Texada Capital Corp.
TSX VENTURE : TXC.P

December 19, 2007 12:03 ET

Texada to Acquire Brazilian Oil and Gas Concession Interests

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 19, 2007) - Texada Capital Corp. (TSX VENTURE:TXC.P) ("Texada" or the "Company"), a Vancouver based Capital Pool Company listed on the TSX Venture Exchange (the "Exchange") is pleased to announce that it has entered into an agreement with Petro Latina Do Brasil Exploracao e Producao de Petroleo e Gas Natural Ltda. ("Petro Latina"), a private company incorporated under the laws of Brazil, pursuant to which Texada has agreed to acquire 100% of the issued and outstanding quotas (shares) of Petro Latina in exchange for common shares of Texada (the "Acquisition"). The Acquisition will constitute Texada's Qualifying Transaction pursuant to the policies of the Exchange.

Pursuant to the terms of three Farm-in Agreements and an Option to Farm-In Agreement with BrazAlta Resources Corp., ("BrazAlta") W. Washington Empreendimentos e Participacoes Ltd. and W. Washington Petroleo S.A. (together, "Washington"), Petro Latina owns the right to acquire certain working interests (as set out below) in a total of 16 petroleum exploration concessions in the producing Reconcavo and the Sergipe Alagoas Basins located in north-east Brazil (the "Properties").

Proposed Acquisition

Under the terms of the Securities Exchange Agreement dated December 12, 2007, Texada agreed to acquire all of the issued and outstanding quotas (shares) of Petro Latina from its sole beneficial shareholder, Petro Latina Energy Pte. Ltd. ("PLE") a company incorporated in Singapore, in exchange for the issuance of 1,000,000 common shares in the capital of Texada. Upon completion of the Acquisition, Petro Latina will be a wholly-owned Brazilian operating subsidiary of Texada.

Texada has also entered into convertible loan agreements dated as of December 3, 2007 with Petro Latina, PLE, and certain lenders, pursuant to which the lenders have advanced the sum of US$3,500,000 to PLE, which PLE has loaned to Petro Latina for the purpose of funding the first instalments payable under the Farm-in Agreements as discussed below under the heading "Summary of the Oil and Gas Properties". Conditional upon the completion of the Acquisition, the debt owing by Petro Latina will be assigned to Texada by PLE in exchange for 7,000,000 common shares of the Company at a deemed price of C$0.50 per share which shares will be transferred to the lenders by PLE to settle the debt owing by it to the lenders.

The Acquisition will be an Arm's Length Transaction (as such term is defined in the Exchange's policies). None of the insiders of Texada are insiders of Petro Latina or own, directly or indirectly, any of the issued securities of Petro Latina. As a result, Texada is not required under the Exchange's policies to seek shareholder approval of the Acquisition and will therefore be able to expedite the closing and ensure that Petro Latina is able to fund its ongoing commitments.

Trading in the Company's common shares on the Exchange will be halted pending completion of the Acquisition and the related transactions.

All common shares of the Company held by Principals (as such term is defined in the Exchange's policies) on the completion of the Acquisition will be escrowed pursuant to the policies of the Exchange, which may include securities they acquire under the Financing (defined below).

Haywood Securities Inc. has agreed to act as the Company's sponsor in accordance with the Exchange's policies and will be paid a fee of $50,000 in cash plus 100,000 warrants, with each warrant entitling it to acquire one additional common share of Texada at a price of C$1.00 for a period of 12 months from issuance.

No finder's fees will be paid in connection with the Acquisition.

On the closing of the Acquisition and the Financing (as described below), the Resulting Issuer will be classified under Exchange policies as a Tier 2 Oil and Gas Issuer and will have approximately 36,414,000 common shares issued and outstanding, in addition to warrants outstanding that entitle the holders to acquire an additional 5,734,000 common shares and incentive stock options outstanding that entitle the optionees to acquire up to 2,414,160 common shares.

Proposed Financing

Texada proposes to carry out a non-brokered private placement (the "Financing") of units of the Company (the "Units"), at a price of C$1.00 per Unit, to raise gross proceeds of up to C$10,000,000. The Financing will be conditional upon and will close concurrently with the completion of the Acquisition.

