Benchmark Energy Corp. to acquire producing field in Argentina through purchase of Central International Corp.


    CALGARY, March 18 /CNW/ - Benchmark Energy Corp. ("Benchmark" or the
"Company"), (TSXV:BEE) is pleased to announce that it has entered into an
arms-length agreement (the "Agreement") with Central Argentina Corporation
("CAC") dated March 10, 2008, by which Benchmark will acquire, subject to
certain conditions, all of the issued and outstanding shares (the "CIC
Shares") of Central International Corporation ("CIC"), a Nevada corporation,
for total consideration of approximately $57.1 million (USD) before closing
adjustments (the "Transaction"), including the assumption of approximately
$23.5 million (USD) of debt with an effective date of January 1, 2008. CIC
holds 100% of the producing Catriel Oeste concession in the Neuquen Basin of
Argentina which is currently producing approximately 1,300 barrels of oil per
day ("bopd") with current productive capacity of over 1,400 bopd. CAC is a
private company controlled by Paul J. Zecchi who holds 70% of CAC's shares,
Richard F. Kral, Sr., who holds 25% of CAC's shares, and a charitable
foundation which holds 5% of CAC's shares. The Transaction is the acquisition
of the asset in Argentina that the Company had previously announced in a press
release dated December 10, 2007 that it was actively working to acquire.
    "This represents an attractive opportunity for Benchmark to establish a
producing platform in Argentina which is consistent with our strategy for
growth in South America," said David R. Robinson, President & CEO of
Benchmark, "The ongoing support of CAC affiliate, Central Resources Inc., a
private oil and gas company with over 20 years of experience, and its CEO,
Paul J. Zecchi, further strengthens the opportunities for growth and financial
flexibility of Benchmark."

    Benefits to Shareholders:
    Shareholders in Benchmark will own a unique company with:

    -   Substantial oil production (currently producing at a rate of approx.
        1,300 bopd of 23(degrees) API oil).

    -   Estimated net proved recoverable reserves for Catriel Oeste are
        3.523 million barrels of oil, and estimated net proved plus probable
        recoverable reserves of 8.588 million barrels of oil, as of
        December 1, 2007, estimated under National Instrument 51-101 by
        independent engineering firm William M. Cobb & Associates (the "Cobb

    -   Pre-tax NPV10 of estimated net proved plus probable recoverable
        reserves of $65.1 million (USD) using constant pricing of $42.00 per
        barrel. (The estimated values disclosed do not represent fair market

    -   Established stable production base characterized by low decline
        rates, with the opportunity to enhance production.

    -   Identified opportunities to increase remaining recoverable reserves.

    -   Attractive purchase price of $6.65 (USD) per barrel of proven plus
        probable reserves.

    -   Significant support from CAC as a new majority shareholder.

    -   Strong additions to the Board of Directors.

    -   Area of Mutual Interest agreement ("AMI Agreement") with CAC and
        Central Resources Inc. ("Central Resources") and its affiliates for
        further acquisitions in various areas of South America.

    Purchase Price and AMI Agreement:
    The purchase price for the CIC Shares is $57.1 million (USD) and is
payable as follows:

        a) $250,000 (USD) down payment, paid on the signing of the Agreement.

        b) $24.75 million (USD) cash to be funded by way of a senior debt
           facility; CAC and Benchmark have mandated a major European Bank to
           provide an initial $23.5 million (USD) bridge financing facility
           to CAC by March 31, 2008, with the intention of ultimately
           refinancing the bridge financing by way of a reserve-based lending
           (RBL) facility for a minimum of $25 million.

        c) 25,000,000 shares of Benchmark issued to CAC valued at $0.48 per
           share, for value of approximately $12.1 million (USD).

        d) 17,500,000 Benchmark warrants that will be exercisable for a
           period of 12 months at an exercise price of $0.75; and

        e) $20 million (USD) subordinated vendor take-back note (the "Note")
           with a term of 12 months and bearing interest at a rate of 10% per
           annum for the first three (3) months, 12% per annum for the next
           three (3) months to six (6) months, and 15% per annum thereafter
           for the remainder of the term of the Note.

