December 21, 2007 11:33 ET

Corporate Update: Arapahoe and First West Petroleum Agree on New Terms of Proposed Transaction

CALGARY, ALBERTA--(Marketwire - Dec. 21, 2007) - ARAPAHOE ENERGY CORPORATION ("Arapahoe" or the "Corporation") (TSX VENTURE:AAO) announces that it has executed a term sheet dated December 20, 2007 with First West Petroleum Inc. of Calgary, Alberta ("First West") which supersedes the letter agreement referred to in Arapahoe's October 19, 2007 news release.

Acquisition of First West Assets

The term sheet with First West sets out the general terms and conditions for the acquisition (the "Transaction") by Arapahoe of all of the oil and gas assets (the "Assets") of First West. The Transaction will result in the issuance of a maximum of 193 million common shares ("Arapahoe Shares") of Arapahoe at the deemed price of $0.125 per share in consideration of the Assets. The number of Arapahoe Shares issuable will be reduced (a) by a pre-determined number of Shares for any property comprising the Assets sold by First West prior to the completion of the Transaction, (b) by 12 Arapahoe Shares for every one dollar loaned by Arapahoe to First West prior to the completion of the Transaction and (c) by 8 Arapahoe Shares for every one dollar spent by Arapahoe in carrying out farm-in activities on the Assets prior to the completion of the Transaction. There is no certainty that Arapahoe will either loan money to First West or farm-in on the Assets.

The Transaction is subject to the condition precedent that First West's daily production of oil and natural gas average not less than the equivalent of 500 barrels of oil per day for a period of 30 days ending not later than June 30, 2007, with the production on the final day of such period being not less the equivalent of 500 barrels of oil (the "Production Condition"). In addition to the Production Condition, the Transaction is also conditional upon the execution of a definitive agreement, the engagement by Arapahoe of key First West personnel, completion of satisfactory due diligence, receipt of applicable shareholder, debentureholder, court and regulatory approvals, and receipt of third party consents and other conditions customary in a transaction of this nature. Pursuant to the term sheet, certain shareholders, directors and officers of First West have agreed to support the Transaction, subject to certain conditions. It is anticipated that the completion of the Transaction will occur around June 30, 2008.

Please refer to Arapahoe's news releases of October 19, 2007 and October 24, 2007 for additional information regarding First West and the Assets.

Corporate Governance Agreement

The term sheet with First West also sets out the general terms and conditions under which Arapahoe will assist First West in restructuring its trade debt and conducting a debt financing. In this regard, the Corporation entered into a corporate governance agreement (the "Corporate Governance Agreement") with First West and Steele Consulting. The purpose of the Corporate Governance Agreement is to provide oversight and direction over First West's expenditures and business activities until such time as a the Transaction has been completed or terminated.

Private Placements

The private placements of flow-through shares and units announced by Arapahoe on December 7, 2007 are anticipated to be completed on or about December 28, 2007.

Sale of Freemont Assets

The proposed sale announced by Arapahoe on August 16, 2007 of its heavy oil and gas assets located in the Freemont area of Saskatchewan to Serrano Energy Ltd. is anticipated to be completed in January or early February 2008.

Arapahoe Energy Corporation is a publicly traded junior oil and gas exploration, development and production company with operations in Western Canada. Arapahoe is pursuing a corporate strategy of being a consolidator of undervalued oil and gas assets located in the Western Canadian Sedimentary Basin. Arapahoe's shares trade on the TSX Venture Exchange under the symbol "AAO".


Robert J. Chenery, President & CEO

Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to TSX Venture Exchange requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Forward-Looking Statements

This release may contain forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements are not guarantees of future performance. Any forward-looking statements are made as of the date hereof and Arapahoe does not undertake any obligation, except as required under applicable law, to publicly update or revise such statements to reflect new information, subsequent or otherwise.

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

Contact Information

  • Arapahoe Energy Corporation
    Robert J. Chenery
    President & CEO
    (403) 920-0040
    (403) 920-0043 (FAX)