VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 26, 2012) - Troy Energy Corp. (the "Corporation" or "Troy") (NEX BOARD:TEG.H) announces that is has entered into a binding letter of intent dated July 26, 2012 (the "Letter of Intent") with Coban Petroleum Ltd. ("Coban"), a private Alberta corporation, pursuant to which Coban has agreed to farmout a portion of its rights, entitlements, interests and obligations 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 Coban region of Guatemala (such lands are referred to as the "License Lands" and the foregoing is collectively referred to as the "Transaction").
Under the Letter of Intent, Troy will fund a two-well program, together with the re-entry and workover of a previously producing well (San Diego #1). In exchange for settling various payments upon closing (an aggregate of approximately $2,700,000), incurring obligations for certain additional post-closing payments to the Government of Guatemala and other private parties and funding 100% of the costs of the first well (to a maximum of US$3.6 million) and the workover (to a maximum of $750,000), Troy will earn a 92% before payout working interest (switching to a 63.75% working interest after payout) in the License Lands. Equivalent percentage interests will be earned in respect of the second well (also subject to a maximum of US$3.6 million in expenditures). The Letter of Intent also provides that a formal farmout agreement with standard industry representations, warranties, covenants and conditions (the "Formal Farmout Agreement") will be entered into between the parties within 30 days of execution of the Letter of Intent.
The Letter of Intent calls for the completion of a private placement for minimum aggregate gross proceeds of $10,000,000 (the "Financing"). The Financing is expected to close concurrently with the closing of the Transaction, which shall occur in any event within 90 days of execution of the Formal Farmout Agreement. The proceeds from the Financing will be used for payment of various costs pertaining to the Production Sharing Agreement (an aggregate of approximately $2,700,000 of which will be due and payable upon closing), the first test well (approximately US$3.6 million) and the Workover (approximately US$750,000) and for general working capital purposes.
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 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. It should be noted that a prior agreement was entered into between Troy and Coban in connection with the Licence Lands in 2010 (see Troy's prior news releases dated April 21, 2010 and June 2, 2010). The Letter of Intent applies in respect of the same interests, though on different terms, as described herein.
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: execution of the Formal Farmout Agrement (with standard industry representations, warranties, covenants and conditions) within 30 days of execution of the Letter of Intent (unless otherwise agreed between the parties); satisfaction of the tier maintenance 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; and the approval of the board of directors of both Troy and Coban. 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 TSX-V has had an opportunity to review various matters, including the following items: (i) a copy of the Letter of Intent; (ii) Personal Information Forms for any new Insiders; and (iii) a geological report prepared in accordance with NI 51-101.
Further announcements will be made once the terms of the Financing are established, upon execution of the Formal Farmout Agreement and upon completion and filing of the technical report prepared in accordance with NI 51-101.
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.