Black Hat Capital Inc.
TSX VENTURE : BHC.P

September 22, 2005 08:30 ET

Black Hat Capital Inc. Announces Proposed Qualifying Transaction

CALGARY, ALBERTA--(CCNMatthews - Sept. 22, 2005) -

(Not for dissemination in the United States of America)

Black Hat Capital Inc. (TSX VENTURE:BHC.P) ("Black Hat") announced today that it has entered into a letter agreement dated September 15, 2005 (the "Letter Agreement") with Guardian Exploration Inc. ("Guardian") respecting a transaction which, when completed, is expected to constitute Black Hat's Qualifying Transaction as a capital pool company. The transaction is an arm's length transaction and is subject to the policies of the TSX Venture Exchange Inc. (the "Exchange").

About the Business Combination

Guardian and Black Hat have agreed to combine their businesses (the "Business Combination") to form a new oil and natural gas exploration and development company which will continue under the name Guardian Exploration Inc. The Letter Agreement contemplates that Guardian and Black Hat will, with the assistance of their respective professional advisers, determine a transaction structure for the Business Combination. Representatives of Guardian and Black Hat expect to finalize the transaction structure for the Business Combination and enter into a formal agreement on or prior to September 30, 2005, at which time Guardian and Black Hat expect to issue a further press release setting out additional details concerning the Business Combination. For purposes of the Business Combination, it is anticipated that one common share of the resulting issuer after completion of the Business Combination (the "Resulting Issuer") will be issued for each common share of Black Hat and one common share of the resulting issuer will be issued for each one common share of Guardian after Guardian has completed a reorganization of its share structure to have 23,000,000 common shares outstanding (the "Guardian Reorganization").

Pursuant to the Merger, holders of issued and outstanding common shares of Guardian ("Guardian Shares") will receive common shares of Black Hat ("Black Hat Shares") on a ratio such that all of the Guardian Shares will be acquired for up to a maximum of 23,000,000 Black Hat Shares ("Exchange Ratio"). The deemed exchange price for the Black Hat Shares to be issued in exchange for the Guardian Shares shall be $0.44 per Black Hat Share, or such other price as permitted by the governing regulatory bodies. Guardian also has 361,000 common share warrants outstanding entitling the holders to acquire, subject to the Exchange Ratio, one class A common share of Guardian at a price of $1.50 per share on or before December 31, 2006 (the "Guardian Warrants"). The Guardian Warrants will be exchanged for warrants of Black Hat based on the Exchange Ratio, subject to regulatory approval.

It is contemplated that the Board of Directors of the Resulting Issuer will consist of five members, including Graydon L. M. Kowal, Mel Chambers, William McKenzie, David Mallory and Anthony Croll. Mr. Kowal will also be appointed President and Chief Executive Officer of the Resulting Issuer, Mr. Mallory will be appointed the Vice-President, Finance and Chief Financial Officer of the Resulting Issuer, Mr. William McKenzie will be appointed V.P. Exploration of the Resulting Issuer and Mr. Scott Reeves will be appointed Corporate Secretary of the Resulting Issuer. Additional officers of the Resulting Issuer are expected to be identified prior to the completion of the Business Combination.

The Business Combination is an arms length transaction as none of the directors or officers of Black Hat have any interest whatsoever in Guardian.

The Business Combination will be completed after Guardian has completed a private placement of up to 5,000,000 common shares of Guardian (the "Guardian Common Shares") at a price of $0.44 per share for gross proceeds up to of $2,200,000 (the "Guardian Private Placement"), to be completed in one or more closings. Guardian intends to engage an agent (the "Agent") in connection with the Guardian Private Placement and in connection therewith the Agent will be paid a commission. In addition, the Agent will be granted agents' options (the "Guardian Agents' Options") to purchase 10% of the number of Guardian Common Shares issued pursuant to the Guardian Private Placement, at a price of $0.44 per share, for a period of eighteen (18) months.

Guardian intends to use the proceeds of the Guardian Private Placement for general working capital purposes of Guardian in the discretion of the Board of Directors of Guardian. Guardian may complete an additional private placement prior to the closing of the Business Combination at a price per share to be the lesser of $0.44 per share and the market price of the common shares of Black Hat for up to $6,000,000 in gross proceeds.