Each Unit will consist of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to acquire one additional common share at a price of C$1.35 for a period of two years from issuance, subject to the right of Texada to accelerate the exercise of the common share purchase warrants if the closing price of the common shares of the Resulting Issuer on the Exchange is C$1.65 or more for 20 consecutive trading days.

The funds raised will be allocated to work commitments on the Properties and general working capital. Existing and proposed insiders of Texada may purchase Units under the Financing.

A finders' fee or commission may be paid by the Company in connection with the Financing.

Name Change

Immediately prior to the closing of the Acquisition, the directors of Texada will resolve, pursuant to the powers granted to them under the Company's articles, to change the name of the Company to a name related to its new business.

Conditions Precedent to Closing

The obligation of Texada and Petro Latina to complete the Acquisition is subject to the satisfaction of the usual conditions precedent including:

(a) the receipt of the approval of the Exchange and all other necessary regulatory authorities and third party approvals;

(b) the completion of the Financing;

(c) the receipt of a satisfactory legal opinion concerning title to the Properties and certain corporate matters relating to Petro Latina;

(d) the completion of the Technical Report (as described below) in a form satisfactory to the Company and prepared in accordance with National Instrument 51-101

(e) no adverse material change having occurred in the business, affairs, financial condition assets or operations of Texada, Petro Latina or the Properties prior to completion of the Acquisition.

Stock Option Grants

Immediately following the completion of the Acquisition, up to 2,414,160 incentive stock options will be granted to the new directors and management of the Company. Each option will grant the holder the right to acquire one common share of the Company at a price of C$1.00 per share in accordance with the new incentive stock option plan which the Company's shareholders will be asked to approve at the Company's upcoming annual general meeting scheduled for January 4, 2008 (the "AGM").

Board of Directors of Texada

At the AGM, the shareholders will be asked to fix the number of directors of the Company at five. Andrew Malim and Joseph Bauer, current directors of Texada, will not be standing for re-election; Darren Devine will be the only current director of the Company standing for re-election. In addition, management will nominate Messrs. Read Taylor, Keith Hill, Ian Baron and Max Pozzoni to the Board. Their biographies are summarized briefly below.

Immediately following the AGM, it is anticipated that Read Taylor will be appointed as the President and CEO of the Company, Darren Devine will be appointed as the Secretary of the Company, and Adam Kniec will be appointed as the CFO of the Company.

Directors, Officers and other Insiders of the Resulting Issuer

On completion of the Acquisition, it is anticipated that the directors, senior officers and insiders of the Resulting Issuer will be:

Read B. Taylor (President and Chief Executive Officer and Director)

Read B. Taylor has worked in increasingly responsible management positions in the energy business around the world for over 26 years. He has served with such notable companies as UNOCAL, Anadarko and recently Devon Energy. His experience includes geologic and geophysical interpretation as a team member and leader for exploration and development projects, management roles in commercial and negotiations, gas marketing and business development including successful new ventures and acquisitions. Within this global experience base, he has worked closely with service, technology, and joint venture companies as well as host country government and regulatory agencies. Most recently, Mr. Taylor successfully acted as General Manager and President of Devon Energy do Brasil Ltda., building Devon's portfolio of exploration and development acreage culminating in the recently announced production start-up of a significant offshore oil discovery, Polvo field Campos Basin estimated at 60,000bopd and over 100MMBO field size.

He is currently the Founder and Director of RICE International Relief Organization, a non-profit charity with projects around the world. Mr. Taylor holds a B.Sc. in International Business from Pepperdine University, and a B.Sc. in Geophysics and an M.Sc. in Geology from the University of Southern California.

Keith Hill (Director)

Keith Hill is currently the President and CEO of Pearl Exploration and Production Ltd., a company focused on heavy oil development in North America, and Chairman of Bayou Bend Petroleum, a company focused on gas exploration in the Gulf of Mexico. He was formerly the founder, President and CEO of Valkyries Petroleum Corp., an oil and gas company focused in Russia, which he led through a highly successful takeover. Mr. Hill has over 22 years of experience in the oil industry, including senior management positions and international new venture and exploration management at Talisman Energy, Lundin Oil AB, Occidental Petroleum Corporation and Shell Oil Company.

Mr. Hill holds a B.Sc. in Geophysics and an M.Sc. in Geology from Michigan State University, as well as an M.B.A. in International Business and Finance from the University of St. Thomas in Houston, Texas.

