Mystique Energy, Inc.

October 16, 2008 11:56 ET

Mystique Energy Inc. and Petro Energy Corp. Provide Details on Reverse Takeover Agreement

CALGARY, ALBERTA--(Marketwire - Oct. 16, 2008) - Mystique Energy, Inc. (TSX VENTURE:MYS) ("Mystique") announced on September 12, 2008 that Mystique and Petro Energy Corp. ("Petro") had executed an arrangement agreement dated as of September 8, 2008 ("Agreement") pursuant to which Agreement, Mystique will undertake to acquire all of the issued common shares of Petro (the "Petro Shares").

The Agreement forms the basis of a proposed arm's length business combination (the "Combination") the details with respect to which Mystique has filed pursuant to the Companies' Creditors Arrangement Act (Canada) (the "CCAA"). The terms of the Combination have been approved by the Alberta Court of Queen's Bench (the "Court") and by the unsecured creditors of Mystique. By order of the Court, the current deadline to complete the Combination is December 31, 2008. Trading in shares of Mystique currently listed on the TSV Venture Exchange (the "TSXV") is currently halted and is anticipated to remain halted until the receipt by the TSXV of satisfactory documentation relating to the Combination, including a Mystique Filing Statement/Petro Information Circular in relation thereto which shall include prospectus level disclosure with respect to Mystique, Petro and the listed issuer resulting from the Combination. Petro anticipates that it will submit an application for an exemption from the sponsorship requirements articulated by Policy 2.2 of the TSXV, however there is no assurance that such exemption will be granted.

In connection with the Combination:

(a) all unexercised options to purchase common shares of Mystique (the "Mystique Shares") shall be cancelled for no consideration and shall cease to represent the right to acquire any Mystique Shares;

(b) the issued and outstanding Mystique Shares shall be consolidated on the basis of one Mystique Share for each thirty Mystique Shares issued and outstanding immediately prior to such consolidation;

(c) those creditors of Mystique who have elected (or deemed to have elected) to receive Mystique Shares in full satisfaction of their respective claims (the "Mystique Creditors"), none of which are non-arm's length parties to either Mystique or Petro, shall receive that number of post-consolidation Mystique Shares calculated by dividing each such Mystique Creditor's aggregate proven claims by $0.25;

(d) the directors of Mystique shall be replaced with a board of directors comprised of three (3) nominees of Petro and one (1) nominee of Mystique, or such other directors as shall be determined by Petro and Mystique, which nominees currently are:

(i) Blair Coady- Mr. Coady has been Chairman and Chief Executive Officer of Petro since July 28, 2006. He has 33 years experience in the oil and natural gas industry, and 10 years experience in capital markets and project planning with Bongard Leslie Ltd., a national investment dealer now part of BMO Nesbitt Burns, as Partner, Director and Vice President. He has served as a Director and Chief Executive Officer of companies engaged in the exploration, development and production of oil and natural gas in North America and internationally that include Trisar Resources Ltd., Terato Resources Ltd., Wolf Industries, and Calgary Chemical. He is a former Director, past Chairman and past President and Chief Executive Officer of Rally Energy Ltd., which was listed on the TSX;

(ii) C. Theodore Swanton- Mr. Swanton, BBA (UNB), has been President and Chief Operating Officer of Petro since July 28, 2006. In the early 1970s, after graduating from UNB, Mr. Swanton worked in the oilfield as a roughneck and a derrick hand in Northern Alberta and the Canadian Arctic. Over the past 35 years, he has developed several real estate projects and founded a corporate finance company called Swancorp, specializing in private to public markets, which financed a number of oil, gas and oilfield service companies. He has served as a director of many private and public companies;

(iii) Richard Newbert- Mr. Newbert is a Director and Vice-President, Corporate Affairs of Petro and has held these positions since July 2006. During his 42-year business career, Mr. Newbert has held many senior management positions including Managing Director of Brockman Partners, LLC, management consultants (January 1995 to present), Senior Vice President Smart Bug Corporation, sports communication device manufacturer (November 2001 to present), Vice President Prestige Group, commercial real estate broker (October 2007 to present), Vice President Keller Williams Commercial Real Estate, commercial real estate broker (January 2005 to September 2007), President of Canada Inc., satellite broad-band provider (March 2001 to May 2002), President of OnSat Financial Services, leasing company (June 2000 to March 2001), Vice President of PrinVest Corp, asset-based lender (January 1995 to June 2000) and Senior Vice President of Hanover Capital, asset-based lender (November 1988 to December 1994); and

(iv) Victor Luhowy- Mr. Luhowy has more than 35 years of experience in the oil and gas industry. In 1990 he took on the role of Executive Vice President and Chief Operating Officer of ELAN Energy Inc. In 1997, Mr. Luhowy founded and became the President and Chief Executive Officer of BelAir Energy Corporation. He and his team grew the company from no production in 1997 to 2,000 boepd prior to the merger of BelAir with Purcell Energy Ltd. in 2003. Growth was achieved in the acquisition and exploration of natural gas in western Canada. Mr. Luhowy obtained a B.Sc. in Engineering at the University of Alberta in 1971 and an MBA from the University of Calgary in 1992;

