Benchmark enters into definitive agreement with Delavaco Energy Inc. regarding business combination


    CALGARY, Jan. 26 /CNW/ - Benchmark Energy Corp. (TSXV: BEE) ("Benchmark"
or the "Company"), is pleased to announce that, further to its press releases
of December 2, 2008 and December 19, 2008, it has entered into an arm's-length
definitive agreement dated January 16, 2009 (the "Agreement") to acquire 100%
of Delavaco Energy Inc. ("Delavaco") for share consideration equivalent to
C$25,000,000 (the "Transaction"). A copy of the Agreement will be filed on
Benchmark's SEDAR profile at
    Delavaco currently has 49,713,900 common shares (the "Delavaco Shares")
issued and outstanding. Holders of Delavaco Shares (the "Delavaco
Shareholders") will receive 3.0841 common shares of Benchmark (the "Benchmark
Shares") in exchange for each Delavaco Share held by such Delavaco Shareholder
(the "Exchange Ratio"). Aggregate consideration paid to Delavaco Shareholders
will consist of approximately 153,324,869 Benchmark Shares, at a deemed price
of $0.163 per share, subject to adjustment as set forth in the Agreement.
There are currently 25,758,578 Benchmark Shares issued and outstanding.
Closing of the Transaction is subject to a number of conditions customary for
a transaction of this nature, including, among other things, regulatory and
shareholder approval, and is expected to occur on or about March 25, 2009.
    Pursuant to the Agreement, Delavaco will amalgamate (the "Amalgamation")
with 2192582 Ontario Inc. ("AcquisitionCo"), a wholly-owned subsidiary of
Benchmark. At the annual and special meeting of the holders of Benchmark
Shares (the "Benchmark Shareholders") to approve the Transaction (the
"Benchmark Meeting"), Benchmark Shareholders will be asked to, among other
things, consider and if deemed advisable, approve an ordinary resolution
authorizing the Amalgamation and a special resolution, subject to the
Amalgamation becoming effective and the receipt of all required regulatory
approvals, changing Benchmark's name to "Delavaco Energy Corp." The Benchmark
Meeting will be held on or about March 23, 2009.
    The board of directors of Benchmark (the "Benchmark Board") has
unanimously determined (subject to certain abstentions required under
applicable laws, as described further below) that the Benchmark Shareholders
should vote FOR the transactions contemplated by the Agreement and that the
Transaction is in the bests interest of Benchmark and the Benchmark
    Delavaco will hold an annual and special meeting (the "Delavaco Meeting")
of Delavaco Shareholders wherein the Delavaco Shareholders will be asked to,
among other things, consider and if deemed advisable, approve a special
resolution authorizing the Amalgamation, the Agreement and the transactions
contemplated thereby. The Delavaco Meeting will be held on or about March 23,
    The board of directors of Delavaco (the "Delavaco Board") has unanimously
determined that Delavaco Shareholders should vote FOR the transactions
contemplated by the Agreement and that the Transaction is in the best
interests of Delavaco and the Delavaco Shareholders.

    Description of Delavaco

    Delavaco is a private Canadian oil and gas company with exploration and
production interests in three producing blocks in Colombia.
    The combined Benchmark and Delavaco entity (the "Combined Entity") will
be focused on upstream oil & gas exploration and development in Colombia,
Brazil and Trinidad and potentially elsewhere in the region. Previously,
Benchmark held an interest in an offshore development project in Tunisia,
which it sold during 2008, and was seeking to acquire and/or farm-in to
upstream oil & gas projects in South America and the region. In connection
with this, Benchmark agreed in August 2008 to farm-in to earn 60% of three (3)
onshore blocks in Brazil held by BrazAlta Resources Corp., by funding 100% of
the estimated US$1.7 million 2D seismic program over these blocks.
    Delavaco has a working interest in two (2) exploration and exploitation
blocks (Rio Madgelena at 51% and Carbonera at 39%) with potential exploration
and development upside. Delavaco also holds a 3.6% interest in the La Punta
No. 2, which is a producing well within the La Punta block. Delavaco's daily
average net production after royalty as at November 30, 2008 was 117 barrels
of oil and 428 Mcf of gas.
    According to an oil & gas reserves report, prepared by Petrotech
Engineering Ltd., an independent consulting firm, for Delavaco prepared in
accordance with National Instrument 51-101 of the Canadian Securities
Administrators, as at November 30, 2008, Delavaco's net reserves after
deduction of royalties (forecast case) were as follows:

