Canadian Phoenix Resources Corp.
TSX VENTURE : CPH

Canadian Phoenix Resources Corp.

April 29, 2008 20:37 ET

Canadian Phoenix Resources Corp.: News Release

Corporate Update: $55 Million Transactions With Serrano Energy Ltd. Proposed Private Placement Call for Conversion of Debentures

CALGARY, ALBERTA--(Marketwire - April 29, 2008) -

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

CANADIAN PHOENIX RESOURCES CORP. ("Canadian Phoenix") (TSX VENTURE:CPH) is pleased to announce that, as contemplated in its news release of February 4, 2008, it has executed the following agreements with Serrano Energy Ltd. ("Serrano"):

(a) an asset sale agreement pursuant to which Canadian Phoenix has agreed to sell its Freemont property to Serrano for 7 million common shares ("Serrano Shares") of Serrano issued at the deemed price of $5 per Serrano Share, representing a transaction value of $35 million, subject to adjustment (the "Freemont Transaction"); and

(b) a subscription agreement pursuant to which Canadian Phoenix has agreed to purchase 2 million Serrano Shares at the price of $5 per share representing a total subscription amount of $10 million (the "Subscription Transaction").

A condition for the completion of each of the Freemont Transaction and the Subscription Transaction is the grant by Canadian Phoenix to Serrano of an option buy-back on selected farm-ins, and earn working interests on certain of Serrano's oil and gas properties by way of incurring specific CEE expenditures (the "Farm-in Transaction"). As consideration for such option, Serrano is to issue 2 million Serrano Shares, valued at a total of $10 million, to Canadian Phoenix.

The completion of the Freemont Transaction, the Subscription Transaction and the Farm-in Transaction (collectively, the "Serrano Transaction") will result in Canadian Phoenix holding a 50.1% controlling ownership interest in Serrano. Subject to the conditions of the underlying agreements, it is presently anticipated that the Serrano Transaction will be completed in June 2008. Please refer to Canadian Phoenix's news release dated February 4, 2008 for additional information regarding Serrano and the Serrano Transaction and Canadian Phoenix's news release dated March 14, 2008 for additional information regarding the Farm-in Transaction.

Serrano Energy Ltd.

Serrano is an Alberta-based company formed to participate in heavy oil and natural gas exploration, development and acquisitions in Alberta and Saskatchewan. Serrano's net daily heavy oil production, based on field estimates, currently exceeds 1,000 barrels of oil.

Serrano's undeveloped land base is 29,626 net acres, the majority of which is located in the Freemont, Sawdy, Standard Hills, and Lloydminster areas of Saskatchewan and Alberta. Included in this acreage is Serrano's 35% working interest in 3,360 contiguous acres of oil sands leases located south of Fort McMurray, Alberta. The most recent reserve data on these Alberta oil sands leases was prepared by DeGolyer and MacNaughton, independent reserves evaluator, in a report dated December 31, 2007. In this report DeGolyer and MacNaughton estimated Serrano's working interest share of possible oil reserves within these leases to be approximately 107,100,000 barrels of oil, and that the 10% discounted before-tax value for these possible reserves is approximately $257,985,000 (net to Serrano) using forecast pricing. The estimated value disclosed above does not represent fair market value.

Serrano's Shares are not currently listed for trading on any stock exchange. There are currently 10,941,297 Serrano Shares outstanding. Following the completion of the Serrano Transaction, 21,941,297 Serrano Shares will be outstanding.

The Serrano Transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance and, if required pursuant to TSX Venture Exchange requirements and shareholder approval. It is anticipated that Canadian Phoenix will prepare an Information Circular or a Filing Statement in accordance with the form prescribed by the TSX Venture Exchange in respect of the proposed transaction. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that this transaction will be completed as proposed or at all.

Proposed Private Placement

Canadian Phoenix proposes to complete a non-brokered private placement of up to 733,333,333 units ("Units") of Canadian Phoenix at the price of $0.15 per Unit for gross proceeds of up to $110 million (the "Unit Private Placement"). This number of Units is inclusive of the units to be delivered by Canadian Phoenix as part of the transaction with Marble Point Energy Ltd. See the Corporation's news releases dated April 16, 2008 for additional information regarding the transaction with Marble Point Energy Ltd. Each Unit will consist of one common share ("Common Share") of Canadian Phoenix and one Common Share purchase warrant ("Warrant"). Each full Warrant will entitle the holder thereof to purchase one additional Common Share at a price of $0.20 on or before the earlier of the date that is two years from the completion of the Unit Private Placement and 30 days after the giving of notice of early termination by Canadian Phoenix. Canadian Phoenix may, in its sole discretion, provide such notice if the closing price of the Common Shares on the TSX Venture Exchange is at least $0.30 for a minimum of 30 consecutive trading days (whether or not trading occurs on such days) (the "Triggering Event"") within 30 days of the Triggering Event by written notice to the CPH Warrantholder that the exercise period of the CPH Warrant has been reduced to 30 days following delivery of such notice. The Unit Private Placement may be completed by way of a subscription receipt structure, to be determined at the discretion of the Corporation. Canadian Phoenix reserves the right to engage institutions to act as its finder for the Unit Private Placement. Any compensation paid to finders will be subject to the acceptance of the TSX Venture Exchange.

