Denovo Capital Corp.

August 11, 2011 19:48 ET

Denovo Provides Update on Proposed Qualifying Transaction

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 11, 2011) - Denovo Capital Corp. ("Denovo" or the "Corporation") is pleased to announce that has entered into a definitive share exchange agreement (the "Share Exchange Agreement") in respect of its previously announced acquisition of all the issued and outstanding shares of Canmex Holdings (Bermuda) I Ltd. ("Canmex I") from Africa Oil Corp. ("Africa Oil"), which transaction (the "Transaction") is intended to constitute the Corporation's "qualifying transaction" under the applicable policies of the TSX Venture Exchange (the "TSX-V"). The Share Exchange Agreement and the Transaction are described in greater detail below.

Information Concerning Africa Oil

Africa Oil is a corporation existing under the laws of British Columbia and is listed on the TSX-V and on First North at NASDAQ OMX-Stockholm under the trading symbol "AOI". Africa Oil is a Canadian oil and gas company with assets in Kenya, Ethiopia, Mali and Puntland (Somalia). Canmex I is a wholly-owned subsidiary of Africa Oil and is the indirect holder of a 60% participating interest in each of the Dharoor Valley and the Nugaal Valley Production Sharing Agreements in Puntland, Somalia (the "Puntland PSAs"). Africa Oil and its subsidiaries are currently in the process of planning a two well exploratory drilling campaign in Puntland (Somalia). Drilling locations have been selected and contracts are being entered into with drilling and drilling related subcontractors. On the ground drilling and logistics operations have commenced.

Information Concerning Denovo

The Corporation is a "capital pool company" under the policies of the TSX-V. The common shares of the Corporation (the "Denovo Shares") were listed for trading on the TSX-V on October 12, 2010 upon completion of the Corporation's initial public offering. On May 11, 2011, the Corporation entered into a letter of intent with Africa Oil with respect to the proposed Transaction (the "Letter of Intent"). The Letter of Intent was amended on June 28, 2011, July 28, 2011 and August 5, 2011 in order to allow the Corporation and Africa Oil to complete the planning, preparation and execution of the Share Exchange Agreement. Trading of the Denovo Shares was halted on May 12, 2011 in connection with the announcement of the proposed Transaction and trading of the Denovo Shares may not resume until after the filing statement, to be prepared in connection with the Transaction, is accepted by the TSX-V and filed on SEDAR.

At a special meeting of the shareholders of the Corporation held on June 30, 2011 (the "Meeting"), the shareholders of the Corporation approved certain matters in contemplation of the Transaction which included: (a) an approval of an increase in the number of directors of the Corporation from three to four; (b) the election of four directors of the Corporation; (c) the approval of the consolidation of the issued and outstanding Denovo Shares on the basis of 0.65 post-consolidation Denovo Shares for every one (1) pre-consolidation Denovo Share (the "Consolidation"), to be effected immediately prior to completion of the Transaction; (d) approval of a name change of the Corporation to "Horn Petroleum Corporation" or such other name as is authorized by the board of directors of the Corporation; and (e) approval of the continuance (the "Continuance") of the Corporation into the province of British Columbia pursuant to the provisions of the Business Corporations Act (British Columbia) ("BCBCA").

In connection with the Continuance, the Corporation will file articles of continuance immediately following the completion of the Transaction. Upon giving effect to the Continuance, the existing by-law of the Corporation will be repealed and a new by-law conforming to the provisions of the BCBCA will come into effect.

For further details with respect to the matters approved at the Meeting, please see the Corporation's press release dated July 8, 2011 and the Corporation's management information circular dated May 31, 2011 prepared in connection with the Meeting, which is available for review under the Corporation's SEDAR profile at www.sedar.com.

Information Concerning the Transaction and the Share Exchange Agreement

The Corporation and Africa Oil entered into the Share Exchange Agreement on August 11, 2011 in order to implement the Transaction. The Corporation, on a post-Transaction basis, is hereafter referred to for convenience as the "Resulting Issuer".

