Flagship Energy Inc. and Insignia Energy Inc. announce strategic arrangement involving Flagship asset acquisition, reorganization and re-capitalization



    /NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN
    THE UNITED STATES/

    CALGARY, June 3 /CNW/ - Flagship Energy Inc. ("Flagship") (TSXV: FG.A and
FG.B) and Insignia Energy Inc. ("Insignia"), a private Alberta based oil and
natural gas exploration company, are pleased to announce that Flagship and
Insignia have entered into an arrangement agreement dated June 2, 2008 (the
"Arrangement Agreement") whereby Flagship has agreed to acquire substantially
all of the assets of Insignia and effect a reorganization and
re-capitalization pursuant to a plan of arrangement (the "Arrangement") to be
approved by the shareholders of each of Flagship and Insignia. The Arrangement
is an arm's length transaction and has been unanimously approved by the Board
of Directors of both Flagship and Insignia. The Board of Directors of each of
Insignia and Flagship have determined that the Arrangement is in the best
interest for each of their respective companies and shareholders and agreed to
recommend approval of the Arrangement to their respective shareholders. All of
the management and directors and certain shareholders of Insignia holding in
the aggregate, approximately 23% of the issued and outstanding common shares
of Insignia ("Insignia Shares") and all of the management and directors and
certain shareholders holding in the aggregate, approximately 21% of the issued
and outstanding class A shares ("Flagship Class A Shares") and approximately
3.5% of the issued and outstanding class B shares ("Flagship Class B Shares")
of Flagship, have agreed to vote their shares in favour of the Arrangement.

    
    Overview of Proposed Arrangement

    Under the Arrangement:

    (a)   Flagship will acquire substantially all of the assets of Insignia;

    (b)   a new class of common shares of Flagship ("New Flagship Shares")
          will be created;

    (c)   holders of Flagship Class A Shares will be entitled to receive one
          New Flagship Share for each 100 Flagship Class A Shares held;

    (d)   holders of Flagship Class B Shares will be entitled to receive
          10 New Flagship Shares for each 100 Flagship Class B Shares held;

    (e)   holders of Insignia Shares will be entitled to receive 15.85 New
          Flagship Shares for each 100 Insignia Shares held;

    (f)   share purchase warrants ("Warrants") will be issued to the previous
          holders of Flagship Class A Shares and Flagship Class B Shares, on
          the basis of 1.77 Warrants for each New Flagship Share issued to
          such holders, which Warrants will each entitle the holder to
          acquire 1 New Flagship Share at a price of $6.80 per New Flagship
          Share prior to 4:30 p.m. (Calgary time) on the 35th day following
          the closing of the Arrangement;

    (g)   Warrants will be issued to the previous holders of Insignia Shares
          on the basis of 0.3576 Warrants for each New Flagship Share held;

    (h)   $27 million of debt owed by Flagship to Tricap Partners Ltd.
          ("Tricap") will be converted into New Flagship Shares at a deemed
          price of $6.80 per New Flagship Share;

    (i)   $15 million of New Flagship Shares will be purchased by Tricap at
          closing at a price of $6.80 per New Flagship Share and an
          additional $25 million of New Flagship Shares ("Equity Commitment
          Shares") will be purchased by Tricap at a price of $6.80 per New
          Flagship Share, from time to time, within 12 months from the
          closing of the Arrangement;

    (j)   Up to $10 million of New Flagship Shares will also be purchased by
          Tricap at a price of $6.80 per New Flagship Share to the extent the
          Warrants issued to the holders of Flagship Class A Shares and
          Flagship Class B Shares are not exercised by these holders prior to
          their expiry time;

    (k)   all of the present directors and officers of Flagship will resign
          and Flagship's management will be replaced with the present
          Insignia management team and the directors will be replaced by
          5 Insignia nominees to the Board of Directors and 2 Tricap nominees
          to the Board of Directors; and

    (l)   Flagship's name will be changed to "Insignia Energy Ltd.".


