Suroco Energy Inc. announces agreement to acquire a limited liability partnership with operations in Colombia, Mexico and Texas, USA



    /NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA/

    CALGARY, June 5 /CNW/ - Suroco Energy Inc. (TSX Venture Exchange: SRN)
(the "Corporation") is pleased to announce that it has entered into a letter
agreement (the "Letter Agreement") dated effective May 31, 2007, for the arm's
length acquisition (the "Proposed Transaction") of NCT Corporacion Petrolera
Latinoamericana S.L. ("NCT"). NCT is a limited liability partnership formed
under the laws of Spain with offices in Caracas, Venezuela and Bogota,
Colombia and operations in Colombia, Mexico and Texas, USA. NCT has existing
oil production of approximately 172 barrels per day and gas production of
approximately 133 boe per day (including interests to be acquired by NCT
pursuant to the Trevino Transaction, as described below).
    The Board of Directors and management of the Corporation feel strongly
that the acquisition of NCT will result in a number of benefits and
opportunities to the Corporation. It is intended that upon the completion of
the Proposed Transaction, NCT will carry on as a wholly owned subsidiary of
the Corporation with current management of NCT continuing to operate NCT. The
management team of NCT all have extensive experience in the oil and gas
industry and were former senior managers with Petroleos de Venezuela S.A., the
national oil company of Venezuela. NCT also has a highly skilled technical
support staff geared to expanding NCT's production base.
    "What we are announcing today is the next level of strategic change for
Suroco," said Jeffrey Scott, President and Chief Executive Officer of the
Corporation. "This transaction will move Suroco to a new level and further
enhance the opportunities we have to create value for our shareholders. The
extent of our expanded asset base and the exploitation opportunities, together
with the experience and relationships of our collective management and board,
present exciting opportunities for Suroco. We plan to be aggressive in
developing an extensive land inventory and in acquiring other positions on
which to build."
    Pursuant to the terms of the Letter Agreement and subject to receipt of
applicable regulatory approval, the Corporation intends to acquire all of the
issued and outstanding participation units of NCT (the "Units") in exchange
for 11,625,000 common shares in the capital of the Corporation at a deemed
price of US$0.80 per share and the issuance of 4,375,000 special warrants (the
"Special Warrants") of the Corporation, as described below.
    Holders of Units will have the option (the "Cash Option") to elect to
receive a per Unit cash payment equivalent to the exchange ratio value of the
Units multiplied by US$0.80 for up to 10% of the Units they hold, subject to a
maximum aggregate cash limit of US$1,280,000. Where holders of Units choose
the Cash Option, the aggregate number of common shares of the Corporation to
be issued pursuant to the Proposed Transaction will be decreased by an
equivalent number of common shares of the Corporation equal to that value
which holders of Units receive pursuant to the Cash Option.
    Upon completion of the Proposed Transaction, three of NCT's current
directors, Manuel Trevino, Fernando Puig and Eduardo Lima, will be added to
board of directors of the Corporation. Five of the current directors of the
Corporation will remain as directors of the Corporation.
    Manuel Trevino is currently the President and a director of NCT. Mr.
Trevino is a natural gas engineer with a Master of Science degree from
Pennsylvania State University. Mr. Trevino has 25 years of experience in the
Venezuelan oil industry, in the areas of strategic planning and management and
business development, both with national and international businesses. Mr.
Trevino has held positions as Principal and Executive Director of Cerro Negro,
Petrozuata, Zuata III, of the Orinoco Oil Belt's Projects, OOB. Mr. Trevino is
fluent in English and Spanish.
    Fernando Puig is currently a director of NCT. Mr. Puig is an engineer
with advanced management studies in IESA. Mr. Puig has 33 years of experience
in the Venezuela oil industry and has held high ranking positions such as
President of PDVSA Gas, President of INTEVEP (Centre for Research and
Development), President of CIED (Corporate University of PDVSA) and General
Manager for Production for the Western Division of PDVSA. Mr. Puig is fluent
in English, Spanish and French.
    Eduardo Lima is currently a director of NCT. Mr. Lima has Master of
Science degree in Thermal Sciences and Management from Stanford University.
Mr. Lima has over 24 years of experience in the Venezuelan oil industry in the
areas of exploration and production and business development. Mr. Lima has
served as a member of the negotiating team of Petrozuata in respect of the
Campo Boscan Agreement and was a member of the structuring team for the
Venezuelan Oil Opening (I/II Round Operating Agreements and Exploration
Round). Mr. Lima is fluent in English and Spanish.