                              L&M Oil             Gas              NGL
                           Gross    Net      Gross    Net     Gross    Net
                           (Mbbl)  (Mbbl)    (Mcf)   (Mcf)    (Mbbl)  (Mbbl)

    Developed Producing      73      68
    Undeveloped              121     111     5,465    5,115    312     287
                             ---     ---     -----    -----    ---     ---
    Total Proved             194     179     5,465    5,115    312     287
    Probable                 291     268     57,470   53,792   2,518   2,317
                             ---     ---     ------   ------   -----   -----
    Total Proved +           486     447     62,934   58,906   2,831   2,604

                                 NPV Before Tax ($000 US) discounted @

                                     0%                        10%
                                     --                        ---
    Developed Producing              3,244                     2,549
    Undeveloped                      10,599                    4,915
                                     ------                    -----
    Total Proved                     13,843                    7,464
    Probable                         256,578                   145,293
                                     -------                   -------
    Total Proved +                   270,601                   152,757

    Note that future net revenue does not necessarily represent fair market
value of Delavaco's reserves.
    The forecast natural gas and oil prices are based on NYMEX futures
( for the week beginning December 8, 2008. The NYMEX futures are
used to determine the commodity price escalation up to the NYMEX forecast
year. The NYMEX West Texas Intermediate prices are adjusted according to the
Platts Latin American Wire and Platts Natural Gas Liquids Wire from mid-week
September 4, 2008. The major Colombian oil reference prices and their
adjustment from West Texas Intermediate are for Cusiana (-$0.97/bbl), Vasconia
(-$9.60/bbl) and 18.5 degrees API Pipeline Specification (-$13.75/bbl). The
forecast natural gas prices for the Company's Colombian properties are based
on a sales gas contract base price and then escalate in accordance with the
NYMEX heating oil futures. The heating oil futures are used in Colombia to
forecast natural gas prices because they better represent the current natural
gas usage in the country. Prices are then escalated at 2% per year after 2013.
Costs are escalated at 5% per year based on the Colombian price index. The
forecast prices used are as follows:

              WTI     La
             Light  Punta      Rio        Rio                Cerro
             Crude  37 API  Magdalena  Magdalena    Cerro    Gordo  Heating
              Oil    Oil       Oil        Gas     Gordo Gas   NGL     Oil

    Year    ($/bbl) ($/bbl)  ($/bbl)   ($/MMbtu)  ($/MMbtu) ($/bbl) ($/USgal)
    2008     54.43   50.40    49.47       3.80       4.00    40.74    1.67
    2009     60.43   56.40    55.47       4.15       4.37    45.23    1.83
    2010     70.04   66.01    65.08       4.60       4.84    52.43    2.03
    2011     76.37   72.34    71.41       4.79       5.04    57.16    2.11
    2012     80.38   76.35    75.42       4.89       5.14    60.17    2.15
    2013     82.95   78.92    77.99       4.98       5.25    62.09    2.19

    Development of Delavaco's interests in Colombia will require an estimated
$34 Million USD of capital expenditures, with approximately $14 Million USD of
such expenditures to be undertaken during the 2009 calendar year, $1.165
Million USD of which are required to be expended in the first quarter of 2009.
In order to meet these requirements Benchmark may be required to access the
capital markets in the future and there is no assurance that such capital will
be available on terms acceptable to Benchmark, if at all. Benchmark may also
seek to farm-out some of its opportunities.
    The following is a summary of significant financial information of
Delavaco derived from unaudited management prepared statements as at and for
the six months ended June 30, 2008 (all figures Canadian dollars):

