Cannon Oil & Gas Ltd.
TSX VENTURE : COO

October 27, 2006 08:00 ET

Cannon Announces Bridge Loan and Completion of Conversion of Debt

CALGARY, ALBERTA--(CCNMatthews - Oct. 27, 2006) -

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

Cannon Oil & Gas Ltd. ("Cannon") (TSX VENTURE:COO) announces that Quest Capital Corp. ("Quest") has provided Cannon with a loan in the principal amount of $3,000,000 (the "Loan"), which will be used by Cannon to fund drilling and other development activities associated with Cannon's oil and natural gas properties located in the Truch area of northern British Columbia and for general working capital purposes. Interest accrues on the amount outstanding under the Loan at the rate of 12% per annum, calculated and compounded monthly, not in advance, and is payable to Quest on the last business day of every month commencing October, 2006. The outstanding balance of the Loan, including any accrued interest, is due March 30, 2007. Cannon issued 600,000 common shares at a price of $0.50 per share to Quest as additional consideration for the advance of the Loan. All of the common shares issued in connection with the Loan are subject to a four-month hold period that expires on February 21, 2007. In support of its obligation to repay the Loan, Cannon provided Quest with a security interest in all of its assets.

Cannon also announces the debt settlement through the issuance of common shares of Cannon previously announced on March 21, 2006 has closed. Cannon has issued 5,000,000 common shares at a price of $0.40 per share to its major shareholder, for full satisfaction of indebtedness owed in the amount of $2,000,000 (the "Debt"). All of the common shares issued in connection with the debt settlement are subject to a four-month hold period that expires on February 26, 2007.

As a result of the conversion of the Debt, Marla Resources Inc. ("Marla"), owns or exercises control or direction over 11,224,644 Common Shares of Cannon representing approximately 41.7% of the issued and outstanding Cannon Common Shares. The conversion was undertaken by Marla for investment purposes and Marla may, in the ordinary course of its business, increase or decrease its holdings in Cannon.

Marla is a private issuer controlled by Robert J. Tessari (a senior officer and director of Cannon) and Marla M. Johnson. As a result of the conversion of the Debt by Marla, Mr. Tessari owns or exercises control or direction over an aggregate of 10,386,011 Common Shares of Cannon or 38.5% of the issued and outstanding Common Shares of Cannon prior to the exercise of any convertible securities. Mr. Tessari also holds options to purchase 250,000 Common Shares of Cannon. Assuming exercise of all convertible securities held, Mr. Tessari would own or control 10,636,011 (39.1%) of the Common Shares of Cannon then issued and outstanding. Mr. Tessari may, in the ordinary course of his business, increase or decrease his holdings in Cannon. As a result of the conversion of the Debt by Marla, Marla M. Johnson owns or exercises control or direction over an aggregate of 4,350,100 Common Shares of Cannon or 16.1% of the issued and outstanding Common Shares of Cannon. Ms. Johnson may, in the ordinary course of her business, increase or decrease her holdings in Cannon.

After giving effect to the bridge loan and debt settlement transactions, Cannon has 26,944,484 issued and outstanding Common Shares.

Cannon is a publicly traded junior oil and natural gas exploration company with its shares listed on the TSX Venture Exchange under the trading symbol "COO". Cannon is based in Calgary, Alberta, and is engaged in the exploration, development and production of oil and natural gas in western Canada.

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

Contact Information

  • Cannon Oil & Gas Ltd.
    Robert J. Tessari
    President
    (403) 237-8407