Ian Baron (Director)

Ian Baron is a founding partner in ESG Dubai, a firm providing management advisory services to the oil & gas industry. Since 2002, he has advised clients in the acquisition and operation of projects in several countries including Kazakhstan, Russia, Iran, Syria, the Philippines, Azerbaijan, Kuwait and Turkey. His prior experience includes acting as the CEO of Dragon Oil plc, and acting as the Vice President and General Manager of the operations of Conoco Inc. based in Dubai, United Arab Emirates, as well as its Middle East expert in Houston, Texas. Mr. Baron also holds the position of Vice President, Exploration and Production, of Sky Petroleum Inc. a US-based oil and gas company listed on the NASD Over-the-Counter Bulletin Board with assets located in the Caspian Sea.

Mr. Baron holds a B.Sc. (Hons) in Geology from the University of Manchester, England and is a member of the American Association of Petroleum Geologists and the London Geological Society.

Max Pozzoni (Director)

Max Pozzoni is the CFO of True North Energy, a US based oil and gas exploration company with assets in Alaska, and has been involved in numerous oil and gas start-ups. Mr. Pozzoni formerly worked with Schlumberger Oilfield Services in the United States and South America. Mr. Pozzoni holds a BSc degree in International Business from the University of Kansas and MBA from the London Business School in England.

Steven J. Bendetti (EVP - Exploration)

Steve Benedetti received a Bachelor of Science degree in Geology from Idaho State University in 1974 and a Master of Science from Texas Christian University in 1976. From 1976 until 2000 Mr. Benedetti was with Unocal, working in the U.S. and internationally in Europe and Latin America. From 2000 to 2002, he was with Samson International as VP for International operations focusing on Russia and Latin America. He formed Southern Cone Energy Consultants in 2002 in Santiago, Chile dealing primarily with cross border energy trade. He then moved to Bogota, Colombia as VP and later Senior VP of Petrominerales Colombia Ltd., a majority owned subsidiary of Petrobank Energy and Resources of Calgary. On March 31, 2007 Steve retired from Petrominerales and returned to Santiago, restarting his consulting firm and focusing on the entirety of Latin America.

Adam Kniec (Chief Financial Officer)

Adam R. Kniec is a Canadian Chartered Accountant and a US Certified Public Accountant (Illinois). He has over 11 years of auditing, accounting and financial reporting experience with many Canadian and US publicly-traded companies from various industry sectors. He was a manager with Staley Okada & Partners Chartered Accountants and a senior manager with PricewaterhouseCoopers Chartered Accountants until August 2007. Mr. Kniec is currently a Chief Financial Officer of two Canadian public companies involved in mineral exploration and development in Europe and South America: Frontier Pacific Mining Corporation and Nortec Ventures Corp. He also provides consulting services relating to Canadian and US accounting and financial reporting matters to other public and going public entities.

Darren Devine (Corporate Secretary and Director)

Darren Devine is the principal of Chelmer Consulting Corp., a firm that provides corporate finance advisory services to private and public companies. Mr. Devine is qualified as a barrister and solicitor in British Columbia, England and Wales. Prior to founding Chelmer Consulting Corp., Mr. Devine practiced at the boutique securities law firm DuMoulin Black LLP. Mr. Devine is also a director and secretary of a number of public companies. including Titan Uranium Inc., Centric Energy Corp. and Galena Capital Corp, as well as a board advisor to a number of private companies.

Mr. Devine holds a B.Sc. in Environmental Science and Economics from the University of Northumbia, England, and a Diploma of Law from the Royal College of Law, York, England.

Summary of the Oil and Gas Properties

Upon completion of the Acquisition, the Company's interests in the Properties will consist of the right to farm-in to the following onshore oil and gas concession blocks, described as follows:

(a) a 42% working interest in exploration Blocks 235, 204, 219 and 234 in the Reconcavo Basin for approximately US$1,650,000 to fund the drilling of one well currently being drilled on Block 235 and 2D seismic acquisition on Blocks 204, 219 and 234;

(b) a 20% working interest in exploration Blocks 94, 105, 115 and 116 in the Reconcavo Basin for approximately US$2,830,000 to fund 3D seismic acquisition to be completed by the first quarter of 2008;

(c) a 50% working interest in exploration Blocks 404, 413 (A&B), 428 and 465 in the Sergipe Alagoas Basin in consideration for completing approximately R$150,000 (approximately US$84,000) of seismic reprocessing and technical evaluation work by March 31, 2008; and

(d) an option to acquire a 50% working interest in exploration Blocks 370, 381 and 382 in the Sergipe Alagoas Basin which option is exercisable on or before January 15, 2008, conditional upon Petro Latina completing a minimum of R$150,000 (approximately US$84,000) of seismic reprocessing and technical evaluation work by January 15, 2008.

