Tango Energy Inc.
TSX VENTURE : TEI

Tango Energy Inc.

April 16, 2010 09:00 ET

Tango Announces Business Combination Transaction with Oil-Focused Private Company and Change in Management Team and Board of Directors

CALGARY, ALBERTA--(Marketwire - April 16, 2010) -

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

Tango Energy Inc. ("Tango" or the "Company") (TSX VENTURE:TEI) announces that it has entered into an amalgamation agreement (the "Agreement") with privately-held Tamarack Valley Energy Ltd. ("Tamarack") and a wholly owned subsidiary of Tango, pursuant to which Tango will acquire all of the issued and outstanding shares of Tamarack on the basis of 11.538462 common shares of Tango in exchange for each common share of Tamarack (the "Exchange Ratio"), resulting in the issuance of approximately 55.1 million common shares of Tango. The Agreement also provides for the appointment of a new management team (the "New Management Team"), a reconstitution of the board of directors (the "New Board"), a name change, and the issue of incentive securities (collectively, the "Transaction").

Mr. John Gunn, the Chief Executive Officer and a Director of Tango, stated "Tango is very pleased to announce this transaction. Tango has achieved considerable recent success, and we believe that Tamarack will bring an ongoing focus on those things that we consider important: growing cash flow, improving efficiencies, and broadening our asset base."

The New Management Team will be led by Mr. Brian Schmidt as President & Chief Executive Officer and Director, and will include Mr. Lew Hayes as Vice President Production & Operations, and Mr. Ron Hozjan as Vice President Finance & Chief Financial Officer and Director.

Mr. Schmidt stated "We are excited about the opportunity to combine Tamarack and Tango. Our objective is to build an oil and natural gas company of significant size and critical mass, and to create value for the shareholders of Tango and Tamarack by delivering such growth."

The New Board will be comprised of Mr. Anthony Lambert, Mr. David MacKenzie, Mr. Floyd Price, Mr. Dean Setoguchi, and Mssrs. Schmidt and Hozjan. Mr. Gunn will remain on the board of the Company.

Pro-Forma Highlights

Assuming the completion of the Transaction, the pro forma entity will have the following attributes:

Current Production 720 BOE/d
Proved Reserves 1.3 MMBOE(1)
Proved plus Probable Reserves 2.4 MMBOE(1)
Undeveloped Land 44,600 net acres, including 5,600 net acres of lands prospective for the Cardium
Positive Working Capital $4.0 million(2)
Undrawn Credit Facilities $5.0 million
Share Capital (Basic) 120.9 million common shares
 Notes:  
 (1) As per the December 31, 2009 Paddock Lindstrom & Associates Ltd. reserves report for Tango.  
 (2) As at March 31, 2010, net of expected transaction costs.  

Rationale For The Transaction

The Transaction provides the Company with an experienced management team and a fully funded program of drilling opportunities, which are expected to provide additional growth to and diversification of the Company's current production and reserves base. Pro forma the Transaction, the Company will have 5,600 net acres of undeveloped land prospective for the Cardium primarily in the Lochend area, 14,975 net acres of undeveloped land prospective for the Montney and Doig in the Wilder/Inga areas, and 24,025 net acres of additional undeveloped land. This improved undeveloped land base, combined with a positive working capital position and available credit facilities, is expected to provide a platform for near-term growth through internally generated prospects focusing on the exploitation of oil resource plays.

The New Management Team has a proven record of achieving significant production and reserves growth, and extensive experience in applying new technology to high oil and natural gas "in place" reservoirs. Following the completion of the Transaction, the strategy of the Company will be to continue to assemble substantial land positions in areas with large resource-in-place, to develop the Cardium hydrocarbon potential on its undeveloped land, and to continue to advance other opportunities, including strategic acquisitions and other transactions. Future production growth is expected to be driven by oil-focused drilling, including both light and heavy oil targets, in addition to continuing to develop Tango's primary producing area at Quaich.

New Management Team

The New Management Team has a proven track record of capturing opportunities in early stage, large scale resource plays.

