Jomar Capital Corp.
TSX VENTURE : JOE.P

November 19, 2010 09:01 ET

Jomar Capital and Online Energy Announce Execution of Amalgamation Agreement in Respect of Previously Announced Qualifying Transaction, Oil and Gas Property Acquisition and Brokered Financing

CALGARY, ALBERTA--(Marketwire - Nov. 19, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS

Jomar Capital Corp. ("Jomar") (TSX VENTURE:JOE.P) is pleased to announce that it has entered into a definitive agreement dated November 17, 2010 (the "Amalgamation Agreement") with Online Energy Inc. ("Online") in respect of the previously announced qualifying transaction made on September 23, 2010, pursuant to which Jomar will acquire all of the issued and outstanding common shares (the "Online Common Shares") of Online for consideration consisting of common shares (the "Jomar Common Shares") of Jomar (the "Business Combination"). Pursuant to the Amalgamation Agreement, Online and a wholly-owned subsidiary of Jomar shall carry out a statutory amalgamation whereby shareholders of Online shall receive 16.25 Jomar Common Shares for each Online Common Share held with a deemed value of $1.30 per share for each Online Common Share owned. There are currently 712,003 Online Common Shares issued and outstanding which would result in the issuance of approximately 11,570,049 Jomar Common Shares at a deemed price of $0.08 per share pursuant to the Business Combination, subject to rounding and excluding any Online Common Shares issued pursuant to the Online Private Placements (described below). The Business Combination, when completed, will constitute the qualifying transaction of Jomar pursuant to Policy 2.4 of the TSX Venture Exchange Inc. (the "Exchange") Corporate Finance Manual.

The Business Combination is subject to the approval of the Exchange and all other necessary regulatory approvals. The completion of the Business Combination is also subject to additional conditions precedent, including shareholder approval of Online and the completion of a private placement of securities of Online for minimum aggregate gross proceeds of $5.0 million.

About Online and the Existing Online Properties

Online was originally created to pursue oil and gas exploration opportunities in Alberta through grassroots prospecting, posting of prospective Crown mineral rights, and subsequent bidding at Alberta Crown landsales. To date, Online has successfully acquired prospective acreage on two oil projects. The first is a Montney oil property in the Charlie area of the Peace River Arch in northern Alberta where Online has leased 5,760 acres (9 sections) at 100% working interest. The second is a Viking and Nordegg oil property in the Greencourt area of central Alberta where Online has leased 3,840 acres (6 sections) at 100% working interest.

Online expects to drill both properties in 2011 and continues to seek additional oil and gas projects through grassroots exploration. Online is also evaluating additional oil and gas acquisition opportunities and will attempt to execute those that meet financial and operational thresholds and are complementary to its existing properties.

Financial information regarding Online and its existing properties will be included in a subsequent press release.

About the Acquisition

Online has entered into an agreement dated November 17, 2010 (the "Acquisition Agreement") with an arm's length public company pursuant to which Online will acquire producing oil and gas assets in the greater Paddle River area of central Alberta and approximately 15,200 net acres of associated undeveloped land (the "Assets") for consideration of $5,910,000, consisting of $3,940,000 cash and 1,515,385 Online Common Shares at a deemed issuance price of $1.30 per Online Common Share (the "Acquisition"). The Acquisition has the following characteristics:

Production 300 boe/d
Commodity mix 32% oil and natural gas liquids
Net undeveloped land 15,200 acres

The Acquisition is complementary to Online's existing undeveloped lands in the Greencourt area and will add a component of operated production infrastructure to support additional development in this area. The acquired production is primarily liquids-rich gas (up to approximately 70 bbls/mmcf) and oil. Online management has identified multiple opportunities to increase production through re-entries, re-completions and re-activations of existing wells, and through vertical and horizontal drilling of an acquired 100% working interest Ostracod oil property.

The Acquisition also includes a Notikewin liquids-rich gas producing property in the Niton area (up to approximately 30 bbls/mmcf). This property was previously developed with vertical wells by the Online management team who feel that additional potential exists to develop the property through horizontal drilling and multi-stage fracture completions.

