Solara Exploration Ltd.
TSX VENTURE : SAA.A

Solara Exploration Ltd.

August 30, 2012 17:44 ET

Solara Exploration To Merge With Verity Energy

CALGARY, ALBERTA--(Marketwire - Aug. 30, 2012) - Solara Exploration Ltd. ("Solara" or the "Company") (TSX VENTURE:SAA.A) announces that it has entered into an Amalgamation Agreement dated August 30, 2012 (the "Amalgamation Agreement") with Verity Energy Ltd. ("Verity"). Verity is a private Alberta corporation engaged in the exploration and development of oil and gas properties in the western Canadian sedimentary basin. In accordance with the terms of the Amalgamation Agreement, Solara will amalgamate with Verity (the "Transaction") to form a new company ("Amalco"). Solara currently has 108,710,732 Class A Common Shares (the "Solara Shares") and Verity has 14,120,470 Common Shares (the "Verity Shares"), issued and outstanding. Pursuant to the Amalgamation Agreement and subject to the Ratio Adjustment described below, the Solara shareholders will receive 0.2357 of one Amalco Common Share for each Solara Share owned by them and the holders of the Verity Shares will receive 1.77048 Amalco Common Shares for each Verity Share owned by them (the "Exchange Ratios"). The Exchange Ratios are based upon Amalco initially having 50 million Common Shares issued and outstanding upon completion of the Amalgamation and the holders of the Verity Shares and the holders of the Solara Shares will each be issued 25 million Amalco Common Shares respectively, prior to the Private Placement described below. The Exchange Ratios are subject to adjustment (the "Ratio Adjustment") for any additional shares or other securities convertible into shares of either Solara or Verity which are issued after this date and prior to the closing the Amalgamation Agreement. The Boards of Directors of the two companies have approved the Transaction subject to certain conditions as set forth the Amalgamation Agreement. The directors and officers of both companies have agreed to enter into lockup agreements committing their support in favour of the Transaction.

The Amalgamation Agreement further provides that each of Verity and Solara will nominate two directors to the board of directors of Amalco and those directors so nominated will mutually agree upon the fifth appointee to the Amalco Board. It is intended that the management of Verity will assume the key management positions within Amalco upon closing of the Transaction with John Zang, the current President and CEO of Verity, being appointed the President and CEO of Amalco.

The closing of the Transaction is subject to a number of conditions, including but not limited to Amalco completing a private placement financing of between $5 million and $10 million (the "Financing"). The Financing is subject to terms and conditions agreeable to both Verity and Solara, the TSX Venture Exchange (the "TSXV") and the approval of the shareholders of Solara and Verity and their respective lenders.

Amalco will be renamed based on the mutual agreement of Solara and Verity, and subject to TSXV and regulatory approval. A finder's fee of approximately $250,000 will be payable to an independent third party upon closing of the Transaction and will include a fairness opinion. The finder's fees will be comprised of one-half cash and one-half Amalco Shares (valued at the Financing price). Brokerage and underwriting fees will also be paid in relation to the Financing. Further information on the Financing will be disseminated in due course.

Verity currently has production from three properties in Alberta and one property in British Columbia totaling approximately 90 bbls/d of oil and 2,140 Mcf/d of natural gas. Verity's key growth property is its Viking oil lands located in the Veteran (Provost) area of east central Alberta. Over ninety (90%) percent of Verity's oil production comes from the seven gross wells (5.8 net) which Verity owns in the Veteran area. Verity has a total of approximately seven net sections of land in the Veteran (Provost) area. Solara also has various working interests in lands in the Provost area. The Management of Verity estimates that there are up to 40 additional Viking development drilling locations based on internal technical evaluation. The other projects of Verity include predominantly gas producing properties located at Helmet, BC, Grande Prairie and Long Coulee, Alberta. Verity currently has total debt of approximately $9 million. Based on the Verity NI 51-101 compliant reserve report prepared by AJM Deloitte (the Verity reserves evaluators) dated December 31, 2011, the 10% discounted value of its proven plus probable basis reserves is $17.8 million.

Upon completion of the amalgamation of Solara and Verity, Amalco will be a newly created junior oil and gas company publicly traded on the TSXV. It will be focused on exploration, development and acquisition of oil and natural gas in central Alberta, with an emphasis on oil resource plays in the Cardium, Viking and Sparky formations. Amalco will have three core producing oil projects located in Buck Lake (Pembina), Veteran (Provost) and Dewberry areas of Alberta. All three oil projects have additional upside in terms of optimization and drilling potential. The combined entities initially will produce approximately 700 BOE/D of oil and gas production and have a gross proven plus probable reserve value of approximately $45 million utilizing a 10% discount rate. The proceeds of the Financing will be used to implement a development drilling and optimization program on the core oil projects and to pursue additional asset acquisitions as part of an aggressive growth strategy.

Solara is publicly traded on the TSXV under the trading symbol SAA.A. More information is available on the Company's website at www.solaraexploration.com.

READER ADVISORY

This news release may contain certain forward-looking statements, including management's assessment of future plans, acquisitions and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, 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, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances 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, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

108,710,732 Class A Common Shares

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.

Contact Information

  • Solara Exploration Ltd.
    Donald R. Holding
    President and Chief Executive Officer
    (403) 585-3737
    dholding@solaraexploration.com

    Solara Exploration Ltd.
    Ross O. Drysdale
    Director
    (403) 585-3737
    ross@drysdalelaw.com

    Solara Exploration Ltd.
    1800, 444 - 5th Avenue S.W.
    Calgary, AB T2P 2Y3