    Sample Consideration Received Under the Arrangement

    For the purposes of illustrating the consideration to be received pursuant
to the Arrangement by holders of Insignia Shares, Flagship Class A Shares and
Flagship Class B Shares, see the below examples:

       ---------------------------------------------------------------

                             Insignia Shareholder

        A holder of 10,000 Insignia Shares will receive(1):

        (i)  1,585 New Flagship Shares;

        (ii) 567 Warrants,

        and will retain their 10,000 Insignia Shares and ownership of
        Insignia and its tax pools.

       ---------------------------------------------------------------


       ---------------------------------------------------------------

                         Flagship Class A Shareholder

        A holder of 10,000 Flagship Class A Shares will receive(1):

        (i)  100 New Flagship Shares; and

        (ii) 177 Warrants.

       ---------------------------------------------------------------


       ---------------------------------------------------------------

                         Flagship Class B Shareholder

        A holder of 10,000 Flagship Class B Shares will receive(1):

        (i)  1,000 New Flagship Shares; and

        (ii) 1,769 Warrants.

       ---------------------------------------------------------------

    Note:
    (1) Subject to rounding for fractions.
    

    It is also currently contemplated under the Arrangement that odd-lot
holders, holding less than 100 New Flagship Shares, will be entitled, at their
election (for a specified period following the Arrangement), to receive a cash
amount equal to $6.80 per New Flagship Share held.
    The existing Insignia options and performance warrants to acquire
Insignia Shares will be cancelled in connection with the Arrangement and
holders of Insignia options and Insignia performance warrants will be issued
new options and performance warrants to acquire New Flagship Shares.
    Upon completion of the Arrangement and assuming all Warrants are
exercised and all Equity Commitment Shares are issued, the shareholders of
Insignia and Tricap will hold approximately 31% and 55% of the issued and
outstanding New Flagship Shares, on a non-diluted basis, respectively.
    There are 25,943,464 Insignia Shares outstanding. Directors and officers
of Insignia hold an aggregate of 6,092,420 Insignia shares (representing
approximately 23% of the issued and outstanding Insignia Shares) and the
remainder of the Insignia Shares are held by approximately 140 other
shareholders. No person or company holds more than 10% of the issued and
outstanding Insignia Shares.
    In connection with the Arrangement, Flagship will grant Tricap rights
relating to board representation, a pre-emptive right to participate in future
share issuances and registration rights.
    The Arrangement will constitute a reverse take-over and change of control
of Flagship within the meaning of Policy 5.2 of the TSX Venture Exchange (the
"Exchange").

    Highlights of the Arrangement

    The Arrangement will create a natural gas levered company with
significant positive working capital that will uniquely position it for future
growth. Upon closing of the Arrangement, the combined company will have:

    
    -   An experienced, committed and dedicated management team, which will
        be comprised of the current management team of Insignia. The Insignia
        management team is predominately comprised of the former management
        team of Petrofund Energy Trust, which, over a 10 year period, grew
        Petrofund from 300 BOEs/d to its exit rate of approximately
        42,500 BOEs/d when it was sold to Penn West Energy Trust in the
        summer of 2006;

    -   Estimated production at closing after giving effect to normal
        declines and no new production additions in the interim of
        approximately 850 BOEs/d comprised of 150 Bbls/d of oil and natural
        gas liquids and 4.2 MMcf/d of natural gas (80% weighted to natural
        gas);

    -   Positive working capital of approximately $60 million assuming the
        Equity Commitment Shares are issued;

    -   An undeveloped land base of approximately 150,000 net acres;

    -   A diverse portfolio of medium to low risk drilling and completion
        opportunities and facility enhancement opportunities designed to
        improve efficiencies at the operating cost level;

    -   Tax pool balances of approximately $60 million;

    -   A production base that is approximately 80% operated; and

    -   A strong financial partner in Tricap which will be a majority
        shareholder going forward.
    

    Management Team and Board of Directors

    The proposed management team and board of directors have considerable
experience in managing and directing public oil and gas entities and
anticipate to be able to generate numerous growth opportunities for the
combined company.
    Upon completion of the Arrangement, the combined company will be led by
an experienced management team and a strong Board as follows:

    
    Management Team      Position
    ---------------      --------

    Jeff Newcommon       President and Chief Executive Officer - Jeff is
                         President and CEO of Insignia. Previously Jeff was
                         Executive Vice President at Petrofund Energy Trust
                         where he headed the land, exploration and A&D
                         divisions.