                     Working Capital         $4,981,903

                     Total Assets            $26,117,435

                     Total Liabilities       $3,017,274

                     Shareholders' Equity    $23,100,161

                     Revenue                 $nil

                     Net income (loss)       $(1,518,193)

    Principals of the Combined Entity

    Zoran Arandjelovic currently holds approximately 33% of the issued and
outstanding Delavaco Shares and will, following closing of the Transaction,
hold greater than 20% of the Benchmark Shares, as then constituted. Mr.
Arandjelovic is a resident of Maple, Ontario, Canada and has been actively
involved with several publicly traded companies including Epsilon Energy Ltd.,
a TSX listed oil & gas company, where he serves as Executive Chairman, and
Tawsho Mining Inc., a TSXV listed junior mining company, where he serves as
Chairman of the board of directors.
    Andrew DeFrancesco is currently the Executive Chairman of Delavaco, a
position he has held since May 2008, and will become the Co-Chairman of
Delavaco Energy Corp. upon closing of the Transaction. Prior thereto he served
as President and Chief Executive Officer of Delavaco from its inception in
November 2007.
    David Robinson is currently the President and Chief Executive Officer of
Benchmark, a position he has held since January 2007, and will become, along
with Mr. DeFrancesco, the Co-Chairman of Delavaco Energy Corp. upon closing of
the Transaction.
    Robert Szczuczko is currently the President and Chief Executive Officer
of Delavaco and will continue in this role with Delavaco Energy Corp. upon
closing of the Transaction. Mr. Szczuczko will also become a member of the
board of Delavaco Energy Corp. Mr. Szczuczko has 33 years of experience in the
oil & gas industry, most recently as Executive Vice-President of Geoscience
and Engineering at Canoro Resources Ltd., a junior oil & gas company listed on
the TSXV and prior thereto as Manager of Production at PetroKazhakstan Inc.
    Chris Cooper is currently the Chief Financial Officer of Benchmark and
will continue in this role on an interim basis with Delavaco Energy Corp. upon
closing of the Transaction. Mr. Cooper has served in various capacities with a
number of publicly traded oil & gas companies including Choice Resources Corp.
and Watch Resources Ltd. A replacement for Mr. Cooper will be sought following
closing of the Transaction.
    Messrs. DeFrancesco, Robinson and Szczuczko will be joined on the board
of directors of Delavaco Energy Corp. by Mr. Larry Youell and Mr. Brian
Petersen, each of whom currently sits on the Benchmark Board. Additionally,
two further nominees to the Delavaco Energy Corp. board of directors will be
chosen by Delavaco, in consultation with Benchmark. Information with respect
to these two further nominees will be contained in a subsequent press release.

    Concurrent Private Placement of Delavaco

    Delavaco is currently undertaking a "best efforts" private placement
financing (the "Delavaco Private Placement") co-led by Cormark Securities
Inc., Clarus Securities Inc. and Thomas Weisel Partners to raise up to an
aggregate of C$15 million by way of an offering of common share subscription
receipts ("Delavaco Share Subscription Receipts") and convertible debenture
subscription receipts of Delavaco ("Delavaco CD Subscription Receipts"),
provided that not more than $10 million principal amount of convertible
debentures may be issued pursuant to the Delavaco Private Placement. Any
shares issued by Delavaco pursuant to the Delavaco Private Placement prior to
the closing of the Transaction will not result in an adjustment to the
Exchange Ratio.
    The closing of the Delavaco Private Placement is not a condition
precedent to the closing of the Transaction and Delavaco is not required to
complete any minimum offering amount under the Delavaco Private Placement. The
proceeds from the Delavaco Private Placement will be used to satisfy capital
commitments and for working capital purposes. Following the closing of the
Transaction, and assuming successful completion of the Delavaco Private
Placement, Delavaco Energy Corp. expects to have approximately C$15.3 million
of cash, before deduction of fees and expenses related to the Transaction and
ongoing business expenses made in the normal course.
    A subsequent news release will provide an update as to the status of the
Delavaco Private Placement, if applicable.

