.

The management of Centric have therefore agreed a resolution with Arax whereby, in return for repayment of advances of US$2 million and an investment by Arax in Centric of C$2 million, Centric will relinquish all of its rights under its existing agreements with Arax. Arax's investment will take the form of a subscription for 8 million units of Centric at C$0.25 per unit. Each unit will consist of a common share and a half warrant, with each whole warrant entitling the holder to purchase an additional share for C$0.45 during the 12 months following issuance. Arax will also be granted an anti-dilution right to participate on a pro-rata basis in any further public offering of shares during the 12 months following the closing date. Centric has written-off the balance of its costs on this project, generating a charge of C$3.1 million in its 2007 Financial Statements.

Centric management is very pleased with this settlement which recovers a substantial part of its investment in the Russian project and provides additional financing with limited dilution to current investors. Arax's investment in Centric, at a significant premium to our current share price, and Arax's desire to have the right to continue to invest on a pro-rata basis, also indicate the strong confidence that Arax has in Centric management and its ability to create value.

This settlement will provide Centric with approximately C$4 million of fresh working capital to secure new oil and gas opportunities and build its business, at a time when raising funds in the financial markets is proving increasingly difficult. The Company has only minor spending obligations in its Mali properties, where it is carried by Heritage under the terms of the previously announced farm-out agreement.

Centric is already working actively on finding new projects, focusing primarily on near production opportunities in sub-Saharan Africa although selected good investment opportunities in other areas are also being evaluated and a few longer-term exploration projects are under review.

Alec Robinson, President & CEO of Centric Energy, states that: "This is an excellent outcome for Centric Energy. It provides the funding necessary to pursue new opportunities without a highly-dilutive placement, and removes the burden of the Russian project which was taking an excessive amount of management time. Centric Energy now looks forward to focusing vigorously on acquiring new opportunities."


Alec E. Robinson, President and CEO

This News Release does not constitute an offer to sell or a solicitation of an offer to sell any securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to a U.S. Person unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Forward-Looking Statements:

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in Centric's periodic filings with Canadian Securities Regulators. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Centric Energy Corp. does not assume the obligation to update any forward- looking statement except as required by applicable securities laws.

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

Contact Information

  • Centric Energy Corp.
    Brooke Cote
    Investor Relations
    Toll Free: 1-800-962-7189
    Website: www.centricenergy.com