Canoro Resources Ltd.
TSX VENTURE : CNS

Canoro Resources Ltd.

June 09, 2006 09:18 ET

Canoro Announces $25 Million Financing for Appraisal and Exploration Drilling

CALGARY, ALBERTA--(CCNMatthews - June 9, 2006) -

This release is not for distribution to the United States newswire services or for dissemination in the United States.

Canoro Resources Ltd. (TSX VENTURE:CNS) has entered into an agreement with Jennings Capital Inc. as lead agent, Canaccord Capital Corporation, Sprott Securities Inc., and Fraser Mackenzie Capital Limited (collectively the "Agents"), whereby the Agents will sell on a private placement agency basis up to 24,300,000 common shares at $1.03 per common share for gross proceeds of $25,029,000. Canoro has also granted the Agents an over-allotment option to sell up to an additional 4,860,000 common shares at $1.03 per common share for additional gross proceeds of $5,005,800. Closing is anticipated to occur on or about July 14, 2006.

Canoro will pay the Agents a cash commission equal to 6.5% of the gross proceeds, plus issue Agents' warrants entitling the Agents to acquire common shares equal to 6.5% of the number of common shares issued through this financing. Each Agents' warrant shall entitle the holder to acquire one common share at a price of $1.30 per common share for 12 months from the date of issuance.

The offering is to be made by way of applicable prospectus exemptions as provided for in the Securities Act (Alberta) and comparable provisions in other provinces and jurisdictions, as agreed to by Canoro and the Agents. The common shares issued will be subject to a four month hold period.

Use of Proceeds

Gross proceeds from this financing are planned to fund the exploration and development of Canoro's existing properties in northeast India and acquire new exploration and development opportunities in India, as well as contribute to general corporate purposes.

Over the next 12 months, Canoro plans to invest approximately CAD$18 million (Amguri $8.7 million, AA-ON/7 $7.7 million, and AA-ONN-2003/2 $1.6 million), to begin unlocking the value of Canoro's Amguri development block and AA-ON/7 exploration block in northeast India. The proposed work program includes the drilling of three exploratory wells in the AA-ON/7 exploration block and two appraisal wells in the Amguri development block. The planned drilling program may also be expanded based on the level of success and actual cost of the wells.

Canoro is working with its partners and the Government of India to obtain final capital budget approval for the five well drilling campaign and other capital costs. Canoro has also started the tendering process to secure the drilling rig and necessary services to begin drilling at the start of the dry season in the fourth quarter.

Amguri

Canoro is planning to drill two appraisal wells to basement at approximately 4,000m during the fourth quarter 2006 and the first quarter of 2007. These wells are planned to test the potential of the undrilled structurally highest area of the producing Barail and Tipam formations, plus up to five additional prospective reservoirs. The expected gross cost to drill, test and complete each well is approximately CAD$6 million. Canoro expects each appraisal well to produce at higher rates than the existing producing wells. These wells are planned for tie-in during the first and second quarters of 2007.

The 3D seismic processing is now complete, with interpretation anticipated to take 4 to 6 weeks. The drilling locations for the appraisal wells are expected to be finalized and approved before the end of the third quarter of 2006.

The gas sales line is now installed with gas sales having just begun. For the remainder of the year, production from the three producing wells (Amguri 5, 6 and 8A) is expected to be in the range of 600 to 700 boe/d (gross). Oil production of approximately 250 to 300 bbl/d (gross) is expected from Amguri 5 and 6 together. Amguri gas volumes have increased to between 2.0 and 2.5 mmcf/d (gross). Canoro is entitled to receive world oil prices for its oil production and gas is planned to be sold at approximately US$2.00/mcf.

AA-ON/7

Initial interpretation of the recently acquired 340 km 2D seismic program has identified five independent exploration prospects in the western portion of the block. The prospects include a Cretaceous graben infill updip of the Dergaon 1 well, a Tipam seismic bright spot, a fractured basement high, a Barail sub-crop, and Barail channel sands.

The interpreted prospects appear to range in size between approximately 12 and 42 km2 and overlap in several places. Canoro intends to test these independent prospects through the drilling of three exploration wells. The total depth of these wells are anticipated to be between 1,500 and 2,000m, with a gross cost of approximately CAD$4 million to drill, test and complete each well. Success in any of these prospects has the potential to make a significant impact on Canoro's shareholder value.

Additionally, Canoro may acquire up to 100 km of 2D seismic in the Nagaland foothills in the eastern portion of the block to evaluate the potential of large sub-thrust targets. Currently, there is only old sparse seismic coverage over the area, limiting Canoro's ability to properly evaluate the area's prospectivity.

AA-ONN-2003/2

Preparatory work for 2D seismic data survey has started on the block. About 40 km of 2D data acquisition is expected prior to the monsoon season in June. The remaining 160 km of 2D and 100 km2 of 3D seismic survey will continue after the monsoons and is likely to commence in the third quarter of 2006-07.

The Operator (Geopetrol International Inc.) has informed Canoro that drilling operations are anticipated to begin in the second quarter of 2007.

Canoro is a Canadian-based international oil and gas company operating in the prolific Assam/Arakan basin of northeast India. Canoro has restored production from the suspended Amguri oil and gas field. Canoro is the operator of Amguri and has a 60% working interest. Canoro is the operator with a post-farmout 50% working interest in the 1,445 km2 AA-ON/7 exploration block, and has a post-farmout 15% non-operated working interest in the 295 km2 AA-ONN 2003/02 exploration block.

Common shares of Canoro trade on the TSX Venture Exchange under the symbol 'CNS'.

Certain statements contained in this news release may be considered as "forward looking". Such statements are generally identifiable by the terminology used, such as "intend", "plan", "expect", "appears", "estimate", "budget", "outlook" or other similar words. Such "forward looking" statements are subject to risks and uncertainties that could cause actual results to differ materially from estimated or implied results.

Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 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 shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The common shares offered will not and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or applicable exemption from registration requirements.

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

Contact Information

  • Canoro Resources Ltd.
    Rob McInnis
    Director, Investor Relations and New Ventures
    (403) 543-5748
    (403) 543-5740 (FAX)
    or
    Canoro Resources Ltd.
    2810, 715 - 5th Ave SW
    Calgary, Alberta T2P 2X6
    Website: www.canoro.com