Cygam Energy Inc.

Cygam Energy Inc.

January 04, 2007 09:15 ET

Cygam Energy Inc. Announces the Proposed Purchase of a Free Carried Interest in Three Exploration Permits in Italy

CALGARY, ALBERTA--(CCNMatthews - Jan. 4, 2007) - Cygam Energy Inc. (TSX VENTURE:CYG) (the "Corporation" or "Cygam") is pleased to announce that it has entered into a Purchase and Sale Agreement (the "Agreement") with Vittorito Petroleum S.r.L. ("Vittorito"), a private company based in Rome, Italy, to acquire a 12.5% free carried interest inclusive of all exploration costs to casing point in the first wells to be drilled in the B.R268.RG and Civitaquana permits and a 5% free carried interest in the first well to be drilled in the Montalbano permit.

The purchase price to be paid for the free carried interest in the three permits described above (the "Permits") is $615,000, consisting of a cash payment of Cdn. $300,000 and 484,614 common shares of the Corporation ("Common Shares") at a deemed price of $0.65 per share, plus warrants exercisable to purchase up to 200,000 Common Shares at a price of $1.50 per share for a period of two years from closing. The transfer and assignment of the free carried interest of Vittorito in the Permits shall be effective as of May 31, 2006.

The Agreement further provides that Cygam shall issue additional Common Shares to Vittorito in the event that Cygam is able to successfully develop the lands to which the Permits relate. The Agreement requires that additional Common Shares be issued if specified levels of proved and producing reserves, based on an independent engineering report acceptable to each of the parties, are attributed to the lands. The Agreement provides for the issuance of Common Shares having a deemed value (based on the market price of the Common Shares at the time of issue) of (i) $500,000 in the event that proved and producing reserves of 10MM bbls are established, (ii) $2,000,000 in the event that proved and producing reserves of 100MM bbls are established and (iii) a prorated value of Common Shares for proved and producing reserves that are established in an amount between these thresholds, subject to a maximum of 1,000,000 Common Shares to be issued pursuant to this provision.

Cygam's wholly owned subsidiary, Vega Oil S.r.L. ("Vega"), had signed an agreement effective May 31, 2004, to assign to Vittorito these free carried interests in consideration for presenting the three prospects to Vega and for all past costs incurred to acquire the Permits. Vittorito is a private company which was owned 50% by Giuseppe Rigo, the late Dr. Rigo's son, and 50% by an unrelated party. Mr. Giuseppe Rigo relinquished his 50% interest in Vittorito shortly after his appointment to the Board of Directors of Cygam on June 15, 2006.

Management and the independent directors of Cygam have determined that this transaction represents an excellent value for the Corporation based on the anticipated cost of carrying the above noted free carried interest in the first well to be drilled in each of the three Permits. The acquisition of the interest of Vittorito in the Permits will be exempt from the minority approval and valuation requirements applicable to related party transactions as the value of the transaction is less than 25% of the Corporation's market capitalization. The acquisition of the free carried interests is expected to close less than 21 days following the issuance of a material change report in relation to this transaction, which management has determined is reasonable and necessary to accommodate Vittorito's business objectives.

The TSX Venture Exchange has provided its conditional acceptance to the acquisition of the interest of Vittorito in the Permits.

This news release includes certain "forward-looking" statements. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding future plans and objectives of Cygam Energy Inc., are forward-looking statements that involve various risks and uncertainties, including the uncertainty of the timing in carrying out future plans. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated or expected in such statements. Important factors that could cause actual results to differ materially from Cygam's expectations are risks detailed herein and from time to time in the continuous disclosure filings made by Cygam with securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at

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

Contact Information