Paris Energy Inc.
TSX VENTURE : PI

Mapan Energy Ltd.

July 31, 2014 14:05 ET

Mapan Energy Ltd. and Paris Energy Inc. Announce Completion of Corporate Transaction, Asset Acquisition, Financing and Reconstitution of Board and Management

CALGARY, ALBERTA--(Marketwired - July 31, 2014) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Mapan Energy Ltd. ("Mapan"), a private company, and Paris Energy Inc. (TSX VENTURE:PI) ("Paris") are pleased to announce the completion of their previously announced (July 2, 2014 press release) corporate transaction (the "Corporate Transaction") and Mapan's acquisition of certain oil and natural gas properties located in the Deep Basin of West Central Alberta ("DBWC") and Northeastern British Columbia ("DBN" or "Deep Basin North") (the "Asset Acquisition") for a purchase price of $132.5 million (before customary closing adjustments), or $121.7 million after interim closing adjustments. The final closing adjustment will be determined within three months of closing of the Asset Acquisition.

Pursuant to the Corporate Transaction, Paris acquired all of the issued and outstanding shares of Mapan in accordance with a plan of arrangement under the Business Corporations Act (Alberta) on the basis of twelve (12) common shares ("Paris Shares") of Paris for each one (1) common share ("Mapan Share") of Mapan. In addition, on completion of the Corporate Transaction, management of Mapan replaced the management of Paris and the board of directors of Paris was reconstituted and is now comprised of directors nominated by Mapan as further described below.

The purchase price for the Asset Acquisition was substantially financed with the net proceeds from a "bought deal" private placement of 63.3 million subscription receipts of Mapan at a price of $2.00 per subscription receipt, for aggregate gross proceeds of $126.6 million, that was recently completed through a syndicate of underwriters led by FirstEnergy Capital Corp. and GMP Securities LP and including Canaccord Genuity Corp. and Raymond James Ltd. (the "Private Placement"). In accordance with the terms of the subscription receipts, in connection with closing of the Asset Acquisition, holders of subscription receipts received one Mapan Share for each subscription receipt and the proceeds from the sale of the subscription receipts were released from escrow.

The remainder of the Asset Acquisition purchase price was funded by cash on hand.

Corporate Transaction

The Corporate Transaction was consented to in writing by Paris shareholders holding in excess of 58.9% of the outstanding Paris Shares. Immediately prior to completion of the Corporate Transaction, there were 69,943,701 Mapan Shares (including 63,300,000 Mapan shares issued pursuant to the subscription receipts) and 17,720,347 Paris Shares outstanding. As a result, Paris issued an aggregate of 839,324,412 Paris Shares pursuant to the Corporate Transaction at a deemed price of $0.1667 per share for an aggregate purchase price of approximately $139.9 million. Accordingly, after giving effect to the Corporate Transaction, there are approximately 857 million Paris Shares issued and outstanding, of which former shareholders of Mapan (including former subscription receiptholders) hold approximately 98% and the previously existing shareholders of Paris hold approximately 2%.

The management and board of directors of Paris have been reconstituted to include the following individuals: President, CEO and Director - Dr. Richard A. Walls, Chief Operating Officer - Michael Boyd, Chief Financial Officer and Director - Jennifer Dugdale, General Counsel and Director - Ronald Kisic and Vice President Engineering - Ian Schafer and Directors - Wilfred Gobert and Kevin Olson. For biographies of Paris' new management and board of directors, please see Paris' July 2, 2014 press release.

Paris also announces that it intends to hold a special meeting of shareholders in early or mid-September 2014 for the purpose of obtaining shareholder approval for a consolidation of the Paris shares on a 1 for 12 basis and a name change of Paris to "Mapan Energy Ltd.". It is anticipated that post consolidation, Paris will have approximately 71.4 million shares outstanding. Further details with respect to the consolidation and name change will be included in the information circular to be provided to Paris shareholders in connection with the meeting.

Mr. Robert Lamond, former president of Paris and a substantial shareholder of Paris through Humboldt Capital Corporation, stated that he was extremely pleased that this transaction will both, enhance the former Paris shareholders equity value, and that they will now be part of a well-financed larger entity.

In connection with the completion of the Corporate Transaction and the Asset Acquisition, Mapan, now a subsidiary of Paris, entered into a $55.0 million credit facility. The credit facility is currently undrawn, leaving the full $55.0 million available thereunder.

For certain pro forma financial information of Paris after giving effect to the Corporate Transaction and the Asset Acquisition, please see below under "Pro Forma Financial Information".

