Octant Energy Corp.
TSX VENTURE : RAN.H
TSX VENTURE : OEL

March 12, 2012 02:00 ET

Octant Energy Corp. Announces Up to $65,000,000 Subscription Receipt Financing and Results of Independent Resource Evaluation

CALGARY, ALBERTA--(Marketwire - March 12, 2012) -

NOT FOR DISSEMINATION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.

Octant Energy Corp. (formerly Rain Resources Inc.) (the "Corporation" or "Octant") ((TSX VENTURE:RAN.H) and scheduled to trade upon close of the financing as (TSX VENTURE:OEL)) is pleased to announce that it has engaged a syndicate of agents, co-lead by RBC Capital Markets and Canaccord Genuity Corp. and including FirstEnergy Capital Corp. (the "Agents") to raise, on a reasonable commercial efforts basis, up to $65,000,000 (the "Offering") through the issuance of subscription receipts of the Corporation (each a "Subscription Receipt").

The proceeds of the Offering will be used to fund a capital program focused on exploration and development in Madagascar, Uganda, the Democratic Republic of Congo ("DRC") and Somaliland as well as for general corporate purposes. The Corporation has entered into: (i) an option agreement ("Madagascar Option") to farm into the Block 2102 production sharing contract (the "Madagascar PSC") in Madagascar; and (ii) a letter of intent ("LOI") to farm into Uganda Block EA4B, DRC Block V and Somaliland Berbera Block (Block 35), with Ophir Energy Plc ("Ophir") (LSE:OPHR).

The Corporation is also pleased to report the results of independent evaluations of oil resources prepared by DeGolyer and MacNaughton Canada Limited ("DeGolyer") on the blocks contemplated in the Madagascar Option and the LOI (the "DeGolyer Reports"). The DeGolyer Reports have an effective date of December 31, 2011, and were prepared in accordance with NI 51-101 (as defined below). According to the DeGolyer Reports, the best estimate gross prospective resources associated with the Madagascar Option and LOI blocks is 796 million bbl1.

Madagascar Option and LOI

Pursuant to the exercise of the Madagascar Option, the Corporation will receive a 50% operating interest in Block 2102, a 12,290 km2 onshore block in Madagascar. The Corporation thereby agrees to fund 100% of the drilling costs for the first two exploration wells drilled on Block 2102. The first exploration well is anticipated to commence drilling in July 2012 and each well is expected to cost approximately $20 million. Accordingly, $40 million of the net proceeds of the Offering will be allocated to exercising the Madagascar Option and funding Octant's commitments in Block 2102.

In addition, the LOI provides that the Corporation pay: (i) 46.75% of certain geological exploration costs for a 26.75%, non-operated, interest in Block V, a 7,447 km2 onshore block in the DRC; (ii) 100% of the certain geological exploration and drilling costs for an 80%, operated interest in Block 4B, a 486 km2 block in Uganda; and (iii) 75% of certain geological exploration costs for a 55%, operated interest in Block 35, a 16,270 km2 onshore exploration block in Somaliland (Block 35).

The Offering

Each Subscription Receipt will entitle the holder to receive, without the payment of any additional consideration or further action on the part of the holder thereof, one common share ("Common Share") in the capital of the Corporation upon the Escrow Release Conditions being satisfied prior to the Qualification Deadline (each as defined below).

If the Escrow Release Conditions are not satisfied on or before 5:00 p.m. on May 4, 2012, or the Madagascar Option between the Corporation and Ophir to enter into a farm-in agreement (the "Madagascar Farm-in Agreement") on Marovoay Block 2102, Majunga Basin, Madagascar (the "Madagascar Farm-in") is terminated at any earlier time or if the Corporation has advised the Agents or announced to the public that it does not intend to proceed with the Madagascar Farm-in (in any case, the "Termination Time"), holders of Subscription Receipts will receive the full purchase price of the Subscription Receipt, together with their pro rata portion of interest earned thereon between the Closing Date (as defined below) and the Termination Time.

The Corporation will use its reasonable commercial efforts to file a final long form prospectus qualifying the Common Shares issuable upon exercise of the Subscription Receipts (the "Prospectus") in each of the Canadian jurisdictions in which the Subscription Receipts are sold and obtain a receipt therefor on or before the day that is 45 days after the Closing Date (the "Qualification Deadline" and the day upon which such receipt is issued is the "Qualification Date"). If a receipt for the Prospectus is not obtained on or before the Qualification Deadline, the Subscription Receipts shall thereafter be exercisable, for no additional consideration or further action on the part of the holder thereof, into 1.1 Common Shares on the earlier of: (i) four months plus a day after the closing date of the Offering scheduled for April 5, 2012 (the "Closing Date"); and (ii) the Qualification Date. Notwithstanding the foregoing, the Corporation will continue to use its reasonable commercial efforts to obtain a receipt for the Prospectus after the Qualification Deadline. In any case, the Subscription Receipts shall be deemed to be exercised and exchanged for Common Shares on the date that is four months and one day following the Closing Date (subject to satisfaction of the Escrow Release Conditions).

