/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
CALGARY, April 18 /CNW/ - Crocotta Energy Inc. ("Crocotta") and Eastshore
Energy Ltd. (TSX Venture: EST.A; EST.B) ("Eastshore") are pleased to announce
that their respective Boards have unanimously approved a combination of the
two entities through a Plan of Arrangement (the "Arrangement"). Under the
terms of the Arrangement, Crocotta will acquire all of the issued and
outstanding shares of Eastshore on the following basis as elected by the
1. Subject to 2 below, all holders of Eastshore Class A shares
("Eastshore Shares") will have their choice of receiving $0.65
cash per Eastshore Share or 0.58 of a Crocotta common share
("Crocotta Shares") per Eastshore Share (value $0.725/Eastshore
Share based on one Crocotta Share valued at $1.25/share).
2. Under the Arrangement, Crocotta is prepared to pay 100% in cash up
to a maximum of $27,807,818 or up to 70% in Crocotta Shares up to
a maximum of 17,369,191 Crocotta Shares.
It is a condition of the Arrangement that Eastshore convert all of the
Eastshore Class B shares ("Class B Shares") to Eastshore Shares on the basis
of 10 Eastshore Shares for each Class B Share prior to obtaining the interim
order in connection with the Arrangement and the Eastshore Annual and Special
Based on the April 17, 2007 closing price of the Eastshore Shares on the
TSX Venture Exchange ($0.51/share), the $0.65 per share cash offer constitutes
a 27% premium to Eastshore shareholders while the share exchange at $0.725
constitutes a 42% premium to Eastshore shareholders.
- Expands Eastshore W5 projects at Niton, Ricinus, Sunchild and Hanlan,
Alberta into Crocotta's capital projects at Lookout Butte and North
Pembina, Alberta and Cache Creek, B.C.;
- Increases combined oil and gas activity levels (ie - accelerated
drilling programs and increased acquisition focus);
- Access to a larger technical and operational team;
- Still significantly exposed to Eastshore assets as a meaningful
portion of combined entity;
- Combined entity will have cash on hand (no debt) and access to
additional capital to accelerate current projects and add additional
- Increased tax horizon due to the combined large tax pool base.
After the Arrangement, the 24 sections of land at Hanlan which hold a
significant portion of Eastshore's future growth potential will still be
material in the combined entity. During 2007, Crocotta's larger technical team
will undertake a complete geological, geophysical and engineering review in
order to assess the next steps to be taken at Hanlan. For 2007, Crocotta
intends to tie-in the recently completed 13-21-46-17W5 well in the northern
part of the field and will review the producing wells at 15-24 and
6-25-45-17W5 for frac stimulation. In addition, the most recently drilled well
at 12-34-45-17W5 will be evaluated for further work. Further drilling,
completion, and land activity for 2008 will be determined based on completion
of technical review and further production data gathered throughout 2007.
- Accretive to Crocotta's projected cash flow, production and proved
plus probable reserves on a per share basis;
- Significantly increases the size of Crocotta's prospect inventory;
- Expands and diversifies Crocotta's asset base thereby reducing its
geographic and capital concentration risk;
- Adds approximately 540 boepd comprised of 40% light crude oil and
NGL's and 60% natural gas;
- Adds 2.0 mmboe of proved plus probable (1.6 mmboe proved) reserves
based on GLJ Petroleum Consultants Ltd.'s ("GLJ") December 31, 2006
- Adds approximately 27,200 gross (18,740 net) acres of undeveloped
- Adds quality assets, primarily operated with high working interests,
generating netbacks of $35.60 per boe in the fourth quarter of 2006;
- Based on an enterprise value for Eastshore of approximately
$33.9 million (assuming 50% cash and 50% share election), and net of
$4.0 million of undeveloped land value, the combination metrics are
- $14.66 per boe of proved plus probable ($19.20 per boe proved)
reserves based on GLJ's evaluation of reserves at December 31, 2006;
- $55,400 per boepd based on March 2007 production of approximately
Pro Forma Crocotta Highlights
Management of both Crocotta and Eastshore believe that the transaction
provides many strategic benefits including benefits of size and scale through
a larger production base, operational and geographic synergies, an expanded
inventory of projects and increased access to capital.
