Serrano Energy Ltd.

July 31, 2009 18:21 ET

Serrano Energy Announces New Credit Facility, Settlement of Litigation and Change of Auditors

CALGARY, ALBERTA--(Marketwire - July 31, 2009) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA.

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

New Credit Facility

Serrano has negotiated an $8.1 million credit facility with a mezzanine lender. The Company has currently drawn $5.1 million of the facility to satisfying outstanding accounts payable. The balance available under the credit facility will be utilized by Serrano to fund ongoing operations. The facility bears interest at 15% per annum and is secured by a debenture and a general security agreement over the assets of the Company. The security is subordinate to the security of the senior lender and is due on March 31, 2010. A fee of $100,000 has been paid in cash and a bonus of 400,000 common shares of Serrano has been issued as an additional fee, subject to certain anti-dilution provisions. The common shares will have a four month hold period. In the event that Serrano is unable to raise no less than $6.0 million in additional equity prior to December 31, 2009, an additional fee of $800,000 will become payable. Additional bonus shares are issuable to the lender should Serrano complete an equity financing at a price per share of less than $2.00 prior to the maturity date.

Settlement of Litigation

Serrano announces that it has negotiated a $1.9 million cash settlement as a full settlement of a claim by its largest creditor which had been seeking damages of approximately $2.9 million.

Resignations and Appointment of Directors

Barry Lee resigned as a director of the Corporation on June 18, 2009 and Daryl S. Clark, was nominated to fill the vacancy. Robert Chenery has also resigned from the board on June 22, 2009. Serrano gratefully acknowledges Messrs Lee and Chenery for their dedication to the Company and wishes them well in their future endeavours.

Mr. Clark is President of Street Sense Capital Advisors LLC in Plantation, Florida who has a long history of corporate finance and management within large and small companies. He is currently the vice-president, chief financial officer and a member of the board of directors of South Asia Energy Management Systems, a California corporation engaged in the development, construction, acquisition, ownership and long-term operation of hydroelectric and other renewable energy projects in various international markets. Prior to South Asia Energy, from 2002 to 2007, Mr. Clark was the vice-president and chief financial officer of Peachtree Settlement Funding LLC, a specialty factoring firm, where he was instrumental in leading revenue growth from $20-million to $180-million annually. The company's valuation was in excess of $750-million when it was eventually taken private by a group of private equity funds. Prior to joining Peachtree, Mr. Clark was chief financial officer for META Security Group, a successful start-up consulting firm specializing in Internet and network security. He has also held key leadership positions in the past with DirecTV and Sensormatic Electronics. Mr. Clark is currently a director of Canadian Phoenix Resources Corp. Serrano's majority shareholder.

Change of Auditors

Serrano has appointed Deloitte & Touche LLP, Chartered Accountants as auditor of the Corporation effective July 22, 2009. The resignation of the Corporation's former auditor, PricewaterhouseCoopers LLP, was accepted by the Corporation effective July 22, 2009.

Following the issuance of the 400,000 common shares in conjunction with the aforementioned subordinated credit facility, the Company currently has 20,269,429 common shares outstanding.

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
    or
    Serrano Energy Ltd.
    Michal J. Holub
    Vice President Finance and CFO
    (403) 262-5256
    Email: nevcrow9@telus.net