Completion of the Business Combination is subject to a number of conditions in favor of Guardian and Black Hat, respectively, including the execution and delivery of a formal agreement, board approval of such formal agreement, completion of satisfactory due diligence inquiries, receipt of all necessary regulatory approvals (including the consent of the Exchange), receipt of third party approvals, approval of the shareholders of Guardian and Black Hat, and a threshold for the exercise of dissent rights (5%) not being exceeded (if the Business Combination is structured in such a manner as to give rise to statutory dissent rights).

An application has been made to the Exchange for an exemption from the sponsorship requirements of the Exchange in respect of the Business Combination although there is no guarantee this exemption will be granted. Trading in the Common Shares of Black Hat will remain halted until the Exchange grants an exemption from sponsorship, or if sponsorship is required, until the Exchange receives a sponsorship acknowledgement form.

Information About Guardian Exploration Inc.

Guardian is a private company formed on March 27, 2001 under the Business Corporations Act (Alberta). Guardian has no subsidiaries. Guardian's assets are located in Northeast British Columbia and consist of approximately 7,540 gross acres (2,035 net) of land with two gas wells (1.2655 net) producing approximately 3 mmcf/d (1.5 mmcf/d net or 250 boed on a 6:1 conversion basis). Guardian holds a 26.55% interest in the Clarke Lake "E" Devonian Keg River gas pool, a 100% interest in a Slave Point gas well in the Kotcho area, and a 38.5% interest in a section of land for a prospective Keg River gas play. Guardian has farmed out to another oil and gas company its 5.75% interest in a Keg River exploration gas play located at Muskwa, British Columbia. Guardian is also pursuing a number of other oil and gas prospects in Northeast British Columbia and Alberta.

McDaniel & Associates Consultants Ltd., independent petroleum evaluators, have prepared an evaluation of Guardian's oil and natural gas reserves in respect of its Clarke Lake Area property in a report dated September 13, 2005 and effective September 1, 2005. The reserve estimations set forth in this report and summarized below were prepared in accordance with the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101. The following sets forth the reserves volumes and future net revenues associated with the Clarke Lake property. Net present values of future net revenue do not represent fair market value.



SUMMARY OF OIL AND GAS RESERVES
BASED ON FORECAST PRICES AND COSTS

Natural Gas Natural Gas Liquids
------------------ ---------------------
Gross Net Gross Net
Reserves Category (mmcf) (mmcf) (mbbl) (mbbl)
------------------------------ --------- -------- ------------ --------
TOTAL PROVED 224.3 163.7 0 0

PROBABLE 3,525.0 2,593.4 0 0
--------- -------- ------------ --------
TOTAL PROVED PLUS PROBABLE 3,749.3 2,757.2 0 0
--------- -------- ------------ --------
--------- -------- ------------ --------

Note:
(1) BOEs (or 'McfGEs' or other applicable units of equivalency) may be
misleading, particularly if used in isolation. A BOE conversion
ratio of 6 Mcf: 1 bbl (or 'An McfGE conversion ratio of 1 bbl:
6 McF") is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead"


NET PRESENT VALUES OF FUTURE NET REVENUE
BASED ON FORECAST PRICES AND COSTS(1)

Before Deducting Income Taxes Discounted At
------------------------------------------------
0% 5% 10% 15% 20%
Reserves Category ($M) ($M) ($M) ($M) ($M)
---------------------- ------------------------------------------------
TOTAL PROVED 972.3 931.8 894.7 860.5 829.2
---------- --------- --------- -------- --------

PROBABLE 12,749.1 10,948.0 9,513.6 8,354.1 7,403.8
---------- --------- --------- -------- --------

TOTAL PROVED
PLUS PROBABLE 13,721.4 11,879.8 10,408.3 9,214.6 8,233.0
---------- --------- --------- -------- --------
---------- --------- --------- -------- --------

Note:
(1) Forecast prices based on the McDaniel & Associates Consultants Ltd.
price forecast effective July 1, 2005.


Based on unaudited financial statements for the nine months ended May 31, 2005, Guardian had revenue of $311,521, expenses of $862,717 and a net loss of $551,196, and had a working capital deficiency of $3,079,646. In addition, as at May 31, 2005, Guardian had total assets of $4,264,129 and total liabilities of $3,101,370.

The only person or company that is known to management of Guardian to own 10% or more of the voting securities of Guardian is Graydon L. M. Kowal of Calgary, Alberta, the remaining shares are held by 23 additional shareholders.

