Caza Oil & Gas, Inc.
TSX : CAZ
AIM : CAZA

Caza Oil & Gas, Inc.

February 24, 2008 02:24 ET

Caza Oil & Gas, Inc.: Farmout Agreement with Singular

HOUSTON, TEXAS--(Marketwire - Feb. 25, 2008) - Caza (TSX:CAZ)(AIM:CAZA) is pleased to announce that it has entered into a farmout agreement with Singular Oil & Gas Sands, LLC ("Singular") on the Wilcox 116 Property in South Texas.

Under the terms of the agreement Singular has acquired a 10.00% interest in the Wilcox 116 Property. In return Singular will bear 13.33% of the drilling costs through completion of the Jonell Cerny Gas Unit #1 test well (the "Cerny Well") and 10.00% of all costs on the Wilcox 116 Property thereafter. Singular will also pay US$64,625 of back costs associated with this property to Caza. This transaction has been entered into by the Company's subsidiary, Caza Petroleum, Inc. ("Caza Petroleum") in accordance with standard industry practices and management's risk management strategy.

The Wilcox 116 Property is located in Wharton County, Texas. Within this property, the Cerny Well commenced drilling on 15 January 2008, and is anticipated to take up to 60 days to drill to a depth of 16,500 feet. The Cerny Well is targeting gas in the Deep Wilcox Sands, which are analogous to sands currently producing in Caza's nearby Matthys-McMillan Gas Unit #1 well (the "Matthys-McMillan Well"). The Cerny Well, if successful, will establish numerous development locations. The dry well cost of the Cerny Well is estimated to be US$8.3 million.

Caza, through Caza Petroleum, is the operator of the Wilcox 116 Property and, following the disposal noted above, now holds a right to earn a 29.88% working interest (which reduces to a 27.81% working interest after completion of the initial well with a corresponding 20.86% net revenue interest).

For the purposes of the AIM Rules for Companies (the "AIM Rules"), the Company is treating Singular as an associate of Sercor Limited, which is a substantial shareholder of Caza, and therefore as a related party of the Company under the AIM Rules. The Company is also treating Singular as a related party of the Company under Canadian securities laws and therefore this farmout agreement is being treated by the Company as a related party transaction for the purposes of both the AIM Rules and Canadian securities laws.

The transaction has been approved by Caza's board of directors, all of whom are unrelated to Singular. The board of directors of Caza considers, having consulted with its nominated adviser, Noble & Company Limited, that the terms of this related party transaction are fair and reasonable insofar as the Company's shareholders are concerned. This transaction is exempt from the formal valuation and minority shareholder approval requirements of Multilateral Instrument 61-101 of the Canadian Securities Administrators because the board of directors of Caza has determined that the fair market value of the subject matter of the transaction does not exceed 25% of Caza's market capitalization.

In March 2007, Caza entered into a farmout agreement with Singular on the Hite Offset Property to drill the Matthys-McMillan Well in Wharton County, Texas. Under the terms of that agreement Singular paid 15.67% of the drilling costs to casing point of the Matthys-McMillan Well to earn a 14.01% interest in the property thereafter. "Casing point" is the point at which operations to complete the well as a producer are commenced.

The Hite Offset Property and Matthys-McMillan Well are located in Wharton County, Texas. Drilling began on the Matthys-McMillan Well in March 2007, and it was drilled to a depth of 17,700 feet. In September 2007 this well was perforated in the Upper Wilcox section and is currently flowing at 4.6 MMcf/d.

Caza holds a 19.62% working interest (14.32% net revenue interest) in the Hite Offset Property.

Mike Ford, Chief Executive Officer of the Company, commented:

"Like the recent transaction with Sojitz, this transaction consolidates our relationship with Singular in the Wharton West Wilcox area following our collaboration on the successful Matthys-McMillan Well."

About Caza

Caza is engaged in the acquisition, exploration, development and production of hydrocarbons in the Texas Gulf Coast (on-shore), south Louisiana, southeast New Mexico and the Permian Basin of West Texas regions of the United States of America through its subsidiary, Caza Petroleum, Inc..

In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies, the information contained in this announcement has been reviewed and approved by Anthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineer and a member of The Society of Petroleum Engineers.

ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests of providing Caza shareholders and potential investors with information regarding Caza, including management's assessment of Caza's and its subsidiaries' future plans and operations, certain statements contained in this news release are forward-looking statements or information within the meaning of applicable securities legislation, collectively referred to herein as "forward-looking statements." Forward-looking statements in this news release include, but are not limited to: future economic and operating performance (including per share growth, cash flow and increase in net asset value); future drilling costs; anticipated growth and success of resource plays and the expected characteristics of resource plays; free cash flow which may be generated in 2008 and beyond, and potential uses for such free cash flow; anticipated production and sales of oil, natural gas and NGLs in 2008; anticipated impact and success of Caza's price hedging strategy, if any; anticipated costs; anticipated prices for oil and natural gas; anticipated capital investment in 2008 and the allocation thereof; anticipated capital inflation; anticipated capital and operating cost efficiencies; anticipated growth in hydrocarbon production; forecast cash flow for 2008 and the anticipated ability to meet guidance targets.

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause the company's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things: volatility of and assumptions regarding oil and gas prices; assumptions based upon the company's current guidance; fluctuations in currency exchange and interest rates; product supply and demand; market competition; risks inherent in the company's marketing operations, including credit risks; imprecision of reserve estimates and estimates of recoverable quantities of oil, natural gas and liquids from resource plays and other sources not currently classified as proved; the company's ability to replace and expand oil and gas reserves; the company's ability to generate sufficient cash flow from operations to meet its current and future obligations; the company's ability to access external sources of debt and equity capital; the timing and the costs of well and pipeline construction; blowouts, fires, explosions and other sudden emergencies; drilling difficulties, such as lost circulation; the company's ability to secure adequate product transportation; changes in royalty, tax, environmental and other laws or regulations or the interpretations of such laws or regulations; the risk of terrorist threats; risks associated with future lawsuits and regulatory actions made against the company; and other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by Caza.

Although Caza believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release, and, except as required by law or regulation, Caza does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

Contact Information

  • Caza Oil & Gas, Inc.
    John McGoldrick
    Executive Chairman
    (281) 363-4442
    Website: www.cazapetro.com
    or
    Noble & Company Limited
    Nick Naylor / Jamie Boyd
    Nominated Adviser and Joint Broker
    +44 (0) 20 7763 2200
    or
    Aquila Financial Ltd
    Peter Reilly
    Financial Public Relations Advisers
    +44 (0) 20 7202 2601