Valparaiso Energy Inc. Announcement of Signing of Letter Agreement For Asset Purchase

/NOT FOR DISTRIBUTION IN THE UNITED STATES OR THROUGH UNITED STATES WIRE SERVICES./

CALGARY, May 12, 2014 /CNW/ - Valparaiso Energy Inc. (the "Corporation") (VPO.H) is pleased to announce that it has signed a letter of intent with a major Canadian exploration and production company to purchase producing legacy oil and gas assets in North Central Alberta (the "Assets"). The purchase agreement is expected to be signed in the near future and the aforementioned purchase is subject to a due diligence review of the Assets by the Corporation, in addition to regulatory, stock exchange and any necessary shareholder approvals. It is anticipated that the closing of the acquisition will occur sometime in the month of June.

The Assets consist of approximately 13,600 gross acres (8,375 net) of land and stable production of approximately 150 (net) barrels of light sweet oil (38 degree API) per day. The Assets are currently under an Alberta Energy Regulator (AER) approved enhanced oil recovery scheme "waterflood" and has no horizontal development to date. The Corporation would be acquiring a 54% operated working interest in the Assets through the purchase. The Corporation plans on undertaking low risk infill development drilling utilizing horizontal drilling and multi-stage hydraulic fracturing to complete wells on the property along with optimizing the existing waterflood scheme. The property has existing pipelined oil and water injection facilities in place to handle future infill development drilling. A major Canadian independent reserves evaluator has assigned significant reserves and net present value to the assets, the details of which will be provided in a further news release.

The purchase price for the Assets is $15.5 million, prior to adjustments. The Corporation intends to raise financing to pay for the purchase price of the Assets through a combination of debt and equity in an amount expected to be approximately $21 million, such that there will be a sufficient amount of working capital to drill new infill horizontal wells on the property and tie in any resulting production.

The Corporation has agreed to pay a finders' fee to a company and three individuals in connection with the asset purchase described herein, such amounts to be paid in cash and/or shares of the Corporation, subject to any applicable limitations of the TSX Venture Exchange. The anticipated finders' fee is to be paid on the total purchase price of the Assets and will be 3.5% of such amount, expected to be paid in common shares in the capital of the Corporation at a deemed price of $0.05 per share, and may include other considerations.

Following the completion of the purchase of the Assets and the financing described herein, the Corporation anticipates completing a consolidation of its issued and outstanding common shares on the basis of one (1) post-consolidation share for every three (3) pre-consolidation shares. Approval of the share consolidation will require a vote by the shareholders of the Corporation, the details of which will be provided in an information circular in connection with a future meeting of the shareholders.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

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

Forward Looking Information

This news release includes information that constitutes "forward-looking information" or "forward-looking statements". More particularly, this news release contains statements concerning expectations regarding the timing and successful completion of the acquisition,
expected production and the estimated number of drilling locations.  Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.  By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements.

Material risk factors include, but are not limited to: the inability to obtain regulatory approval for any operational activities, inability to get all necessary approvals for completion of the acquisition, the risks of the oil and gas industry in general, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable shortages of equipment and/or labour; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates, and reliance on industry partners and other factors, many of which are beyond the control of the CorporationYou can find an additional discussion of those assumptions, risks and uncertainties in the Corporation's Canadian securities filings.

Neither the Corporation nor any of its subsidiaries nor any of its officers, directors or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor do any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this document or the actual occurrence of the forecasted developments.

Readers should also note that even if the drilling program as proposed by the Corporation is successful, there are many factors that could result in production levels being less than anticipated or targeted, including without limitation, greater than anticipated declines in existing production due to poor reservoir performance, mechanical failures or inability to access production facilities, among other factors.

Statements relating to "reserves" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitable in the future.  There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of the Corporation.  In general, estimates of economically recoverable oil and natural gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results.  All such estimates are to some degree speculative and classifications of reserves are only attempts to define the degree of speculation involved. 

Use of 'boe'

Throughout this press release, the calculation of barrels of oil equivalent ("boe") is at a conversion rate of 6,000 cubic feet ("cf") of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6,000 cf: 1 barrel is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead. 

SOURCE Valparaiso Energy Inc.

For further information: William J. Wylie, Valparaiso Energy Inc., T: 403.266.5515 (Ext. 4), E: Bill@raptap.com; Norman Mackenzie, Valparaiso Energy Inc., T: 403.815.5204, E: njmack14@gmail.com