The gross proceeds from the sale of the Subscription Receipts (the "Escrowed Proceeds") will be delivered to and held by a licensed Canadian trust company or other escrow agent (the "Escrow Agent") mutually acceptable to the Corporation and the Co-Lead Agents in an interest bearing account. The remainder of the fee payable to the Agents not payable on the Closing Date, plus accrued interest thereon, shall be released to the Agents out of the Escrowed Proceeds and the balance of the Escrowed Proceeds, plus accrued interest thereon, shall be released to the Corporation upon satisfaction of certain conditions, including: (i) the exercise of the Madagascar Option by Octant in accordance with its terms; and (ii) transfer of a 50% participating interest to Octant in the Madagascar PSC and the related joint operating agreement in accordance with their respective terms (collectively, the "Escrow Release Conditions").

The Offering, Madagascar Farm-In Agreement and LOI are subject to definitive agreements and ordinary regulatory approvals, including the approval of the TSX Venture Exchange.

The DeGolyer Reports

The following table summarizes DeGolyer's gross estimates for the various blocks:

ESTIMATE of the GROSS PROSPECTIVE OIL RESOURCES
as of
DECEMBER 31, 2011
for
OCTANT ENERGY LTD.
in
CERTAIN OIL PROSPECTS
VARIOUS LICENSE BLOCKS
VARIOUS COUNTRIES
Gross Pool Prospective Oil Resources Summary
Low
Estimate
(10
3
bbl)
Best
Estimate
(10
3
bbl)
High
Estimate
(10
3
bbl)
Prospect Country Area/
Basin
License/
Block
Anjohibe East Madagascar Majunga 2102 14,569 47,350 134,698
Anjohibe West Madagascar Majunga 2102 14,073 43,494 135,014
Upper Cret A Madagascar Majunga 2102 24,526 76,058 203,896
Upper Cret B Madagascar Majunga 2102 21,651 64,659 178,712
Upper Jurassic Lead Madagascar Majunga 2102 27,604 90,785 250,013
Lwr Cretaceous Lead Madagascar Majunga 2102 35,327 114,725 351,567
Statistical Aggregate 336,975 564,793 927,222
Arithmetic Summation 137,751 437,071 1,253,899
Izzy DRC/Uganda Lake Edward Exploration Area 4B 65,649 258,023 984,364
Prospect A DRC/Uganda Lake Edward Exploration Area 4B 7,006 15,984 37,383
Prospect B DRC/Uganda Lake Edward Exploration Area 4B 802 1,904 3,983
Prospect D DRC/Uganda Lake Edward Exploration Area 4B 17,033 40,038 89,700
Lead A Republic of Somaliland Ragudah SL9/SL12 4,634 14,514 38,024
Lead E South Republic of Somaliland Las Durah SL9/SL12 8,789 28,003 76,160
Statistical Aggregate 179,078 391,497 1,112,646
Arithmetic Summation 103,914 358,466 1,229,615

Notes:

  1. Pg has not been applied to the quantities in this table.
  2. Recovery efficiency is applied to prospective resources in this table.
  3. Low, best and high estimates in this table are P90, P50 and P10 respectively.
  4. Summations may vary from those shown here due to rounding.
  5. There is no certainty that any portion of the prospective resources estimated herein will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources evaluated.

DeGolyer is an internationally recognized oil and gas consultancy and a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta, Canada.

The DeGolyer Reports were prepared in accordance with the procedures and standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook"). The definitions used in preparing the DeGolyer Reports are those contained the COGE Handbook and the Canadian Securities Administrators National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

Estimates of gross pool prospective oil resources were generally prepared using land and technical information including well information, engineering, geological and geophysical data available up to the date of the report. The method or combination of methods used in the analysis of the reservoirs was tempered by experience with similar reservoirs, stage of development, and quality and completeness of basic data.

Gross pool prospective resources are defined as the total estimated petroleum that is potentially recoverable after December 31, 2011. See Appendix A - Resource Definitions for further information.

There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

The estimates of petroleum volumes described in this news release are for resources only. These estimates constitute forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific that contributes to the possibility that the predictions, forecasts, projections in the forward-looking statements will not occur, and that the actual performance or results expressed or implied by such forward-looking statements.

Potential resources estimates are subject to certain assumptions, risks and uncertainties, including those associated with exploration for oil and gas, the drilling and completion of future wells, limited available geological data and uncertainties regarding the actual production characteristics of, and recovery efficiencies associated with, the reservoirs, all of which are being assumed. As estimates, there is no guarantee that the estimated resources will be recovered or produced. Actual resources may be greater than or less than the estimates provided in this presentation. There is no certainty that any portion of these prospective resources described above will be discovered. There is also no certainty that it will be commercially viable to produce any portion of such prospective resources, if discovered.

The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by applicable securities laws, the Corporation, disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, the Corporation undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above.

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

Appendix A

Resource Definitions

Prospective resources and have been prepared in accordance with NI 51-101. Because of the lack of commerciality or sufficient development drilling, the prospective resources estimated herein cannot be classified as contingent resources or reserves. The petroleum resources are classified as follows:

Prospective Resources - Those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity.

