RE: Two NR's dueUpdate on McCallan Oil & Gas (U.K.) Ltd.
Further to the company's news in Stockwatch of March 2, 2006, which announced the agreement for the acquisition of an initial 22.5-per-cent interest in McCallan Oil & Gas (U.K.), and June 27, 2006, which announced the agreement for the acquisition of an additional 22.5-per-cent interest in McCallan, the company is pleased to announce that the acquisition of both interests totalling a 45-per-cent interest in McCallan was closed on Sept. 20, 2006. In conjunction with closing, the company issued 2.25 million shares in its capital to the vendor, Hans Dietmann, and paid the vendor $75,000 in cash with respect to the acquisition of the first 22.5-per-cent interest and issued 1.3 million shares to the vendor and paid the vendor $200,000 in cash with respect to the acquisition of the second 22.5-per-cent interest. Of the 2.25 million shares, two million are held in escrow and of the 1.3 million shares, 1.15 million are held in escrow, subject to the vendor demonstrating that he has secured appropriate exploration financing for the concession interests held by McCallan. If such financing is not secured within six months of closing (March 20, 2007), the escrow shares are to be cancelled and returned to treasury.
The company has also agreed to issue the vendor contingent consideration of up to 25 million shares with respect to the acquisition of the first 22.5-per-cent interest and 11.7 million shares with respect to the second 22.5-per-cent interest. These shares will be issued pro rata over the first 25 oil, natural gas or methane gas wells placed in commercial production by McCallan, each to be confirmed by the report of a recognized petroleum engineer.
In conjunction with the purchase of the second 22.5-per-cent interest, the vendor has granted the company an option to acquire an additional 6-per-cent interest in McCallan, to take the company's interest to 51 per cent, in the event that McCallan enters into an agreement with a major energy company with respect to one of its resource assets. Should McCallan enter into such an agreement and trigger the option, the company can exercise the option by issuing the whole 11.7 million contingent shares with respect to the acquisition of the second 22.5-per-cent interest in one lump rather than on the earn-in basis.
The 2.25 million shares issued to the vendor with respect to the purchase of the first interest were issued in May in anticipation of closing at that time, which was delayed. The shares were subject to a hold period that restricted them from trading until Sept. 18, 2006. The 1.3 million shares issued with respect to the purchase of the second interest were subject to a hold period that restricts them from trading until Jan. 14, 2007. As stated above, 3.15 million of these shares are also held in escrow and must be earned out by March 20, 2007.