Mr. Brian Schmidt
President & Chief Executive Officer and Director
Mr. Schmidt is a professional engineer with over 30 years of oil and gas experience.  He was most recently a founder of Spearpoint Energy Corp. ("Spearpoint").  While at Spearpoint, Mr. Schmidt orchestrated a 1,000 section farm-in which included access to Cardium prospective lands in Garrington.  Spearpoint was ultimately sold to NAL Oil & Gas Trust.  Prior to that he was the President of Apache Canada where he assembled large blocks of undeveloped land with material drilling upside that contributed to significant growth during his tenure.  He began his career at Shell Canada, spending 19 years there prior to joining Apache Canada.
   
Mr. Lew Hayes
Vice President Production & Operations
Mr. Hayes is a professional engineer with over 25 years of oil and gas experience. Most recently Mr. Hayes consulted with Spearpoint.  Prior to that he founded HYgait Resources Ltd. ("HYgait") where he was the President and COO. HYgait was very successful with early entry into the Bakken and Lower Shaunavon plays in Saskatchewan prior to merging with Wild River Resources Ltd. Mr. Hayes also was the VP Operations at Petrovera Resources Ltd. and the Drilling and Completions Manager at CS Resources Limited. He has extensive experience in horizontal drilling and completions as well as operations.
   
Mr. Ron Hozjan, Vice President Finance & Chief Financial Officer and Director
Mr. Hozjan is a C.M.A. with over 22 years of oil and gas experience, and over 14 years of experience as a senior financial officer. Most recently he was the Chief Financial Officer at Vaquero Resources Ltd. which was vended into RMP Energy Ltd. Prior to that he was the Vice President Finance and Chief Financial Officer at Vaquero Energy Ltd. which grew successfully before merging with Highpine Oil & Gas Limited.

The team is rounded out by Mr. Niels Gundesen as Chief Reservoir Engineer, Mr. David Washenfelder as Senior Staff Geologist and Mr. Scott Reimond as Senior Staff Geologist. This team has worked together for many years and has extensive drilling experience in the Western Canadian Sedimentary Basin, including at Apache Canada.

New Board

In addition to Mssrs. Schmidt and Hozjan, the New Board is expected to consist of the following individuals:

Mr. Anthony Lambert Mr. Lambert is a professional engineer and is currently the President, CEO and a Director of Daylight Resources Trust. Previously, he was the COO of Midnight Oil and Gas Ltd.
   
Mr. David MacKenzie Mr. MacKenzie is a professional engineer and an independent businessman with over 35 years of oil and gas experience. He is currently the Chairman of Avant Garde Energy Corp., was the President of Gascan Resources Ltd., and served as a director of TUSK Energy Corporation.
   
Mr. Floyd Price Mr. Price is a geologist, and recently retired from Apache Corporation as Executive VP Exploration in 2009. He also served as Executive VP Eurasia, Latin America and Australia after serving as President of Apache Canada.
   
Mr. Dean Setoguchi Mr. Setoguchi is a chartered accountant and is currently Vice President and Chief Financial Officer of Keyera Facilities Income Fund. He has extensive experience in junior oil and gas companies as former CFO of Cordero Energy Inc. and Resolute Energy Inc.
   
Mr. John Gunn Mr. Gunn is a professional engineer and is currently Chief Executive Officer of Tango Energy Inc. He has served in various executive and directorship roles in public and private oil and gas companies over the last 20 years.
   

Tamarack Warrants

Pursuant to the Agreement, all Tamarack performance warrants outstanding at the time of closing of the Transaction will be replaced with Tango replacement performance warrants (the "Warrants") based on the Exchange Ratio, resulting in the issuance of approximately 23.4 million Warrants. Each Warrant will entitle the holder to purchase one common share of Tango at a price of $0.26 per share for a period of five years. The Warrants will vest and become exercisable as to one-third upon the first, second, and third anniversaries of the closing of the Transaction, and will contain the same material terms and conditions as the Tamarack performance warrants.

Conditions and Approvals Related to the Transaction

Completion of the Transaction is subject to a number of conditions and approvals including, but not limited to, the approval of the TSX Venture Exchange. The Transaction also requires the approval of the shareholders of Tango and Tamarack. The required approval of the shareholders of Tango (the "Tango Shareholders") will be obtained at a special meeting of the Tango Shareholders to be held on or about June 17, 2010 (the "Tango Meeting"). The required approval of the shareholders of Tamarack (the "Tamarack Shareholders") may be obtained by a written resolution executed by all of the shareholders of Tamarack approving the Agreement and related matters (the "Written Resolution"), or if the Written Resolution is not obtained, by ordinary resolution at a special meeting of the Tamarack Shareholders to be held no later than May 31, 2010.

