Troy Energy Corp.

NEX BOARD : TEG.H


Troy Energy Corp.

October 12, 2012 14:39 ET

Troy Energy Corp. Announces Execution of Formal Farmout Agreement and up to $12,600,000 Non-Brokered Financing

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 12, 2012) - Troy Energy Corp. (the "Corporation" or "Troy") (NEX BOARD:TEG.H) is pleased to announce that is has executed a formal agreement in connection with its previously announced farm-in in respect of Guatemala Production Sharing Agreement 4-93 (the "Production Sharing Agreement"), an oil and gas production sharing agreement covering approximately 174,000 hectares in the South Peten Basin of Guatemala (such lands are referred to as the "License Lands" and the foregoing is collectively referred to as the "Transaction") (for further details, please refer to the Corporation's press release dated July 26, 2012). Whereas the binding letter of intent in respect of the Transaction (the "LOI") was entered into between Troy and Coban Petroleum Ltd. ("Coban"), a private Alberta corporation, the formal farmout agreement has been entered into among Troy, Coban, Ceiba Petroleo S.A. ("Ceiba"), a private Guatemalan corporation that is is a party to the Production Sharing Agreement, and Truestar Petroleum Corporation ("Truestar"), a British Columbia corporation that is Ceiba's parent company. Other than adding Ceiba and Truestar to the agreement (with Ceiba, as farmor, farming out a portion of its rights, entitlements, interests and obligations in and to the Production Sharing Agreement), the conditions, interests earned and commercial terms remain largely consistent with the binding LOI. The formal farmout agreement, which is dated October 9, 2012 (the "Farmout Agreement"), varies from the LOI in that each of Troy, Coban and Truestar will, respectively, earn working interests in the License Lands and Production Sharing Agreement via Ceiba.

The Farmout is comprised of two phases. In phase one, Troy will fund a two-well program which includes the re-entry and workover of a previously producing well. In exchange for settling various payments upon closing of approximately USD$2,700,000, funding 100% of the costs of the workover to a maximum of USD$750,000 and the first new well to a maximum of $3,600,000, Troy will earn a 92% before payout working interest (converting to a 63.75% working interest after payout) in these wells. In phase two, Troy will fund an additional new well to a maximum of $3,600,000 and earn a 92% before payout working interest (converting to a 63.75% working interest after payout) in this well and will have deemed to earn 63.75% in all future production from the License Lands. Coban has been nominated as the operator for phases one and two. Operations subsequent to completion of phase two (including future well and drilling commitments) will be governed by 2007 Canadian Association of Petroleum Landmen (CAPL) and will be based on independent elections to participate on a well-by-well basis.

As a condition to the Farmout Agreement and subject to approval from the TSX Venture Exchange (the "TSXV"), Troy intends to carry out a non-brokered private placement of between USD$10,000,000 and USD$12,600,000 (the "Financing"). The Financing will consist of no less than 16,666,666 units and no more than 21,000,000 units of the Company (each, a "Unit"), at a price of CDN$0.60 per Unit. Each Unit will consist of one common share of the Company (each, a "Common Share") along with one-half of one Common Share purchase warrant. Each full warrant may be exercised for one additional Common Share at a price of CND$1.00 for a period of two years from the closing of the Financing.

The Financing is expected to close concurrently with the closing of the Transaction, which shall occur no later than January 6, 2013. The proceeds from the Financing will be used for payment of various costs pertaining to the Production Sharing Agreement, including approximately $2,700,000 that is payable upon closing of the Transaction, US$750,000 for the Workover, USD$3,600,000 for the first well and for general working capital purposes. It is expected that consulting fees in the amount of up to $500,000 will be paid upon closing of the Transaction, with such fees being paid via the issuance of Common Shares at a price equal to the offering price under the Financing.

The Production Sharing Agreement covers an area of approximately 174,000 hectares in the South Peten Basin in central Guatemala. It is limestone rich in organic carbon as well as Jurassic aged sediment. It has previously had seismic work and one exploration oil well drilled, which last produced in July 1988. Political unrest in the region prompted the shut-in of the well and a cessation of all development activities. There are roads, pipe lines and full infrastructure throughout the Licence Lands.

The Corporation will be filing materials with the TSX Venture Exchange (the "TSX-V") requesting reactivation as a Tier 2 Oil & Gas Issuer on the TSX-V. Completion of this Transaction is subject to a number of conditions, including, but not limited to: satisfaction of the continued listing requirements of the TSX-V; TSX-V approval of the reactivation of the Corporation as a Tier 2 Oil & Gas Issuer; receipt of all required third party consents; completion of the Financing; receipt of a report completed in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"); receipt of a title opinion in respect of the Production Sharing Agreement and the License Lands; submission of Personal Information Forms and completion of standard background searches to the satisfaction of the TSX-V for all Insiders; and the approval of the board of directors of Troy, Coban, Truestar and Ceiba. There is no assurance that these conditions will be satisfied. The proposed Transaction is not a "non-arm's length transaction" and, as such, shareholder approval is not expected to be required.

It is expected that trading in the Corporation's Common Shares will remain halted until such time as the the Financing and the Transaction have been completed and the Corporation's listing has been graduated from the NEX to the TSX-V and the Corporation has been reinstated as a Tier 2 Oil & Gas Issuer on the TSX-V.

Forward Looking Statements

Except for statements of historical fact relating to the Corporation, certain information contained herein constitutes forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Neither 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 the release.

Contact Information

  • Troy Energy Corp.
    James Owen
    President and Chief Executive Officer
    (604) 684-9201
    (604) 684-9877 (FAX)