Kallisto Energy Corp.

Kallisto Energy Corp.
Cumberland Oil & Gas Ltd.

Cumberland Oil & Gas Ltd.

August 15, 2012 17:46 ET

Kallisto Energy to Acquire Cumberland Oil & Gas

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2012) -


Kallisto Energy Corp. (TSX VENTURE:KEC) ("Kallisto" or the "Company") and Cumberland Oil & Gas Ltd. (TSX VENTURE:COG) ("Cumberland") are pleased to announce that they have entered into an arrangement agreement providing for the acquisition by Kallisto of all of the outstanding common shares of Cumberland ("Cumberland Shares") on the basis of 0.9180 of a common share of Kallisto ("Kallisto Share") for each outstanding Cumberland Share (the "Transaction"). At closing of the Transaction, Kallisto will have approximately 93.6 million Kallisto Shares outstanding with Kallisto shareholders owning approximately 65% and Cumberland shareholders owning approximately 35% of the pro forma Company.

Cumberland is also pleased to announce that it has closed the sale of its West Nig property to a senior oil and gas producer for a cash purchase price of $1.8 million.

Kallisto's existing executive team, led by Robyn Lore, will continue to manage the combined Company. It is expected that Steven Cloutier and Martin Hislop, current members of the board of directors of Cumberland, will be appointed to the board of directors of Kallisto at closing.

Kallisto and Cumberland believe that this strategic combination offers an exceptional opportunity to create substantial value for their respective companies and shareholders.

About the Combined Company

Key attributes of the combined Company include:

  • Healthy balance sheet;
  • Positive cash flow from a current production base of approximately 300 BOE/d (59% oil and liquids);
  • A credit facility of $8.8 million to supplement growth capital expenditures;
  • Tax pools of approximately $48.0 million;
  • Proved Reserves of 1,302 MBOE and Proved plus Probable Reserves of 2,034 MBOE based on the independent reserve reports effective December 31, 2011 of each of Kallisto and Cumberland;
  • A significant land base, including 78,000 net acres of undeveloped land;
  • A diversified asset base with abundant near term drilling opportunities including:
    • Cardium light oil at Pembina;
    • Doe Creek light oil at Valhalla;
    • Basal Quartz liquids rich gas and Elkton light oil at Crossfield; and
    • Shaunavon crude oil in southwest Saskatchewan;
  • Significant potential upside from a waterflood program being implemented at Pembina.

Transaction Terms and Conditions

The Transaction is to be effected by way of a plan of arrangement under the Business Corporations Act (Alberta). Completion of the Transaction, which is anticipated to occur in mid-October 2012, is subject to, among other things, the approval of at least 66 2/3 percent of the Cumberland shareholders voting on the arrangement, the approval of the Court of Queen's Bench of Alberta, the receipt of all necessary regulatory and stock exchange approvals, and certain closing conditions that are customary for a transaction of this nature.

The boards of directors of each of Kallisto and Cumberland have unanimously approved the Transaction and Cumberland's board of directors has resolved to recommend that its shareholders vote in favour of the Transaction. Directors and officers of Cumberland, who collectively hold approximately 26% of the outstanding Cumberland Shares, have entered into support agreements with Kallisto pursuant to which each has agreed to vote in favour of the Transaction.

An information circular is expected to be mailed to Cumberland shareholders in early-September and a special meeting of the Cumberland shareholders is expected to be held in early-October. It is expected that the Transaction will be completed in mid-October on the assumption that Kallisto and Cumberland receive the requisite approvals and all of the conditions to closing are satisfied.

Cumberland has agreed to not solicit or initiate any discussions regarding any other business combination or sale of material assets and has granted Kallisto the right to match competing, unsolicited proposals. The arrangement agreement provides for a mutual $250,000 non-completion fee payable by Kallisto or Cumberland, as the case may be, in certain circumstances if the Transaction is not completed.

