DNO International proposes an all-cash offer to acquire Calvalley Petroleum Inc. for CAD 2.30 per share

  • Fully funded all-cash offer represents approximately 60 percent premium to Calvalley shareholders
  • Strategic bolt-on to DNO International's existing Yemen asset base consistent with stated Middle East-North Africa expansion strategy
  • Provides Calvalley shareholders immediate liquidity and certainty of value

OSLO, July 5, 2012 /CNW/ - DNO International ASA ("DNO International"), the Norwegian oil and gas company, announced today that it intends to make an all-cash offer, through an acquisition entity, to acquire Calgary-based Calvalley Petroleum Inc. ("Calvalley") (TSX: CVI.A) at a price of CAD 2.30 per Class A common share (the "Shares").

DNO International's offer represents a premium of approximately 60 percent to the CAD 1.43 closing price of Calvalley Shares on the Toronto Stock Exchange (the "TSX") on 4 July 2012 and approximately 55 percent to the volume weighted average trading price of Calvalley's Shares on the TSX for the past 30 trading days. The proposed transaction represents a market capitalization value of approximately CAD 215 million.

"This offer provides Calvalley shareholders with significant, immediate and certain value for the company's existing assets, as well as recognizing its future growth potential," said Bijan Mossavar-Rahmani, DNO International's Executive Chairman. "We also believe our own shareholders and other stakeholders would be very well-served by the combination of these two businesses."

"For DNO International, this transaction is complementary to our existing Yemen asset base and fits well with our strategy of continuing to build a balanced portfolio of production, development and exploration assets in the Middle East and North Africa," said Mr. Mossavar-Rahmani. "We believe the combination of Calvalley's portfolio and DNO International's operational capabilities and strong balance sheet position us to enhance value in Yemen through increased production and reserves."

Calvalley's principal assets and operations relate to its 50 percent working interest in the Production Sharing Agreement for Block 9, which consists of a 2,234 square kilometre (552,000 acre) area within the prolific Sayun-Masila Basin in the Republic of Yemen.

Calvalley also owns a 100 percent working interest in a Production Sharing Contract in the Republic of Ethiopia for the Metema and Gimbi blocks covering a total area of 46,470 square kilometres (11.5 million acres).

DNO International currently holds working interests in five assets in Yemen, three of which are in production with Company Working Interest of 4,169 barrels of oil per day ("bopd") in Q1 2012 (approximately 10 percent of DNO International's production) and proved plus probable ("2P") reserves of 10.5 million barrels (approximately 2 percent of DNO International's 2P reserves). On a combined basis, Calvalley would add production of 1,942 bopd (based on Q1 2012 data) and 2P reserves of 29.3 million barrels (as at year end 2011). Block 9 is located within the same area as DNO International's current Yemen assets and operations.

The all-cash offer will not be subject to any financing condition.  Macquarie Capital is DNO International's financial advisor and Stikeman Elliott LLP is DNO International's legal advisor.

DNO International first approached Calvalley in late May with the aim of reaching a negotiated transaction to combine the two companies. Written offers to acquire all currently issued and outstanding Shares for CAD 2.30 per share followed with the last letter on 7th June 2012. Despite continued discussion between the companies and DNO International's best efforts, after a month, the Company has not to date received any meaningful engagement from Calvalley's board of directors or senior management. Given the size of the premium on offer and the potential benefits of the transaction to Calvalley, DNO International felt compelled to bring this offer directly to shareholders.

DNO International expects to commence the offer on or about July 12, 2012 by way of publication of an advertisement and filing of a formal take-over bid circular. The offer will be open for acceptance for a period of 35 days and will expire on or about August 16, 2012 unless extended or withdrawn. Full details of the offer will be included in the formal offer and take-over bid circular to be publicly filed and subsequently mailed to Calvalley's shareholders.

The offer will be subject to certain conditions, including acceptance of the offer by holders of at least 66 2/3 percent of Calvalley's shares (including those held by DNO International and its affiliates) calculated on a fully-diluted basis and at least a majority of the Shares calculated on a fully-diluted basis the votes attached to which would be included in the minority approval of a second-step business combination under applicable securities laws, no change having occurred that is, may be or would have a material adverse effect in relation to Calvalley and receipt of all necessary regulatory approvals.

DNO International ASA is an Oslo-listed, Middle East and North Africa focused oil and gas company holding stakes in 17 licenses in various stages of exploration, development and production both onshore and offshore in the Kurdistan Region of Iraq, the Republic of Yemen, the Sultanate of Oman, the United Arab Emirates and the Tunisian Republic.

http://www.dno.no

Oslo, 5 July 2012

DNO International ASA
Corporate Communications

This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)

This news release contains statements that constitute "forward-looking information" or "forward-looking statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding the proposed offer to acquire all of the issued and outstanding Shares of Calvalley, including the timing and terms thereof and management's assessment of the effects of the successful completion of the transaction on DNO International. This forward-looking information is subject to numerous risks and uncertainties, certain of which are beyond DNO International's control including, without limitation, uncertainty related to the completion of the transaction and the effects of the transaction on DNO International, the impact of legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels and general economic conditions in geographic areas where DNO International operates. Readers are cautioned that the foregoing list of risk factors is not exhaustive. DNO International's actual results, performance or achievements may differ materially from those expressed in, or implied by this forward-looking information and, accordingly, no assurance can be given that any events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that DNO International will derive therefrom.

Forward-looking information is based on the estimates and opinions of DNO International's management at the time the information is released and DNO International does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Information in this news release concerning Calvalley is based entirely on publicly available sources and has not been independently verified by DNO International. DNO International assumes no responsibility for the accuracy or completeness of such information.

Note: All financial figures are in Canadian dollars unless noted otherwise.

DNO International and its affiliates have not yet commenced the offer referred to in this news release. The offer (as it may be varied or extended in accordance with applicable law) will be made exclusively by means of, and subject to the terms and conditions set out in, the offer to purchase and take-over bid circular to be delivered to Calvalley and filed with applicable Canadian provincial securities regulators and to be mailed to Calvalley shareholders by the offeror. The offer to purchase and take-over bid circular will contain important information about the offer, including the terms and conditions of the offer, and should be read carefully by Calvalley shareholders. When the offer is commenced, a Calvalley shareholder will be able to obtain at no charge the offer to purchase, take-over bid circular and all other documents when they become available on the system for electronic document analysis and retrieval (SEDAR) at www.sedar.com. Accordingly, this announcement is for informational purposes only and does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. The release, publication and distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published and distributed should inform themselves about and observe such restrictions.

The offer is not being made in, nor will deposits of securities be accepted in, any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, DNO International may, in its sole discretion, take such action as it deems necessary to extend the offer in any such jurisdiction.

In addition, this news release does not constitute an offer to sell or the solicitation of an offer to buy any securities. No offering of securities will be made absent registration under, or an exemption from the registration requirements of, applicable securities laws.

SOURCE DNO International ASA

For further information:

Queries: Tom Bratlie (tom.bratlie@dno.no or tel: +47 905 21 904)

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DNO International ASA

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