Magnum Energy Inc.

Magnum Energy Inc.

May 25, 2012 11:49 ET

Magnum Energy Inc. Announces Closing of First Tranche of Private Placement and Filing of Amended and Restated Preliminary Short Form Prospectus

CALGARY, ALBERTA--(Marketwire - May 25, 2012) -


MAGNUM ENERGY INC. (the "Company") (TSX VENTURE:MEN) is pleased to announce the closing of the first tranche of a private placement (the "Private Placement"). Pursuant to the Private Placement, the Company issued 2,900,000 flow-through shares (the "Flow-Through Shares") at a price of $0.10 per share for gross proceeds of $290,000 and 887,500 non-flow-through shares (the "Common Shares") at a price of $0.08 per share for gross proceeds of $71,000.

All securities issued pursuant to the private placement are subject to a four month hold period and final approval from the TSX Venture Exchange.

Further to its press release dated April 15, 2012, Magnum announces that it has filed an amended and restated preliminary short form prospectus dated May 18, 2012 (the "Amended & Restated Preliminary Prospectus") in connection with the marketed public offering which now includes a minimum offering of $1,050,000 and a maximum offering of $3,300,000 that is comprised of a minimum of $750,000 and a maximum of $3,000,000 aggregate principal amount of 11% subordinated secured convertible debentures (the "Debentures") at a price of $1,000 per Debenture together with $300,000 or 3,750,000 common shares are a price of $0.08 per common share (the "Offering"). Macquarie Private Wealth Inc. has been engaged to sell the Debentures and common shares on a commercially reasonable efforts agency basis.

The Debentures have the same terms and conditions as previously announced and will mature three years after the Closing Date (the "Maturity Date") and will bear interest at an annual rate of 11%, payable semi-annually commencing six months after the Closing date. Each Debenture will be convertible into Class A common shares of the Corporation (the "Common Shares") at the option of the holder at any time prior to the Maturity Date at a conversion price of $0.25 per Common Share, being a conversion rate of 4,000 Common Shares per $1,000 principal amount of Debentures. Holders converting their Debentures will receive accrued and unpaid interest thereon from the period of the last interest payment date on their Debentures prior to the date of conversion to the date that is one day prior to the date of conversion.

The Debentures will be redeemable by the Corporation at any time after two years from issuance for a cash payment consisting of the outstanding principal amount of the Debentures, the outstanding accrued and unpaid interest to the date of redemption and a premium of 2% of the principal amount of the Debentures.

The Debentures will be secured against all of the assets of the Corporation and will rank second after the Corporation's secured lenders. The net proceeds of the Offering will be used primarily for expansion of the Corporation's oil production and reserves in its Provost Viking Oil Project, where it has recently added oil production from its first horizontal well.

Magnum has obtained a receipt for the Amended & Restated Preliminary Prospectus filed with the securities regulatory authorities in each of the provinces of Ontario, Saskatchewan, Alberta and British Columbia. Magnum has made application to have the Debentures and the Common Shares issuable upon conversion of the Debentures listed for trading on the TSX Venture Exchange. The Closing of the Offering is subject certain closing conditions, including, but not limited to, the issuance of a receipt by the securities regulatory authorities in each of the provinces of Ontario, Saskatchewan, Alberta and British Columbia for a final short form prospectus qualifying the distribution of the Debentures and the approval of the TSX Venture Exchange.

About Magnum Energy Inc.

Magnum is a junior oil and gas producer with operations located in the Western Canadian Sedimentary Basin. The Corporation produces from Viking oil operations in Alberta, gas operations in Alberta and maintains a 100% ownership of the Sedalia gas facility in East-Central Alberta.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state in the United States in which such offer, solicitation or sale would be unlawful. The securities referred to herein have not been and will not be registered or sold under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Forward looking statements:

The information and statements in this news release contain certain forward-looking information relating to: (i) the proposed issuance of the Debentures, closing of the Offering and the use of net proceeds of the Offering. All statements other than statements of historical fact may be forward-looking information. This forward-looking information is subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking information. These assumptions include market acceptance of the terms of the Offering. The outcome and timing of the proposed Offering could differ materially from those expressed in, or implied by, such forward-looking information, and accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur or, if any of them do, what benefits the Corporation will derive from them. The Corporation's forward-looking information is expressly qualified in its entirety by this cautionary statement. Except as required by law, the Corporation undertakes no obligation to publicly update or revise any forward looking information.

Neither 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 release.

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