Complete details of the terms of the Transaction are set out in the arrangement agreement, which will be filed by Kallisto and Cumberland and will be available for viewing under each of Kallisto's and Cumberland's profiles at www.sedar.com.

Financial Advisors

Peters & Co. Limited is acting as financial advisor to Cumberland and has provided the board of directors of Cumberland with its opinion as of the date hereof and subject to the review of final documentation, that the consideration to be received by the Cumberland shareholders pursuant to the Transaction is fair, from a financial point of view, to Cumberland shareholders.

Acumen Capital Finance Partners Limited is acting as financial advisor to Kallisto and has provided the board of directors of Kallisto with its opinion as of the date hereof and subject to the review of final documentation, that the consideration payable by Kallisto pursuant to the Transaction is fair, from a financial point of view, to Kallisto shareholders.

About Kallisto and Cumberland

Kallisto is a Calgary-based junior resource company engaged in the exploration, development and production of oil and natural gas in Alberta.

Cumberland is a Calgary-based junior resource company engaged in the exploration, development and production of oil and natural gas in Alberta and Saskatchewan.

Forward-Looking Statements

In the interest of providing Kallisto's shareholders, Cumberland's shareholders and potential investors with information regarding Kallisto and Cumberland, including management's assessment of the future plans and operations of Kallisto and Cumberland, certain statements contained in this joint news release constitute forward - looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "project", "could", "plan", "intend", "should", "believe", "outlook", "potential", "target" and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this joint news release contains, without limitation, forward- looking statements pertaining to the following: expectations of management regarding the proposed Transaction, including the timing of completion of the Transaction, operating and financial metrics of the Transaction, potential attributes of the combined Company resulting from the Transaction, including the effect of the Transaction on Kallisto's balance sheet, tax pools, production, reserves, asset base and undeveloped land position.

With respect to forward-looking statements contained in this joint news release, Kallisto and Cumberland have made assumptions regarding, among other things: the timing of receipt of regulatory, Court and shareholder approvals; Kallisto's expectations regarding future growth, results of operations production, future capital and other expenditures (including the amount, nature and sources of funding thereof); and the ability of Kallisto to execute and realize on the anticipated benefits of the Transaction. Although Kallisto and Cumberland believe that the expectations reflected in the forward looking statements contained in this joint news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward -looking statements included in this joint news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward -looking statements will not occur, which may cause Kallisto's or Cumberland's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the following: that the Transaction may not close when planned or at all or on the terms and conditions set forth herein; the failure of Kallisto and Cumberland to obtain the necessary shareholder, Court, regulatory and other third party approvals required in order to proceed with the Transaction; volatility in market prices for oil and natural gas; incorrect assessment of the value of the Transaction; failure to realize the anticipated benefits and synergies of the Transaction; the general economic conditions in Canada, the U.S. and globally; industry conditions; governmental regulation; imprecision of reserve and resource estimates; environmental risks; competition from other industry participants; stock market volatility; Kallisto's ability to access sufficient capital from internal and external sources; and the other factors described under "Risk Factors" in Kallisto's most recently filed Annual Information Form available in Canada at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this joint news release speak only as of the date of this joint news release. Except as expressly required by applicable securities laws, Kallisto and Cumberland do not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this joint news release are expressly qualified by this cautionary statement.

Barrels of Oil Equivalent

Barrels of oil equivalent (BOE) are calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This joint news release does not constitute an offer to sell or the solicitation of an offer to buy any securities within the United States. The securities to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act or other laws.

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 joint news release.

Contact Information

  • Kallisto Energy Corp.
    Robyn Lore
    President and Chief Executive Officer
    (403) 237-9996

    Kallisto Energy Corp.
    Greg Florence
    Chief Financial Officer
    (403) 237-9996

    Cumberland Oil & Gas Ltd.
    Daniel Allan
    President and Chief Executive Officer
    (403) 237-0790

    Cumberland Oil & Gas Ltd.
    Alan MacDonald
    Vice President, Finance and Chief Financial Officer
    (403) 237-0790