    Bridge Loan to Delavaco in Connection with the Transaction

    In connection with the Transaction and as more fully described in a press
release dated December 18, 2008, the TSX Venture Exchange ("TSXV") approved a
secured non-revolving credit facility (the "Bridge Loan") of up to
USD$1,500,000 from Benchmark to Delavaco. An initial drawdown of USD$1,010,000
has been made by Delavaco on the Bridge Loan. A copy of the Bridge Loan has
been filed on Benchmark's SEDAR profile available at
    The Bridge Loan was established by Benchmark, in favour of Delavaco, as a
secured, non-revolving credit facility which may be drawn by Delavaco on the
dates and in the amounts provided for in Schedule "B" to the Bridge Loan. The
Bridge Loan is not a revolving loan and Benchmark is not obligated to
re-advance any amounts that have been repaid by Delavaco.
    The proceeds of the Bridge Loan will be used to fund obligations of
Delavaco with respect to exploration and production interests in the Rio
Magdelena, Carbonera and La Punta blocks in Colombia.
    The aggregate principal amount under the Bridge Loan will be paid by
Delavaco to Benchmark on or before June 18, 2009 (the "Maturity Date")
together with all accrued and unpaid interest and fees on the aggregate
principal amount and all other amounts owing to Benchmark in respect of the
loan documents on such date shall also be paid.
    Delavaco will make repayments of the aggregate principal amount of the
Bridge Loan to Benchmark equal to 100% of the net cash proceeds received by
Delavaco or any of its subsidiaries from (a) any private or capital markets
issue of debt or equity (including the Delavaco Private Placement) and (b) any
sale or other disposition of any of Delavaco's or any of its subsidiaries'
assets, in each case, within three (3) business days of the receipt thereof.
Upon one business day prior notice to Benchmark, Delavaco shall have the right
to prepay all or any part of the aggregate principal amount without premium,
bonus or penalty.
    The aggregate principal amount of the Bridge Loan will bear interest at a
rate of 8% per annum. Interest on the aggregate principal amount will be
calculated on the basis of a year of 365 days and will accrue from the
drawdown date and be calculated and compounded monthly and, except as
expressly stated otherwise in the Bridge Loan, be payable in arrears in full
on the Maturity Date.

    Conditions to the Completion of the Transaction

    The consummation of the Transaction is subject to the satisfaction of a
number of conditions including, among other things:

    (a)   the joint information circular and other documentation required in
          connection with the Delavaco Meeting and Benchmark Meeting shall
          have been mailed on or before February 25, 2009;

    (b)   the Delavaco Meeting resolution approving the Amalgamation and the
          Amalgamation Agreement shall have been approved by the Delavaco
          Shareholders at the Delavaco Meeting;

    (c)   the Benchmark Meeting resolution approving the Amalgamation
          Agreement shall have been approved by the Benchmark Shareholders at
          the Benchmark Meeting, including, if required, by "minority
          approval" as such term is defined in Multilateral Instrument 61-101
          ("MI 61-101");

    (d)   the Amalgamation shall have become effective on or prior to
          April 30, 2009;

    (e)   TSXV approval;

    (f)   holders of not greater than one percent (1%) of the outstanding
          Delavaco Shares shall have exercised dissent rights in respect of
          the Amalgamation that have not been withdrawn as at the effective
          date of the Amalgamation; and

    (g)   such other conditions as are customary for a transaction of this

    In connection with the Transaction, Benchmark and Delavaco have agreed,
subject to certain exceptions, that neither will solicit nor initiate
discussions regarding any other business combination and the Agreement
provides for the payment, by either Benchmark or Delavaco, as applicable, of a
$300,000 non-completion fee under certain circumstances where the Agreement is


    Wellington West Capital Markets Inc. ("Wellington West") has agreed to
act as sponsor pursuant to TSXV Policy 2.2 (the "Sponsor") in connection with
the Transaction. In connection with its services as Sponsor, Wellington West
will, among other things and subject to the completion of satisfactory due
diligence, prepare and file a sponsorship report with the TSXV in accordance
with TSXV policies. An agreement to act as Sponsor should not be construed as
an assurance with respect to the merits of the Transaction or the likelihood
of the completion of the Transaction.

