Testudo Oil & Gas Exploration Ltd. ("Testudo") (TSX VENTURE:TG.P) wishes to
announce that it has entered into a letter agreement dated April 30, 2009, as
amended on May 14, 2009 ("Batoche SPA") with Batoche Energy Corp ("Batoche") and
the shareholders of Batoche to purchase all of the issued and outstanding shares
of Batoche effective February 1, 2009. The Batoche SPA supercedes the agreement
Testudo had previously entered into with Batoche, Batoche Energy (Griffen) Corp
("BEC-Griffen") and 14 legal entities ("GL Beneficial Owners") dated September
25, 2008 (as amended) ("BEC-Griffen Asset Sale Agreement") to purchase certain
assets. The TSX Venture Exchange Inc. ("Exchange") has conditionally approved
the share purchase under the Batoche SPA as a Qualifying Transaction as defined
under Exchange Policy 2.4. The Batoche SPA contemplates that Testudo would
effect a consolidation of its common shares ("Testudo Shares") on a 3.125 old
for 1 new post-consolidated common share ("Antler Creek Share") and change its
name to Antler Creek Energy Corp. ("Antler Creek"). Batoche has two wholly owned
subsidiaries (BEC-Griffen and Batoche Energy (Heward) Corp ("BEC-Heward")). The
sole condition to closing is the completion of the financing. Upon completion of
the proposed acquisition, Testudo does not anticipate any change to its board of
directors or management. It is expected that Antler Creek and Batoche will
amalgamate immediately after closing of the Qualifying Transaction and carry on
business as Antler Creek Energy Corp. Antler Creek will carry on the business of
a junior oil and gas exploration and development company in Western Canada. In
addition, Antler Creek has entered into a letter of intent to provide evaluation
and administration services for the Relentless DIP Funds and Cirious Capital
Funds. The Relentless DIP Fund has been created to provide debtor-in-possession
financing ("DIP Financing") for oil and gas production companies with less than
1,000 boe/d. The Cirious Capital Fund has been created to purchase oil and gas
properties from vendors under financial duress.
Batoche Energy Corp Share Purchase Agreement
Subject to the terms and conditions contained in the Batoche SPA, Testudo will
acquire all of the issued and outstanding shares of Batoche for $2,100,000
payable as follows: (a) $550,000 cash; (b) note payable of $1,100,000; and (c)
$450,000 to be satisfied by the issuance of 1,000,000 Antler Creek Shares at a
deemed price of $0.45 per Antler Creek Share. The loan will bear interest at 4%
and will mature in 48 months. The loan will be repaid in 2009 on a monthly basis
from 75% of cash flow. Commencing in 2010, Antler Creek will be required to make
a minimum monthly payment of $20,000 from all sources. The debt shall be secured
by general security agreements granted by Antler Creek, Batoche and the
subsidiaries of Batoche which shall rank as first charges against all of the
assets of Antler Creek, Batoche and the subsidiaries of Batoche (other than any
interests held in trust by the respective parties).
Batoche is a private Alberta corporation which commenced operations in January
2007. For the fiscal period ended January 31, 2009, Batoche had petroleum and
natural gas sales of $2,000,576 which was offset by royalties of $245,754,
operating expenses of $141,280, management fees of $220,000, depletion,
depreciation and accretion of $272,717, bad debt allowance (SEM Canada) of
$113,658 and general and administrative expenses of $166,325 resulting in a net
profit after taxes of $633,977. As of January 31, 2009, Batoche had current
assets of $337,440, net petroleum and natural gas properties and equipment of
$807,210 and total assets of $1,181,642. As of January 31, 2009, Batoche had
current liabilities (excluding taxes) of $235,353, income tax payable (net of
future tax) of $206,865, share capital of $600 and retained earnings of
$627,900.
