Milagro Energy Inc.
TSX : MIG

Milagro Energy Inc.

February 22, 2008 19:39 ET

Milagro Energy Inc. Enters Into Pre-Acquisition Agreement With Second Wave Petroleum Ltd.

CALGARY, ALBERTA--(Marketwire - Feb. 22, 2008) -

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Milagro Energy Inc. (TSX:MIG) ("Milagro" or the "Company") today announced that it has entered into an agreement (the "Agreement") with Second Wave Petroleum Ltd. (TSX VENTURE:SCS.A) (TSX VENTURE:SCS.B) ("Second Wave") pursuant to which Second Wave has agreed to make a formal take-over bid to acquire all outstanding common shares of Milagro (the "Milagro Shares"). In exchange for each Milagro Share, the holder thereof will be offered one unit of Second Wave (the "Units"), each Unit consisting of 0.0298 of a Class A share of Second Wave (the "Second Wave Shares") and 0.0298 of a Second Wave Class A share purchase warrant. Each whole warrant shall entitle the holder to purchase one Second Wave Share at a price of $0.40 for one year from the date of closing of the transaction The offer will be subject to certain conditions, including acceptance of the offer by holders of at least 66 2/3% of the outstanding Milagro Shares calculated on a fully diluted basis, completion of the restructuring of Milagro's existing debt to Brookfield Bridge Lending Fund Inc. ("Brookfield") on terms acceptable to Second Wave, receipt of all required third party and regulatory approvals and other customary conditions. The parties expect that Second Wave will mail a take-over bid circular to all of Milagro's securityholders in early March, 2008, with the transaction closing in April, 2008.

The transaction has the unanimous support of the board of directors of both Milagro and Second Wave and was approved by a committee of independent directors of Milagro. Thomas Weisel Partners Canada Inc. ("TWP") is acting as financial advisor to Milagro in respect of the Agreement and TWP has advised the board of directors of Milagro that TWP is of the opinion, subject to review of the final form of the documents affecting the Agreement, that the consideration to be paid by Second Wave to the existing holders of the Milagro Shares pursuant to the Agreement is fair to those holders of Milagro Shares, from a financial point of view, as of the date and time of the opinion. Based upon the determination of the independent committee and the advice of TWP, the board of directors of Milagro has concluded that the transaction is in the best interests of its shareholders and has confirmed its intention to recommend that holders of Milagro Shares tender their shares to the Second Wave offer. All of the directors and officers of Milagro have entered into lock-up agreements whereby they have agreed to tender their shares to the Second Wave offer and otherwise support the transaction. Each of Milagro and Second Wave have agreed to pay non-completion fees of CDN$500,000 in certain circumstances if the transaction is not completed.

Second Wave is a publicly traded, newly recapitalized junior oil and gas company focused on exploration and development of oil and natural gas in Alberta and south eastern Saskatchewan. Second Wave remains focused on organic growth through the drill bit on its existing acreage while continuing a process of adding accretive acquisitions in 2008. Additional information regarding Second Wave can be obtained from Second Wave's profile on the SEDAR website at www.sedar.com.

If completed, the transaction will provide the shareholders of Milagro with continued participation in the upside of the existing Milagro asset base while providing exposure to Second Wave's emerging light oil play in Tableland, Saskatchewan. Milagro's core areas are complementary to Second Wave's existing acreage. Milagro expects that the combined entity will realize administrative savings through the combination of the two companies and the restructuring of Milagro's debt facilities. Upon closing of the transaction, the combined entity will have a solid production base consisting of 820 boe/d (62% oil and 38% natural gas) and approximately 74,000 undeveloped acres.

About Milagro

Milagro is an exploration and production company engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada.

Statements in this press release may contain forward-looking information. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the company. These risks include, but are not limited to, completion of the proposed transaction, the risks associated with the oil and gas industry, commodity prices, general economic conditions, conditions in the capital markets in Canada and elsewhere and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy securities in any jurisdiction. The Class "A" common shares of Second Wave will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, or to a U.S. person, absent registration or applicable exemption therefrom.

The term BOE or BOEs may be misleading, particularly if used in isolation. A BOE (barrel of oil equivalent) conversion rate of 6 Mcf per one (1) BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    CEO
    (403) 693-4006
    or
    Milagro Energy Inc.
    Travis Doupe
    CFO
    (403) 693-4007