Pursuant to the Share Exchange Agreement, Denovo will issue 27,777,778 Denovo Shares, after giving effect to the Consolidation, at a deemed price of $0.90 per Denovo Share in exchange for all the issued and outstanding shares of Canmex I, with an effective date of May 1, 2011. Upon completion of the Transaction, Canmex I will be a wholly-owned subsidiary of the Resulting Issuer (to be renamed "Horn Petroleum Corporation") and it will continue to carry on the business currently conducted by it. It is anticipated that upon completion of the Transaction there will be approximately 74,840,473 Denovo Shares issued and outstanding, on a non-diluted basis and after giving effect to the Consolidation, not including Denovo Shares, if any, issued to finders pursuant to Denovo's Private Placement (defined below). Former shareholders of the Corporation will hold 1,527,500 post-Consolidation Denovo Shares, purchasers of Subscription Receipts (as defined below) will hold 45,535,195 post-Consolidation Denovo Shares and Africa Oil will receive 27,777,778 post-Consolidation Denovo Shares pursuant to the Share Exchange Agreement.

Upon completion of the Transaction, it is expected that the Resulting Issuer will meet the listing requirements of the TSX-V for a Tier II Oil and Gas Issuer.

Financing

As previously announced, on August 2, 2011, Denovo completed a non-brokered private placement of 45,535,195 subscription receipts of the Corporation (the "Subscription Receipts"), at a price of $0.90 per Subscription Receipt, for aggregate gross proceeds of $40,981,675.50 (the "Private Placement").

The subscription proceeds from the Private Placement are being held in escrow pending the satisfaction of certain release conditions (the "Release Conditions"). The Release Conditions include the receipt of all regulatory approvals and the satisfaction of certain conditions to the completion of the Transaction.

If the Release Conditions are satisfied, each Subscription Receipt purchased under the Private Placement will be automatically converted, without payment of any additional consideration or any further action by the holder thereof, into one unit of the Corporation (a "Unit"). Each Unit will consist of one post-Consolidation Denovo Share and one post-Consolidation Denovo Share purchase warrant (a "Warrant"). Each Warrant will entitle the holder to acquire one additional post-Consolidation Denovo Share at an exercise price of $1.50 for the first two years following the satisfaction of the Release Conditions, subject to accelerate expiry in certain circumstances.

The Resulting Issuer intends to use its available funds (including the net proceeds from the Private Placement) for, among other things, the costs and amounts incurred following the closing of the Qualifying Transaction, including costs of the work program for the Qualifying Property, as defined by the policies of the TSX-V, and general working capital costs of the Resulting Issuer.

Management and Board of Directors of the Resulting Issuer

The following is a brief description and jurisdiction of residence of each of the proposed members of management and directors for the Resulting Issuer.

Keith Hill – Director and Chairman

Mr. Hill has over 25 years experience in the oil industry including international new venture management and senior exploration positions at Occidental Petroleum and Shell Oil Company. His education includes a Master of Science degree in Geology and Bachelor of Science degree in Geophysics from Michigan State University as well as an MBA from the University of St. Thomas in Houston. He is currently President and CEO of Africa Oil Corp. and Chairman of the Board of BlackPearl Resources, Shamaran Petroleum and Petrovista Energy. Prior to his involvement with Africa Oil, Mr. Hill was President and CEO of Valkyries Petroleum Corp. where he led the company through rapid growth and ultimately a highly successful $700 million takeover by Lundin Petroleum. In addition, Mr. Hill was one of the founding directors of Tanganyika Oil which was recently the subject of a $2 billion takeover by Sinopec International Petroleum.

Ian Gibbs - Director

Mr. Gibbs is a Canadian Chartered Accountant and a graduate of the University of Calgary where he obtained a bachelor of commerce degree. He is currently the Chief Financial Officer of Africa Oil Corp. Prior to Africa Oil, Ian was the Chief Financial Officer of Tanganyika Oil Company Ltd. which was acquired by Sinopec International Petroleum Exploration and Production Corporation for $2 billion. Prior to Tanganyika Oil, Mr. Gibbs was CFO of Valkyries Petroleum Corp. which was the subject of a $700 million takeover.