The assets of Batoche consist of: (a) 47.5% working interest in certain mineral
leases which provide oil and gas mineral rights to approximately 7 gross (5.7
net) sections 8 miles north of Griffin, Saskatchewan ("Griffin Lands"); (b)
rights under a farmin agreement with ConocoPhillips Canada (BRC) Partnership
which provide rights to earn-in on 75% of the oil and gas mineral rights under
the NE, SE and SW 13-9-9-W2M (subject to obligation to drill 2 test wells by
July, 2010); (c) 100% of the issued and outstanding shares of BEC-Griffen; and
(d) 100% of the issued and outstanding shares of BEC-Heward. BEC-Griffen has the
following assets: (a) a 20% working interest in the oil and gas mineral rights
under Section 13-8-11-W2M (restricted to the zones set out in the sublease/lease
documents) which has 2 producing Bakken wells drilled in 2008 (Crescent Point
Resources Limited Partnership has a 80% working interest and is the operator);
(b) a 22.5% working interest in the oil and gas mineral rights under the West
Half of Section 31-8-9-W2M which has 2 producing Bakken wells drilled in 2008
(Crescent Point Resources Limited Partnership has a 55% working interest and is
the operator); and (c) 50% of the well bore located on LSD 14 Bakken 13-8-11-
W2M. BEC-Heward owns a 25% working interest in the oil and gas mineral rights in
the Bakken zone under the South Half of Section 5-9-9 W2M which has 2 producing
Bakken wells drilled in 2008 (Aldon Oils Ltd. has a 25% working interest and is
the operator).
Testudo expects to close a private placement of $608,400 consisting of 680,000
Antler Creek Shares with flow through attributes at $0.45 per Antler Creek Share
and 672,000 Antler Creek Units at $0.45 per Antler Creek Unit. Each Antler Creek
Unit consists of 1 Antler Creek Share (without flow-through attributes) and one
common share purchase warrant ("Antler Creek Warrant"). Each Antler Creek
Warrant will entitle the holder to purchase 1 Antler Creek Share (without flow
through attributes) until April 30, 2011 at an exercise price of $0.60 per
Antler Creek Share. The transaction will be non-brokered. Antler Creek will pay
a finders fee of 10% cash (or maximum permitted by the Exchange) to persons who
introduce qualified accredited investors plus a warrant equivalent to 10% of the
shares sold ("Antler Creek Finders Warrants"). A finder has been engaged. It is
anticipated that Antler Creek would grant warrants to the finder to acquire up
to 130,000 Antler Creek Shares with an exercise price of $0.60 per Antler Creek
Share exercisable at any time up to 2 years from the date of closing of the
financing. The Antler Creek Shares issued as part of the financing, the Antler
Creek Shares issued upon exercise of the Antler Creek Warrants and the Antler
Creek Finders Warrants will be subject to a 4 month hold period from the date of
closing.
Upon completion of the acquisition of the shares of Batoche and closing of the
financing, there will be: (a) 4,000,000 Antler Creek Shares issued and
outstanding; (b) Antler Creek Warrants to acquire 672,000 Antler Creek Shares;
(c) Antler Creek Finders Warrants to acquire 130,000 Antler Creek Shares; and
(d) options granted to the directors to acquire 364,800 Antler Creek Shares; or
(e) 5,166,800 Antler Creek Shares on a fully diluted basis. Officers and
directors, as a group, (assuming they purchase 185,000 Antler Creek Shares or
Antler Creek Units in the financing) would: (a) own 1,629,800 issued and
outstanding Antler Creek Shares (40.75%); (b) have rights to acquire an
additional 499,800 Antler Creek Shares upon exercise of options or warrants; or
(c) would own or have rights to acquire 2,129,600 Antler Creek Shares (41.22%)
assuming all options and warrants were exercised.
