Azabache Energy Inc.

TSX VENTURE : AZA


Azabache Energy Inc.

December 12, 2013 19:53 ET

Azabache Energy Inc. Announces Participation Agreement for Vaca Muerta Assets and Non-Brokered Private Placement

CALGARY, ALBERTA--(Marketwired - Dec. 12, 2013) -

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

Azabache Energy Inc. (TSX VENTURE:AZA) ("Azabache" or the "Company") announces that it has entered into a Participation Agreement (the "PA") with RIO BRAVO COMMERCIAL ENTERPRISES INC. ("RBE"), a private Panama corporation which, together with its affiliates, owns and operates oil and gas interests in Colombia, in respect of the Company's Vaca Muerta project in order to provide funding for the Company's planned fracture stimulations of the Cvo.x-2 well which has a budget of US$4,850,000. Pursuant to the PA, RBE will pay US$5,000,000 in exchange for earning a 23.76% working interest (directly or indirectly) in the Covunco Norte-Sur and the El Corte joint operating agreements and contracts in the Province of Neuquén (the "Contracts"). Other terms of the PA include:

  1. The transfer of the above working interest remains subject to the approval of the Province of Neuquén.
  2. RBE shall be entitled to nominate an individual for election to the Company's Board of Directors at the annual general meeting ("AGM") of the shareholders of the Company following the next AGM scheduled for January 2014.
  3. The Parties will enter into industry standard joint operating and other similar agreements to provide for the joint operation the Contracts and future cost sharing.
  4. The US$5,000,000 is due in 3 tranches as follows: US$500,000 upon Closing, US$2,500,000 on February 20, 2014 and US$2,000,000 on March 20, 2014.
  5. Between August 1, 2014 and August 1, 2015, RBE and the Company (at the election of RBE) may enter into to good faith negotiations to create a liquidity event by (i) locating a suitable counterparty to purchase the Company and/or RBE's working interests in the above Contracts, (ii) locating a suitable counterparty to farm-in on the Contracts so as to fund development of the Vaca Muerta, or (iii) allowing for the Company to purchase back the above working interest from RBE for consideration based in part on the market capitalization of the Company at the time. The consideration for the buyback would be cash or, at the Company's election, shares in the Company. Any such buyback would be subject to required governmental, corporate and or regulatory approval at that time.
  6. A condition precedent (for the benefit of Company) that the Company completes a private placement for aggregate gross proceeds of between US$3,500,000 and US$4,000,000 on or before December 20, 2013.

Non-Brokered Private Placement

Azabache also announces that it intends to proceed with a non-brokered private placement (the "Private Placement") of up to 30,769,231 units of the Company ("Units") at a price of $0.13 per Unit for anticipated gross proceeds of between $3,500,000 and $4,000,000. Each Unit shall be comprised of one common share in the capital of the Company (a "Common Share") and one-half share purchase warrant of the Company (each whole, a "Warrant"). Each Warrant shall entitle the holder to purchase one Common Share at a price of $0.18 per share for a period of 24 months from the closing of the Private Placement.

Closing of the Private Placement is expected to occur on or about December 20, 2013 or such other date as the Company may determine, and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange (the "Exchange"). The Common Shares and Warrants comprising the Units issued pursuant to the Private Placement will be subject to resale restrictions imposed by applicable securities laws and the policies of the Exchange.

The Company intends to use the proceeds from the Private Placement to fund the Company's Vaca Muerta project, as well as for general working capital and general corporate purposes.

In connection with the Private Placement, the Company may pay eligible persons a finder's fee of up to 6% of that portion of the proceeds of the Private Placement that result from such parties' efforts, subject to compliance with applicable securities laws.

For further information on Azabache please visit the Company's website at www.azaenergy.com.

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.

This press release contains forward-looking statements. More particularly, this press release contains statements concerning the terms of the PA, the anticipated timing for the closing of the Private Placement, the expected use of proceeds of the Private Placement and the Company's future operations. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Azabache, including with respect to Company's ability to close the Private Placement, its ability to use the proceeds of the Private Placement as anticipated and its expected future operations. Although Azabache 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 Azabache 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, 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. The forward-looking statements contained in this document are made as of the date hereof and Azabache 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.

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 state in which such offer, solicitation or sale would be unlawful. The securities have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

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