Wojtek Wodzicki - Director

Dr. Wodzicki has worked in the international mining industry since 1987, managing exploration programs on five continents. His impressive career with Teck Cominco Ltd. included managing exploration offices in Bolivia, Peru, Chile, and Argentina. In 2001 Dr. Wodzicki was appointed Teck Cominco's General Manager of Exploration for North America and Europe-Africa. He holds a doctorate in Geosciences from the University of Arizona.

Dr. Wodzicki is currently the President and CEO of NGEx Resources Inc., a TSX-V listed exploration company with gold and copper projects in North and South America and Africa.

Randy Neely - Director

Mr. Neely has over 19 years of financial services and oil and gas executive experience. His executive experience includes working as CFO of Pearl (BlackPearl) Exploration and Production and prior to that as CFO of Trident Exploration. Since 2009 Mr. Neely has been CFO of Zodiac Exploration Inc., a TSX-V listed company focused on oil exploration in the San Joaquin Basin in California USA. Prior to working directly in the oil and gas industry Mr. Neely spent 11 years working in the financial services industry with TD Securities investment banking and at KPMG LLP where he obtained his Chartered Accounting designation. Mr. Neely also holds a Chartered Financial Analyst designation.

David Grellman – President and Chief Executive Officer

Mr. Grellman has over 39 years of international experience in the oil industry, including 30 years with Occidental Oil and Gas Corporation. He has managed and headed up operations throughout Africa, the Middle East, Central America, as well as Asia during his highly successful career. Mr. Grellman has a BA, Geology and Economics, from Sydney University, Sydney, Australia.

Jeromie Kufflick – Chief Financial Officer

Mr. Kufflick is a Canadian Chartered Accountant and a graduate of the University of Saskatchewan where he obtained a bachelor of commerce degree. Mr. Kufflick's eleven years of experience includes seven years at Trican Well Service Ltd. and three years at KPMG LLP. Since March 2010, Mr. Kufflick has been the controller of Africa Oil Corp.

Ronda Fullerton – Corporate Secretary

Ms. Fullerton has over twelve years of corporate services experience, including four years as corporate secretary for Pacific Rim Mining Corp. Currently, Ms. Fullerton provides paralegal and corporate secretary services to Namdo Management Services Ltd.

Interests of Insiders

Upon completion of the Transaction and the exercise of the Subscription Receipts issued pursuant to the Private Placement, no person other than Africa Oil will beneficially own, directly or indirectly, or exercise control or direction over more than 10% of the Denovo Shares. It is currently anticipated that upon completion of the Transaction, Africa Oil will directly hold approximately 38,888,889 (51.8%) Denovo Shares on an undiluted basis. Keith Hill is currently President, Chief Executive Officer and a director of Africa Oil and a proposed director of the Resulting Issuer. Ian Gibbs is currently Chief Financial Officer of Africa Oil and a proposed director of the Resulting Issuer.

Sponsorship

Haywood Securities Inc., subject to completion of satisfactory due diligence, has agreed to act as sponsor in connection with the Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

Arm's Length Transaction

The Transaction will not constitute a Non-Arm's Length Qualifying Transaction under the applicable policies of the TSX-V. The approval of the shareholders of the Corporation is not required for the Transaction.

Other Information and Updates

Denovo and Africa Oil will continue to provide further details in respect of the Transaction, in due course, by way of press releases.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSX-V acceptance. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX-V has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Further information concerning Canmex I, the Puntland PSAs, the Transaction and the Resulting Issuer will be contained in a filing statement, to be prepared in accordance with the policies of the TSX-V, and filed on the Corporation's SEDAR profile at www.sedar.com prior to the completion of the Transaction.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Denovo Capital Corp.
    A. Murray Sinclair
    President and Chief Executive Officer,
    Chief Financial Officer and Director
    (604) 689-1428