Denovo Capital Corp.

September 07, 2011 13:52 ET

Denovo Provides Update on Proposed Qualifying Transaction and Independent Assessment of Prospective Resources

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 7, 2011) - Denovo Capital Corp. ("Denovo" or the "Company") (TSX VENTURE:DVO.P) is pleased to provide an update to 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 "Exchange"). The Exchange approved the filing of the Company's filing statement dated August 29, 2011 (the "Filing Statement") relating to the Transaction and the Filing Statement was filed on SEDAR on September 1, 2011. The Company has made its initial submission to the Exchange but has not received conditional approval of the Transaction. The Company expects to be in a position to close the Transaction in the next few weeks. Shareholders of the Company and Africa Oil are encouraged to review the Filing Statement which is filed under the Company's SEDAR profile at

Following the completion of the Transaction, the Company, among other things, will have consolidated its issued and outstanding common shares on the basis of one post-consolidation common share for every 0.65 pre-consolidation common shares, continued into the Province of British Columbia under the Business Corporations Act (British Columbia) and changed its name to "Horn Petroleum Corporation". For further information regarding the Transaction, please see the Company's press release dated August 11, 2011.

In connection with the transaction, Denovo is pleased to announce that it has received an independent evaluation of the prospective resources in the Dharoor Valley and Nugaal Valley Blocks in Puntland (Somalia) ("Resource Report"). The Resource Report, effective June 30, 2011, was prepared by Petrotech Engineering Ltd. ("Petrotech") and in accordance with the current guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. A copy of the Resource Report may also be found under the Company's profile on SEDAR.

The Resource Report indicates that gross best estimate prospective resource in the Dharoor Valley and Nugaal Valley Blocks, including both prospects and leads, are in excess of 5.2 billion barrels of oil. A summary of the Company's gross and net share of the unrisked prospective resources (prospects) and the net present values from the profit oil revenue less the un-recoverable amount of funds from the production operation; discounted at 0, 5, 10, 15 and 20% before and after income tax are presented in the table below. The net cash flow is calculated at forecast prices and escalated costs on the prospective resources, to all future time and after deduction of the capital costs, royalties and before and after deduction of income tax. All cash flow data is in U. S. dollars.

Unrisked L&M Oil Resources Before and After Tax NPV discounted @
Resources (Prospects)
100% Co.'s
0% 5% 10% 15% 20%
(Mbbl) (Mbbl) (Mbbl) (MM$) (MM$) (MM$) (MM$) (MM$)
Low Estimate
Dharoor 19,774 11,864 2,790 258 160 98 56 28
Nugaal 82,109 49,265 10,108 894 470 233 96 16
Total Low Estimate 101,882 61,129 12,898 1,152 631 331 152 43
Best Estimate
Dharoor 401,041 240,624 86,455 8,549 6,025 4,465 3,433 2,712
Nugaal 1,689,983 1,013,990 309,668 31,552 19,126 12,181 8,044 5,450
Total Best Estimate 2,091,024 1,254,614 396,123 40,101 25,152 16,646 11,477 8,162
High Estimate
Dharoor 3,459,660 2,075,796 755,041 75,450 52,679 38,905 29,930 23,725
Nugaal 12,208,497 7,325,098 2,314,341 241,402 140,508 86,866 56,089 37,353
Total High Estimate 15,668,157 9,400,894 3,069,382 316,852 193,186 125,771 86,020 61,078

Prospective resources (leads) are identified in both blocks and the unrisked resources at 100% and are as follows:

Total Unrisked Prospective Resources (Leads) - Dharoor Valley and Nugaal Valley

Estimates Low Best High
Petroleum Originally in Place (Mbbl) 1,044,887 16,012,157 66,301,497
Prospective Resources on Leads (Mbbl) @ 100% WI 156,733 3,202,431 16,575,374

The Company's Share of the Cost Oil and Profit Oil cannot be determined at this time until the leads can be upgraded to prospects together with the evaluation of production and economic forecasts.

Definitions and Cautionary Statements

Prospective Resources: those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates, assuming their discovery and development, and may be sub-classified based on project maturity.

