CALGARY, ALBERTA--(Marketwire - Oct. 6, 2008) - Testudo Oil & Gas Exploration Ltd. (TSX VENTURE:TG.P) ("Testudo") is pleased to announce that it has entered into definitive letter agreement dated September 25, 2008 ("BEC-Griffen Asset Sale Agreement") with Batoche Energy Corp. ("Batoche"), Batoche Energy (Griffen) Corp. ("BEC-Griffen") and 14 legal entities ("GL Beneficial Owners"). The transaction will constitute a "Qualifying Transaction" or "QT Transaction" in accordance with TSX Venture Exchange Inc. ("Exchange") Policy 2.4 concerning Capital Pool Companies. Upon successful completion of the Qualifying Transaction, Testudo will be a Tier 2 oil and gas issuer. Testudo has scheduled an annual and special meeting of shareholders for Monday October 28, 2008 to approve the Qualifying Transaction and related matters. The transaction is a Non-Arm's Length Transaction. Upon completion of the QT Transaction, the Corporation's initial focus will be on Bakken formation prospects in South East Saskatchewan. It is a condition of the QT Transaction that Testudo effect a consolidation of its common shares ("Testudo Shares") on a 3.125 old for 1 new post-consolidated common share ("Antler Creek Share(s)") and change its name to Antler Creek Energy Corp. ("Antler Creek").
Proposed QT Transaction
Subject to the terms and conditions contained in the BEC-Griffin Asset Sale Agreement, Testudo agreed to purchase from BEC-Griffen a 10% working interest ("Minimum WI% Acquisition") being the right to exploit the petroleum and natural gas minerals on or under Section 13-8-11-W2M (2 miles east of Griffin, Saskatchewan) and on or under 8 gross sections (approx 6.7 - net sections - approx 4,300 acres -"Griffin Lands")(8 miles north of Griffin)(Sections 31, 33 and 34, Twp 9-11-W2M; Sections 3, 4, 5, 8 and 9-10-11-W2M)("BEC-Griffen Sale Assets"). BEC-Griffen has a 20% working interest in Section 13-8-11- W2M. Crescent Point Resources Limited Partnership owns an 80% working interest of Section 13-8-11-W2M and is the operator. Section 13-8-11-W2M has 2 producing Bakken formation wells which were completed in mid-March 2008 (Batoche Griffin HZ1B4-24-4B4-13-8-11-W2M and Batoche Griffin HZ 2A1-24-3A1-13-8-11-W2M). The two wells have cumulatively produced approximately 24,000 barrels of oil from March 18 - August 31, 2008. For July 2008 production, the sale price was approximately $140/barrel. Royalty payments were approximately $15/barrel and operating costs were approximately $9/barrel resulting in a field netback of approximately $116/barrel. There are 6 development well prospects assuming 8 well per section. The owners of the Griffin Lands are: BEC-Griffen 20% WI , Batoche 27.5% WI and the GL Beneficial Owners 52.5 % WI subject to the rights of a farmee (see below). The farmee has drilled and fracced a Bakken formation well (Batoche Creelman HZ S 1B4-4-1B4-33-9-11-W2M) in August 2008. The well was swabbed for 4 days and produced water. The farmee has capped the well (and not abandon it) to evaluate the frac results and its production options.
Under the terms of the BEC-Griffen Asset Sale Agreement, Testudo has agreed to purchase the BEC-Griffen Sale Assets for an aggregate price of Cdn $1,200,000 plus GST. The purchase price shall be satisfied by payment of cash of $500,000 (plus GST component) and by the issuance of 700,000 post-consolidation common shares of Antler Creek at a deemed value of $1.00 per post consolidated common share. In addition, the BEC-Griffen Asset Sale Agreement contains a put/call provision ("BEC-Griffen Put/Call Option") which if triggered would permit Antler Creek to purchase an additional 10% working interest (aggregate 20%)("Maximum WI% Acquisition") for $1,200,000 plus GST ("BEC-Griffen Option Assets"). The consideration would be satisfied by payment of cash $500,000 (plus GST component) plus the issuance of 700,000 Antler Creek Shares for a deemed price of $1.00 per post-consolidation common share. The BEC-Griffen Put/Call Option may be triggered by BEC-Griffen at any time prior to March 31, 2009. The BEC-Griffen Put/Call Option may be exercised by Antler Creek if Antler Creek raises at least $7,500,000 in equity prior to March 31, 2009.
Pursuant to the terms of a novation agreement dated September 25, 2008 ("BEC-GLBO Trust Novation Agreement"), Batoche will hold in trust the legal title to the interest of BEC-Griffen, Testudo and the GL Beneficial Owners until December 31, 2009. Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo have agreed that any decisions relating to the development of the Griffin Lands, including the sale or mortgage of the entire beneficial interest of all the owners as a project, or farmout of the Griffin Lands on a parcel by parcel basis, may be made by a vote of the working interest holders including Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo, totaling 66-2/3% of the working interests holders in the Griffin Lands (on an aggregate basis) until December 31, 2009. In addition, Batoche (as to a 20% working interest), BEC-Griffen, the GL Beneficial Owners and Testudo have agreed to provide each other with a right of first refusal on sale of their respective working interests until December 31, 2009.