- Pro forma Crocotta will have:
- Reserve base of 2,767 mboe (GLJ December 31, 2006 combined
proved plus probable reserves) comprised of 35% light crude oil
and NGL's and 65% natural gas. Note that Crocotta's internal
views on the properties with respect to capital deployment etc.
are different from the current view of GLJ and may result in a
difference in the timing and/or quantity of reserves booked at
- Current production of approximately 680 boepd, 40% light crude
oil and NGL's and 60% natural gas;
- 2007 exit production estimated at over 1,100 boepd based on
rest of year capital expenditures of approximately
- Undeveloped land base and farm-in lands exceeding 36,200 net
- Over 20 identified drillable locations; and
- Over $65 million in tax pools and losses.
The combined entity, which will continue as Crocotta Energy Inc., will be
managed by the current Crocotta management team and will welcome Gary Burns to
its Board of Directors. Mr. Burns has 39 years of experience in the oil and
gas industry throughout Western Canada and will provide project continuity and
contact with Eastshore shareholders in the expanded Crocotta entity.
Gary Burns, President, CEO and a Director of Eastshore stated, "This
merger with Crocotta accomplishes a number of objectives which are focused on
increasing and accelerating value to the shareholders of Eastshore as part of
the combined entity. Firstly, this combination provides immediate access to
working capital to be deployed into development of joint property interests
and immediate growth on production. Secondly, Crocotta brings an expanded and
experienced management and technical team with history of accelerating growth
and creating multiples of shareholder value."
Rob Zakresky, President, CEO and a Director of Crocotta stated, "The
combination creates a number of synergies that both shareholder groups will
benefit from in addition to the increased scope of the overall operation that
will reduce the overall business risk of the entity while still providing
exposure to the significant upside of the combined properties."
Crocotta Financing and Capitalization
Crocotta currently has available net cash of approximately $16.8 million
(including assumed exercise of existing put/call arrangements) and no debt.
Crocotta has also entered into a financing arrangement to issue 7.2 million
Crocotta Shares priced at $1.25 per share for gross proceeds of $9.0 million
contingent on closing of the Arrangement. In conjunction with this offering,
Crocotta will have an option to issue up to an additional 8.0 million Crocotta
Shares priced at $1.25 per share for a period of 10 business days time after
closing of Arrangement.
Crocotta currently has 30 million shares outstanding (including assumed
exercise of existing put/call arrangements).
Assuming the Arrangement is completed and Eastshore shareholders elect
"all cash", Crocotta will have approximately 45.2 million shares outstanding
and $3.5 million net cash. This assumes Crocotta will exercise its option to
issue the additional 8.0 million shares noted above.
Assuming the Arrangement is completed and Eastshore shareholders elect to
receive the maximum number of Crocotta Shares, Crocotta will have
approximately 54.6 million shares outstanding, cash of $13.0 million and no
debt. This assumes Crocotta will not exercise its option to issue the
additional 8.0 million shares noted above.
Based on these and other factors, the Boards of Directors of both
Crocotta and Eastshore have determined that the Arrangement is in the best
interests of Crocotta and Eastshore and the Board of Directors of Eastshore
recommends that its shareholders vote in favour of the Arrangement. Management
and directors of Eastshore, representing approximately 10% of the outstanding
fully diluted common shares of Eastshore, have agreed to vote in favour of the
Arrangement. The Boards of Directors of both Crocotta and Eastshore have
unanimously approved the Arrangement and the Arrangement Agreement.
