Brookwater Ventures Inc.

December 21, 2010 09:00 ET

Brookwater Announces Letter of Intent to Acquire Oil & Gas Concessions

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 21, 2010) - Brookwater Ventures Inc. (TSX VENTURE:BW.H) ("Brookwater") is pleased to announce that it has entered into a Letter of Intent dated December 6, 2010 to acquire (the "Acquisition") all of the outstanding share capital of Água Grande Exploração e Produção de Petróleo Ltda, a private limited Brazilian company ("Água Grande"), through the issuance of an aggregate of 13,250,000 common shares of Brookwater. Mr. Wagner Freire, the President of Água Grande will remain as President of the Brazilian subsidiary. Mr. Freire is a former E&P Managing Director of Petrobras and President of BRASPETRO, International Division of Petrobras, and a founder of Starfish Oil & Gas S.A., recently acquired by Sonangol, to become Sonangol Starfish Oil & Gas S.A. ("Sonangol Starfish"). Mr. Freire and the Água Grande technical team will strive to expand the Brazilian property portfolio through their wide reaching network in the Brazilian industry.

Água Grande is a party to a Farm-Out Agreement dated November 25, 2010 with Somoil Internacional de Petróleo Ltda. and Sonangol Starfish, pursuant to which Água Grande has the right, subject to the approval of the Brazilian National Petroleum Agency ("ANP"), to acquire an undivided 30% interest in certain oil & gas exploration concessions (Block REC-T-166) located in the Recôncavo Basin in Brazil (the "Concessions").

As one of the conditions to the completion of the Acquisition, Brookwater intends to complete a non-brokered private placement (the "Offering") in the aggregate amount of $1,500,000. Brookwater will be offering 6,000,000 subscription receipts at a price of $0.25 per subscription receipt, each convertible into one common share of Brookwater upon completion of the Acquisition. The Offering proceeds will be held in escrow until the Acquisition is completed. If the Acquisition is not completed by April 30, 2011, the Offering proceeds will be returned to subscribers. Pursuant to the Letter of Intent, Água Grande will also complete a debenture financing in the principal amount of $3,500,000, which will be convertible on closing of the Acquisition, at a deemed price of $0.25 per share, into an additional 14,000,000 common shares of Brookwater.

The concession for Block REC-T-166, which covers an area of 30 km², was awarded to Sonangol Starfish by ANP in 2007 as part of the bid-round process, and the relevant contract was signed on March 12, 2008. During the contract period (which expires on March 12, 2012), Sonangol Starfish is required to complete an exploration program consisting basically of seismic surveys and commence the drilling of an exploratory well.

Block REC-T-166 is well situated in the highly productive Recôncavo Basin (see Figure 1 below) which has been producing oil and gas since the late thirties and continues to produce 45,000 b/d of oil and 66,000 boe/d of gas. The recent discovery of the Jandaia field, containing 16 million barrels of 42º API oil confirms the discovery potential of the basin. Block REC-T-166 occurs immediately west of the large Água Grande field, which contained 675 million barrels of oil at discovery in 1952 and continues to produce 3,000 b/d. Figure 2 below shows the location of the major fields in the basin which are surrounding the REC-T-166 Block.

Sonangol Starfish reprocessed and reinterpreted the 2D seismic data available and completed a 3D seismic survey in order to define the potential of Block REC-T-166. Several prospects were defined.

The Água Grande E&P staff have independently completed a detailed review and identified several additional prospects which will be evaluated by the Joint Venture. Prospects and leads are related to pre-rift system, rift-Candeias system, rift-Ilhas system and fractured shales of Gomo Mb. of Candeias Fm. Sonangol Starfish staff had previously defined the Macaúba prospect, related to the Água Grande – Sergi pre-rift system and approved the drilling of 1-MAC-1-BA wildcat. Figure 3 illustrates the various producing structures in the basin and Figure 4 is a seismic section of the 1-MAC-1-BA prospect.

To view Figures 1 - 4 accompanying this press release, please click on the following link:

In addition to the Macaúba prospect, Sonangol Starfish and Água Grande E&P have identified other prospects, in different structural settings, that will be considered for drilling by the Joint Venture.

In order to acquire its interest in the Concessions under the Farm-Out Agreement, Água Grande must (i) pay 50% of the costs and expenses incurred in relation to the drilling, logging, testing and completion or plugging and abandonment of one exploration well and thereafter pay its share of costs incurred in connection therewith; and (ii) in case of a commercial discovery, pay its share of the total agreed costs and expenses incurred prior to the execution of the Farm-Out Agreement.

Água Grande has commissioned a NI 51-101 report on the Concessions, which is expected to be completed and filed with the TSX Venture Exchange (the "Exchange") for review in connection with the proposed transaction. Further information on the Concessions and future exploration programs will be announced once the NI 51-101 report has received regulatory approval and has been filed on SEDAR.

The Acquisition will constitute a Change of Business under the policies of the Exchange, and will result in the graduation of the Company from NEX to the TSX Venture Exchange. Completion of the Acquisition is subject to a number of conditions, including Exchange acceptance and shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction 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 Acquisition, 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 Brookwater should be considered highly speculative. Trading will remain halted pending further regulatory filings with the Exchange.

The securities of Brookwater to be issued in the financing will be subject to a four month hold period. The securities of Brookwater to be issued on the Acquisition will be subject to a four month hold period, in addition to the escrow requirements of the Exchange. The parties to the proposed transaction are at arm's length.


Scott Ackerman, President & CEO

Information in this press release expressed in barrels of oil equivalent (boes) is derived by converting natural gas to oil in the ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.7 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.

This news release may contain forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in the management discussion and analysis section of our interim and most recent annual financial statement or other reports and filings with the TSX Venture Exchange and applicable Canadian securities regulations. We do not assume any obligation to update any forward-looking statements.

The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Neither 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.

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