(e) the articles of Mystique shall be amended such that the name of Mystique shall be changed to "Petro Energy Corp.";

(f) all unexercised options to acquire Petro Shares shall be cancelled for no consideration and shall cease to represent the right to acquire any Petro Shares; and

(g) with respect to each Petro Share, each holder of Petro Shares (the "Petro Shareholders") shall be deemed to have received an offer from Mystique to acquire all of such holder's Petro Shares, and an agreement of purchase and sale will exist between Mystique and such holder, and such Petro Shares will be and will be deemed to be transferred by the holder thereof, to Mystique in exchange for one Mystique Share for each Petro Share so transferred.

Petro is a private company operating in the oil and gas sector. Petro was incorporated under the Business Corporations Act (Alberta) on July 28, 2006 under the name "Petro Energy Corp.", and its head office is located at Suite 900, 805 - 8th Avenue S.W., Calgary, Alberta T2P 1H7.

The following table sets forth selected financial information for Petro for the twelve month periods ended December 31, 2007 and 2006 and the six month period ended June 30, 2008.

Year Ended December 31
2006 2007
----------- -----------

Interest Income Nil 222
Funds from Operations Nil Nil
Per Share - basic Nil Nil
Per Share - diluted Nil Nil
Net Income (loss) (218,298) (550,247)
Total Assets 395,042 634,885
Total long term liabilities 41,500 32,900
Working capital (deficit) 113,702 205,984
Shareholders' equity 322,582 578,585

Six Months Ended
June 30, 2008

Revenue, net of royalties 30,606
Interest Income 19,572
Funds from Operations 30,606
Per Share - basic 0.00
Per Share - diluted 0.00
Net Income (loss) (273,769)
Total Assets 6,835,631
Total long term liabilities Nil
Working capital (deficit) (1,551,459)
Shareholders' equity 4,773,241

The following is a table containing a summary of Petro's oil and gas reserves, based on constant prices and costs, such information derived from a report prepared by an independent reserves evaluator, for an effective date of July 1, 2008 by Chapman Petroleum Engineering Ltd. ("Chapman"), as of June 30, 2008. Such reserve and economic evaluation has been prepared and presented in a form consistent with the requirements of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.


Petro Reserves
Light and Natural Gas
Medium Oil Heavy Oil Natural Gas Liquids
Gross Net Gross Net Gross Net Gross Net
Reserves Category MSTB MSTB MSTB MSTB MMscf MMscf Mbbl Mbbl
------------------------ ---------------------------------------------------
Developed Producing 13 12 0 0 195 159 1 1
Developed Non-Producing 0 0 1 1 42 32 1 1
Undeveloped 0 0 0 0 0 0 0 0
TOTAL PROVED 13 12 1 1 237 190 3 2
TOTAL PROBABLE 9 8 1 1 140 115 1 1

TOTAL PROVED + PROBABLE 22 20 3 2 377 304 4 3

TOTAL POSSIBLE 0 0 0 0 0 0 0 0
+ POSSIBLE 22 20 3 2 377 304 4 3

All of Petro's wells are located in the province of Alberta, Canada, in the fields of Forestburg, Medicine Hat, Retlaw, Sousa, Swan Hills and Saleski.

Petro has one producing non-associated gas well in the Forestburg, Alberta area. There are no further plans to develop that property at this time. Total abandonment and restoration liabilities for this area are estimated to be $1,000 net to Petro.

Petro has one non-producing heavy oil well in the Medicine Hat, Alberta area that is expected to commence production in November of 2008. This well is currently shut-in and is awaiting the installation of equipment necessary to produce the heavy oil in this region. Total abandonment and restoration liabilities for this area are estimated to be $1,000 net to Petro.

Petro has one producing and one non-producing non-associated gas wells in the Retlaw, Alberta area. It is anticipated that the non-producing gas well will be completed in October of 2008. Total capital expenditures for the development of this property are estimated to be $39,000 net to Petro. Total abandonment and restoration costs for this area are estimated to be $11,000 net to Petro.

Petro has one producing oil well in the Sousa, Alberta area. Petro also has plans to drill an additional Slave Point well in this area. No reserves have been attributed to this future development. Total abandonment and restoration liabilities for this area are estimated to be $13,000 net to Petro.

Petro has one producing oil well in the Swan Hills, Alberta area. There are no further plans to develop this property at this time. Total abandonment and restoration liabilities for this area are estimated to be $4,000 net to Petro.

In the Saleski area in northeastern Alberta, Petro has earned a 50% working interest in 5,120 acres of land by participating in the drilling of seven wells. All seven wells were cased. Petro's interest is in the Wabasca and McMurray formations. Due to the high cost of access, development drilling will be delayed for the foreseeable future. Because the wells were only cored and not tested, proved and probable reserves were not assigned to these properties and are therefore not included in the above summary of reserves.

