Serrano Energy Ltd.

June 12, 2009 11:57 ET

Serrano Energy Announces New Credit Facility, Agreements With Creditors and Officer Appointment

CALGARY, ALBERTA--(Marketwire - June 12, 2009) -

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Serrano Energy Ltd. ("Serrano" or the "Company") is pleased to announce the following:

New Credit Facility

Serrano has negotiated a $7.5 million credit facility with a major financial institution. The facility bears interest at the bank's prime rate plus 2.5% and is secured by a general security agreement over the assets of the Company. The facility is currently capped at $3.5 million, however the Company may access the entire $7.5 million line pending the following: raising a minimum of $3.0 million of equity, maintaining production at 900 boe/d and achieving an adjusted working capital ratio of one to one. The next annual review date is scheduled for April 30, 2010.

Agreements with Trade Creditors

Serrano also announces that it has entered into agreements with ten trade creditors to settle approximately $7 million of trade debt through an initial payment of one-half of the amount owing to each of them and providing a promissory note for the balance payable over the remainder of 2009. This has allowed the Company to remove all existing liens on its producing properties. An additional creditor has been settled in part by the issuance of 10,413 common shares issued at a deemed price of $5.00 per share. The common shares issued will have a hold period of four months.

Following the issuance of the 10,413 common shares, the Company has issued 422,453 common shares in total for trade creditor settlements. to result in 19,879,842 Common Shares currently outstanding in the capital stock of the Company.

Appointment of Officer

Michal J. Holub has joined the Company as the Vice-President of Finance and Chief Financial Officer. Mr. Holub has held senior financial positions with both public and private companies involved in the oil and gas exploration and production and accounting sectors, most recently as the controller with a junior oil and gas producer. Prior thereto he was a senior manager at a national accounting firm. Mr. Holub obtained a Bachelor of Commerce degree from the University of Calgary and holds a Chartered Accountant designation.

Cautionary Statements

Certain information set forth in this document, including management's assessment of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond this party's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Actual results, performance or achievement could differ from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will be derived there from. Serrano disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required in accordance with applicable securities laws.

The Company has also used certain measures of financial reporting that are commonly used as benchmarks within the oil and natural gas production industry. The measures discussed are widely accepted measures of performance and value within the industry, and are used by investors and analysts to compare and evaluate oil and natural gas exploration and producing entities. Most notably, these measures include operating netback and funds flow from operations. Operating netback is a benchmark used in the crude oil and natural gas industry to measure the contribution of oil and natural gas sales subsequent to the deduction of royalties, operating and transportation costs. Funds flow from operations is before changes in non-cash working capital but adjusted for site restoration expenditures, and is used to analyze operations, performance and liquidity. These measures are not defined under GAAP and should not be considered in isolation or as an alternative to conventional GAAP measures. These measures and their underlying calculations are not necessarily comparable to a similarly titled measure of another entity.

Per barrel of oil equivalent amounts have been calculated using a conversion of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). (Barrel of oil equivalents (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead).

Contact Information

  • Serrano Energy Ltd.
    J.W. Grant Robertson
    Vice-President Business Development
    (403) 231-1230
    Email: nevcrow2@telus.net