Emerge Oil & Gas Inc.

Emerge Oil & Gas Inc.

September 12, 2011 08:00 ET

Emerge Announces Asset Divestiture Agreement

CALGARY, ALBERTA--(Marketwire - Sept. 12, 2011) - Emerge Oil & Gas Inc. ("Emerge" or the "Company") (TSX:EME) announced today that it has entered into an agreement with Secure Energy Services Inc. ("Secure") to divest of its 100% owned Silverdale crude oil and emulsion processing facility near Lloydminster, Saskatchewan to Secure for cash consideration of $18.0 million and the provision of preferred rate processing agreements for Emerge's continued use of the facility.

Emerge has invested approximately $14.5 million over the past two years to expand the facility to its current throughput of 12,000 barrels per day of oil and 60,000 barrels per day of emulsion in addition to building a terminal for clean oil into the Manitou pipeline. The initial investment in the facility was designed to: acquire priority access to processing capacity and a clean oil terminal; construct a facility closer to its producing fields to reduce trucking costs; and reduce processing and clean oil terminal fees below industry rates. As part of the asset divestiture transaction, Emerge has negotiated with Secure priority access for its volumes, a flat preferred oil processing rate and clean oil terminal fees along with a preferred rate for its slop oil and sand handling fees all for a period of 7 years. Through this transaction, Emerge expects to achieve the benefits of the original investment and realize the expected reduction in operating costs that were to be obtained from the facility in addition to a return of its capital to re-invest into oil and gas activities.

Tom Greschner, President and Chief Executive Officer of Emerge, stated, "We are extremely pleased with this transaction, that when concluded, will immediately strengthen our balance sheet through the upfront cash component, and thereafter, will offer long term operating cost savings through the processing fee agreements. This transaction will allow us to reduce our facility operating costs while continuing to meet our fluids processing needs within a predictable cost structure and with minimal disruption to our ongoing operations. In addition, monetizing our investment will free up capital and company resources to focus on executing our promising light and heavy oil drilling programs. We look forward to a long term partnership with Secure which is a reputable and established midstream services company."

Closing of the transaction is subject to customary closing conditions and is expected to occur on September 30, 2011. Upon closing, Emerge expects to realize, net of closing expenses, proceeds of approximately $17.7 million which will be used to reduce the Company's bank indebtedness.

About Emerge Oil & Gas Inc.

Emerge is engaged in the acquisition and exploration for and development and production of oil and natural gas in Western Canada. The Company currently operates within two principal areas, namely, the Lloydminster area of west-central Saskatchewan and east-central Alberta and the Battlebend/Coronation area of east-central Alberta. Emerge is headquartered in Calgary, Canada.

Reader Advisories:

Barrel of Oil Equivalent

The Company may present petroleum and natural gas production and reserve volumes in barrel of oil equivalent ("boe") amounts. For purposes of computing such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) is used. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this news release contains forward-looking statements and information concerning: the benefits expected to be achieved from the asset divesture transaction (the "Transaction"), including future operating cost savings and stability; expectation of minimal disruption to the Company's ongoing operating from executing the Transaction; expectation that the Transaction will close, and the closing date thereof; and the expected net cash proceeds from the Transaction after closing costs.

The forward-looking statements in this news release are based on certain key expectations and assumptions made by Emerge, including but not limited to expectations and assumptions concerning: the ability of Emerge and Secure to close the Transaction; the timing of the closing of the Transaction; the benefits to be realized from the Transaction, including operating cost savings and stability; and the receipt, in a timely manner, of any regulatory and third party approvals.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties, certain of which are beyond the control of the Company. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: the inability of Emerge and/or Secure to close the Transaction, in a timely fashion; the uncertainty of estimates and projections relating to production rates, operating costs and other expenses; health, safety and environmental risks; failure to obtain required regulatory and other third party approvals; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive. Additional information on these and other factors that could impact Emerge can be found in Emerge's Annual Information Form for the year ended December 31, 2010 which may be accessed through Emerge's SEDAR profile at www.sedar.com.

The forward-looking statements and information contained in this news release are made as of the date hereof and Emerge undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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