Lion Energy Corp.
TSX VENTURE : LEO

April 04, 2011 09:00 ET

Lion Energy Enters Arrangement Agreement With Africa Oil Providing for Business Combination

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 4, 2011) - (TSX VENTURE:LEO) - Lion Energy Corp. ("Lion" or "the Company") is pleased to announce that, further to its March 8, 2011 news release, it has entered into an arrangement agreement with Africa Oil Corp. (TSX VENTURE:AOI) ("Africa Oil"), a publicly traded oil and gas company listed on the TSX Venture Exchange, pursuant to which Africa Oil has agreed to acquire all of the issued and outstanding shares of Lion.

Pursuant to the arrangement agreement, Africa Oil will acquire, by way of a plan of arrangement, all of the issued and outstanding shares of Lion in consideration for 0.20 Africa Oil shares for each common share of Lion. Any options or warrants to purchase common shares of Lion that are outstanding on completion of the acquisition will be replaced or amended to entitle the holder to acquire common shares of Africa Oil, with the number of shares to be acquired and the exercise price each adjusted to reflect the ratio of 0.20 shares of Africa Oil for each 1.0 share of Lion.

Lion is a joint venture partner of Africa Oil in Kenya and Puntland (Somalia). Working interests on the Blocks in which Africa Oil and Lion are joint venture partners are as follows:

Block Lion Africa Oil Others
Block 9 (Kenya) 33.3% 66.7%  
Block 10BB (Kenya) 10% 40% 50%
Dharoor Valley (Puntland) 15% 45% 40%
Nugaal Valley (Puntland) 15% 45% * 40%
* Subject to Africa Oil fulfilling its sole funding obligation to Range Resources Ltd.

The Transaction will need to be approved by 66 2/3% of the Lion shareholders at a meeting expected to be held on June 8, 2011 and, assuming shareholder approval, the transaction is expected to close shortly thereafter. The Transaction is also subject to receipt of the approval of majority of the minority shareholders of Lion. Lockup agreements have been signed with Lion shareholders, including the Board of Directors, representing 29.23% of the issued and outstanding shares. The Transaction is subject to certain conditions precedent including TSX Venture Exchange, shareholder, court and Kenyan and Puntland Government approvals and any requisite third-party consents and right of first refusal waivers. 

John Nelson, Lions President and Chief Executive Officer, commented, "The acquisition by Africa Oil provides Lion shareholders with a stronger portfolio of oil prone exploration blocks in East Africa, significant working interests in all blocks, technical expertise and sufficient capital to fully fund the robust exploration program and drilling campaign over the next year or more. Combining with Africa Oil at this stage allows Lion shareholders to fully benefit from any future success generated thru companies with proven track records such as Africa Oil as part of the Lundin Group and joint venture partner, Tullow Oil. 

The following table summarizes the net working interests for Africa Oil following the completion of the proposed Transaction in the various production sharing contracts/agreements, based on working interest ownership:

Country   Block/Area   Net Working Interest %
Puntland, Somalia   Dharoor Valley   60%
Puntland, Somalia   Nugaal Valley   60%
Kenya   Block 10A   30%
Kenya   Block 9   100.0%
Kenya   Block 10BB   50%
Kenya   Block 12A   50%
Kenya   Block 13T   50%
Kenya   Block 10BA   50%
Ethiopia   Blocks 2/6   55%
Ethiopia   Blocks 7/8   55%
Ethiopia   Adigala   50%
Ethiopia   South Omo   30%
Mali   Block 7   25%
Mali   Block 11   25%
         
Note:
Net Working Interests are subject to back-in rights or carried working interests, if any, of the
respective governments or national oil companies of the host governments and AOC fulfilling its sole funding obligation during the exploration period in Nugaal.

Additional Transaction Details

The Arrangement will be effected pursuant to the provisions of the Business Corporations Act (British Columbia). The completion of the Transaction is subject to the satisfaction of a number of conditions, including the receipt of requisite shareholder, court and regulatory approvals.

Under the terms of the Arrangement Agreement, Lion has agreed that it will not solicit or initiate any inquiries or discussions regarding any other business combination or sale of assets. Lion has granted Africa Oil the right to match any superior proposals. The Arrangement Agreement also provides for the payment by Lion of a non-completion fee of $900,000 to Africa Oil under certain circumstances. Complete details of the terms of the Transaction are set out in the Arrangement Agreement and plan of arrangement, which will be filed by Lion on SEDAR and will be available for viewing under Lion's profile on www.sedar.com.

The Board of Directors of Lion has unanimously approved the Arrangement Agreement, determined that the consideration to be received by Lion shareholders pursuant to the Arrangement is fair to holders of Lion Shares, is in the best interests of Lion and the holders of Lion Shares and unanimously resolved to recommend that holders of Lion Shares vote in favour of the Arrangement. 

Closing of the Arrangement expected to be held shortly following the shareholders' meeting presently scheduled for June 8, 2011, provided that all shareholder, court and regulatory approvals are obtained. 

Haywood Securities Inc.. is acting as exclusive financial advisor to Lion in connection with the Arrangement and has provided Lion's Board of Directors with its verbal opinion that, as of the date of such opinion, the consideration to be received by the Lion Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Lion Shareholders.

As indicated above, completion of the proposed Transaction is subject to a number of conditions, including shareholder approval. There can be no assurance that the Transaction will be completed as proposed or at all.

On behalf of the Board,

LION ENERGY CORP.

John R. Nelson, President and Chief Executive Officer

Forward-Looking Statements: Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to the Transaction. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: the failure to obtain necessary Lion shareholder approval with respect to the Transaction, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the Transaction, general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling; recompletions and related activities; timing and rig availability, the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of Lion. Except as may be required by applicable securities laws, Lion assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

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