Poplar Creek Resources Inc.
TSX VENTURE : PCK

June 29, 2009 16:18 ET

Poplar Creek Resources Inc. Announces Twoco Transaction

CALGARY, ALBERTA--(Marketwire - June 29, 2009) -

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Poplar Creek Resources Inc. ("Poplar Creek" or the "Corporation") (TSX VENTURE:PCK), symbol PCK on the TSX Venture Exchange (the "Exchange"), classified as a Tier 2 Category 3 Oil and Gas Issuer on the Exchange, announces that it has entered into an arm's length definitive agreement (the "Agreement") to purchase 4% of all of the petroleum and natural gas assets from Twoco Petroleums Ltd., for a cash consideration of $2.2 million (the "Transaction"). Twoco is a Calgary based oil and gas company engaged in the exploration for, and acquisition, development and production of oil and natural gas reserves primarily in the Province of Alberta. Twoco trades on the TSXV under the symbol "TWO". The assets initially being sold pursuant to the Agreement represent a 4% interest in all of Twoco's existing wells, production, petroleum and natural gas rights, facilities and seismic. The closing date for such purchase (the "First Tranche") will be July 15, 2009 with an effective date of July 1, 2009. The majority of Twoco's production is operated by Twoco and includes strategic plant, facility and pipeline interests. Twoco's land base consists of approximately 140,000 multizone natural gas prone acres. Further information about Twoco is contained on www.sedar.com and on Twoco's website www.Twoco.ca and readers are specifically referred to the Statement of Reserves Data and Other Oil and Gas Information included in Twoco's Annual Information Form dated April 16, 2009 and the Form 51-101F2 and Form 51-101F3 attached thereto.

The Twoco Transaction

On each of September 1, October 1, November 1 and December 1, 2009 (the "Election Dates") or such other dates as may be agreed by the parties, Poplar Creek may elect to purchase an additional maximum of 4% of Twoco's assets on similar terms and conditions held as of the effective date of each purchase (each 4% interest is a subsequent "Tranche") Accordingly, if Poplar Creek elects to purchase the additional 4% interest on each of the Acquisition Dates, Poplar Creek shall have effectively elected to purchase all the Tranches, being a total of 20% of all of Twoco's assets.

The purchase price for each election to purchase an additional 4% interest will be $2,200,000, subject to a reduction if Poplar Creek elects to purchase a smaller percentage of Twoco's assets on a particular Election Date.

The right of Poplar Creek to acquire an additional interest is the right to acquire a maximum of 4%. Poplar Creek shall have the right to purchase a lesser interest on each of the Election Dates, however, such right shall be restricted to purchasing 1/3 of 4% (1.333%) or 2/3 of 4% (2.666%). If Poplar Creek elects to acquire a lesser interest, the purchase price shall be pro-rated accordingly.

In the event Poplar Creek does not to elect to purchase any additional interest in Twoco's assets on any of the Election Dates, Twoco shall be entitled to terminate Poplar Creek's right to purchase any further interests in Twoco's assets.

The Twoco Farm-in

Subject to the closing of the initial purchase of assets, Twoco shall have the obligation to drill 3 wells at Twoco's cost and expense at locations and at depths of its choice within 60 days (subject to any unforeseen delays) of the effective date of the initial acquisition. Such wells shall be drilled at Twoco's sole cost, risk and expense and at casing point Twoco shall have earned 50% of the interest Poplar Creek owns at the date of casing point in the section of land on which the well is located. After casing point Poplar Creek shall be responsible for its share of costs of the setting of casing and subsequent completion attempt. However, at casing point for each well, Poplar Creek shall have the right to elect to convert its interest to an industry standard non convertible sliding scale overriding royalty of 1/150 (5%-15%) on oil and 10% on gas based on its after earned working interest.

In the event Poplar Creek elects to acquire additional interests, Twoco shall be obligated to drill additional wells on the same basis. The amount of wells Twoco shall be obligated to drill shall depend on the size of the acquisition Poplar Creek elects to make. If Poplar Creek elects to acquire the maximum 4%, Twoco shall be obligated to drill 3 additional wells. If, however, Poplar Creek elects to acquire 1/3 of the 4% maximum, Twoco shall only be obligated to drill one additional well and, accordingly, if Poplar Creek elects to acquire 2/3 of the 4% maximum, Twoco shall be obligated to drill 2 additional wells. This provision to drill additional wells shall apply to each election Poplar Creek has the right to make at each of the Election Dates.

