COLONIA ENERGY CORP.
TSX VENTURE : CLA

COLONIA ENERGY CORP.

November 23, 2009 08:03 ET

Colonia Energy Corp. Announces Duce Oil Ltd. Acquisition, and Bought Deal Financing

CALGARY, ALBERTA--(Marketwire - Nov. 23, 2009) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Colonia Energy Corp. ("Colonia" or the "Company") (TSX VENTURE:CLA) is pleased to announce that it has entered into a share purchase and sale agreement (the "Purchase Agreement") in respect of Duce Oil Ltd. ("Duce"), a private SE Saskatchewan producer, for total consideration of $31.0 million (the "Duce Acquisition") and in addition intends on entering into purchase agreements with Duce's minority working interest partners for cash consideration of $4.0 million (collectively the "Acquisitions") for total consideration of $32.0 million cash and $3.0 million in Colonia common shares. Colonia is also pleased to announce a $35.0 million bought deal private placement of 175,000,000 subscription receipts ("Subscription Receipts") at a price of $0.20 per Subscription Receipt (the "Financing"). These Acquisitions are a key step in furthering the Company's business plan of being an aggressive, high growth oil weighted junior oil and gas company.

SUMMARY OF ACQUISITION

The Acquisitions provide Colonia with conventional high impact, high netback light oil assets and a significant position in the Bakken light oil resource play. In addition, Colonia will operate 14 facilities in SE Saskatchewan providing significant control over its production.

Duce has the following characteristics:



Current Production 475 Boepd (100% light oil)
Proved plus Probable Reserves (1) 1.1 MMBoe
Proved plus Probable RLI 6.3 years
35 net sections
Land (5,800 net undeveloped acres)
Average producing wells per section 1.4 net wells
Total drilling locations 82 gross; 68.6 net
Operated Facilities 13 all SE Saskatchewan
Operating Net Back (2) $45.93 per Boe
Working capital surplus (3) $1.0 million


(1) Reserves evaluated by Sproule Associates Limited with respect to the Duce Oil assets as at October 1, 2009, in accordance with National Instrument 51-101.

(2) Based on US$80.00/Bbl WTI and US$/CDN$ exchange rate of 0.94 and calculated by subtracting royalties and operating costs from revenues.

(3) Represents the estimated assumed working capital surplus of Duce.

TRANSACTION METRICS

The Acquisitions and Financing are accretive to Colonia on a per share basis on all key metrics. Net of undeveloped land at an estimated value of $2.9 million, the transaction metrics are as follows:



Production $65,450 per producing Boepd
Proved plus Probable Reserves (1) $29.59 per Boe


(1) Reserves calculated as disclosed above.

DUCE ACQUISITION

Colonia is pleased to announce that it has entered into a Purchase Agreement with Duce. Pursuant to the Purchase Agreement, Colonia has agreed to acquire all of the outstanding common shares of Duce through a combination of cash and the issuance of common shares of Colonia. Colonia will, subject to adjustment based on the working capital surplus of Duce at the time of the closing of the transaction, issue a total of approximately 15.0 million common shares, at a deemed price of $0.20 per common share and make a cash payment of $28.0 million to the shareholders of Duce. In addition, Colonia intends on entering into agreements with Duce's minority working interest partners, through Duce, to buy out their working interests for total cash consideration of $4.0 million. Total consideration for Duce and Duce's minority working interest partners is $35.0 million. The transaction is anticipated to close on or about January 8, 2010. Completion of the transaction is subject to certain conditions and the receipt of all regulatory approvals, including the approval of the TSX Venture Exchange ("TSX-V").

BOARD APPOINTMENT

Colonia is pleased to announce that following the closing of the Duce Acquisition, Mr. Dallas Duce has agreed to join the Board of Directors of Colonia.

EQUITY FINANCING

Colonia is also pleased to announce that it has entered into an agreement with a syndicate of underwriters, co-led by GMP Securities L.P. and Peters & Co. Limited and including Genuity Capital Markets, Macquarie Capital Markets Canada Ltd., Acumen Capital Finance Partners Limited, CIBC World Markets Inc., Dundee Securities Corporation and Paradigm Capital Inc. (collectively, the "Underwriters"), providing for the private placement, on a bought deal basis, of 175,000,000 subscription receipts (the "Subscription Receipts") at price of $0.20 per Subscription Receipt for gross proceeds of $35.0 million. The net proceeds of the Financing will be used to fund the purchase price payable by Colonia for the Duce Acquisition. Closing of the private placement is subject to customary conditions and regulatory approvals, including the approval of the TSX-V. Closing is expected to occur on or about December 9, 2009 and, in any event, will occur following the record date for the Company's previously announced rights offering such that subscribers under the Financing will not be entitled to rights pursuant to the rights offering. Both the Subscription Receipts and common shares will be subject to a four month hold.

Each Subscription Receipt will entitle the holder to receive one common share without further payment or action on the part of the holder, concurrently with the successful closing of the Duce Acquisition. If the Duce Acquisition is not completed by the Company on or before January 20, 2010, then the Subscription Receipts shall be automatically redeemed by the Company at a price of $0.20 per Subscription Receipt plus accrued interest.

FINANCIAL ADVISORS

GMP Securities L.P. and Peters & Co. Limited acted as co-financial advisor to Colonia with respect to the Duce Acquisition.

STRATEGIC RATIONALE AND PRO FORMA COLONIA

The Acquisitions dramatically increase Colonia's operational presence and opportunity inventory in its light oil focus area of southeast Saskatchewan. As a result of the transaction, pro forma Colonia will have production of 625 Boepd, proven plus probable reserves of 1.5 MMBoe, more than 14,000 net acres of undeveloped land and an inventory of over 80 gross drilling locations, all for light oil. Almost half of Colonia's production will be from the Bakken, giving the Company significant exposure to the benefits and upside of this light oil resource play.

Colonia will now have the critical mass and capital to undertake a full-cycle exploration program and effectively develop a light oil resource play. The Company anticipates the Financing will result in an under-levered balance sheet, providing certainty to the execution of a capital program and the ability to better weather any commodity volatility, with the flexibility to be opportunistic on future acquisition targets.

Colonia's common shares trade on the TSX-V under the symbol CLA. Colonia currently has 104.2 million common shares outstanding. Colonia anticipates that it will have approximately 347.6 million fully diluted common shares following the completion of the Acquisitions, the Financing and the previously announced rights offering and private placement.

WARNING

The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated dates for the closing of the disclosed transactions and the anticipated accretive impact of the transactions on Colonia.

The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Colonia, including: (i) with respect to the anticipated closing dates of the transactions, expectations and assumptions concerning timing of receipt of required shareholder, court and regulatory approvals and third party consents and the satisfaction of other conditions to the completion of the transactions and (ii) with respect to the anticipated accretive impact of the transaction on Colonia, expectations and assumptions concerning the success of future drilling and development activities, the performance of existing wells, the performance of new wells and prevailing commodity prices.

Although Colonia believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Colonia can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the transactions, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Colonia' Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this document are made as of the date hereof and Colonia undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

MEANING OF BOE

When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boepd means a barrel of oil equivalent per day.

Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Colonia Energy Corp.
    Michael Erickson
    President & CEO
    (403) 355-8922
    or
    Colonia Energy Corp.
    Alex Wylie
    Vice-President, Finance & CFO
    (403) 410-3376
    or
    Colonia Energy Corp.
    Suite 725, 435 - 4th Avenue S.W.
    Calgary, AB T2P 3A8