Asset Acquisition

Pursuant to the Asset Acquisition, Mapan acquired production, lands and P&NG rights in two areas of the Alberta and British Columbia Deep Basin comprised of 203,200 gross acres (162,000 net acres) of which approximately 120,000 net acres consist of undeveloped lands. Average production from the lands, for the period January 1 to June 1, 2014, was approximately 7,000 barrels of oil equivalent per day ("BOED"), of which 90% is natural gas production. Production for the full year 2014 is expected to average approximately 6,520 BOED.

Deep Basin North

The DBN properties are comprised of 163,700 gross acres (132,200 net acres) with 64 producing wells with average production from January 1 to June 1, 2014 of approximately 4,760 BOED. The lands and P&NG rights are in an area located along the border of Alberta and British Columbia (Chinook Ridge, Wapiti, Ojay and Hiding Creek areas).

All of the current production is gathered into two field compressor facilities located at Chinook Ridge, Alberta (100% owned, operated) and Hiding Creek, BC (34.5%, non-operated) and transported through a 60 km pipeline (75% ownership, with gross capacity of 175 MMcf/d) to the Elmworth Sweet Gas Plant where the gas is processed under a long term contract. Approximately 83% of the current production will be operated by Mapan.

Deep Basin West Central Alberta

The DBWC properties are comprised of 39,500 gross acres (29,800 net acres) with 109 producing wells with average production from January 1 to June 1, 2014 of approximately 2,240 BOED. The lands and P&NG rights are located in four areas: Cecilia, Bigstone, Fir and Berland River.

Approximately 75% of the production will be operated by Mapan through a 148 km field gathering system and three separate field compression facilities (35MMcf/d of capacity). All the pipelines and facilities are operated with 100% ownership by Mapan. The gas is processed under a firm capacity agreement at the Cecilia Sweet Gas Plant.

Reserves

Proved Developed Producing ("PDP") and Proved plus Probable Producing Reserves attributable to the properties acquired pursuant to the Asset Acquisition were evaluated effective March 31, 2014 by GLJ Petroleum Consultants ("GLJ"), an independent qualified reserves evaluator, in accordance with the requirements under National Instrument 51-101 (the "GLJ Report") and are 15.16 million BOE, of which 83% (12.58 million BOE) are PDP reserves. As further summarized below and based on the GLJ report, the before tax net present value (discounted at 10%) of the future net revenue attributable to such reserves is approximately $153.1 million. There is no future capital required to recover the PDP plus Probable Producing Reserves.

Summary of Oil and Gas Reserves

Effective Date: March 31, 2014 Light & Medium Oil Natural Gas Liquids Natural Gas Total Oil Equivalent

Reserve Category
Gross
(Mbbl)
Net
(Mbbl)
Gross
(Mbbl)
Net
(Mbbl)
Gross
(MMcf)
Net
(MMcf)
Gross
(Mboe)
Net
(Mboe)
Proved
Developed Producing 76 65 524 349 71,875 65,008 12,579 11,248
Developed Non-Producing - - - - - - - -
Undeveloped - - - - - - - -
Total Proved 76 65 524 349 71,875 65,008 12,579 11,248
Probable
Developed Producing 30 26 101 67 14,691 13,365 2,579 2,320
Developed Non-Producing - - - - - - - -
Undeveloped - - - - - - - -
Total Probable 30 26 101 67 14,691 13,365 2,579 2,320
Total Proved plus Probable 106 91 625 415 86,566 78,373 15,158 13,568
Notes:
(1) Columns may not add due to rounding
(2) "Gross" reserves means the company's working interest (operated and non-operated) share before deduction of royalties payable to others and without including any royalty interests of the company
(3) "Net" reserves means the company's working interest (operated and non-operated) share after deduction of royalty obligations plus the company's royalty interests in reserves

Summary of Net Present Value of Future Net Revenue

Before Income Tax Discounted at (%/yr)

Reserve Category
0%
(M$)
5%
(M$)
8%
(M$)
10%
(M$)
12%
(M$)
15%
(M$)
20%
(M$)
Proved
Developed Producing 187,043 155,925 141,870 133,897 126,834 117,646 105,235
Developed Non-Producing - - - - - - -
Undeveloped - - - - - - -
Total Proved 187,043 155,925 141,870 133,897 126,834 117,646 105,235
Probable
Developed Producing 41,938 27,383 21,977 19,227 16,978 14,310 11,153
Developed Non-Producing - - - - - - -
Undeveloped - - - - - - -
Total Probable 41,938 27,383 21,977 19,227 16,978 14,310 11,153
Total Proved plus Probable 228,982 183,307 163,847 153,124 143,812 131,956 116,387
After Income Tax Discounted at (%/yr)