The officers of Guardian are Graydon L. M. Kowal, David G. Mallory and Scott M. Reeves, and the Board of Directors of Guardian currently consists of Graydon L. M. Kowal, William L. McKenzie, Melvin (Mel) H. Chambers and David G. Mallory.

Graydon L. M. Kowal has been the President and Chief Executive Officer of Guardian since 2001. He has been active in the petroleum industry in Alberta and British Columbia for the last 15 years. Since 1995, Mr. Kowal has been President and Chief Executive Officer of Guardian Helicopters Inc., a private helicopter company serving the oil and gas industry in Alberta and British Columbia, as well as the forest and filming industries in Western Canada and Ontario.

William L. McKenzie holds a Bachelor of Science (Honours) degree in geology from the University of Manitoba and has over 30 years of experience in Northeast British Columbia and Alberta. Mr. McKenzie was recently the Vice-President, Exploration of Aquest Energy Ltd., a public oil and gas company listed on the Toronto Stock Exchange ("TSX"), from February 2003 to August 2005. Prior to joining Aquest Energy Ltd., he was a geological consultant with Cornerstone Energy Inc., a private oil and gas company. He was Exploration Manager and Vice-President of Tikal Resources Corp., a public oil and gas company listed on the TSX, from January 1998 to January 2002. Mr. McKenzie was also previously the Senior Exploration Geologist at Poco Petroleums Ltd.

Melvin H. Chambers is a professional geologist with over 30 years of experience in exploration and development of oil and gas properties in Alberta, British Columbia, East Coast onshore, North Dakota and Louisiana. Since May 2005, Mr. Chambers has been Vice-President of Dyno Energy Ltd., a private oil and gas company. Prior to joining Dyno Energy Ltd., he was the President of I.C. Resources Ltd., a private oil and gas company, from December 2003 to May 2003. From September 1998 to December 2003, he was Chief Geologist/Team Leader with Encana Corporation and its predecessor, Alberta Energy Corp. Mr. Chambers has a Bachelor of Science degree (Honours) in Geology from the University of Calgary.

David G. Mallory, has been Chief Financial Officer and a director of Guardian since December 2004. Mr. Mallory was Chief Financial Officer of Flowing Energy Corporation, a public oil and gas company listed on the TSX, from September 2000 to May 2004 and a director from March 2001 to May 2004. He was co-founder and Chief Financial Officer of Questerre Energy Corporation ("Questerre"), a public oil and gas company listed on the Exchange, from November 2000 to March 2003, and a director since October 2001. On September 1, 2004 Mr. Mallory was appointed Interim Chief Financial Officer of Questerre.

Scott M. Reeves is a partner with the law firm Tingle Merrett LLP and has been since October 2003. Prior to joining Tingle Merrett LLP, he was an associate lawyer with Bennett Jones LLP and Burnet Duckworth & Palmer LLP. Mr. Reeves is currently a Director or Corporate Secretary of several public companies listed on the Exchange, including Canyon Creek Food Company Ltd., Madison Energy Corp. and Bishop Gold Inc.

Information About Black Hat Capital Inc.

Black Hat is a capital pool company which was listed on the Exchange on January 6, 2005, following the completion of its initial public offering of $500,000, including $200,000 raised from founders. Black Hat currently has working capital of approximately $360,000.

The Board of Directors of Black Hat consists of Anthony M. Croll, Mark P. Brennan and Zoran Arandjelovic.

Other

Black Hat announces it has reserved a price of $0.44 per share for the grant of stock options to acquire up to 10% of the number of issued and outstanding common shares of the Resulting Issuer (the "Stock Options") in the event the Business Combination and the maximum Guardian Private Placement are completed. The grant of the Stock Options is subject to regulatory approval. The Stock Options will be granted to directors, officers, employees and consultants of the Resulting Issuer, as determined by the Board of Directors of the Resulting Issuer following the completion of the Business Combination.

Completion of the Business Combination is subject to a number of conditions, including but not limited to, the execution of a formal agreement relating to the Business Combination, Exchange acceptance and shareholder approval, if required. The Business Combination cannot close until the required shareholder approval, if required is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the disclosure document to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon. Trading in the securities of Black Hat should be considered highly speculative.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Neither Guardian nor Black Hat will 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 Black Hat and Guardian.

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

Contact Information

  • Black Hat Capital Inc.
    Anthony M. Croll
    (514) 399-9952 ext. 28
    or
    Black Hat Capital Inc.
    425 Place Jacques Cartier, Suite 203
    Montreal, Quebec H2Y 3B1