The Area of Mutual Interest

Poplar Creek and Twoco have also agreed to an industry standard area of mutual interest ("AMI") whereby any lands purchased by one party within one mile of the lands Poplar Creek acquires from Twoco shall be offered to the other party on the same terms as the party which acquired the lands. The interest of the parties in such after acquired lands shall be the relative interest of the parties in Twoco's assets at the time of the AMI acquisition. In the event Poplar Creek elects to acquire additional interests of Twoco, the purchase price for such acquisition shall be increased proportionately to account for the costs of any acquisition made pursuant to the AMI provision.

Prospect Fee

John Carruthers and Richard Edgar, both of Calgary, Alberta and arm's length to Poplar Creek and Twoco introduced the Twoco Transaction to Poplar Creek and in consideration thereof, will be paid $100,000 on closing of the Transaction and will be issued 3,000,000 Poplar Creek purchase warrants (the "Purchase Warrants") entitling them to purchase one Poplar common share for each Purchase Warrant at a price of $0.20 for a period of 3 years. The Purchase Warrants will be issued subject to a Purchase Warrant Agreement on the following terms:

- The Purchase Warrants will be issued on closing of the first Tranche;

- The Purchase Warrants will be exercisable as to 1,000,000 shares concurrently with the closing of the first Tranche;

- 1,000,000 Purchase Warrants are exercisable upon Poplar Creek reaching a production level of 300 boe/d;

- 1,000,000 Purchase Warrants are exercisable upon Poplar Creek achieving an EBITDA of $0.024 per share;

- Those Purchase Warrants not exercised within three years from the date of issuance of the Purchase Warrants will expire; and

- The Purchase Warrants have no voting rights and are not transferable.

John Carruthers and Richard Edgar

On closing of the first Tranche Messrs. Carruthers and Edgar will enter into executive management services agreements with Poplar Creek; Mr. Carruthers will act as CEO and Mr. Edgar as President. There will be a re-organization of the board of directors such that it will be comprised of Messrs. Carruthers, Edgar, existing directors George Watson and Gregory R. Harris and a fifth director who is acceptable to Carruthers and Edgar and the existing Poplar Creek directors. A further news release will be issued when such director is identified.

John Carruthers has been the President and CEO of four successful oil and natural gas corporations throughout his industry career. After receiving a Bachelor of Arts Degree in Political Science and Economics in 1970, Mr. Carruthers started his career with Mobil Oil Canada as a landman in the Alberta exploration group. He joined Kerr McGee Corporation in 1976 as land manager where he was in charge of the Canadian land operations. In 1979 he became President of Summit Resources Limited. In 1984 he was co-founder of Hillcrest Resources Limited which grew, during his tenure, from a start-up with no production to 1800 BOED. In 1992 Mr. Carruthers founded and became the President and CEO Lorrac Energy Inc. which merged with Tethys Energy Corp in 1996 at which time Mr. Carruthers became Chairman until 1999. Tethys was sold in July 2001 for approximately $150 Million. In 1997 Mr. Carruthers along with three partners founded Encounter Energy Inc. which was eventually sold in 2002 for $25 Million. He founded and was a director and Executive VP until February 13, 2009 of Avery Resources Inc., a TSX listed company which actively explored for oil and gas internationally with a focus on Australia until it was recapitalized and reorganized under the name of Bengal Energy Ltd. Mr. Carruthers recently completed a ten year term on the Governance Committee of the Alberta Motor Association ('AMA"), during which he was Chair of a number of the AMA's major business units and was Chair of the Board of Governors of the AMA from 2005 until 2007.

Richard N. Edgar, B.Sc., P. Geol. is a Professional Geologist who has been active in the oil and gas exploration and development business in Canada and internationally since his graduation with a Bachelor of Science Degree from the University of Alberta in 1972. Mr. Edgar has been involved in the design and implementation of many successful exploration and development programs in western Canada, Australia and Eastern Europe. Since late 2008 Mr. Edgar has been working as President of Peco Resources Inc., in sourcing low cost oil and gas acquisition opportunities during the current economic downturn. In March of 2008 Mr. Edgar became active as Executive Chairman of Shelton Canada Corp. in the assembly of a high quality portfolio of oil and gas investment opportunities in the Ukraine. In addition, he took on the role of acting CEO of Arrow Energy Ltd. for an interim 6 month period. In December, 2005 Mr. Edgar was appointed President of Avery Resources Inc. From August, 2004 to December 2005, Mr. Edgar was President of Moroil Corp., a consulting firm that offers consulting and business development services to domestic and international oil and gas companies. From October, 1995 to August, 2004, Mr. Edgar was founder, President and Chief Executive Officer and Director of Energy North Inc. a TSX listed corporation. Prior to that Mr. Edgar served as Vice President of Exploration and Director for Harbour Petroleum Company, a TSX listed company, Vice President of Exploration for Chauvco Resources, a TSX listed company, Vice President of Exploration for NSM Resources, a private corporation and Geologist and Senior Geologist for multi national Amerada Hess and Tenneco Oil and Minerals. Mr. Edgar is a member of the Petroleum Exploration Society of Great Britain, the Petroleum Exploration Society of Australia, the Canadian Society of Professional Geologists and the Association of Professional Engineers, Geologists and Geophysicists of Alberta which institution has awarded him the designation of Professional Geologist. Mr. Edgar is a director of several private corporations and currently serves on the board of directors of the following publicly traded companies: Bengal Energy Ltd., Shelton Canada Corp., TriStar Oil and Gas Ltd. and Arrow Energy Ltd.