The estimation of resources quantities for a prospect is subject to both technical and commercial uncertainties and, in general, may be quoted as a range. The range of uncertainty reflects a reasonable range of estimated potentially recoverable quantities. In all cases, the range of uncertainty is dependent on the amount and quality of both technical and commercial data that are available and may change as more data become available.

Low, Best, High, and Mean Estimates - Estimates of petroleum resources in this press release are expressed using the terms low estimate, best estimate, high estimate, and mean estimate to reflect the range of uncertainty.

Probabilistic terms used in this press release are identified with an asterisk (*). For probabilistic estimates of petroleum resources, the low estimate reported herein is the P90* quantity derived from probabilistic analysis. This means that there is at least a 90-percent probability that, assuming the prospect is discovered and developed, the quantities actually recovered will equal or exceed the low estimate. The best (median) estimate is the P50* quantity derived from probabilistic analysis. This means that there is at least a 50-percent probability that, assuming the prospect is discovered and developed, the quantities actually recovered will equal or exceed the best (median) estimate. The high estimate is the p10* quantity derived from probabilistic analysis. This means that there is at least a 10-percent probability that, assuming the prospect is discovered and developed, the quantities actually recovered will equal or exceed the high estimate. The expected value* (EV), an outcome of the probabilistic analysis, is used for the mean estimate.

Uncertainties Related to Prospective Resources - The quantity of petroleum discovered by exploration drilling depends on the number of prospects that are successful as well as the quantity that each success contains. Reliable forecasts of these quantities are, therefore, dependent on accurate predictions of the number of discoveries that are likely to be made if the entire portfolio of prospects is drilled. The accuracy of this forecast depends on the portfolio size, and an accurate assessment of the probability of geologic success* (Pg).

Probability of Geologic Success - Pg is defined as the probability of discovering reservoirs that flow petroleum at a measurable rate. Pg is estimated by quantifying the probability of each of the following individual geologic factors: trap, source, reservoir, and migration. The product of these four probabilities or chance factors is computed as Pg.

In this press release estimates of prospective resources are presented before adjustment for Pg.

Application of Pg to estimate the Pg adjusted prospective resources quantities does not equate prospective resources with reserves or contingent resources. Pg-adjusted prospective resources quantities cannot be compared directly to or aggregated with either reserves or contingent resources. Estimates of Pg are interpretive and are dependent on the quality and quantity of data currently made available. Future data acquisition, such as additional drilling or seismic acquisition, can have a significant effect on Pg estimation. These additional data are not confined to the study area, but also include data from similar geologic settings or technological advancements that could affect the estimation of Pg.

Predictability versus Portfolio Size - The accuracy of forecasts of the number of discoveries that are likely to be made is constrained by the number of prospects in the exploration portfolio. The size of the portfolio and Pg together are helpful in gauging the limits on the reliability of these forecasts. A high Pg, which indicates a high chance of discovering measurable petroleum, may not require a large portfolio to ensure that at least one discovery will be made (assuming the Pg does not change during drilling of some of the prospects). By contrast, a low Pg, which indicates a low chance of discovering measurable petroleum, could require a large number of prospects to ensure a high confidence level of making even a single discovery. The relationship between portfolio size, Pg, and the probability of a fully unsuccessful drilling program that results in a series of wells not encountering measurable hydrocarbons is referred to herein as the predictability versus portfolio size relationship* (PPS). It is critical to be aware of PPS, because an unsuccessful drilling program, which results in a series of wells that do no encounter measurable hydrocarbons, can adversely affect any exploration effort, resulting in a negative present worth.

For a large prospect portfolio, the Pg-adjusted mean estimate of the prospective resources quantity should be a reasonable estimate of the recoverable petroleum quantities found if all prospects are drilled. When the number of prospects in the portfolio is small and the Pg is low, the recoverable petroleum actually found may be considerably smaller than the Pg-adjusted mean estimate would indicate. It follows that the probability that all of the prospects will be unsuccessful is smaller when a large inventory of prospects exist.

Prospect Technical Evaluation Stage - A prospect can often be subcategorized based on its current stage of technical evaluation. The different stages of technical evaluation relate to the amount of geologic, geophysical, engineering, and petrophysical data as well as the quality of available data.

Prospect - A prospect is a potential accumulation that is sufficiently well defined to be a viable drilling target. For a prospect, sufficient data and analyses exist to identify and quantify the technical uncertainties, to determine reasonable ranges of geologic chance factors and engineering and petrophysical parameters, and to estimate prospective resources.

(1) Arithmetic summation of Best Estimate (P50) Gross Prospective Oil Resources as evaluated by DeGolyer and MacNaughton Canada Limited, see Appendix A for further detail.

Neither the 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 press release.

Contact Information

  • Octant Energy Corp.
    Richard Schmitt
    CEO and President
    North America: +1 (403) 470-6591
    International: +971 50 640 3380
    rick.schmitt@octantenergy.com