    Below is a presentation of certain CIC, Argentine branch financial
information for the nine-month period ended September 30, 2007 and the fiscal
year ended December 31, 2006, 2005, 2004:

                    Nine Months
                       Ended        Year Ended     Year Ended    Year Ended
                   September 30,    December 31,   December 31,  December 31,
                        2007           2006           2005          2004

                                                All dollar figures are in US

    Working Capital $  (586,985)   $(4,344,221)   $   696,545    $  (113,105)
     Assets         $11,319,092    $12,028,165    $10,599,329    $ 6,609,675
     Liabilities    $ 1,056,205    $ 1,171,691    $   766,945    $   705,424
     Equity         $ 9,705,902    $ 6,512,253    $10,528,929    $ 5,791,146
    Net Sales       $14,410,335    $17,617,288    $14,457,775    $12,085,116
    Net Income      $ 3,193,649    $ 4,447,000    $ 4,737,783    $ 3,914,757

    At the completion of the transaction Benchmark will have a total of
approximately 49.5 million shares outstanding, and CAC will own 50.6% of the
basic outstanding shares of Benchmark and 61.4% on a fully diluted basis
including the 17.5 million warrants to CAC.
    In addition, there is a contingent $12 million (USD) payment to be made
to the vendor if the recently implemented statutory maximum oil price in
Argentina of $42 (USD) per barrel is fully repealed within 24 months from the
date of the signing of the Agreement, with a pro-rated payment if partially
repealed. Assuming a full repeal, the payment would consist of $5 million
(USD) in cash and the remainder payable by way of a $7 million (USD)
convertible note, which would be priced based on TSXV pricing requirements.
    The PV10 value of Catriel Oeste according to the Cobb Report based on the
statutory oil price of $42.00 (USD) per barrel is $65.1 million (USD). If
there is a full repeal, and assuming actual November 2007 oil price of
$51.18 (USD), the Cobb Report PV10 value of the revenues of Catriel Oeste
would be $95.8 million (USD), an increase of 47% in the PV10 value versus an
increase in the purchase price from $57.1 million (USD) to $69.1 million
(USD), an increase of approximately 21%.
    Also, as a part of the transaction, Benchmark has entered into the
AMI Agreement with CAC and Central Resources regarding future potential
acquisitions in Argentina, Colombia, Peru and Paraguay. This is a unique
opportunity to leverage the South American experience and relationships of
Central Resources to support Benchmark in its growth strategy.
    "CAC and Central Resources, and myself personally, are excited to have a
continuing interest in the assets we have owned in Argentina", said Paul J.
Zecchi, CEO, Central Resources (, "and we view
Benchmark as a strong partner to continue growth plans in Argentina and
elsewhere in South America."
    CAC will also have the right to appoint three (3) out of six (6) members
to the Board of Directors of Benchmark, including Paul J. Zecchi who will act
as Chairman of the Board. The Board of Directors, following completion of the
transaction, will also include David Robinson, Larry Youell, Brian Petersen,
and two other members appointed by CAC, being Richard F. Kral, Sr. and
Scott W. Smith.

    Mr. Paul J. Zecchi is the President and Chief Executive Officer of
Denver, Colorado based Central Resources, Inc. and affiliates, and has served
in such capacity since October 1988. Prior to founding Central Resources in
1988, he was the President of Midland Resources, Inc., a Midland Texas based
independent energy company, from June 1984 to September 1988. From 1971 to
1984, Mr. Zecchi held various executive, management, and engineering positions
for, among others, Johnston Division of Schlumberger Technology Corp,
Parker Drilling Company, and Tennessee Gas Pipeline Company, Division of
Tenneco, Inc. Since 1984, he has been primarily involved in the acquisition
and exploitation of oil and gas producing assets and the subsequent
operational management of those properties. Mr. Zecchi has personally
negotiated the purchase and sale of approximately $500 million of oil and gas
assets in the U.S., Canada, Argentina, and Brazil and is actively pursuing
similar potential opportunities in other countries as well.
    He holds a Bachelor of Science Degree in Petroleum Engineering from
Marietta College and a Master of Science Degree in Management Science from
Renssalear Polytechnic Institute. Mr. Zecchi sits on several charitable and
corporate boards, including Novus Energy, Inc., an alternative fuel company
based in Minneapolis. He was the former president of the Independent Petroleum
Association of Mountain States.

