Sagres Energy Inc.
TSX VENTURE : SGI

April 20, 2011 12:31 ET

Sagres Energy Agrees to Acquire Participating Interests in Two Colombian Exploration Blocks

CALGARY, ALBERTA--(Marketwire - April 20, 2011) - Sagres Energy Inc. ("Sagres" or the "Company") (TSX VENTURE:SGI), an international oil and gas exploration company with an exploration portfolio in Guyana and Jamaica, announced today that further to its news releases of August 27, 2010 and March 14, 2011, Sagres has agreed to acquire private participating interests in each of the Llanos 11 and Putumayo 3 blocks located in Colombia.

Private Participation Agreements

A wholly-owned subsidiary of Sagres entered into separate private participation agreements with each of Stetson Oil & Gas Ltd. ("Stetson") (TSX VENTURE:SSN) and Vast Exploration Inc. ("Vast") (TSX VENTURE:VST) pursuant to which Sagres agreed to acquire a 90% private participating interest in each of the Llanos 11 and Putumayo 3 blocks. Pursuant to the terms of these agreements, Stetson and Vast, as operators of the blocks, will each have a 10% carried interest and Sagres will be responsible for 100% of all costs required to be incurred by the operators under their respective exploration and production contracts with the Agencia Nacional de Hydrocarburos of Colombia (the "ANH") for the duration of the first exploration phases. In respect of each block, Sagres will be entitled to 98.5% of the net revenue from the block until it has recovered the cost of the 10% carried interest held by the operator. Once cost recovery has occurred, each operator's carried interest will convert to a participating interest whereafter the parties will share the net revenues and costs from the block on the basis of their respective participating interests. The completion of each acquisition is subject to Stetson and Vast (as applicable) obtaining the approval of the TSX Venture Exchange.

The Llanos 11 block

The Llanos 11 block is comprised of 51,190 Ha (gross) and is located in the Llanos Basin of Colombia, a prolific basin in the foreland of the Colombian Andes (Figure 1). The Llanos 11 block is on trend with existing and new discoveries and is also close to the giant Caño Limon field. Currently, there is approximately 900 km of 2D seismic data and a magnetic map over parts of this Block.

Note: To view Figure 1: LLA-11 Location Map, please visit the following link: http://media3.marketwire.com/docs/Figure1_LLA11_Location_Map.pdf.

Stetson is the operator of the Llanos 11 block under a Hydrocarbon Exploration and Production Contract (the "LLA-11 E&P Contract") with the ANH. Under the LLA-11 E&P Contract, the contract parties are required to drill one exploration well and acquire, process and interpret 162 km2 of 3D seismic for a minimum cost of USD$9.5 million in the first 36-month exploration phase. In the second 36-month exploration phase, the contract parties are required to drill two exploration wells or drill one exploration well and surrender 50% of the contract area for a minimum cost of USD$6 million.

The Llanos 11 block carries an additional royalty of 1% above the basic royalty scheme established under Colombia law (8% for up to 5,000 bopd of production and increasing to 25% for a 600,000 bopd field).

The Putumayo 3 block

The Putumayo 3 block is comprised of 59,895 Ha (gross) and is located in the Putumayo Basin of Colombia, a prolific basin in the foreland of the Colombian Andes (Figure 2). The Putumayo 3 block is on trend with existing and new discoveries and there is very limited 2D seismic data over this Block.

Note: To view Figure 1: PUT-3 Location Map, please visit the following link: http://media3.marketwire.com/docs/Figure1_PUT-3_Location_Map.pdf.

Vast is the operator of the Putumayo 3 block under a Hydrocarbon Exploration and Production Contract (the "PUT-3 E&P Contract") with the ANH. Under the PUT-3 E&P Contract, the contract parties are required to drill one exploration well and acquire, process and interpret 150 km of 2D seismic for a minimum cost of USD$12.9 million in the first 36-month exploration phase. In the second 36-month exploration phase, the contract parties are required to drill two exploration wells or drill one exploration well and surrender 50% of the contract area for a minimum cost of USD$12 million.

The Putumayo 3 Block carries an additional royalty of 7% above the basic royalty scheme established under Colombia law (8% for up to 5,000 bopd of production – increasing to 25% for a 600,000 bopd field).

Shares issuances and director appointments

As a result of entering into the private participation agreements, Sagres intends to issue to the former shareholders of 2236967 Ontario Inc. ("PrivateCo") in due course an aggregate of 25.0 million Sagres common shares pursuant to the terms of the definitive agreement entered into between Sagres, PrivateCo and the former shareholders of PrivateCo. 75% of these shares will be subject to resale restrictions and be released in equal instalments on the six, twelve and eighteen month anniversaries of the issuance of such shares.

Effective April 21, 2011, Mr. Ahmed Said is expected to join the board of directors of Sagres. In addition, it is expected that Mr. Gerold Fong will, upon completion of the acquisitions, resign as a director and the Chairman of Sagres and that Mr. Stan Bharti will be appointed to the board of directors of Sagres with Mr. Bharti as Chairman.

About Sagres

Sagres Energy Inc. is a Canadian based international oil and gas exploration company with an exploration portfolio in Colombia, Guyana and Jamaica. The common shares of Sagres are listed for trading on the TSX Venture Exchange under the symbol "SGI".

Forward-looking information

This news release contains forward-looking information relating to the completion of the acquisitions of two private participating interests, acquisition of seismic data, work commitments, cost recovery, the issuance of Sagres common shares and resale restrictions in respect thereof, the resignation and appointment of directors and other statements that are not historical facts. Forward-looking information relates to management's future outlook and anticipated events or results, and may include statements or information regarding the future plans or prospects of the Company.

Forward-looking information is based on certain factors and assumptions regarding, among other things, the impact of increasing competition; the general stability of the economic and political environments in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products, and other similar matters. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, the inability to settle the definitive terms of the Company's joint venture arrangements, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, reliance on key personnel, regulatory risks and delays, including risks relating to the acquisition of necessary licenses and permits, environmental risks and insurance risks.

You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, the Company is under no obligation and does not undertake to update this information at any particular time, except as required by law.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Sagres Energy Inc.
    Dr. David Johnson
    President
    (403) 978-9878

    Sagres Energy Inc.
    Jason Bednar
    Chief Financial Officer
    (403) 607-4607