CALGARY, Alberta, May 11, 2012 /PRNewswire/ --
/NOT FOR DISSEMINATION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
Terra Nova Minerals Inc. ("Terra Nova" or the "Corporation") is pleased to announce that further to the news releases dated March 26, 2012 and May 7,2012 in respect of Australian Foreign Investment Review Board approval, it has signed a definitive agreement ("Definitive Agreement") with Holloman Energy Corporation ("Holloman") of Houston, Texas to acquire, through its wholly-owned subsidiary Terra Nova Resources Inc., an Alberta corporation, up to a 55% working interest in two onshore petroleum exploration licenses (the "Acquisition") located on the western flank of the Cooper Basin in the State of South Australia, namely PEL 112 (comprised of 2,196 square kilometers) and PEL 444 (comprised of 2,358 square kilometers) (collectively, the "Licenses" and individually a "License"). Eli Sakhai ("Sakhai"), an individual resident in New York, USA and Australian-Canadian Oil Royalties Ltd. ("ACOR"), a British Columbia corporation having offices in Cisco, Texas, each holding a 16.6665% interest in the Licenses, have been made parties to the Definitive Agreement. Holloman currently owns a 66.6670% working interest in the Licenses. (Holloman, Sakhai and ACOR are referred to collectively in this press release as the "Current Working Interest Holders").
The Corporation is also pleased to announce that, together with Macquarie Private Wealth Inc. (Canada) ("Macquarie") acting as agent on a commercially reasonable efforts agency basis, it has today closed the previously announced brokered private placement offering ("Offering") of units ("Units") for aggregate gross proceeds of CAD$10,652,075.
The Definitive Agreement
Under the letter of intent, the Corporation paid a non-refundable fee of USD$100,000 (the "Fee") to Holloman. In accordance with the Definitive Agreement, within ten business days of the later of: (i) the date of the Definitive Agreement; and (ii) the date that the Acquisition is conditionally approved by the TSX Venture Exchange (the "Exchange"); (the "Effective Date"), the Corporation shall issue to the Current Working Interest Holders in accordance with their pro rata working interests 1,000,000 common shares of Terra Nova ("Common Shares"), which shares shall be subject to applicable statutory and Exchange hold periods. These consideration shares have been conditionally approved for listing by the Exchange.
Pursuant to the Definitive Agreement, Terra Nova will pay USD$250,000 to Holloman which, after execution, shall be non-refundable and for Holloman's unrestricted use. Within 10 days from the Effective Date, Terra Nova shall pay AUD$4,700,000 into the trust account of an escrow agent agreed upon by the parties ("Escrow Agent") to be used for the completion of seismic acquisition programs sufficient to meet the minimum seismic acquisition requirements for PEL 112 and PEL 444, respectively, as well as the interpretation of the acquired data. Upon completion of a seismic program on PEL 112 or PEL 444, as the case may be, Terra Nova shall earn a 20% working interest in that License.
Also in accordance with the Definitive Agreement, on or before November 1, 2012, Terra Nova shall pay to the account of the Escrow Agent an additional AUD $4,500,000 which funds shall be used by Terra Nova to conduct a three well drilling program on the Licenses (the "Initial Well Program"), with a minimum of one well to be drilled on each License. In the event that any well drilled as part of the Initial Well Program tests positively for commercially viable production of oil or gas, Terra Nova is responsible to pay 50% of the total aggregate completion costs of such well, with the Current Working Interest Holders responsible for the remaining 50% of such costs, in accordance with their respective working interests.
Further, at Terra Nova's option and on or before March 1, 2013 or within 90 days of completion of the third well in the Initial Well Program, the Corporation may pay into trust an additional AUD$4,500,000, which funds are to be used to conduct an additional three well drilling program on the Licenses (the "Optional Well Program"), with a minimum of one well to be drilled on each License, and with the same responsibilities for completion costs for wells testing positive for commercial production as under the Initial Well Program.
Upon drilling and abandonment or completion of each well within (i) the Initial Well Program and (ii) the Optional Well Program, within certain designated time frames, Terra Nova shall be deemed to have earned an additional 5.8333% working interest in each of the Licenses for a total of approximately 35% in all three wells (55% including the seismic earning entitlement).
