Quetzal Energy Ltd.

Quetzal Energy Ltd.

May 16, 2011 19:58 ET

Quetzal Announces Proposed Spinout of Guatemalan Assets

CALGARY, ALBERTA--(Marketwire - May 16, 2011) - Quetzal Energy Ltd. (TSX VENTURE:QEI) ("Quetzal" or the "Company") is pleased to announce that its Board of Directors has approved a plan, subject to shareholder and other approvals, whereby the Company intends to distribute its Guatemalan oil and gas interests, held through a wholly-owned subsidiary, to its shareholders. The plan is intended to maximize the value of its businesses to Quetzal shareholders by creating two distinct and independent companies. The plan will result in the creation of a new, publicly traded company, RealPetrol Ltd. ("RealPetrol"), which will indirectly hold the Guatemalan assets. Quetzal's other assets, comprised primarily of oil and gas assets in Colombia, will become the focus of its management and strategic direction.

"The decision to distribute the Guatemalan assets to RealPetrol recognizes that we have two distinct businesses that can be significantly enhanced by giving them the opportunity to independently evaluate growth opportunities and organize their capital resources. We believe that separating the two businesses at this time will be financially beneficial to both and moreover, will unlock value for shareholders," said Robert Szczuczko, Quetzal Chief Executive Officer.

Under the plan, Quetzal shareholders will retain their current interest in Quetzal and will receive one common share in RealPetrol for every fifteen Quetzal common shares held. RealPetrol will have separate management and Board of Directors, and will be publicly traded. Current optionholders and warrantholders will participate in the arrangement and the details of such participation will be set out in the proxy circular referenced below. The proposed distribution will be effected by way of a Plan of Arrangement that will be subject to, among other things, TSX Venture Exchange, court, shareholder and other regulatory approvals. It is expected that for most securityholders, the distribution will be completed on a tax-deferred basis. A proxy circular outlining details of the proposed transaction will be mailed to Quetzal shareholders and warrantholders shortly, with a special meeting of shareholders to take place on June 20, 2011. The plan is expected to take effect July 1, 2011.

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

Ascendant Securities Inc. provided services to Quetzal with respect to the proposed transaction.

About Quetzal

Quetzal is a development stage independent oil and gas company engaged in exploration, development, and production activities in Colombia and Guatemala. Quetzal is actively involved in identifying and developing commercial opportunities for the monetization of hydrocarbon resources in both countries.

Cautionary Statements

This news release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (together, "forward-looking information"). The use of any of the words "expect", "anticipate", "continue", "estimate", "believe", "plans", "intends", "confident", "may", "objective", "ongoing", "will", "should", "project", "should" and similar expressions are intended to identify forward-looking information. In particular, but without limiting the foregoing, this news release contains forward-looking information concerning the use of proceeds of the recently completed offering of units of the Corporation.

The forward-looking information is based on certain key expectations and assumptions made by Quetzal, including expectations and assumptions concerning the operational results in Colombia and Guatemala. Although Quetzal believes that the expectations and assumptions on which the forward-looking information are based are reasonable, undue reliance should not be placed on the forward-looking information because Quetzal can give no assurance that they will prove to be correct.

Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the inherent risks involved in the exploration and development of oil and gas properties, the uncertainties involved in interpreting drilling results and other geological data, uncertainties relating to fluctuating oil and gas prices, the possibility of cost overruns or unanticipated costs and expenses and other factors including unforeseen delays. Anticipated exploration and development plans relating to Quetzal's properties are subject to change.

The foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information contained in this press release is made as of the date hereof and Quetzal 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.


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