Magnus Energy Inc.

Magnus Energy Inc.

October 09, 2007 15:25 ET

Magnus Energy Announces Mailing of Information Circular for Annual and Special Meeting, Arrangement With Questerre Energy, Private Placement and Corporate Update

CALGARY, ALBERTA--(Marketwire - Oct. 9, 2007) - Magnus Energy Inc. (TSX VENTURE:MEI.A) (TSX VENTURE:MEI.B) ("Magnus" or the "Company") announces that it has executed an amended and restated arrangement (the "Arrangement Agreement") and it is proceeding with its previously announced arrangement (the "Arrangement") with Questerre Energy Corporation ("Questerre") (TSX:QEC) (OSE:QEC) whereby Questerre has agreed to acquire all of the securities of Magnus. Pursuant to the Arrangement, Questerre will acquire all of the outstanding securities of Magnus on a fully diluted basis through the issuance of 0.015316 of a Questerre share for each Class A Share of Magnus. Each Class B Share of Magnus will be exchanged for 10 Class A Shares of Magnus in the Arrangement. As a condition of the Arrangement, all secured debt of Magnus in the approximate amount of $17,000,000 will be paid out or satisfied. Magnus also announces that it has settled substantially all of its trade payables of secured and unsecured creditors through the issuance of cash and 23,963,160 Class A Shares of the Company at a deemed price of $0.10 per share.

Magnus also announces that its previously announced Annual and Special Meeting (the "Meeting") has been rescheduled to take place on Wednesday, October 31, 2007 at 10:00 a.m. at the offices of Burstall Winger LLP, #1600, 333 - 7th Avenue SW, Calgary, Alberta. The new Record Date for the meeting is Monday, October 1, 2007 and the Notice of the Meeting and accompanying Information Circular detailing the information with respect to the Meeting matters, including the Arrangement, was mailed to the Company's shareholders on October 4, 2007. The Company has obtained an interim order of the Court of Queen's Bench of Alberta (the "Court") providing for, among other things, the holding of the Meeting to approve the Arrangement. Dundee Securities Corporation ("Dundee") is acting as financial advisor to the Board of Magnus and has provided an opinion that the Arrangement is fair, from a financial point of view, to the shareholders of Magnus. The Arrangement requires the approval of 66 2/3% of the votes cast by the shareholders of Magnus. In addition, the Arrangement must be approved by a majority of the votes cast by the shareholders, after excluding the votes cast in respect of the shares of Magnus beneficially owned or controlled by the directors and officers of the Company and such other persons whose votes may not be included in determining minority approval of a business combination pursuant to OSC Rule 61-501. After reviewing many proposals, the management and Board of Magnus believe that the Arrangement will provide value to the shareholders of Magnus and represents the best alternative to enhance the value of the Company's shares over time. The Arrangement is expected to close immediately following the Meeting and final Court approval of the Arrangement, which Court approval is scheduled for the afternoon of October 31, 2007. Insiders, officers and directors of Magnus holding in excess of 24.6% of the issued Class A Shares of Magnus have agreed to vote their shares in favour of the Arrangement.

The Company announces that it has finalized and amended the terms and provisions of its previously announced private placement (the "Private Placement"). The amended Private Placement is now an offering of 83,333,333 Class A Shares of the Company to be issued to subscribers on a flow-through basis at a price of $0.036 per share and 210,000,000 Class A Shares to be issued to subscribers at a price of $0.03 per share for gross proceeds of $9,300,000. Closing of the Private Placement is a condition to completion of the Arrangement and is expected to take place on October 31, 2007 following the Meeting and final Court approval of the Arrangement. The majority of the proceeds of the Private Placement will be used to satisfy the Company's obligations under the farmin by the Company on Questerre's property in Beaver River and thereby satisfy the balance of the Company' s flow-through commitments for 2007. Dundee will be paid an advisory fee of 2% of the funds raised in the Private Placement. The fee will be paid or satisfied through the issuance of 13,492,927 Class A Shares of Magnus at a deemed price of $0.013785 per share in settlement of the fee amount of $186,000.

The Company also announces that on the closing of the Arrangement, the Company shall issue 5,250,000 Class A Shares of the Company at a deemed price of $0.08 per share in settlement of amounts aggregating $420,000 to certain officers, directors and management of the Company to satisfy advisory fees and severance, termination and retention payments.

Also as part of the Arrangement, Dundee will receive a transaction fee satisfied through the issuance of 32,208,923 Class A Shares of the Company at a deemed price of $0.013785 per share in settlement of the fee amount of $444,000 for assisting with the Arrangement and providing a fairness opinion and financial advisory services to the Company. Avonlea Investments Ltd. ("Avonlea") will receive an advisory fee satisfied through the issuance of 91,403,700 Class A Shares of the Company at a deemed price of $0.013785 per share in settlement of the fee amount of $1,260,000. The advisory fee is payable to Avonlea for providing its services as Chief Restructuring Consultant to the Company. The issuance of the shares to Dundee and Avonlea is subject to shareholder approval at the Meeting and final regulatory and TSX Venture Exchange approval. Such approvals are conditions precedent to the completion of the Arrangement.

The Company also announces that, following a review by its auditors, Deloitte & Touche LLP, of the Company's Interim Financial Statements and MD&A for the six month period ending June 30, 2007, the Company's Interim Financial Statements and MD&A were amended and refiled on SEDAR and can be viewed on

About Magnus Energy

Magnus Energy is a junior oil and gas company focused on the acquisition, exploration, exploitation and development of oil and natural gas properties in western Canada.


This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

The term BOE or BOEs may be misleading, particularly if used in isolation. A BOE (barrel of oil equivalent) conversion rate of 6 Mcf per one (1) BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

68,439,761 Class A Shares

1,044,000 Class B Shares

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved of the contents of this news release and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Magnus Energy Inc.
    Murray M. Stewart
    President and Chief Executive Officer
    (403) 233-4963
    (403) 262-9920 (FAX)
    Magnus Energy Inc.
    Suite 1650, AMEC Place
    801 - 6th Avenue S.W.
    Calgary, Alberta T2P 3W2