Terra Nova shall act as operator with respect to all drilling work contemplated by the Definitive Agreement. Holloman shall be granted the right to appoint a nominee to the Board of Directors of Terra Nova.
In the event any well drilled in connection with the Initial Well Program or the Option Well Program demonstrates commercial viability, and Terra Nova has elected to complete such well (a "Successful Well"), Terra Nova shall be entitled to a preferential recovery of an amount equal to one hundred percent of the costs it has paid to drill that Successful Well (a "Successful Well Cost Recovery Amount"). Terra Nova shall receive and be entitled to 80% of production from the Successful Well until either: (a) such Successful Well has ceased production and is subsequently abandoned; or Terra Nova has received Net Revenue attributable to the Successful Well equal to the Successful Well Cost Recovery Amount; following which, the parties shall be entitled to a working interest share of the production equal to their working interest at the time the oil and gas is produced in accordance with the joint operating agreement. "Net Revenue" attributable to a Successful Well shall be the gross proceeds from Terra Nova's sale of its 80% of the oil and gas from the Successful Well, less royalties, taxes, and reasonable sales, marketing and transport costs.
The Definitive Agreement may be terminated in the following circumstances: (i) in the event the Effective Date does not occur by June 4, 2012; (ii) by Terra Nova at any time before it has earned the Farm-In Interest in a License upon providing written notice of such termination to each of the Current Working Interest Holders, provided that it has paid the Fee and has issued the Common Shares to the Current Working Interest Holders. In the event Terra Nova terminates the Definitive Agreement, it shall not be entitled to any interest in a License unless it has satisfied its earning obligations in respect of such License (in which case Terra Nova shall be entitled to the interest it has earned in the relevant Licence) and shall not be entitled to any refund, reimbursement or return of amounts paid to others or the Common Shares issued to the Current Working Interest Holders under the Definitive Agreement; (iii) by Terra Nova if any of the Current Working Interest Holders is in breach of the material terms of the Definitive Agreement, which fails to go uncured within 30 business days of receipt by the Current Working Interest Holder of notice of such breach; or (iv) by any of the Current Working Interest Holders if Terra Nova is in breach of the material terms of the Definitive Agreement which fails to go uncured within 30 business days of receipt by Terra Nova of notice by of such breach; provided, however, that if either ACOR or Sakhai wishes to terminate the Definitive Agreement in accordance with the foregoing, Holloman shall have the option but not the obligation to substitute itself or a third party to undertake Terra Nova's remaining obligations under the Definitive Agreement, including without limitation any uncompleted Earning Obligations, in exchange for the right to earn an aggregate 55% working interest in each of the Licenses in accordance with the terms of the Definitive Agreement.
The Exchange conditionally accepted the Acquisition on April 20, 2012, subject to standard conditions, including receipt of an executed Definitive Agreement, a satisfactory title report, and the approval of the Australian Foreign Investment Review Board which approval was granted on May 3, 2012. Following final approval, Terra Nova will be categorised as an 'oil and gas issuer' on the Exchange.
The Licenses
Estimated quantities of resources disclosed herein have been prepared by Apex Energy Consultants Inc., an independent qualified reserves evaluator, as set out in its report entitled "Resource Study on PEL112 and PEL444 South Australia Prepared for Terra Nova Minerals Inc." dated April 18, 2012 and effective March 20, 2012 (the "Apex Report"). The Apex Report was prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
Pursuant to the Definitive Agreement, Terra Nova has acquired the right to acquire from Holloman up to a 55% working interest in PEL112 and PEL 444, located within the Cooper/Eromanga Basin in the northeast corner of the state of South Australia. The total land holdings for each License along with the average working interest held by Holloman are as follows:
Gross Undeveloped Net Undeveloped Average Working
Acres Acres Interest
PEL 112 542,643 361,780 66.67%
PEL 444 582,674 388,469 66.67%
Total 1,125,317 750,249 66.67%
The Licenses are highly prospective for the discovery of oil. Both Licenses are on trend with several discoveries made in the area. The structures on PEL 112 and PEL 444 are defined by 2D seismic data acquired from South Australia government sources and from Holloman.