    Financial Advisors

    Cormark Securities Inc. is acting as financial advisor to Delavaco with
respect to the Transaction and has advised the Board of Directors of Delavaco
that it is of the opinion that the consideration to be received by Delavaco
Shareholders pursuant to the Amalgamation is fair, from a financial point of
view, to the Delavaco Shareholders.
    Petersen Capital Corporation is acting as financial advisor to Benchmark
with respect to the Transaction and has assisted the Board of Directors of
Benchmark in their evaluation of the Transaction. Brian Petersen, a director
of Benchmark and a principal of Petersen Capital Corporation, has declared an
interest in, and has abstained from voting in respect of, the Amalgamation.

    Trading Halt

    Trading of the Benchmark Shares has been halted by the TSXV and the
Benchmark Shares will remain halted in accordance with TSXV policies until all
required documentation with respect to the Transaction has been received.

    About Benchmark Energy Corp.

    Benchmark is a development stage junior oil and gas company focused
internationally which holds the preferential right in Colombia, Peru, Ecuador
and Trinidad for the use of a proprietary well-performance enhancement
technology, which may have some application within the interests in Colombia
being acquired through the Delavaco transaction. Furthermore, Benchmark holds
a 60% interest in three (3) onshore blocks in Brazil's Espirito Santo basin
known as Blocks 318, 362, and 380 where the Company earned its interest by
funding 100% of an 83-km 2D seismic shoot at a cost of approximately US$1.7

    Forward-Looking Statements

    Certain information set forth in this press release, including
management's assessment of future plans and operations, contains
forward-looking statements. In addition, information with respect to the crude
oil, natural gas liquids and natural gas reserves, resources and future net
production revenues attributable to the properties of Delavaco are based on
management estimates of Delavaco. The use of any of the words "anticipate",
"continue", "estimate", "expect", "may", "will", "project", "should",
"believe" and similar expressions are intended to identify forward-looking
statements. By their nature, forward-looking statements are subject to
numerous risks and uncertainties, some of which are beyond management's
control, including the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, imprecision
of reserve or resource estimates, environmental risks, competition from other
industry participants, the lack of availability of qualified personnel or
management, stock market volatility, the ability to access sufficient capital
from internal and external sources, and unexpected transportation or other
issues, such as guerrilla activity that has occurred sporadically in Colombia.
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. Actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
forward-looking statements. No assurance can be given that any of the events
anticipated will transpire or occur, or if any of them do so, what benefits
will derive from them. Benchmark disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
    In this news release, reserves and production data are commonly stated in
barrels of oil equivalent ("boe") using a six to one conversion ratio when
converting thousands of cubic feet of natural gas ("Mcf") to barrels of oil
("bbl") and a one to one conversion ratio for natural gas liquids. Such
conversion 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.

    Completion of the transaction is subject to a number of conditions,
including TSXV acceptance and disinterested Benchmark Shareholder approval.
The Transaction cannot close until the required Benchmark 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 release.
Neither the TSXV not its Regulation Services Provider (as that term is defined
in the policies of the TSXV) accepts responsibility for the adequacy or
accuracy of this release.
    Wellington West, subject to completion of satisfactory due diligence, has
agreed to act as sponsor to Benchmark in connection with the Transaction. An
agreement to sponsor should not be construed as any assurance with respect to
the merits of the Transaction or the likelihood of completion.

For further information:

For further information: Benchmark Energy, David Robinson, Chairman &
CEO, (403) 802-0770

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