Poplar Creek Private Placement Financing

In order to fund the Transaction, Poplar Creek proposes to conduct a non-brokered private placement to raise up to $1,000,000 by offering 10,000,000 units ("Units") at $0.10 each, where one Unit comprises one Poplar Creek common share and a half warrant, where one full warrant ("Warrant") entitles the holder to acquire one further Poplar Creek common share at a cost of $0.20 for a period of three years (the "Unit Offering"). In the event that the Poplar Creek shares trade at $0.40 or higher for 20 consecutive trading days at any time after 6 months from closing of the Unit Offering, Poplar Creek may require that the Warrant holders exercise their Warrants within 30 days from notice. The founders and directors of Poplar Creek and Messrs. Carruthers and Edgar may subscribe to the Unit Offering. At this time Poplar Creek has 13,834,000 common shares issued and outstanding, of which 3,800,000 shares which were issued to the founders of Poplar Creek are subject to a 3 year escrow agreement with releases of 10% on December 24, 2008 and 15% every six months thereafter. There are outstanding options to directors and officers to purchase 1,190,000 shares at $0.20 each until April 11, 2012 or earlier in certain circumstances. As at March 31, 2009, Poplar Creek had approximately $1,398,000 in current assets and the proceeds from the Unit Offering will be used to fund the Transaction.

The closing of the first Tranche of the Transaction is scheduled to occur by July 15, 2009 and is subject to Exchange approval including their receipt and examination of documents pursuant to the requirements of Policy 5.3. Poplar Creek expects to have the documents submitted before the end of June.

Trading Resumption

The shares of Poplar Creek have been halted at the request of Poplar Creek and pursuant to the rules of Exchange the shares will remain halted until required documentation has been filed and accepted by the Exchange.

In this news release the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (Mcf) of natural gas for one barrel (Bbl) of oil based on an energy equivalency conversion method; boes may be misleading particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1Bbl is based on an energy equivalency conversion method primarily applicable to the burner tip and does not represent a value equivalency at the wellhead.

This news release has been reviewed and approved for issuance by the Board of Directors of Poplar Creek.

Investors are cautioned that, except as disclosed in documents filed by the Corporation any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Corporation should be considered highly speculative.

For more information on Poplar Creek Resources Inc., investors should review the Corporation's filings which are available at www.sedar.com.

This release includes certain statements that may be deemed "forward looking statements". More particularly, this news release contains statements concerning completion of the proposed Transaction, drilling plans, capital programs, debt and funds flow from operations. All statements in this release, other than statements of historical facts, which address future activities including the closing of the Transaction or the private placement, exploration drilling and activity, reserves potential, and events or developments that the Corporation intends, plans, anticipates, believes, estimates or expects are forward looking statements. Actual results may differ materially. Although the Corporation believes such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward looking statements. Factors that could cause results to differ materially from those in the forward looking statements include, but are not limited to: market conditions and difficulties of raising funds in this economic environment, availability and costing of exploration contractors; exploration success; continued availability of capital government regulations, laws and charges; environmental developments; exploitation economics; and generally the economic, market, financial and business conditions in the present volatile and uncertain economic period. Investors are cautioned that any statements are not guarantees of future performance and actual results or developments may differ materially from those stated in the forward looking statements. The Company does not intend, and does not assume any obligation to update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Poplar Creek. This news release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Poplar Creek Resources Inc.
    Donald G. J. Dutton
    President & CEO
    (403) 471-5640
    or
    Poplar Creek Resources Inc.
    Gregory R. Harris
    Director
    (403) 777-9222