Upon completion of the acquisition of the shares of Batoche and upon closing of
the financing, based on a pro forma compilation report prepared by the
management of Testudo, it is expected that the resulting issuer will have
$751,004 in current assets, $2,864,281 in petroleum and natural gas properties
and equipment and $3,615,285 in total assets as of January 31, 2009. It is
expected that the resulting issuer will have approximately $218,640 in short
term liabilities, $243,857 income tax payable, $1,100,000 in long term debt
owing to the shareholders of Batoche, $73,932 in asset retirement obligations,
$548,961 in future tax obligations and $2,185,390 in total liabilities as of
January 31, 2009. The pro forma estimates are based on the figures provided in
the interim unaudited financial statements of Testudo as of January 31, 2009 and
the audited financial statements of Batoche as of January 31, 2009. The estimate
is based on the assumption that the resulting issuer will sell 1,352,000 Antler
Creek Shares for aggregate gross proceeds of $608,400 and net proceeds of
$550,000. The estimates assume that the shareholders of Batoche are paid
$550,000 and that all non-arm's length receivables are collected and all
non-arm's length payables are paid. The estimates do not take into consideration
any financial transactions commencing February 1, 2009. In preparing the pro
forma compilation, the business combination was accounted for on a purchase
acquisition method with Antler Creek being identified as the acquirer. The
transaction was treated as a related party transaction and has been accounted
for at the exchange amount, which is the price agreed by the related parties
based on the fair market value of the assets and liabilities being acquired.
Non-Arm's Length Party Transaction
The Qualifying Transaction has been treated as a Non-Arm's Length Qualifying
Transaction under the policies of the Exchange. Shareholder approval on a
Majority of the Minority Approval basis was obtained from the shareholders when
they approved the BEC-Griffen Asset Sale Agreement on October 28, 2008.
Mr. Gregory J. Leia, of Calgary, Alberta is the Chief Financial Officer and a
director of Testudo. Mr. Leia is the sole officer and director of Batoche. Mr.
Leia owns 140,000 Testudo Shares. Mr. Leia (directly or indirectly with his wife
and children) own all of the issued and outstanding shares of Batoche. Batoche
owns a 47.5% working interest in the leases of the oil and gas rights under the
Griffin Lands. The remaining 52.5% working interest in the Griffin Lands is
owned by 14 persons or entities (GL Beneficial Owners) including, two directors,
Mr. Coolidge and Mr. Watkins and is held in trust by Batoche. Following the
completion of the Qualifying Transaction and the financing (assuming that Mr.
Leia purchases 135,000 Antler Creek Units in the financing), Mr. Leia will own
or control 1,179,800 Antler Creek Shares (29.47%)(directly and with his wife and
children) and will have a right to own or acquire an additional 204,600 Antler
Creek Shares upon the exercise of options and warrants for a total of 1,383,600
Antler Creek Shares (26.77%) on a fully diluted basis (directly or indirectly
with his wife and children ). Mr. Leia will have options to acquire 68,800
Antler Creek Shares. Mr. Leia is the owner of the Relentless DIP Fund companies
and Cirious Capital Fund companies.
Mr. Gus B. Coolidge, of Calgary, Alberta is the President, CEO and a director of
Testudo. Mr. Coolidge owns 250,000 Testudo Shares. Mr. Coolidge owns a 5.25%
working interest in the leases of oil and gas rights under the Griffin Lands.
Following the completion of the Qualifying Transaction and the financing
(assuming that Mr. Coolidge purchases 50,000 Antler Creek Shares in the
financing), Mr. Coolidge will own or control 130,000 Antler Creek Shares and
have options to acquire 68,800 Antler Creek Shares. Mr. Coolidge and Mr. Leia
have entered into an arrangement whereby Mr. Coolidge will be entitled to Antler
Creek Shares from Mr. Leia if Mr. Coolidge continues to act as a director of the
corporation for a 3 year period and as such Mr. Coolidge shall be considered a
non arms length party.