In accordance with the Apex Report, PEL 112 has prospective resources with a high estimate (P10) of 114 MMBLs and low estimate (P90) of 27.5 MMBLs. PEL 444 has prospective resources with a high estimate (P10) of 21 MMBLs and low estimate (P90) of 6.0 MMBLs.
There is no certainty that any portion of the resources will be discovered.If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
"Prospective Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity.
"Low Estimate or P90" means a conservative estimate of the quantity that will actually be recovered from the accumulation. It is likely that the actual remaining quantities discovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability that the quantities actually recovered will equal or exceed the low estimate.
"High Estimate or P10" means an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability tha the quantities actually recovered will equal or exceed the high estimate.
Cancellation of Options
The 760,000 options issued to the former directors and officers of the Corporation, exercisable at $0.53, have been cancelled with the agreement of the holders.
The Offering
Terra Nova has entered into an agency agreement dated effective March 23, 2012 (the "Agency Agreement") with Macquarie acting as agent on a commercially reasonable efforts agency basis, pursuant to which Terra Nova has sold Units for aggregate gross proceeds of CAD$10,652,075. The Units were offered at a price of CAD$0.25 per Unit and are comprised of one Common Share and one share purchase warrant ("Warrant"). Each Warrant entitles the subscriber to purchase an additional Common Share at a price of CAD$0.30 for 24 months from the date of closing. Upon provision of 30 days notice to subscribers, the expiry date of the Warrants will be accelerated if the Common Shares trade in excess of CAD$0.70 for 20 consecutive trading days. The Agent was granted an option to increase the size of the Offering by up to 10% which was exercised in part. In connection with the Offering, the Agent has received a cash commission equal to 8% of the gross proceeds raised and agent's options to purchase that number of Common Shares equal to 8% of the total number of Units sold (the "Agent's Options"). The Agent's Options are exercisable at a price of CAD$0.25 per Common Share for a period of 24 months from the Closing Date. The Agent has also been reimbursed for its expenses in relation to the Offering.
The Common Shares and Warrants comprising the Units, Agent's Options and Common Shares issued on the conversion or exercise of such securities, as applicable, will be subject to a hold period of four months and one day from the closing date in accordance with the rules and policies of the TSX Venture Exchange and applicable Canadian securities laws. The Exchange has conditionally accepted the listing of such securities.
The net proceeds of the Offering will be used to fund, in part, Terra Nova's payment obligations under the Definitive Agreement.
The Common Shares of Terra Nova are currently halted but are expected to resume trading once the Exchange issues it's final bulletin in respect of these matters.
Forward looking information
This news release contains forward-looking information relating to the Acquisition, the use by the Corporation of the proceeds from the Offering, and the Corporation's intentions to conduct the seismic program, the Initial Well Program, and the Optional Well Program, and other statements that are not historical facts. More particularly, this news release contains statements concerning the Acquisition and the steps to be taken by Terra Nova and the Current Working Interest Holders pursuant to same such that Terra Nova will earn the 55% interest that is the subject of the Acquisition. Such forward-looking information is subject to important risks, uncertainties and assumptions. The results or events predicated in this forward-looking information may differ materially from actual results or events. As a result, you are cautioned not to place undue reliance on this forward-looking information.
Forward looking-information is subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what is currently expected. These factors include: the expectation that the Acquisition will proceed as planned, the availability of personnel and equipment, risks related to oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of the resource estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of the properties, failure to realize the anticipated benefits of the Acquisition, delays resulting from or inability to obtain required regulatory approvals in Canada or Australia, and ability to access sufficient capital from internal and external sources, reliance on key personnel, regulatory risks and delays, including risks relating to the acquisition of necessary permits, and insurance risks.
You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Corporation may elect to, the Corporation is under no obligation and does not undertake to update this information at any particular time, except as required by law.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state in the United States in which such offer, solicitation or sale would be unlawful. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
About Terra Nova Minerals Inc.
Terra Nova Minerals Inc. is currently a Calgary based mining company. With the final acceptance of the Acquisition by the Exchange, Terra Nova will become an oil and gas issuer. Its common shares trade on the TSX Venture Exchange under the symbol "TGC".
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.
For further information:
Terra Nova Minerals Inc.
Norman J. Mackenzie
Chief Executive Officer
+1-(403)-815-5204
Njmack14@gmail.com
