Texada Capital Corp.

March 19, 2008 14:42 ET

CORRECTION FROM SOURCE: Texada Enters Letter of Intent for Acquisition of Colombian Oil and Gas Assets

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 19, 2008) - A correction from source is issued with respect to the release disseminated today at 9:30 AM EST. The fifth paragraph was added. The corrected release follows:

Texada Capital Corp. (TSX VENTURE:TXC.P) ("Texada" or the "Company"), is pleased to announce that it has entered a binding letter of intent (the "Letter Agreement") with Petropuli Ltda. ("Petropuli"), a Colombian limited liability company, and certain of its quotaholders, and Compania Geofisica Latinoamericana S.A. ("CGL") a Colombian private company to acquire not less than 90% of the quota capital of Petropuli and all of the interests in the E+P Agreement noted below (the "Acquisition"). Petropuli is a 47.4% working interest holder and CGL is a 4.4% working interest holder in oil and gas exploration and production rights granted by the Agencia Nacional de Hidrocarburos ("ANH") in an exploration and development agreement (the "E+P Agreement") over 23,167 hectares, that includes the Morichito Block located in the prolific East Plains, Llanos Basin, Colombia (the "Morichito Block"). Assuming completion of the Acquisition, Texada will acquire a 47.4% working interest in and operational control of the Morichito Block. The completion of the Acquisition will require all necessary regulatory and corporate approvals including those necessarily required of the Colombian government and its agencies.

States Read B. Taylor CEO and President: "The Company's strategy in 2008 is to establish an initial base production in both of its two focus countries, Brazil and Colombia, while developing a portfolio of low risk proven exploration plays and drilling opportunities with significant upside potential. This Colombian Morichito opportunity is the first of several significant projects the Company expects to complete in Colombia this year, a country known to have one of the best hydrocarbon resource potentials in the world with one of the most attractive fiscal terms in global exploration. Morichito presents a low risk, near term production opportunity to the Company as its first project."

The Morichito Block

Petropuli has completed extensive 3D seismic work and an exploration well on the Morichito Block. Petropuli drilled the Morichito #2 well in late 2006, recovered oil, but was unable to complete the well at the time due to adverse weather conditions resulting from the rainy season in this equatorial area. The well logs from this well have been analyzed both internally and by third party petrophysical experts and show potential high quality reservoir sands found in field analog wells in the area producing, for instance 1,350 bopd of 37 degree API oil (independent source: La Punta Well, Mirador Formation, Llanos Basin - Baraka Petroleum Limited, ASX Quarterly Report January 30, 2008).

Preliminary 3D seismic evaluation by the Company over the Morichito Block indicates several leads and drillable prospects the largest and most prospective of which shows similar geophysical similarities to The La Punta oil field, 25 kilometers to the west of Morichito which has produced 2 MMbo to date with total estimated recoverable field reserves of 6-9 MMbo (independent source: Baraka Petroleum Limited, ASX Quarterly Report January 30, 2008). In the Caracara Block, 20 kilometres to the southwest and on a parallel structural trend with Morichito, Hupecol has had multiple discoveries. To give an indication of the value of discoveries in the area, on March 17, 2008, Hupecol Caracara LLC entered into an agreement to sell the Caracara Prospect for US$920 million to an undisclosed buyer. (independent source: Yahoo Finance, March 17, 2008).

There are no oil/gas reserve estimates for the interest lands being acquired. It is unknown whether the analog reserve estimates were prepared in accordance to NI 51-101 and the Company has not verified the estimates and they therefore should not be relied upon.

Assuming completion of the Acquisition following the completion of Texada's "qualifying transaction", the plan is to complete and test the existing Morichito #2 well to bring it on production and then drill a second exploration well defined by detailed 3D analysis up dip from this discovery before the end of September 2008. The Company estimates that the net costs of the work program on the Morichito Block over a 12-month period would be approximately US$1,200,000 (inclusive of the US$1,000,000 work guarantee provided to the ANH as discussed below).

Two additional leads having similar potential have been identified on the Morichito Block which could be drilled should technical merit warrant. Further seismic work may be required to fully de-lineated these leads.

Acquisition Terms

Pursuant to the Letter Agreement Texada, advanced US$1,000,000 to Petropuli to provide an exploration work guarantee to the ANH, subject to Texada having the irrevocable right to the return of these funds if it decides not to complete the Acquisition.

In order to fund this advance, Texada has entered loan agreements (the "Loan Agreements") with certain lenders (the "Lenders") who have advanced money to Texada (the "Loan") for the purpose of funding a part of the advance that Texada will make to Petropuli. The Loan Agreements stipulates that the Loan will automatically be converted into shares of Texada upon the acquisition of Petropuli by Texada unless either (i) the Lenders elect otherwise; or (ii) the acquisition has not taken place by May 31, 2008.

As consideration for not less than 90% of the quotas of Petropuli and the interests of CGL, the Letter Agreement requires Texada to pay a total of US$2,500,000, issue $2,000,000 worth of share of Texada and grant a 4% net production royalty.

Under the terms of the Letter Agreement, the parties are permitted to complete due diligence investigations of each other in connection with the transaction from the date of signing the Letter Agreement until April 15, 2008. At such time, the parties plan to negotiate a definitive agreement to set out the terms of their ongoing relationship.

The obligation of Texada and Petropuli Ltda. to complete the transaction contemplated under the Letter Agreement is subject to the satisfaction of certain conditions precedent including: (a) the receipt of the approval of the TSX Venture Exchange and all other necessary regulatory authorities and third party approvals; (b) proportionate contributions to the ANH work guarantee from the remaining interest holders in the E+P Agreement; and (C) the satisfactory completion of due diligence review by each party. Additional funding or a reallocation of a portion of Texada's cash may be required to fund the Acquisition costs and work commitments of Petropuli Ltda. Texada will not re-allocate cash until it has received, evaluated and filed an independent technical report on the Morichito Block in form NI 51-101.


Read Taylor, President and CEO

This press release includes "forward-looking statements" including forecasts, estimates, expectations and objectives for future operations that subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding future production, reserve additions and capital expenditures are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Texada does not assume the obligation to update any forward-looking statement.

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

Contact Information

  • Texada Capital Corp.
    Brooke Cote
    Investor Relations
    (949) 373-3655