Uncertainty Categories

Estimates of resources always involve uncertainty, and the degree of uncertainty can vary widely between accumulations/projects and over the life of a project. Consequently, estimates of resources should generally be quoted as a range according to the level of confidence associated with the estimates. An understanding of statistical concepts and terminology is essential to understanding the confidence associated with resources definitions and categories. The range of uncertainty of estimated recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. Resource should be provided as low, best and high estimates as follows:

  • Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
  • Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
  • High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

This approach to describing uncertainty may be applied to reserves, contingent resources and prospective resources. There may be significant risk that sub-commercial and undiscovered accumulations will not achieve commercial production. However, it is useful to consider and identify the range of potentially recoverable quantities independently of such risk.

Significant Positive and Negative Factors Relevant to the Resources Estimates

This news release contains forward looking information including, but not limited to, estimated resources. The forward looking information is based on current expectations and is subject to a number of risks and uncertainties which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to the following:

Risks associated with ever making a discovery

The estimation of prospective resource volumes for high-risk and poorly calibrated basins can be subject to large variation from the introduction of new information. The estimates presented herein are based on all of the information available; however, new data or information is likely to have a material effect on the resource assessment values. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that the discovery will be commercially viable to produce any portion of the resources. Given that a significant portion of the resources in the portfolio are in leads that require additional data to fully define their potential it is likely that significant changes to the resource estimates will occur with the incorporation of additional data and information.

Risk Associated with the Estimates

In the event of a discovery, basic reservoir parameters, such as porosity, net hydrocarbon pay thickness, fluid composition and water saturation, may vary from those assumed, affecting the volume of hydrocarbon estimated to be present. Other factors such as the reservoir pressure, density and viscosity of the oil and solution gas/oil ratio will affect the volume of oil that can be recovered. Additional reservoir parameters such as permeability, the presence or absence of water drive and the specific mineralogy of the reservoir rock may affect the efficiency of the recovery process. Recovery of the resources may also be affected by well performance, reliability of production and process facilities, the availability and quality of source water for enhanced recovery processes and availability of fuel gas. There is no certainty that certain mineral interests are not affected by ownership considerations that have not yet come to light.

Substantial Capital Requirements

The Company expects to make substantial capital expenditures for exploration, development and production of oil and gas reserves in the future. The Company's ability to access the equity or debt markets in the future may be affected by any prolonged market instability. The inability to access the equity or debt markets for sufficient capital, at acceptable terms and within required time frames, could have a material adverse effect on the Company's financial condition, results of operations and prospects.

Ability to Execute Exploration and Development Program

It may not always be possible for the Company to execute its exploration and development strategies in the manner in which the Company considers optimal. Execution of exploration and development strategies is dependent upon the political and security climate in the host countries where the Company operates. The Company's exploration and development programs may involve the need to obtain approvals from relevant authorities who may require conditions to be satisfied or the exercise of discretion by the relevant authorities. It may not be possible for such conditions to be satisfied.

Access to Infrastructure

The Company's ability to produce and market hydrocarbons from any potential discoveries will depend on its ability to access suitable infrastructure. The Company may also be affected by deliverability uncertainties related to the proximity of its potential production to pipelines and processing facilities and operational problems affecting such pipelines and facilities as well as potential government regulation relating to price and the export of oil and gas. Currently there is limited local infrastructure and markets for oil, natural gas and condensate and export infrastructure to enable other markets to be accessed. The Company will work with its partners and government authorities to evaluate the commercial potential and technical feasibility of any discovery made.

Additional Risks

Additional risks associated with the estimate of the prospective resources include risks associated with the oil and gas industry generally (i.e. financing; operational risks in exploration, development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections related to production; costs and expenses; health, safety, security and environmental risks; and the uncertainty of resource estimates), drilling equipment availability and efficiency, the ability to attract and retain key personnel, the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with dealing with governments and obtaining regulatory approvals, and the risk associated with international activity.

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

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

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Corporation's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. Forward-looking information included in this press release includes statements with respect to closing of the Transaction. This press release also contains forward-looking information relating to the intention of the parties to, among other things, complete the Transaction. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation. The material factors and assumptions include the parties to the agreements underlying the Transaction being able to obtain the necessary director, shareholder and regulatory approvals; TSX-V policies not changing; and completion of satisfactory due diligence. Risk factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: conditions imposed by the TSX-V, the failure to obtain the required directors' and shareholders' approvals in respect of the Transaction and related matters; changes in tax laws, general economic and business conditions; and changes in the regulatory environment. The Corporation cautions the reader that the above list of risk factors is not exhaustive. The forward-looking information contained in this press release is made as of the date hereof and the Corporation is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

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