Escrow Shares
The shares issued to the officers and directors upon the formation of Testudo
are subject to a Seed Shareholder Escrow Agreement. The shares issued to the
shareholders of Batoche as part of the Qualifying Transaction will be subject to
an Exchange Value Escrow Agreement. The Antler Creek Shares will be released
over a 36 month period as follows: 10% upon completion of the Qualifying
Transaction and 15% every 6 months thereafter. If Testudo obtains the status of
a Tier 1 issuer the Antler Creek Shares will be released over an 18 month period
as follows: 25% upon completion of the Qualifying Transaction and 25% every 6
month thereafter.
The following table summarizes the share position of the officers and directors
of Testudo before and after the Qualifying Transaction:
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Number and
Percentage Number and Percentage of Antler Creek Shares
of Testudo and Antler Creek Options upon completion of the
Directors Shares QT Transaction assuming a financing ($608,400)
and as at the resulting in 4,000,000 Antler Creek Shares
Officers date hereof (5,166,800 shares fully diluted)
----------------------------------------------------------------------------
Post
Con- Financing/ Shares
solidated Batoche Aggregate Fully
Shares Options Shares Shares Shares % Diluted %
----------------------------------------------------------------------------
Gus B.
Coolidge 250,000 90,000 80,000 50,000 130,000 3.25 198,800 3.83
----------------------------------------------------------------------------
Gregory J.
Leia 140,000 90,000 44,800 1,135,000 1,179,800 29.47 1,383,600 26.77
----------------------------------------------------------------------------
Wilbur V.
Watkins 250,000 90,000 80,000 0 80,000 2.00 148,800 2.86
----------------------------------------------------------------------------
Ron A.
Parsons 100,000 40,000 32,000 0 32,000 0.80 84,800 1.62
----------------------------------------------------------------------------
Joseph W.
Worobec 650,000 205,000 208,000 0 208,000 5.20 313,600 6.0
----------------------------------------------------------------------------
Total 1,390,000 515,000 444,800 1,185,000 1,629,800 40.75 2,129,600 41.22
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The board of directors believe that the conflicts of interest that will arise in
the course of the Qualifying Transaction have been dealt with in a manner that
is generally acceptable in corporate transactions, in particular: (a) Testudo
has made full disclosure to its shareholders of these conflicts; and (b) none of
the Testudo Shares beneficially owned by Mr. Coolidge, Mr. Leia, Mr. Watkins or
Mr. Worobec or their respective associates were voted at the meeting held on
October 28, 2008 to approve the BEC-Griffen Asset Sale Agreement as Testudo's
Qualifying Transaction.
Reserve Data
The reserves data presented in a report (the "Engineer Report") prepared by
Paddock Lindstrom & Associates Ltd. ("Paddock" or "PLA") is effective as of
April 1, 2009. The reserves data set forth below ("Reserves Data") is based on
an evaluation by Paddock in the Engineer Report. The Reserves Data summarizes
the crude oil, natural gas liquids and natural gas reserves of Batoche and the
net present value of the future net reserves for the reserves using Paddock
forecast pricing and constant prices and costs. The Engineer Report has been
prepared in accordance with the COGE Handbook and the reserve definitions
contained in NI 51-101. Paddock and its officers and directors do not own any
securities of Testudo or Batoche, nor do any officers or directors have any
other relationship with Testudo or Batoche and as such Paddock would be
considered as independent of Testudo and Batoche under applicable securities
legislation.
It should not be assumed that the estimates of future net revenues presented in
the table below represent the fair market value of the reserves. There is no
assurance that the forecast prices and cost assumptions will be attained and
variances could be material. The recovery and reserve estimates of Batoche's
crude oil, natural gas liquids and natural gas reserves provided herein are
estimates only and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas and natural gas liquid reserves may be
greater than or less than the estimates provided herein.