Tamarack has entered into an agreement to acquire a private oil and natural gas company ("Privateco") immediately prior to the closing of the Transaction (the "Privateco Acquisition"). Pursuant to the Privateco Acquisition, Tamarack will acquire the Privateco's working capital and undeveloped land by acquiring all of the issued and outstanding common shares of the Privateco in exchange for common shares of Tamarack, which common shares are included in the number of common shares of Tamarack that will be acquired by Tango. The completion of the Privateco Acquisition, which is a condition to the closing of the Transaction is subject to a number of conditions, including approval by the shareholders of Privateco. The Board of Directors and officers of Privateco and certain other shareholders, who, in aggregate, control over 70% of the shares of Privateco, have entered into lock-up agreements pursuant to which they have agreed, among other things, to approve the Privateco Acquisition.

Board of Directors' Recommendations and Lock-up Agreements

The Board of Directors of Tango has determined that the Transaction is in the best interests of Tango and the Tango Shareholders, has unanimously approved the Agreement, and recommends that the Tango Shareholders vote in favour of the matters to be considered at the Tango Meeting, including the Transaction. In coming to the foregoing determination, the Board of Tango also considered advice provided by Peters & Co. Limited ("Peters & Co.") related to the Transaction.

The Board of Directors and officers of Tango and certain other shareholders, who, in aggregate, own or control approximately 38% of the Tango Shares, have entered into lock-up agreements pursuant to which they have agreed, among other things, to vote in favour of the Transaction.

The Board of Directors of Tamarack has determined that the Transaction and related matters are in the best interests of Tamarack and the Tamarack Shareholders, has unanimously approved the Transaction, and recommends that the Tamarack Shareholders vote in favour of the proposed amalgamation of Tango and Tamarack.

The Board of Directors and officers of Tamarack and certain other shareholders, who, in aggregate, own or control approximately 34% of the common shares of Tamarack, have entered into lock-up agreements or agreed to enter into lock-up agreements pursuant to which they have agreed, among other things, to vote in favour of the proposed amalgamation of Tango and Tamarack.

The Agreement

The Agreement contains a number of customary representations, warranties and conditions and provides for a reciprocal non-completion fee of $250,000 payable in certain circumstances. The Agreement will be accessible on Tango's SEDAR profile at www.sedar.com.

Financial Advisors

Peters & Co. is acting as exclusive financial advisor to Tango with respect to the Transaction.

Paradigm Capital Inc. is acting as exclusive financial advisor to Tamarack with respect to the Transaction.

About Tango

Tango Energy Inc. is a junior oil and gas exploration and development company based in Calgary, Alberta, which is focused west of the fifth meridian in Alberta.

Tango has 65.8 million common shares that trade on the TSX Venture Exchange under the symbol TEI.

Forward Looking Statements

This document contains forward-looking statements. More particularly, this document contains statements concerning the completion of the transactions contemplated by the Agreement, including the private company acquisition, and certain other matters related to the transactions.

The forward-looking statements are based on certain key expectations and assumptions made by Tango, including expectations and assumptions concerning completion of the Privateco Acquisition, the Transaction and related matters, timing of receipt of required shareholder and regulatory approvals and third party consents and the satisfaction of other conditions to the completion of the transactions. Although Tango 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 Tango 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, risks that required shareholder, regulatory and third party approvals and consents are not obtained on terms satisfactory to the parties within the timelines provided for in the Agreement, the Privateco Acquisition may not be completed, and risks that other conditions to the completion of the transactions are not satisfied on the timelines set forth in the Agreement or at all.

The forward-looking statements contained in this press release are made as of the date hereof and Tango 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.

The term "BOE" may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

  • Tango Energy Inc.
    John Gunn
    Chief Executive Officer
    (403) 266-5688
    or
    Tamarack Valley Energy Ltd.
    Brian Schmidt
    President & Chief Executive Officer
    (403) 263-4440