In accordance with the terms of the Farm-in Agreements dated November 28, 2007 with BrazAlta and Washington, Petro Latina has paid an aggregate of approximately US$3,500,000, being 100% of the amount payable under item (a) above and 50% of the amount payable under item (b) above.

The Property that will constitute the primary focus of the Company's farm-in commitments following completion of the Acquisition is exploration Block 235. Prior to completion of the Acquisition, the Company will file a technical report on Block 235 (the "Technical Report") which is being prepared by Petrotech Engineering Limited in accordance with National Instrument 51-101, and which will be made available on SEDAR under the Company's profile at www.sedar.com.

Block 235 and surrounding areas comprises a gross 26.17 sq km (6,466.75 acres) and net 11 sq km or 2,716 acres for Petro Latina. Block 235 has a total of 4 drillable prospects confirmed by 3D survey and detailed geotechnical appraisal.

Block 235 lies within the mature large 10,200 sq km prolific Reconcavo Basin with over 6.3 million barrels of oil and 4.27 Tcf gas in place and 1.5 billion barrels of oil and 2.14 Tcf produced (per the ANP Bid Round 9 presentation). Current production primarily by Petrobras Petroleo Brasileiro S.A. is estimated at 44,000 barrels of oil per day. Estimates by the Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis ("ANP") of the remaining potential or yet to be produced is over 220 million barrels of oil equivalent (BOEs) proved. Block 235 is adjacent to the prolific Dom Joao Field 120 million barrels of oil equivalent and having analogous reservoir intervals within the Serge and Agua Grande Formations (clastic) which are Jurassic to Cretaceous in age. The proven hydrocarbon traps found in the basin and those of the prospects occur as NE-SW and NW-SE trending structural and stratigraphic traps in primarily "horst" blocks and tilted fault blocks.

Exploration activities have existed in the Reconcavo Basin since the late 1930s with a light high quality oil 32 degrees API produced. The main Agua Grande and Serge reservoir targets are relatively shallow and can be reached above -1400 metres. Extensive infrastructure exists in the area with two oil batteries and a large pipeline network nearby. An oil terminal is located within 15 km of the producing fields.

Summary of Proposed Work Program

The proposed work program, as recommended in the Technical Report and subject to approval by BrazAlta and Washington, will be focused on Block 235. Block 235 has a minimum of four independent prospects identified within 3D seismic coverage and ready to drill. The recommended work program consists of drilling and based on positive results, testing and completing the first well in December, 2007. If successful, additional appraisal wells at this location, up to a total of 4 wells as determined, would be initiated in 2008. The other prospects in the block are independent upon the results at the first well location. Additional exploration drilling on the remaining prospects is planned for 2008.

The initial Phase I work program envisioned to be completed over a 12-month period includes:



One Initial
Exploration Well (Completed) Paid by Petro Latina US$1,662,570

Three Additional
Exploration Wells (Completed) Paid by Petro Latina US$997,542

Four wells
(remainder 2007 and 2008) Net Cost to Petro Latina US$4,655,100

Geotechnical and engineering
evaluations Net Cost to Petro Latina US$210,000

Anticipated costs related to
administration, travel,
salaries and fees US$1,500,000
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Total budget for the 12 months
following completion of the
Acquisition US$6,365,100
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BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 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.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Haywood Securities Inc., subject to completion of satisfactory due diligence, has agreed to act as a sponsor in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

ON BEHALF OF TEXADA CAPITAL CORP.

Darren Devine, Director

This press release includes "forward-looking statements" including forecasts, estimates, expectations and objectives for future operations that subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Statements regarding future production, reserve additions and capital expenditures are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Texada does not assume the obligation to update any forward-looking statement.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Texada Capital Corp.
    Darren Devine
    Director
    (604) 638-8067
    (604) 688-9620 (FAX)