    NCT's assets include the following:

    
    -  Suroriente Block: NCT holds 65% of the shares of NCT P&G Corporation,
       a company incorporated under the laws of Barbados, resulting in an
       indirect participation by NCT of 19.8% in Consorcio Colombia Energy
       ("CCE"). CCE has an Incremental Production Contract with ECOPETROL for
       the operation of the Suroriente Block. The Suroriente Block
       (36,528 hectares) is located in the southeast sector of the Putumayo
       River and south by the San Miguel River on the Colombian side of the
       border with Ecuador. Oil production from NCT's interest in the
       Suroriente Block is approximately 172 barrels per day.

    -  Arjona Field: NCT holds a 25% participation in Consorcio Vetra-NCT,
       which participates with ECOPETROL in a "Risk Production Contract for
       the Operation of Non-Developed and Inactive Fields" for the Arjona
       Field. The Arjona Field (11,891 hectares) is part of the Chimichagua
       block, located in the department of Cesar, in the midst of the Central
       and the Eastern Mountain Ranges in the Valle Inferior del Magdalena
       basin in Colombia.

    -  Hato Nuevo Field: NCT holds a 16.67% participation in Consorcio
       Empesa-NCT, which participates with ECOPETROL in a "Risk Production
       Contract for the Operation of Non-Developed and Inactive Fields" for
       the Hato Nuevo Field. The Hato Nuevo Field (525 hectares) is an
       inactive field located 20 kilometres north of the city of Neiva,
       Colombia, on the eastern bank of the Magdalena River within the sub-
       basin of Neiva.

    -  Hardin Field: NCT holds an interest entitling it to 9% of the revenues
       proceeding from well Barret No.5 and an interest entitling it to 15%
       of the revenues proceeding from well Teten No.1, both wells Barret
       No.5 and Teten No.1 being located in the Hardin Field. The Hardin
       Field is located in Liberty County, Texas, approximately 50 miles
       northeast of Houston, Texas. Gas production from NCT's interest in the
       Hardin Field is approximately 11 boe per day.
    

    NCT has also entered into an agreement (the "Trevino Transaction")
whereby it will acquire a 5.51% interest in the "Pirineo Block" held
indirectly by Manuel Trevino, a director of NCT, in exchange for 704,653 Units
(the "Trevino Units"). Manuel Trevino holds, indirectly, 5.51% of the shares
of Monclova Pirineo Gas, S.A. de CV ("MPG"), a Mexican company originally
incorporated under the laws of Mexico as a Limited Liability Society (Sociedad
de Responsabilidad Limitada de Capital Variable) and converted into a
corporation (Sociedad Anonima de Capital Variable) in 2006. On March 2005, MPG
signed a Multiple Services Contract with Pemex Exploracion & Production for
the development, infrastructure and maintenance of the Pirineo Block, a
non-associated gas field located in the State of Coahuila, Mexico. The Pirineo
Block (37,000 km(2)) is located in northern Mexico, in the Cuenca de Sabinas
(central-north section), en el Estado de Coahuila. The Trevino Transaction is
subject to requisite approvals, which are currently outstanding. The gas
production from the interest in the Pirineo Block to be acquired by NCT
pursuant to the Trevino Transaction is approximately 122 boe per day.
    As at May 8, 2007, NCT had cash on hand of US$496,394 and no long term
debt. As at April 30, 2007, NCT had net working capital of US$1,630,000.
    Gaffney, Cline & Associates has been engaged to complete an evaluation of
proved and probable reserves and net present values of reserves of NCT in
accordance with standards set out in the Canadian Oil and Gas Evaluation
Handbook and National Instrument 51-101. This report is expected to be
completed in June 2007.
    The Special Warrants referenced above will be registered in the name of
Manuel Trevino and will entitle the holder thereof to acquire an aggregate of
4,375,000 common shares of the Corporation in exchange for the Trevino Units,
at no additional cost, in the event that the Trevino Transaction is completed.
In the event that the Trevino Transaction is not completed within 120 days of
the Deadline (as defined below), the Trevino Units will not be issued to
Manuel Trevino and the Special Warrants will expire and confer no right to
acquire common shares of the Corporation. The Special Warrants will contain a
call feature whereby upon completion of the Trevino Transaction, the
Corporation shall have the right to compel the exchange of the Trevino Units
for 4,375,000 common shares of the Corporation pursuant to the Special
Warrants.
    The closing of the Proposed Transaction is subject to a number of
conditions including, but not limited to:

    
    (a)  the Proposed Transaction receiving approval from holders of Units
         holding more than 66 2/3% of Units outstanding or approval from that
         number of holders of Units necessary for the Corporation to acquire
         all of the issued and outstanding Units;

    (b)  execution of any other documentation reasonably required to close
         the Transaction, in a form and substance acceptable to the
         Corporation and NCT, including, but not limited to, a mutually
         accepted definitive agreement (the "Definitive Agreement")
         incorporating the terms hereof and other terms customary of a
         transaction of this nature by September 1, 2007 (the "Deadline"),
         unless extended by mutual written agreement;

    (c)  receipt of all necessary consents, approvals, exemptions and
         authorizations of governmental bodies, lenders, lessors and other
         third parties, including, but not limited to, approval of the
         Proposed Transaction by the TSX Venture Exchange;

    (d)  the approval of the Corporation's and NCT's board of directors;

    (e)  all necessary securityholder approvals being received;

    (f)  each issue raised by any due diligence investigation which
         materially affects the respective businesses and financial condition
         of either NCT or the Corporation being remedied or addressed to the
         other party's satisfaction, acting reasonably;

    (g)  formation of a committee comprised of three (3) nominees of the
         Corporation and two (2) nominees of NCT to deal with the
         coordination of operations between the Corporation and NCT upon
         completion of the Proposed Transaction; and

    (h)  the execution of employment agreements by key members of the
         management of NCT that are to the satisfaction of the Corporation
         and such managers.
    

    Subject to receipt of all necessary consents, approvals, exemptions and
authorizations of governmental and regulatory authorities, including the TSX
Venture Exchange, concurrent with the closing of the Proposed Transaction, the
Corporation has agreed to issue to management of NCT, performance warrants to
acquire up to 3,000,000 common shares of the Corporation. Such performance
warrants will contain terms and conditions mutually acceptable to the
Corporation and NCT, including that such performance warrants will have an
exercise price based upon the Policies of the TSX Venture Exchange, shall
expire three (3) years from the date of grant and will vest based on
performance milestones of aggregate wellhead production by NCT exceeding net
1,000, 1,500 and 2,000 boe per day for thirty (30) consecutive days, as
determined by the Board of Directors of the Corporation.
    The Corporation has also agreed to lend to NCT, on a secured basis, up to
US$3,000,000 (the "Loan") to fund cash calls and operating costs associated
with NCT's oil and gas production. The Loan is subject to satisfactory
completion of due diligence by the Corporation and negotiation of loan
documentation and related documentation (including documentation necessary to
provide collateral or a security interest in NCT's 19.8% net interest in the
Suroriente Block (as described above) (the "Security")). In the event that the
Corporation and NCT are unable to enter into a mutually accepted Definitive
Agreement by the Deadline, then the Loan will become due in 90 days with
interest payable monthly at a rate of LIBOR plus 2%. In the event that NCT is
unable to repay the Loan and any interest payable within that 90 day period,
the Corporation will have the right to immediately realize on the Security.
    The Letter Agreement provides for mutual break fees of US$250,000 in the
event of non-completion of the Proposed Transaction for specified reasons.
    There are currently 27,366,606 common shares of the Corporation
outstanding. Upon closing of the Proposed Transaction, the Corporation will
have 38,991,606 common shares of the Corporation outstanding, 43,366,606
common shares in the event that all of the Special Warrants are exercised.
    References herein to "boe" mean barrels of oil equivalent derived by
converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to
one barrel (bbl) of oil. Boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.

    The Corporation is a Calgary-based junior oil and gas company, which
explores for, develops, produces and sells crude oil, natural gas liquids and
natural gas in Western Canada. The Corporations's common shares trade on the
TSX Venture Exchange under the symbol SRN.

    The TSX Venture Exchange has in no way passed on the merits of the
Proposed Transaction and has neither approved nor disapproved the contents of
the press release. There can be no assurance that the Proposed Transaction
will be completed as proposed or at all. Trading in the securities of the
Corporation should be considered highly speculative.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this press release.





For further information:

For further information: Jeffrey Scott, President and Chief Executive
Officer of the Corporation, Telephone: (403) 232-6252, Facsimile: (403)
264-7455

Organization Profile

SUROCO ENERGY INC.

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