An independent reserves evaluation is being prepared for the Assets in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. Financial information and reserves values and other technical information regarding the Assets will be included in a subsequent press release.

The Acquisition will be completed concurrent with, but is not a condition to, the completion of the Business Combination. The completion of the Acquisition is subject to the satisfaction of all conditions to the completion of the Business Combination and the completion of an equity financing for aggregate proceeds of at least $11.0 million through a combination of a non-brokered private placement of up to $2.0 million at a price of $1.30 per Online Common Share and a brokered private placement of a minimum of $10.0 million at a price of $1.30 per Online Common Share (described below) (collectively, the "Online Private Placements").

Equity Financing

Online has entered into an agreement with Wellington West Capital Markets Inc. (the "Agent") for an offering, on a private placement basis, to raise minimum aggregate gross proceeds of $10 million and maximum aggregate gross proceeds of $20 million (the "Offering") through the issuance of subscription receipts ("Subscription Receipts") at a price of $1.30 per Subscription Receipt (the "Offering"). In connection with the Offering, Online has agreed to pay a cash commission to the Agent in the amount of 6% of the aggregate gross proceeds.

Closing of the Offering is expected to occur on or about December 9, 2010, and is subject to customary conditions and regulatory approvals, including the approval of the TSX Venture Exchange. The net proceeds from the sale of the Subscription Receipts will be used to fund the cash portion of the Acquisition, for the company's initial capital program and for general corporate purposes.

The gross proceeds from the sale of the Subscription Receipts will be held in escrow pending the completion of the Acquisition and the Business Combination. If the Acquisition and Business Combination are completed on or before January 31, 2011, the proceeds will be released to Online. If the Acquisition and Business Combination are not completed on or before January 31, 2011, or either of the Amalgamation Agreement or the Acquisition Agreement is terminated at an earlier time, holders of Subscription Receipts will receive a cash payment equal to the offering price of the Subscription Receipts and any interest that was earned thereon during the term of the escrow.

Upon satisfaction of the conditions relating to the release of the gross proceeds of the Offering from escrow, each Subscription Receipt shall deemed to be exercised, for no additional consideration or action on the part of the holder thereof, for one Online Common Share. In addition, all Online Common Shares issued pursuant to the Offering shall be exchanged for Jomar Common Shares pursuant to the Business Combination and on the same basis as all other holders of Online Common Shares.

Other Matters

Trading of the Jomar Common Shares will not resume until the Exchange has reviewed a resource report regarding the Online properties and all other documents required by the Exchange have been filed. Jomar will issue a further news release when the Exchange has received the necessary documentation and trading of the Jomar Common Shares is to resume. It is currently anticipated that closing of the Business Combination and the Acquisition will occur on or about December 21, 2010.

Forward Looking Information

As indicated above, completion of the Business Combination is subject to a number of conditions, including but not limited to, the Exchange acceptance and shareholder approval. The Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Information Circular or Filing Statement, as applicable, of Jomar to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon. Trading in the securities of Jomar should be considered highly speculative.

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Online and Jomar. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Jomar and Online shareholders and potential investors with information regarding Jomar and Online, including management's assessment of Jomar's and Online's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on Jomar's or Online's, as the case may be, beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. Jomar and Online believe the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements.

In particular, this press release may contain forward looking statements pertaining to the following:

  • the Business Combination;
  • the Acquisition;
  • the Offering;
  • the performance characteristics of Online's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of Online's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

Online's and Jomar's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • liabilities inherent in oil and natural gas operations;
  • uncertainties associated with estimating oil and natural gas reserves;
  • competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, neither Jomar nor Online undertakes any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The Subscription Receipts offered and the underlying Online Common Shares have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and many not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable states securities laws.

Neither the TSX Venture Exchange nor its Regulation Service 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

  • Jomar Capital Corp.
    Theodore Rousseau
    President
    (780) 489-8334
    or
    Online Energy Inc.
    Steve Dabner
    President
    (403) 510-0155