The net proceeds of the Unit Private Placement will be used by Canadian Phoenix to satisfy any unfunded obligation to provide up to $100 million to Marble Point Energy Ltd. (see the Corporation's news releases dated April 16, 2008 and February 29, 2008) by way of debt and/or equity, to conduct acquisitions and for general working capital purposes. It is anticipated that the Unit Private Placement will be completed immediately prior to or concurrently with the completion of the transaction to acquire control of Marble Point Energy Ltd. It is not anticipated that the Unit Private Placement will result in a change of control of Canadian Phoenix. The Unit Private Placement is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance, if required pursuant to TSX Venture Exchange requirements, shareholder approval. Where applicable, the Unit Private Placement cannot close until the required shareholder approval is obtained. There can be no assurance that the Unit Private Placement will be completed as proposed or at all.

April 2007 Trust Indenture

The entering into of the asset sale agreement and the subscription agreement with Serrano along with the completion on March 17, 2008 by Canadian Phoenix of a private placement of units for gross proceeds of approximately $25.3 million constitutes a "Business Combination Transaction" under the trust indenture dated April 11, 2007, as amended, between Canadian Phoenix and Computershare Trust Company of Canada. Please refer to Canadian Phoenix news release dated March 5, 2008 for information regarding the most recent amendments to the trust indentures. Accordingly, Canadian Phoenix will now call for the conversion of all debentures that remain into Common Shares of Canadian Phoenix. At present, debentures in the aggregate amount of $2,200,140 remain outstanding, the conversion of which will result in the issue of 26,401, 680 Common Shares.

Canadian Phoenix Resources Corp. is a publicly traded junior oil and gas exploration, development and production company with operations in Western Canada. Canadian Phoenix is pursuing a corporate strategy of being a consolidator of undervalued oil and gas assets located in the Western Canadian Sedimentary Basin. Canadian Phoenix's shares trade on the TSX Venture Exchange under the symbol "CPH". There are presently 534,034,393 Common shares of Canadian Phoenix issued and outstanding.

ON BEHALF OF THE BOARD OF DIRECTORS OF CANADIAN PHOENIX RESOURCES CORP.

Robert J. Chenery, President & CEO

This news release does not constitute an offer to sell or the solicitation of an offer to buy the Units, Common Shares or Warrants within the United States. The Units, Common Shares and Warrants have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws. Accordingly, none of the Units, Common Shares or Warrants may be offered or sold in the United States or to U.S persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities law or an exemption from such registration is available.

Forward-Looking Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning completion of the Serrano Transaction and the Unit Private Placement. The forward-looking statements and information are based on certain key expectations and assumptions made by Canadian Phoenix. Although Canadian Phoenix believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Canadian Phoenix can give no assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. There are risks also inherent in the nature of the Serrano Transaction, including financing risk, incorrect assessment of the value of Canadian Phoenix's Freemont properties and Serrano, and failure to obtain the required security holder, regulatory and other third party approvals. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements and information contained in this press release are made as of the date hereof and Canadian Phoenix 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.

Significant Assumptions and Uncertainties

The preceding information presents values that are estimated for possible reserves (as defined in the Canadian Oil and Gas Evaluation Handbook) using costs and prices in C$ obtained from sources considered to be reasonable by the Corporation and the reserves evaluator, DeGolyer and MacNaughton.

The process of estimating reserves is complex requiring significant judgments and decisions based on available geological, geophysical, engineering and seismic data. Although every reasonable effort is made to ensure that reserve estimates are accurate, reserve estimation is an inferential science. As a result, the subjective decisions, new geological or production information and a changing environment may impact these estimates and the impact could be material.

The TSX Venture 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.

Contact Information

  • Canadian Phoenix Resources Corp.
    Robert J. Chenery
    President & CEO
    (403) 920-0040
    (403) 920-0043 (FAX)