On July 15, 2008, Batoche and the GL Beneficial Owners have entered into a farmout agreement with a private oil and gas producer ("Farmee") for the development of the Griffin Lands. The Farmee has drilled, cased, and completed (with multistage horizontal frac) one (1) mile horizontal well in the Bakken formation under Section 33-9-11-W2M (Batoche Creelman HZ 1B4-4-1B4-33-9-11-W2M). Assuming the QT Transaction closes, upon equipping the well and commencement of production the Farmee will earn 100% of Batoche (as to 27.5% WI gross), BEC-Griffen (as to 10% WI gross), the GL Beneficial Owners (as to 52.5% WI gross) and Testudo (10% WI gross) Pre-Participation Working Interest (as defined in the farmout agreement) in the east half of Section 33-9-11-W2M subject to lessor royalties and a 10% overriding royalty in favour of Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo. Upon repayment of the cost of drilling, casing, completing and equiping the well to the Farmee, Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo could elect to convert their 10% overriding royalty into a 50% working interest (Batoche 13.75% WI net, BEC-Griffen 5% WI net, the GL Benefical Owners 26.75% WI net and Testudo 5.0% WI net). The Farmee would then be entitled to a rolling option to acquire a 50% working interest in the remaining Griffin Lands. To earn a working interest in each additional half section, the Farmee would be obliged to drill, case, complete and equip a 1 mile horizontal well in the Bakken formation. Upon repayment of the cost of drilling, casing, completing and equipping the option well, the Farmee would earn 100% of Batoche's, BEC-Griffen's, the GL Beneficial Owners' and Testudo's Pre-Participation Working Interest subject to payment of crown royalties (or freehold royalties where applicable) and a 10% overriding royalty in favour of Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo. Upon repayment of the costs of drilling, casing, completing and equipping the option well, Batoche, BEC-Griffen, the GL Beneficial Owners and Testudo could convert their overriding royalty into a 50% working interest. The agreements provide for a 3 mile Area of Mutual Interest. At 8 wells per section spacing, there would be approximately 64 Bakken well targets to fully develop the 8 gross sections. Sublease, farmout or joint operating agreements would have to be negotiated to develop the full 8 sections of the Griffin Lands. If the Farmee does not elect to participate or having elected to participate fails to advance the monies required, then the Farmee will forfeit its rights under that particular half section.
Private Placement - Warrants - Agent Options - Directors Options
Antler Creek proposes to close a private placement to raise between $2,500,000 ("Minimum Financing") and $8,000,000 ('Maximum Financing"). Antler Creek proposes to sell up to 4,000,000 Antler Creek Shares (with flow thorough attributes) at $1.00 per Antler Creek Share. Antler Creek proposes to sell up to 4,000,000 Antler Creek Units at $1.00 per Unit (post-consolidation). Each Antler Creek Unit consists of one (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 March 31, 2010 at an exercise price of $1.50 per Antler Creek Share. The transaction will be non-brokered. Antler Creek will pay a finders' fee of 5% to persons who introduce qualified accredited investors. If an agent is engaged it is anticipated that as part of the consideration, Antler Creek would grant to the agent an option to acquire up to 10% of the Antler Creek Shares issued as part of any agency agreement, being 250,000 Antler Creek Shares in the event of a Minimum Financing and 800,000 Antler Creek Shares in the event of a Maximum Financing at an exercise price of $1.00 exerciseable at any time up to 1 year from the date of closing of the Financing ("Antler Creek Agent Options"). There is an existing agent option in favour of Blackmont Capital Inc. ("Blackmont Agent Options") which would permit Blackmont Capital Inc. to purchase 120,000 Antler Creek Shares at an exercise price of $0.625 per Antler Creek Share at any time up until October 26, 2008. The Antler Creek Shares issued as part of the Financing and the Antler Creek Shares issued upon exercise of the Antler Creek Agent Options will be subject to a four (4) month hold period from the date of closing.
Antler Creek is proposing to grant 200,000 options to directors of Antler Creek to purchase Antler Creek Shares at $1.00 per Antler Creek Share. The options would expire in 5 years. Each director would be issued a grant to acquire up to 40,000 Antler Creek Shares. These options would be in addition to the existing, 164,000 options (post consolidation) to acquire Antler Creek Shares at an exercise price of $0.625 per Antler Creek Share and with an expiry of October 24, 2011.
Post-Transaction Capitalization
Because the Maximum Financing is not fully subscribed, the post Qualifying Transaction share capital may vary depending on 3 scenarios.
Upon completion of the acquisition of the BEC-Griffen Sale Assets, BEC-Griffen Option Assets (the Maximum WI% Acquisition) and closing of the Maximum Financing using an agent (and providing Antler Creek Agents Options are granted), there will be: (a) 11,048,000 Antler Creek Shares issued and outstanding; (b) warrants to acquire 4,000,000 Antler Creek Shares; (c) Antler Creek Agents option to acquire 800,000 Antler Creek Shares; (d) Blackmont Agent Options to acquire 120,000 Antler Creek Shares; and (e) directors options to acquire 364,800 Antler Creek Shares; and (d) 16,332,800 Antler Creek Shares on a fully diluted basis.