    Mr. Richard F. Kral, Sr. a resident of Fairfield, Connecticut, is
actively involved in varied and oil and gas investments and the management and
ownership of commercial and coastal real estate. He is also a consultant in
consumer products marketing and capital markets. From 1984 to 1993, Mr. Kral
was the Chairman and Chief Executive Officer of Crystal Brands, a $1.8 billion
NYSE traded apparel, retail, jewelry holding company. He founded the company
as a "spin out" from General Mills Corporation. He raised the initial capital
and took the company public on the New York Stock Exchange. From 1983 to 1984
he was Executive Vice President of General Mills and President of the
Non-Foods Division.
    From 1963 to 1983, Mr. Kral held various executive and management
positions at Warnaco Corporation, a $800 billion NYSE apparel company,
including as a member of the Board of Directors, and President and Executive
Vice-President of several divisions. From 1961 to 1963, he was the Industrial
Products Sales Manager for Armstrong Cork Company (NYSE). Mr. Kral holds a
Bachelor of Science Degree in Economics from the University of Connecticut and
is a graduate of Dartmouth College Management Institute. He has served on
numerous other boards of directors and advisory boards including
Chemical Bank, Dominion Bank, Connecticut National Bank, Goldman Sachs and
Dillon Reed. He is a member of YPO (Young Presidents Organization).

    Mr. Scott W. Smith is the President and Chief Executive Officer of
Vanguard Natural Resources, LLP (NYSE:   VNR) and has served in such capacity
since October 2006. He has over 25 years of experience in the energy industry,
primarily in business development, marketing, and acquisition and divestiture
of producing assets and exploration and exploitation projects in the energy
sector. Mr. Smith's experience includes evaluating, structuring, negotiating
and managing business and investment opportunities, including energy
investments totaling approximately $400 million as both board member and
principal investor in Wiser Investment Company LLC, the largest shareholder in
The Wiser Oil Company (NYSE:  WZR) until its sale to Forest Oil Corporation
(NYSE:  FST) in June of 2004. From June 2000 to June 2004, Mr. Smith served on
the Board of Directors of The Wiser Oil Company. Mr. Smith was also a member
of the executive committee of The Wiser Oil Company.

    Transaction Metrics:

                                       All figures are in US dollars
                                 Operating         Metrics at
                                Statistics        $57.1 million
                                                 Purchase Price
    Current Production (bbl/d)       1,300   $   43,923   per bopd
    Proved Reserves (mbbl)           3,523   $    16.21   per barrel
    Proved + Probable Reserves
     (mbbl)                          8,588   $     6.65   per barrel

    Catriel Oeste Field Overview:
    The Catriel Oeste field was discovered in 1959 by Repsol YPF. The center
of the block sits in a structural high in the northern Neuquen Basin on a
northwest-to-southeast trending anticline. The primary oil producing zones are
in the Quintuco, at an approximate depth of 850 m, composed of cretaceous age
sandstones and carbonates. The asset is comprised of a single block in the
Rio Negro province, is owned 100% and operated by CIC, and is an opportunity
to acquire long term production with considerable upside potential. It is a
mature field with 108 producing wells, 55 water injection wells, and 2
disposal wells amongst 7 tank batteries. A water flood was initiated in 1974.
The current term of the concession contract expires October 1, 2016 with two
possible five-year extensions available.
    Catriel Oeste contains considerable well-defined upside potential
including applying production technologies for the acceleration of the
recovery of existing reserves, and secondary recovery including water flood
optimization and expansion into lower zones (Capa-9 through Capa-15), and the
potential for a polymer injection pilot. The application of processed 3D
seismic could lead to further development of infill drilling locations. There
is gas reserve upside and there is the potential for a co-generation facility
to generate electricity which could significantly lower operating costs. Also,
there is the potential for field extension through drilling on the outer
flanks of the field.