The Arrangement prohibits Eastshore from soliciting or initiating any
discussions concerning the sale of material assets or any other business
combination and provides Crocotta with the right to match any competing
proposal in the event of such proposal. Under the terms of the Arrangement,
Crocotta is entitled to receive a $1.5 million break fee from Eastshore in
certain circumstances, including if Eastshore enters into an agreement with
another party for a takeover of Eastshore or if the Eastshore Board of
Directors recommends that its shareholders deposit or vote their Eastshore
Shares in favour of another proposal. In addition, Eastshore is entitled to
receive a $1.5 million break fee from Crocotta in certain circumstances.
Full details of the Arrangement will be included in an information
circular to be completed by Eastshore which is expected to be mailed to
Eastshore shareholders early May 2007. Successful completion of the
Arrangement is subject to court and regulatory approvals and the approval of
the Arrangement by at least two-thirds of Eastshore's shareholders voting at
an annual and special meeting. It is anticipated that the Eastshore annual and
special meeting required to approve the Arrangement will be held in early June
2007. If approved by the Eastshore shareholders, the Arrangement is expected
to close shortly after the annual and special meeting.
Background Information on Crocotta
Crocotta is a non-trading public entity that is a reporting issuer in
Alberta, Manitoba, Ontario and British Columbia. Historical information can be
found at www.sedar.com.
In November 2006, the current management team led by Rob Zakresky and a
group of private investors recapitalized Crocotta and refocused the business
plan towards oil and gas activities in the Western Sedimentary Basin.
Rob Zakresky, President and CEO, has previously led various public oil
and gas companies including Chamaelo Exploration Ltd., Chamaelo Energy Inc.,
Viracocha Energy Inc. and Bellator Exploration Inc.
Background Information on Eastshore
Eastshore is a Canadian junior oil and gas exploration, development, and
production company. The Corporation's focus is on areas of liquids-rich
natural gas and light oil in West Central Alberta.
Jennings Capital Inc. acted as sole financial advisor to Eastshore and
has advised the Board of Directors of Eastshore that it is of the opinion,
subject to its review of the final form of the documents effecting the
Arrangement, that the consideration to be received by the Eastshore
shareholders pursuant to the Arrangement is fair from a financial point of
view to the Eastshore shareholders.
Certain information set forth in this document, including managements'
assessment of the future plans and operations of Crocotta and Eastshore and
the benefits of the proposed acquisition, contains forward looking statements.
By their nature, forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond Crocotta and Eastshore control,
including the impact of general economic conditions, industry conditions,
volatility of commodity prices, currency fluctuations, imprecision of reserve
estimates, environmental risks, competition from other industry participants,
the lack of availability of qualified personnel or management, stock market
volatility and ability to access sufficient capital from internal and external
sources. Readers are cautioned that the assumptions used in the preparation of
such information, although considered reasonable at the time of preparation,
may prove to be imprecise and, as such, undue reliance should not be placed on
forward looking statements. The actual results, performance or achievement of
Crocotta, Eastshore or the combined entity could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any of the events anticipated by
the forward looking statements will transpire or occur, or if any of them do
so, what benefits that Crocotta and Eastshore will derive therefrom. Crocotta
and Eastshore disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Boe's may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead
For further information:
For further information: CROCOTTA ENERGY INC., 700, 639 - 5 Avenue SW,
Calgary, Alberta, T2P OM9, Robert J. Zakresky, President & CEO, Tel: (403)
538-3736, Fax: (403) 538-3735, Website: www.crocotta.ca, Email:
firstname.lastname@example.org; EASTSHORE ENERGY LTD., 1650, 521 - 3 Avenue SW, Calgary,
Alberta, T2P 3T3, Gary W. Burns, President & CEO; Wende Dummer, VP Finance &
CFO, Email: email@example.com; Gordon Holden, VP Corp. Dev. &
Reserves, Email: firstname.lastname@example.org, Tel: (403) 232-1150, Fax: (403)
232-1466, Website: www.eastshoreenergy.com