Reserve Category
0%
(M$)
5%
(M$)
8%
(M$)
10%
(M$)
12%
(M$)
15%
(M$)
20%
(M$)
Proved
Developed Producing 167,446 138,725 125,840 118,558 112,125 103,782 92,562
Developed Non-Producing - - - - - - -
Undeveloped - - - - - - -
Total Proved 167,446 138,725 125,840 118,558 112,125 103,782 92,562
Probable
Developed Producing 34,224 21,811 17,299 15,033 13,196 11,039 8,523
Developed Non-Producing - - - - - - -
Undeveloped - - - - - - -
Total Probable 34,224 21,811 17,299 15,033 13,196 11,039 8,523
Total Proved plus Probable 201,671 160,536 143,139 133,591 125,320 114,820 101,085
Notes:
(1)Columns may not add due to rounding
(2)It should not be assumed that the undiscounted and discounted future net revenues estimated by GLJ represent the fair market value of the reserves

GLJ employed the following pricing, exchange rate and inflation rate assumptions as of April 1, 2014 in the GLJ Report in estimating the net present value of the future net revenue attributable to the reserves:

Natural Gas Light Crude Oil Pentanes Plus
Henry Hub AECO WTI Edmonton Edmonton Inflation Exchange
Year
Forecast

($US/MMBtu)

($CAD/MMBtu)

($US/bbl)

($CAD/bbl)

($CAD/bbl)
Rates
(%/year)
Rate
($US/$CAD)
2014 Q2-Q4 4.40 4.64 97.50 102.78 113.06 2.0 0.90
2015 4.50 4.50 97.50 102.78 113.06 2.0 0.90
2016 4.75 4.75 97.50 105.56 112.94 2.0 0.90
2017 5.00 5.00 97.50 105.56 112.94 2.0 0.90
2018 5.25 5.25 97.50 105.56 112.94 2.0 0.90
2019 5.50 5.50 97.50 105.56 112.94 2.0 0.90
2020 5.63 5.63 98.54 106.37 113.81 2.0 0.90
2021 5.74 5.74 100.51 108.49 116.08 2.0 0.90
2022 5.85 5.85 102.52 110.66 118.40 2.0 0.90
2023 5.97 5.97 104.57 112.87 120.77 2.0 0.90
Thereafter +2%/yr +2%/yr +2%/yr +2%/yr +2%/yr 2.0 0.90

Pro Forma Financial Information

After giving effect to the Corporate Transaction and the Asset Acquisition, it is estimated that Paris has aggregate pro forma combined assets of $132.4 million, including current assets of $7.3 million (net of underwriters' commissions) and resource assets of $125.0 million. As at May 31, 2014, after giving effect to the Corporate Transaction and the Asset Acquisition, Paris has nominal debt outstanding and total pro forma liabilities of approximately $4.0 million, which includes an estimated $3.1 million of long term decommissioning liabilities relating to the assets acquired pursuant to the Asset Acquisition. Total pro forma shareholders' equity after giving effect to the Corporate Transaction and Asset Acquisition is approximately $128.4 million, which includes approximately $143.9 million of share capital and a loss of approximately ($16.1) million relating to the past operations of Paris. The foregoing unaudited pro forma consolidated balance sheet information is derived from the unaudited balance sheets of Paris and Mapan as at May 31, 2014 and reflects the effects of the Acquisition as at May 31, 2014, including an interim purchase price adjustment of $10.8 million which was the net sum of revenue owing to Mapan from the effective date of the Asset Acquisition until closing. The final purchase price adjustment will be determined within three months of closing of the Asset Acquisition.

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 jurisdiction in which such offer, solicitation or sale would be unlawful. The securities issued pursuant to the Corporate Transaction or the Private Placement described herein may not be offered or sold in the United States absent registration or applicable exemptions from the registration requirements.

ADVISORY: This press release contains forward looking statements. More particularly, this press release contains forward looking statements concerning the reserves attributable to the assets acquired pursuant to the Asset Acquisition and the estimate of the net present value of the future net revenues attributable thereto, estimated production for 2014 and the shareholders' meeting expected to be held to approve the name change and consolidation. Although Paris believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Paris cannot give assurances that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Risks include risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets and other economic and industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling services, incorrect assessment of value of acquisitions and failure to realize the benefits therefrom, delays resulting from or inability to obtain required regulatory approvals, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources and economic or industry condition changes. Actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Paris and MAPAN will derive therefrom. Additional information on these and other factors that could affect Paris are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward looking statements contained in this press release are made as of the date hereof and Paris 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.

Barrels of Oil Equivalent: Disclosure provided herein in respect of barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl 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.

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.

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