BrazAlta Resources Corp.

BrazAlta Resources Corp.

January 31, 2008 09:26 ET

BrazAlta Announces a USD$40 Million Convertible Debenture Financing in BCH Ltd.

CALGARY, ALBERTA--(Marketwire - Jan. 31, 2008) -


BrazAlta Resources Corp. ("BrazAlta") (TSX VENTURE:BRX) is pleased to announce that its wholly-owned service company, BCH Ltd. ("BCH") has reached an agreement with Allis-Chalmers Energy Inc. ("Allis-Chalmers") whereby Allis-Chalmers will invest USD $40,000,000 in BCH by way of a Convertible Subordinated Secured Debenture (the "Debenture"). Allis-Chalmers is a Houston based oilfield services company which provides services and equipment to the energy sector both on land and offshore to operators in the United States, Mexico, Argentina, Canada, Malaysia, Russia and Colombia. Currently, Allis-Chalmers has a significant presence in Latin America, accounting for approximately 30% of its EBITDA.

David Mears, BrazAlta's President & CEO, is excited about the company's future partnership with Allis-Chalmers. "Allis-Chalmers' strategic international focus on South America is highly compatible with that of BCH. These proceeds will allow BCH and BrazAlta to further its long-term growth strategy." He further stated "this transaction is the culmination of many months of hard work to develop our energy services business and will allow BrazAlta to more aggressively pursue its upstream strategy."

Munawar Hidayatallah, Allis-Chalmers' Chairman of the Board and CEO added, "BrazAlta's management team and the footprint they have established in the Brazilian market positions BCH well. We are very excited with the partnership we have built with BrazAlta and very much look forward to working with the BCH team."

The Debenture is for a two year term and will bear interest at a rate of 15% payable annually and is convertible at Allis-Chalmers' option into common shares of BCH at a conversion price of USD$4.163 per BCH common share, equating to approximately 49% of the post-conversion outstanding common shares. Allis-Chalmers will have the option to acquire the remaining outstanding shares of BCH from BrazAlta on or about maturity of the Debenture at fair market value, to be determined by a mutually agreed upon third party valuator. The Debenture does not provide Allis-Chalmers recourse to BrazAlta for the loan. Management of BCH will remain unchanged. Allis-Chalmers will appoint three nominees to the BCH Board of Directors with the remaining three to be elected by BrazAlta including the Chairman who will have the casting vote to break any tie.

The net proceeds of the Debenture will be used to repay inter-company debt to BrazAlta from BCH and in turn fund BrazAlta's exploration and development program, reduce BCH senior debt principle in the amount of $3.2 million and fund the future growth of BCH's operations.

Both the boards of Allis-Chalmers and BrazAlta have approved the transaction. The transaction remains subject to certain closing conditions, including the consent of BCH's senior lender. Financial closing is expected to occur imminently. RBC Capital Markets acted as financial advisor to BCH.

BrazAlta is a publicly traded Canadian based international oil and gas corporation with operations in Brazil, Northern Ireland and Canada.

BCH is the third largest on-shore drilling service company in Brazil and has entered into several long-term drilling contracts with Brazilian state owned oil company Petrobras.

This press release may contain statements within the meaning of safe harbour provisions as defined under US Laws and Regulations. The above statements are based on the current expectations and beliefs of BrazAlta's management and are subject to a number of risks and uncertainties that may cause the actual results to differ materially from those described above. BrazAlta does not undertake any responsibility with regard to the accuracy of this press release nor the obligation to update the abovementioned information.

This press release contains certain forward-looking statements within the meaning of applicable securities law. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation cannot assure that actual results will be consistent with these forward looking statements. They are made as of the date hereof and are subject to change and the Corporation assumes no obligation to revise or update them to reflect new circumstances, except as required by law. Prospective investors should not place undue reliance on forward looking statements. These factors include the inherent risks involved in the exploration for and development of crude oil and natural gas properties, the uncertainties involved in interpreting drilling results and other geological and geophysical data, fluctuating energy prices, the possibility of cost overruns or unanticipated costs or delays and other uncertainties associated with the oil and gas industry. Other risk factors could include risks associated with negotiating with foreign governments as well as country risk associated with conducting international activities, and other factors, many of which are beyond the control of the Corporation. A barrel of oil equivalent (boe) is derived by converting gas to oil in the ratio of six thousand cubic feet of gas to oil and may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead, especially in various international jurisdictions.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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