CALGARY, ALBERTA--(Marketwire - March 28, 2011) - Tuscany Energy Ltd. ("Tuscany") (TSX VENTURE:TUS) and Sharon Energy Ltd. ("Sharon") (TSX VENTURE:SHY) are pleased to jointly announce that they have entered into an agreement in principle in connection with a proposed business combination (the "Transaction") whereby Tuscany will acquire, subject to certain conditions, all of Sharon's issued and outstanding common shares on the basis of 0.84 common shares of Tuscany for each one (1) Sharon common share. Following completion of the Transaction, Tuscany will have approximately 126.7 million common shares outstanding, of which approximately 50% will be held by current shareholders of Tuscany and approximately 50% of which will be held by former shareholders of Sharon. The combined entity will have total proved plus probable reserves of approximately 1,345,000 barrels of oil equivalent ("BOE"), current estimated production of 250 BOE per day ("BOE/d"), approximately 17,000 net acres of undeveloped land, and marketable securities of $4.0 million. The combined entity will also have working capital of approximately $4.2 million and an unused bank line of $4.6 million.
The Transaction is expected to be completed by way of a Plan of Arrangement and is subject to the parties entering into a definitive arrangement agreement. Closing is expected to occur by the end of May 2011, subject to satisfaction of certain conditions including standard stock exchange, court and regulatory approvals and the requisite two-thirds majority and the majority of minority approvals of both Tuscany's and Sharon's shareholders. It is anticipated that the definitive agreement will be negotiated and entered into within the next two weeks, with an information circular, prepared jointly by the parties, to subsequently be mailed to shareholders of both Tuscany and Sharon in connection with the shareholder meetings of each company expected to be held in May 2011 to consider and approve the Transaction.
The Board of Directors of both Tuscany and Sharon each established a Special Committee comprised of independent directors with a mandate, among other things, to consider the Transaction and to make a recommendation to the respective Board of Directors in respect thereof. The Special Committee of the Board of Directors of each of Tuscany and Sharon recommended that the respective Boards of Directors approve the Transaction. Based on the recommendation of their respective Special Committee, the Board of Directors of each of Tuscany and Sharon unanimously approved the Transaction and have concluded that the Transaction is in the best interest of its shareholders and company and have unanimously resolved to recommend that its shareholders vote their shares in favour of the Transaction.
Emerging Equities Inc. ("EEI") was engaged to act as Sharon's exclusive financial advisor with respect to the Transaction. EEI has advised the Board of Directors of Sharon that, in its opinion, subject to review of final documentation, the consideration to be received by Sharon shareholders pursuant to the Transaction is fair, from a financial point of view, to Sharon shareholders.
Certain shareholders, including the directors and members of senior management of each of Tuscany and Sharon, who beneficially own or exercise control or direction over approximately 42% of the Tuscany common shares and 31% of the Sharon common shares, have indicated that they intend to vote their Tuscany and Sharon shares, as the case may be, in favour of the Transaction and will enter into support agreements relating thereto.
Benefits of the Transaction
The management of both Tuscany and Sharon believe the business combination will have synergistic benefits for the future growth of the companies. Tuscany's major property, the Dina pool on its Evesham, Saskatchewan has been assigned proved and probable reserves to 14 additional horizontal drilling locations in the independent engineering evaluation prepared for the company. In a Contingent Resource Evaluation Report it was estimated that Tuscany could drill up to 59 additional wells on the property. As the development of this property will require further funding, the addition of the working capital that Sharon brings to the business combination will allow the development of the property to be significantly accelerated. In addition, both companies share working interests in other oil prospects in Alberta and Saskatchewan that are in various stages of development which may also be accelerated as a result of the transaction.
Following completion of the Transaction, Tuscany's management team will be led by Robert Lamond, as President and Chief Executive Officer, and include Don Clark, Marshall Kis, John McLeod and Tony Teare, each as Vice President, and Brad Perry, as Chief Financial Officer. Subject to approval of Tuscany's shareholders, Bob Lamond will also continue to lead Tuscany's board of directors as Chairman, with the other board nominees being David Bennington, Don Clark, Roger Hume, John McLeod, Glen Phillips, John Steinhauser and Tony Teare.
Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel and is based on an energy equivalent conversion method applicable at the burner tip and does not represent an economic value equivalency at the wellhead.
This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning the combined company's working capital and bank facility, reserves, undeveloped landholdings and anticipated benefits from the Transaction. The forward-looking statements and information are based on certain key expectations and assumptions made by Tuscany and Sharon, including expectations and assumptions concerning prevailing commodity prices and exchange rates, applicable royalty rates and tax laws; future well production rates and reserve volumes; the timing of receipt of regulatory and shareholder approvals, the performance of existing wells; the success obtained in drilling new wells; and the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services. Although Tuscany and Sharon believe that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Tuscany and Sharon can give no assurance that they will prove to be correct.
Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. There are risks also inherent in the nature of the proposed Transaction, including failure to realize anticipated synergies or cost savings; risks regarding the integration of the two entities; incorrect assessments of the values of the other entity; and failure to obtain the required shareholder, court, regulatory and other third party approvals.
This press release also contains forward-looking statements and information concerning the anticipated completion of the proposed Transaction and the anticipated timing for completion of the Transaction. Tuscany and Sharon have provided these anticipated times in reliance on certain assumptions that they believe are reasonable at this time, including assumptions as to the time required and the ability of the companies to successfully negotiate and enter into a definitive agreement with respect to the Transaction, the time required to prepare meeting materials for mailing, the timing of receipt of the necessary regulatory and court approvals and the time necessary to satisfy the conditions to the closing of the Transaction. These dates may change for a number of reasons, including unforeseen delays in negotiating and entering into a definitive agreement, preparing meeting materials, inability to secure necessary regulatory or court approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the Transaction. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this press release concerning these times. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Tuscany's, Sharon's or the combined company's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), in the case of Tuscany, at Tuscany's website (www.tuscanyenergy.com), and in the case of Sharon, at Sharon's website (www.sharonenergy.com). The forward-looking statements and information contained in this press release are made as of the date hereof and Tuscany and Sharon undertake no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.