    Glen Fischer         Chief Operating Officer - Glen is a Professional
                         Engineer and the Chief Operating Officer of
                         Insignia. He has 30 years of experience in the
                         upstream oil and gas industry and was most recently
                         Sr. VP Operations with Petrofund Energy Trust.

    Steven J. Mackay     Vice President Exploration - Steve is a petroleum
                         geologist and the Vice President, Exploration of
                         Insignia. Prior to Insignia Steve was co-founder and
                         President of Selkirk Energy.

    Brenda Hughes        Controller - Brenda is a Chartered Accountant with
                         over 20 years experience in the oil and gas industry
                         and the Controller of Insignia. Ms. Hughes has
                         served as the Controller and CFO for several small
                         oil and gas E&P companies.


    Board of Directors   Occupation
    ------------------   ----------

    David Ambedian       David is currently a Partner with 32 Degrees
                         Capital, a private energy focused investment
                         management company. Previously David was a founder
                         and CFO of several oil and natural gas exploration
                         companies.

    Sandra S. Cowan      Sandra is a Partner and General Counsel of Edgestone
                         Capital Partners, an independent private equity
                         firm. Previously, Ms. Cowan practiced law for over
                         15 years, most recently as senior partner with
                         Goodman and Carr LLP.

    Jeffery E. Errico    Jeff is a businessman and Professional Engineer, and
                         is currently Chairman of Insignia. He has over
                         30 years experience in the oil and gas industry,
                         most recently as President and CEO of Petrofund
                         Energy Trust.

    Christopher P.       Chris is a Professional Engineer. He was a founding
     Slubicki            member of Waterous & Co., and was instrumental in
                         growing Waterous into a global leader in oil and gas
                         merger and acquisition activities.

    Jeff Newcommon       Jeff is President and CEO of Insignia. Previously
                         Jeff was Executive Vice President at Petrofund
                         Energy Trust where he headed the land, exploration
                         and A&D divisions.

    Jim Reid             Jim is currently a Managing Partner with Brookfield
                         Asset Management's Energy Group based in Calgary.
                         Jim established Brookfield's Calgary office in 2003
                         after spending several years as a CFO for two oil
                         and gas exploration companies.

    Brian Baker          Brian is a Vice President with Brookfield Asset
                         Management's Energy Group. Previously Brian was a
                         CFO of several oil and natural gas exploration
                         companies and was a Partner in the energy practice
                         of Collins Barrow Chartered Accountants LLP.

    Benefits to Shareholders

    -   The combined company will have a strong balance sheet which will
        provide added flexibility and sustainability on a go-forward basis;

    -   Strong capitalization will also allow the combined company to
        capitalize on a number of low risk development opportunities
        identified on the existing asset base;

    -   Eliminating duplication of services and supplies will result in
        reduced G&A expense;

    -   Management and the employees of Insignia have a proven track record
        in both the public markets and in growing oil and gas entities to
        significant size;

    -   The transaction will provide Flagship shareholders with the
        opportunity to participate in an entity with more diversification, a
        stronger balance sheet and less risk; and

    -   The transaction will provide Insignia with a liquidity event and also
        afford the Insignia shareholders the opportunity to participate in an
        exciting, well capitalized vehicle, with a goal for accretive per
        share growth.
    

    Overview of Insignia's Assets

    The Insignia assets to be acquired by Flagship are comprised of
$16.3 million in cash, over 11,000 net undeveloped acres of petroleum and
natural gas rights and a producing natural gas property. The producing
property is located approximately 50 kilometers southeast of Edmonton near
Tofield, Alberta. There are four (3.75 net) Mannville gas wells on the
property, three (2.75 net) of which are currently producing approximately
1.1 MMcf/d net to Insignia. The fourth well is expected to be on production in
the third quarter. Additional drilling locations have been identified on
Insignia held lands.
    Total revenues for Insignia for the year ended December 31, 2007 were
approximately $1.5 million (three months ended March 31, 2008 - $757,000).
Lease operating and transportation expenses for the corresponding periods were
approximately $299,000 for 2007 and $162,000 for 2008.

