Donnybrook Energy Inc.
TSX VENTURE : DEI

Donnybrook Energy Inc.

August 25, 2011 18:15 ET

Donnybrook to Reorganize into Two Companies: Donnybrook Energy Inc. and Donnycreek Energy Inc.

CALGARY, ALBERTA--(Marketwire - Aug. 25, 2011) - Donnybrook Energy Inc. ("Donnybrook" or the "Company") (TSX VENTURE:DEI) reports that it intends to complete a proposed reorganization of its business components into two separately listed public corporations by the spin-out of certain non-core oil and gas assets to a new corporation, Donnycreek Energy Inc. ("Newco"), by means of a plan of arrangement pursuant to the Business Corporations Act (Alberta) (the "Arrangement"). The objective of the Arrangement is to maximize shareholder value of the retained oil and gas assets and the oil and gas assets of the Company being transferred to Newco.

Newco will hold the following key assets (the "Assets"):

  • 4,864 gross (4,864 net) hectares of petroleum and natural gas rights prospective for Montney, Wilrich, Bluesky and Falher liquid rich natural gas resource development in the Deep Basin area of west central Alberta, consisting of Donnybrook's interests in the Prairie Creek, Gold Creek, Ansell Creek, Grand Prairie, Valhalla Creek and Leland Creek areas of Alberta;
  • 1,920 gross (465 net) hectares of Mannville petroleum and natural gas rights in the Delia-Michichi area of eastern Alberta, including an interest in 2 gross (0.82 net) producing natural gas wells and 2 gross (0.32 net) non-producing wells in this area; and
  • $300,000 in cash.

The remaining assets, including Donnybrook's interests in its core areas of Simonette, Resthaven and Bigstone in the Deep Basin area of west central Alberta will remain in Donnybrook along with the remaining cash to fund Donnybrook's ongoing exploration and development program.

Transaction Terms

Under the proposed Arrangement, it is intended that the Company will transfer the Assets to Newco in return for common shares of Newco ("Newco Shares") and the issuance by Newco to Donnybrook of a promissory note in the principal amount of approximately $2.19 million (the "Promissory Note"). Pursuant to the Arrangement, shareholders of Donnybrook will be entitled to receive 0.025 of a Newco Share for each common share of the Company outstanding as of the effective date of the Arrangement. It is currently contemplated that the plan of arrangement will be structured as a return of capital for Donnybrook shareholders.

Upon closing of the Arrangement, the directors of Newco are expected to be the current directors of the Company namely: Malcolm Todd, Murray Scalf, Randy Kwasnicia, David Patterson, Ken Stephenson and Colin Watt. Additionally, it is currently expected that the officers of Newco are expected to be the current officers of the Company, namely: Malcolm Todd as the President and Chief Executive Officer of Newco, Robert Todd as the Chief Financial Officer of Newco and Murray Scalf as the Vice President of Business Development of Newco.

It is anticipated that the Arrangement will be completed in mid October, 2011. The implementation of the Arrangement is subject to, among other things: further board of directors approval by each of the Company and Newco of the final structure and terms and the arrangement agreement to be entered into between the Company and Newco, shareholder, court and regulatory approvals, including TSX Venture Exchange acceptance of the Arrangement, the continued listing of the Company's common shares on the TSX Venture Exchange and conditional listing approval of Newco Shares. No application for listing has been made and there is no assurance that if made that approval will be granted. The TSX Venture Exchange has not approved or disapproved the Arrangement and there is no assurance that the TSX Venture Exchange will approve the Arrangement.

The Company will hold a special meeting of shareholders to approve the Arrangement. Further particulars, including the record and meeting dates, will be announced in due course and a complete description of the Arrangement will be set forth in a management information circular to be sent to shareholders of the Company in connection with the special meeting to approve the Arrangement.

In connection with the Arrangement, it is expected that certain directors and officers of the Company will be among the participants in a private placement for Newco Shares at a purchase price per share equivalent to the deemed issue price per Newco Share issued pursuant to the Arrangement, for aggregate gross proceeds of approximately $2.4 million (the "Private Placement"). The proceeds of the Private Placement will be used to repay the Promissory Note and to provide Newco with additional working capital. The Arrangement will be conditional upon the completion of the Private Placement.

Assuming no convertible securities of the Company are exercised prior to the Arrangement, on completion of the Arrangement, including the Private Placement, it is anticipated that Newco will have approximately 10.8 million Newco Shares outstanding.

Further information relating to the Company is also available on its website at www.donnybrookenergy.ca.

ON BEHALF OF THE BOARD OF DONNYBROOK ENERGY INC.

Malcolm F.W. Todd, Chief Executive Officer

FORWARD-LOOKING STATEMENTS

Certain information set forth in this news release contains forward-looking statements or information ("forward-looking statements"), including statements regarding the timing and completion of the Arrangement, the timing and completion of the Private Placement, the transfer of the Assets to Newco, the receipt of any shareholder and regulatory approvals for the Arrangement and the Private Placement, the development potential of the Company's properties and the number of Newco Shares outstanding upon completion of the Arrangement. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Donnybrook's control, including the risks of the Company not obtaining the required approvals to proceed with the Arrangement or the Private Placement, tax consequences of the Arrangement, the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, operational risks in exploration and development, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal and external sources. Although Donnybrook believes that the expectations in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our management's discussion and analysis and other documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Donnybrook does not undertake any obligation to publicly update 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 document are expressly qualified by this cautionary statement.

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 news release.

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