    Below is a presentation of excerpts from the Cobb Report dated January 22,

                             CATRIEL OESTE FIELD
                           NET RESERVES AND VALUE
                           AS OF DECEMBER 1, 2007
                   STATUTORY OIL PRICE OF $42.00 PER BARREL
                               CONSTANT PRICING
                        All figures are in US dollars

                                      Future Net Pre-Tax
                                          Income - M$
         Reserve          Net Oil                Discounted
         Category          (MMBL)  Undiscounted     at 10 %
    -----------------     -------  ------------  ----------
      Producing             3,072      63,294       44,660
      Non-Producing           139       4,647        2,764
      Undeveloped             312       4,519        1,470
                          -------     -------      -------
    Total Proved            3,523      72,460       48,894
    Probable                5,065      72,052       16,194
    Proved + Probable       8,588     144,512       65,088

                             CATRIEL OESTE FIELD
                           NET RESERVES AND VALUE
                           AS OF DECEMBER 1, 2007
                               CONSTANT PRICING
                        All figures are in US dollars

                                      Future Net Pre-Tax
                                         Income - M$
         Reserve          Net Oil                 Discounted
         Category          (MMBL)   Undiscounted     at 10 %
    -----------------     -------   ------------  ----------
      Producing             3,072       88,965       62,395
      Non-Producing           139        5,808        3,488
      Undeveloped             519        7,802        1,896
                          -------      -------      -------
    Total Proved            3,730      102,575       67,779
    Probable                6,035      125,399       28,057
    Proved + Probable       9,765      227,974       95,836

    The Boards of Directors of both Benchmark and CAC have unanimously
approved the transaction. Petersen Capital Corporation acted as financial
advisor to Benchmark, and Scotia Waterous and Berkeley Energy Partners acted
as advisors to CAC.
    Completion of the acquisition is subject to approval of both the
TSX Venture Exchange, and the shareholders of the Company. As such, a Special
Meeting of the shareholders will be called.
    Canaccord Capital Corporation, subject to completion of satisfactory due
diligence, has agreed to act as sponsor to Benchmark in connection with the
    An agreement to sponsor should not be construed as any assurance with
respect to the merits of the transaction or the likelihood of completion.
    Trading of the shares of Benchmark will remain halted pending receipt by
the TSXV of certain documentation.

    Since July 28, 2005, Benchmark has been a junior Canadian oil and gas
exploration company, focused internationally.

    This news release shall not constitute an offer to sell or the
solicitation of any offer to buy the securities in any jurisdiction.

    This news release is not for dissemination in the United States or to any
United States news services. The Benchmark Shares and Warrants to be issued
pursuant to the transaction will not be and have not been registered under the
United States Securities Act of 1933 and may not be offered or sold in the
United States.

    Certain information regarding Benchmark contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, anticipations,
expectations, opinions, forecasts, projections, guidance or other similar
statements that are not statements of fact. Although Benchmark believes that
the expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to be correct.
These statements are subject to certain risks and uncertainties and may be
based on assumptions that could cause actual results to differ materially from
those anticipated or implied in the forward-looking statements. Benchmark's
forward-looking statements are expressly qualified in their entirety by this
cautionary statement.
    Completion of the transaction is subject to a number of conditions,
including TSX Venture Exchange ("TSXV") acceptance and disinterested
shareholder approval. The transaction cannot close until the required
shareholder approval is 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 Management
Information Circular to be prepared in connection with the transaction, any
information released or received with respect to the transaction may not be
accurate or complete and should not be relied upon. Trading in the securities
of Benchmark should be considered highly speculative.

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

For further information:

For further information: Benchmark Energy Corp., David R. Robinson,
President & CEO, Phone: (403) 802-0770, Fax: (403) 266-5732, E-Mail:

Organization Profile


More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890