    Financial Advisors

    Sayer Energy Advisors is acting as financial advisor to Flagship and has
provided the Board of Directors of Flagship with their oral opinion, subject
to review of the final form of documents effecting the Arrangement, that the
consideration offered pursuant to the Arrangement is fair, from a financial
point of view, to the holders of Flagship Class A Shares and Flagship Class B
Shares. In addition, Sayer Energy Advisors will be providing a written
fairness opinion for inclusion in the joint management information circular to
be mailed to the shareholders of Flagship and Insignia.
    GMP Securities L.P. is acting as financial advisor to Insignia with
respect to the Arrangement.
    Flagship will apply for an exemption from the sponsorship requirements of
the Exchange. No guarantee can be provided that such exemption will be
granted.

    Arrangement Agreement

    The Arrangement Agreement contains customary provisions, including
non-solicitation covenants by Flagship, right to match by Insignia any
superior proposals and a non-completion fee payable in certain circumstances
by Flagship.
    Subject to certain exceptions, the Board of Directors of Flagship have
agreed that they will not solicit or initiate discussions or negotiations with
any third party for any business combination involving Flagship, and under
defined circumstances, Flagship has agreed to a non-completion fee of up to
$750,000.

    Conditions Precedent to Closing the Arrangement

    The Arrangement is subject to customary closing conditions including:
(i) regulatory and Exchange approvals; (ii) requisite court order approving
the Arrangement; (iii) approval of 66 2/3% of the votes of holders of Insignia
Shares at a meeting of Insignia shareholders; (iv) approval of 66 2/3% of the
votes of the holders of Flagship Class A Shares at a meeting of such
shareholders and (v) approval of 66 2/3% of the votes of holders of Flagship
Class B Shares at a meeting of such shareholders. A joint management
information circular for the meetings of the shareholders of Insignia and
Flagship is expected to be mailed to such shareholders in late June 2008 with
the meeting expected to be scheduled for late July 2008. Closing of the
Arrangement is expected to occur on or before July 31, 2008.

    Completion of the transaction is subject to a number of conditions,
including Exchange acceptance and disinterested shareholder approval. The
transaction cannot close until the required shareholder approvals are
obtained. There can be no assurance that the transaction will be completed as
proposed or at all.
    Investors are cautioned that, except as disclosed in the joint management
information circular to be prepared in connection with the transaction, any
information released or received with respect to the Arrangement may not be
accurate or complete and should not be relied upon. Trading in securities of
Flagship should be considered highly speculative.

    The Exchange has in no way passed upon the merits of the proposed
    transaction and has neither approved nor disapproved the contents of this
    press release.

    Cautionary Statements

    Disclosure provided herein in respect of BOEs may be misleading,
particularly if used in isolation. A BOE conversion ratio of 6 Mcf to 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. All BOE
conversions in this press release are derived by converting gas to oil
according to this 6 Mcf to 1 Bbl ratio.

    Certain information set forth in this press release, including without
limitation management's assessment of Flagship's, Insignia's and the combined
company's future plans and operations and completion of the Arrangement and
all related transactions, contains forward-looking statements. By their
nature, forward-looking statements are subject to numerous risks and
uncertainties, some of which are beyond these parties' 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. Flagship's and Insignia's actual results,
performance or achievement 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
statement will transpire or occur, or if any of them do so, what benefits that
work and the combined company will derive therefrom. Flagship and Insignia
each disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by applicable securities laws.

    This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities within the United States. The
New Flagship Shares and Warrants have not been and will not be registered
under the U.S. Securities Act of 1933, as amended, or any state securities
laws, and may not be offered or sold in the United States, or to a U.S. person
absent registration or an applicable exemption from the registration
requirements of such Act or other laws.

    %SEDAR: 00003847E




For further information:

For further information: Flagship Energy Inc.: Glenn R. Carley,
Executive Chairman, Telephone (403) 261-9277; Insignia Energy Inc.: Jeff
Newcommon, President and CEO, Telephone (403) 536-8138

Organization Profile

FLAGSHIP ENERGY INC.

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INSIGNIA ENERGY INC.

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