Quattro Exploration and Production Ltd.
TSX VENTURE : QXP

Quattro Exploration and Production Ltd.

November 05, 2013 16:38 ET

Quattro Closes Purchase and Sale Agreement for the Acquisition of 950 boe/d of Oil and Gas Production in Western Canada

CALGARY, ALBERTA--(Marketwired - Nov. 5, 2013) - Quattro Exploration and Production Ltd. ("Quattro" or the "Company") (TSX VENTURE:QXP) is pleased to announce that it has closed an arms-length agreement (the "Purchase and Sale Agreement" or "PSA") with an Alberta-based private oil and gas exploration and production company for the acquisition of certain oil and gas interests in Central Alberta, NW Alberta, NE British Columbia and Saskatchewan (the "Acquisition").

The foundation of the Acquisition is located in 3 regions of Western Canada currently producing more than 950 boe/d (of which greater than 25% is oil and liquids), including developed land of approximately 91,312 acres (net), undeveloped lands of 92,770 acres (net) for a total of 184,082 acres (net) of exploration land in the provinces of Alberta, British Columbia and Saskatchewan. Recent production is supported by a December 31st, 2012 Sproule & Associates engineering report showing that the Acquisition assets produced an average of more than 1,000 boe/d of production in 2012 of which 276 bopd were medium to light oil and liquids. Prior to the completion of the Acquisition, AJM Deloitte independently confirmed the continuing performance of the assets for Quattro in July 2013.

Quattro will operate the majority of the assets being acquired and will own a 75% to 87% working interest in these conventional oil and gas fields in Western Canada. The effective date of the Acquisition is January 1 st, 2013, with a purchase price of $7.8 million plus G.S.T. and customary closing adjustments. Funding of the acquisition will be completed through a combination of a $5.5 million 4-year term debt facility with Business Development Bank of Canada at favorable rate of 7.15% per annum and assumed working capital.

In addition to this financing, the Company will continue to work towards an additional financing of up to $4.5 million by way of Convertible Debentures with a 3-year term paying an annual interest rate of 8% with a conversion price of $0.50/share and 125 bonus warrants priced at $0.50/share for each $1,000 debenture issued.

Leonard Van Betuw, President & CEO of the Company, commented "We are very pleased this Acquisition has been completed as proposed earlier this year. The Company wishes to thank its stakeholders for their continuing support as the Company pursues its vision to become a significant domestic and international oil and gas producer, through internally-funded development opportunities and complementary acquisitions."

"The term debt facility of $5.5m and the subsequent planned debenture financing of $4.5m, for a total of $10 million, will position the Company to operate in a conservative manner with a strong balance sheet. This will also allow the Company to continue to execute its business plan in Canada and Guatemala with deliberate and predictable results." Upon the completion of its financing, the Company shall commence the execution of a remediation and development budget with plans to exit 2013 with production greater than 1,200 bbls boe per day working towards a target of 2,000 boe per day by June 30th, 2014. The goal of the Company is to generate in 2014 cash-flow in excess of $10 million while maintaining less than 1X net debt to cash-flow."

Summary of the Acquisition

Production: 950 boe/d Oil and Gas, with greater than 250 boe/d of shut-in oil and gas
Common Metrics: $18,640 per flowing boe (including cash and assumed long term liabilities)
Proven Reserves: $4.45 per boe (2P reserves of 3.9 million boe)
Facilities: Established and operating with a high working interest, and excess capacity
Land: 184,084 net acres; 91,312 acres developed and 92,770 acres undeveloped
Additional Potential:


(i) optimization, (ii) work-over and (iii) developmental drilling opportunities, with up to 100% interests in the Leduc, Viking and Mannville horizons, in Alberta and as well as the Montney, Doig, Cecil and Halfway formations in NW Alberta and NE British Columbia which provide the opportunity to increase production by more than 1,000 boe/d.

The Company intends to continue to add personnel in a manner that is measured and sustainable while pursuing low risk material growth in Western Canada as well as its established business plan in Canada and Central and South America. The closing of this Acquisition is anticipated to result in an average net production of 1100 boe/d by year end, with a pro-forma more than 1,000 boe/d for 2013.

Upon the completion of the Acquisition the enterprise value of the Company, as supported by the independent engineered evaluation of the Acquisition assets (NPV20%) of $33,046,000, is calculated to be approximately $50 million or $1.41 per share with Book Value of $0.98/share based on 34,994,778 shares currently issued and outstanding.

In addition to the acquisition and financing the Company is pleased to announce the receipt of notices from certain officers and shareholders to convert $250,000 of outstanding debentures to equity at an issue price of $0.15 per share.

About Quattro Exploration and Production Ltd.

Quattro Exploration and Production Ltd. will continue to focus on the conventional exploration and development of oil and natural gas reserves in Western Canada, with an expanding presence in Alberta and NE British Columbia. Our core low risk production base will provide us the capacity to aggressively pursue a series of high impact exploration and development efforts in Central and South America. The Company intends to balance this portfolio of activities to assure its shareholders that it achieves material growth in both reserves and production through execution of its business plan.

This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. For more information on the Company, Investors should review the Company's registered filings which are available at www.sedar.com.

This news release shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities offered have not been and will not be 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 applicable exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.

BOE presentation:

Barrel ("bbl") of oil equivalent ("boe") amounts may be misleading particularly if used in isolation. All boe conversions in this report are calculated using a conversion of six thousand cubic feet of natural gas to one equivalent barrel of oil (6 mcf=1 bbl) and is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Net Asset Value (per share),NPV, future net revenue, presentation:.

Per NI 51-101/5.6 the estimated values disclosed do not represent fair market value.

Trading in the securities of Quattro Exploration & Production Ltd. should be considered highly speculative. 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 release.

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