Closing of the Combination is subject to the following significant conditions:

1. In favour of Petro:

(a) Mystique shall not have entered into any transaction or contract which will have a Material Adverse Effect (as defined in the Agreement) with respect to Mystique since December 31, 2007 excluding those transactions undertaken in the ordinary course of business or pursuant to the Creditor Approved Plan (as defined in the Agreement), without first discussing and obtaining the approval of Petro;

2. In favour of Mystique:

(a) before giving effect to the transactions contemplated by this Agreement there shall have been no Material Adverse Change (as defined in the Agreement) in respect of Petro or the Petro Business (as defined in the Agreement) after October 23, 2007, to the Effective Date (as defined in the Agreement), except as disclosed in the Petro Financial Statements (as defined in the Agreement) delivered to Mystique;

(b) the board of directors of Petro shall not have changed, withdrawn or modified its endorsement of the Creditor Approved Plan or the Arrangement (as defined in the Agreement), its determination that the Arrangement is fair and in the best interests of Petro and the Petro Shareholders and its recommendation that Petro Shareholders vote in favour of the Arrangement;

(c) if dissent rights are granted to Petro Shareholders by the Court in connection with the Arrangement, holders of not more than ten (10%) of the issued and outstanding Petro Shares shall have exercised rights of dissent in relation to the Arrangement;

(d) Petro shall have delivered signed "lock up" agreements in the form satisfactory to Mystique, acting reasonably, entered into by each director and officer of Petro as of the date hereof, pursuant to which such persons (subject to the terms and conditions of such "lock up" agreement) agree to tender or vote their Petro Shares, as applicable, or vote in support of the Arrangement and such persons are in material compliance with all representations, warranties and covenants of such lock-up agreements at all material times up to and including the Effective Time; and

(e) Mystique shall be satisfied with the content of the information contained in the Information Circular (as defined in the Agreement) relating to Mystique and the Mystique Business (as defined in the Agreement).

3. Mutual:

(a) the Combination shall have become effective on or before December 31, 2008 (or such later date as the parties may agree to, subject to Court approval);

(b) Petro and Mystique shall have obtained all third party consents, approvals and authorizations (including, without limitation, all stock exchange, securities commission and other regulatory approvals) required or necessary in connection with the transactions contemplated herein on terms and conditions satisfactory to Petro and Mystique, acting reasonably, and all applicable domestic and foreign statutory or regulatory waiting periods to the transactions contemplated under the Arrangement shall have expired or been terminated, and no objection or opposition shall have been filed, initiated or made by any regulatory authority during any applicable statutory or regulatory period;

(c) the TSXV shall have conditionally approved the listing of Mystique Shares deliverable under the Combination on terms which Mystique is capable of satisfying after giving effect to the Combination, including, but not limited to, allowing Mystique to proceed with the Arrangement without holding a shareholders meeting to approve the Arrangement or any matters related thereto; and

(d) post Combination, Mystique shall be able to satisfy the minimum listing requirements of the TSXV and the TSXV shall have granted its conditional approval to the trading in Mystique Shares (on a post-Combination basis) on the TSXV.

On October 2, 2008, Petro completed an arm's length, non-brokered private placement (the "Private Placement") initiated in contemplation of the Combination. Pursuant to the Private Placement, 25,692,600 Petro Shares were issued at a price of $0.25 per Petro Share for aggregate net proceeds to Petro of approximately $5,792,925, after the deduction of approximately $630,000 payable to twenty-two (22) arm's length parties in finders' fees. Finders were compensated through the payment of cash and/or the issuance of Petro Shares in lieu thereof, pursuant to which $150,825 was paid in cash and 1,917,600 Petro Shares were issued. Proceeds of the Private Placement were used for development drilling, oil and gas asset acquisition, farm-in payments relating to the Saleski property and general working capital. Petro anticipates commencing another private placement, at a higher issuance price, in the near future, details of which will be announced in a future news release.

Completion of the transaction is subject to a number of conditions, including Exchange acceptance and Petro Shareholder approval. The transaction cannot close until the required Petro Shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Mystique Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the securities of Mystique should be considered highly speculative.

This release may contain forward-looking information, including expectations of future components of revenue, cash flow and earnings. By its very nature, the preparation of such forward-looking information requires Mystique and/or Petro to make assumptions, and involves inherent risks and uncertainties, both general and specific. There is significant risk that express or implied projections contained in such forward-looking information will not materialize or will be inaccurate. A number of factors could cause actual future results, conditions, actions or event to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information. Such differences may be caused by factors, many of which are beyond Mystique's and/or Petro's control. Investors and others who rely on these statements should consider the above factors as well as the uncertainties they represent and the risk they entail. The risks outlined above should not be construed as exhaustive. Investors are cautioned not to place undue reliance on any forward-looking information. Neither Mystique nor Petro undertakes or assumes any obligation to update or revise any forward-looking information.

The TSX Venture Exchange Inc. does not accept responsibility for the adequacy or accuracy of this release.

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