----------------------------------------------------------------------------
Batoche Reserves Using Imperial Net Present Value Before Tax
Measurements Forecast Pricing and Costs PLA March 31, 2009 Price Deck
PLA March 31, 2009 Effective April 1, 2009 (1)
----------------------------------------------------------------------------
Reserves Category Oil Mstb Gas NGL 0% 5% 10% 15%
mmcf $M $M $M $M
----------------------------------------------------------------------------
Gross Net Gross Gross
----------------------------------------------------------------------------
Proved Developed
Producing 35.1 -- -- 1.708.0 1,528.3 1,389.9 1,280.2
----------------------------------------------------------------------------
Probable Additional 67.7 -- -- 2,410.8 1,761.9 1,320.2 1,004.6
----------------------------------------------------------------------------
Total Proved and
Probable 102.7 -- -- 4,118.8 3,290.2 2,710.0 2,284.9
----------------------------------------------------------------------------
Note:(1) WTI Cushing $US/bbl Pricing - 2009 - $55.00 US/bbl (0.82 Cdn/US
exchange rate); 2010 - $62.50 US/bbl (0.85 Cdn/US exchange rate);
2011 - $70.00 US/bbl (0.88 Cdn/US exchange rate); 2012 - $80.00 US/bbl
(0.90 Cdn/US exchange rate); 2013 - $85.00/bbl (0.90 Cdn/US exchange
rate); 2014 - $86.70 US/bbl (0.90 Cdn/US exchange rate); 2015 - $88.43
US/bbl (0.90 Cdn/US exchange rate).
All oil prices used in the evaluation were adjusted from the reference price for
quality and transportation. Well abandonment costs (excluding reclamation costs)
were included in the economic runs. Salvage value for existing equipment as well
as costs to abandon suspended wells, production wells with no remaining reserves
assigned and facilities were not included in the evaluation. Four Batoche Bakken
wells have been on production since mid-March. Two Batoche Bakken wells have
been on production since September 2008. One Bakken well has not been frac
stimulated.
Statements in this press release regarding the Company's business which are not
historical facts are "forward-looking statements" that involve risks and
uncertainties, such as terms and completion of the proposed transaction. Since
forward-looking statements address future events and conditions, by their very
nature, they involve inherent risks and uncertainties. Actual results in each
case could differ materially from those currently anticipated in such
statements.
ON BEHALF OF THE BOARD
TESTUDO OIL & GAS EXPLORATION LTD.
Gus B. Coolidge President
Investors are cautioned that, except as disclosed in the management information
circular or filing statement to be prepared in connection with the transaction,
any information released or received with respect to this transaction may not be
accurate or complete and should not be relied upon. Trading in the securities of
a capital pool company should be considered highly speculative.
ADVISORY: Certain information in this press release constitutes forward-looking
statements under applicable securities law. Any statements that are contained in
this press release that are not statements of historical fact may be deemed to
be forward-looking statements. Forward-looking statements are often identified
by terms such as "may", "should", "anticipate", "expects" and similar
expressions. Forward-looking statements in this press release include, but are
not limited to, statements with respect to the closing or completion of the
Qualifying Transaction. Forward-looking statements necessarily involve known and
unknown risks, including, without limitation, risks associated with oil and gas
production, marketing and transportation; loss of markets; volatility of
commodity prices; currency and interest rate fluctuations; imprecision of
reserve estimates; environmental risks; competition; incorrect assessment of the
value of acquisitions; failure to realize the anticipated benefits of
acquisitions; inability to access sufficient capital from internal and external
sources; changes in legislation, including but not limited to income tax,
environmental laws and regulatory matters. Readers are cautioned that the
foregoing list of factors is not exhaustive.
Readers are cautioned not to place undue reliance on forward-looking statements
as there can be no assurance that the plans, intentions or expectations upon
which they are placed will occur. Such information, although considered
reasonable by management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated. Forward-looking
statements contained in this press release are expressly qualified by this
cautionary statement.
The forward-looking statements contained in this news release are made as of the
date of this news release, and Testudo does not undertake any obligation to
update publicly or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise, except as
expressly required by securities law.
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