/NOT FOR DISTRIBUTION IN THE UNITED STATES OF AMERICA/
CALGARY, Feb. 27 /CNW/ - Velo Energy Inc. ("Velo" or the "Company") (TSX
VENTURE EXCHANGE: VLO) provides the following update on its activities.
Velo's Business Plan was described in a June 5, 2007 press release and an
October 15, 2007 press release. There were three objectives to the plan:
1. Tying in the Pica 13-06-84-05W6 Well.
The well was drilled and cased in December 2006, completed as a gas well
in January 2007 and placed on production in December 2007. The well averaged
approximately 400 Mcf/d (160 Mcf/d net) over a 17 day period in December and
then experienced water production problems. The well is presently shut in and
is being reviewed for potential remedial work.
2. Evaluate new exploration and development opportunities.
The Company continues to evaluate other exploration and development
opportunities. The Company's ability to pursue such an opportunity would be
subject to financing.
3. Analyze and develop a one year financial plan.
The financial restructuring of the Company's wholly owned subsidiary,
Velo Energy Ltd. ("Velo Ltd.") is ongoing. In December 2007, Velo Ltd.
successfully negotiated a repayment plan with almost all of its unsecured
creditors. In addition to an initial payment made at that time, Velo Ltd. is
required to make a final payment by the end of April.
A new element of the financial plan is the consequence of the December
2006 flow-through share issue. The amount of this issue was $1,977,000. Nova
Bancorp Investments Ltd. ("Nova Bancorp") and three Velo directors purchased
$425,000 of this issue. Nova Bancorp and its affiliates currently own 23.1% of
the common shares of the Company and its directors are officers and directors
From the date of the flow-through share financing on December 29, 2006 to
December 31, 2007, the Company incurred qualified exploration expenditures of
approximately $986,000, which represents a shortfall of approximately
$991,000. The Company and its advisors have finalized an analysis of this
situation. Subscribers to the December 2006 flow-through share issue will lose
the benefit of approximately 36% of the 2006 deduction to which they were
entitled. This amount would have been greater but Nova Bancorp and the Velo
directors, who were subscribers, have agreed to forgo 100% of the benefit to
which they were entitled, thus minimizing the loss to other subscribers.
Without this concession by Nova Bancorp and the Velo directors, subscribers
would have lost approximately 50% of the 2006 deduction.
Under the terms of the subscription agreement for the flow-through share
financing, the Company has indemnified subscribers for any such loss. The
Company will propose that subscribers accept new Velo shares as payment under
the indemnity, the amount of which, is estimated to be approximately $459,923
($991,000 x 46.41% (assuming the top marginal income rate in Ontario)) 42.9%
of the shares to be issued under such a proposal would be issued to Nova
Bancorp and Velo directors. Such a share issue would be subject to the
approval of the TSX Venture Exchange.
In order to provide additional information to subscribers of the December
2006 flow-through share issue, the Company has scheduled a conference call for
4:30 p.m. EST, Thursday, February 28, 2008. The pass code is 49633 followed by
the number sign and the dial in numbers are as follows:
About Velo Energy Inc.
Velo is an emerging oil and gas company engaged in the exploration for,
development and production of natural gas and oil in the western sedimentary
Certain information set forth in this media release contains
forward-looking statements, including statements regarding the potential
remedial work on the Pica well, the Corporation's financing requirements and
opportunities therefore, payments to be made under the financial restructuring
as well as the proposal to indemnify subscribers of the flow-through
financing. By their nature, forward-looking statements are subject to numerous
risks and uncertainties, some of which are beyond Velo's control, including
the acceptance of the financial restructuring with flow-through share
subscribers, the remedial work assessment, impact of general economic
conditions, commodity prices, environmental risks, competitive industry
conditions, availability of qualified personnel, stock market volatility and
ability to access sufficient capital from internal and external sources.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this press release.
For further information:
For further information: Jack Muir, Director, Tel: (604) 891-8782