Canadian Imperial Venture V.CQV.H

RE: Garden Hill South

[jubbyjubber]

Here is the full release:-

10 June 2011
Enegi Oil Plc
('Enegi' or 'the Company')
Operational Update
Highlights:
-- All farm-in agreements with Fire Horse Energy Limited that relate to PL2002-01 have been terminated by the Company to enable the work programme to be moved forward in a more timely fashion;
-- The results of the workover to date are encouraging with the implication being that:
-- connectivity has improved;
-- deliverability will improve further as the latter stages of the workover are implemented; and
-- the well is in contact with more oil than previously thought.
-- Enegi now holds all rights to the PL2002-01 acreage and production from the PAP#1-ST3 well thereon;
-- The Company now controls all activities involved with and the timing of future workover activities;
-- The Company intends to commission within a week a new resource report to update the Competent Person's Report prepared in 2007;
-- The Company is seeking funds through Canadian markets to complete the workover programme via 'flow-through shares';
-- The Company intends to raise approximately GBP1.4 million. The money is expected to be raised in units which will consist of one share at a price of 18p, and one half purchase warrant;
-- Each full warrant will allow the subscriber to purchase one additional share at a cost of 30p for a period of 18 months from the date of closing; and
-- Upon completion of fundraising activities the Company will immediately initiate the remaining elements of its work programme.
Termination and Operational Update
The Company has decided, after reviewing progress in the implementation of the PAP#1-ST3 well workover programme and the encouraging results achieved to date, that it is in the best interests of shareholders to terminate all farm-in agreements with Fire Horse Energy Limited ('FHEL') that relate to PL2002-01 as workover activities have not been implemented in line with the pre-agreed schedule. The Company therefore now holds all rights to the PL2002-01 acreage and production from the PAP#1-ST3 well thereon and can now control the actions involved with and the timing of future workover activities.
The well has been flowed over the last few days to recover fluids and chemicals injected during the work programme to date and the Company is pleased to report the following positive indicators:
-- Well performance is much better; the well has been flowed with a 4/64(th) choke and still maintained a minimum flow pressure of 4,500KPa;
-- In the news release of 10(th) February the Company indicated that the pressure recovery rate as a result of workover operations undertaken was twice that observed prior to the commencement of the workover. In fact, following flowing of the well and recovery of the injected fluids the wellbore appears to have cleaned up and the pressure recovery rate now observed appears to be approximately five times that prior to the commencement of the workover;
The implication of these results is that:
-- There is affirmation that the connectivity between the well bore and the oil bearing portion of the reservoir has increased;
-- The further use of chemicals and acid will improve further the deliverability from the well; and
-- The improvement in connectivity coupled with the well performance under choked conditions indicates that the well is in contact with more oil than previously estimated.
These implications will be validated by the next stages of the work plan and through the preparation of a new resource report. The resource report will be issued under the Canadian oilandgas evaluation regulations governed by NI51-101.
Dragon Lance Management Corporation (DLMC) will continue to act on behalf of the Company's Canadian subsidiary PDI Production Inc. ('PDIP') in communications with the Newfoundland and Labrador Department ofNaturalResources with respect to the engineering and planning of PAP#1-ST3.
By terminating the farm-out agreements the Company believes that it is generating significant value for shareholders. Self-financing the next phase of activity will result in a significantly greater attribution of value from the PAP#1-ST3 well to the Company and its shareholders than would have occurred under the farm in agreements. That is, the Directors believe that any dilution necessary to raise finance to complete the workover will be significantly less than the 40% of the value that would have been allocated to FHEL on completion of their farm in obligations.
Fundraising
The Company believes that the previously announced workover will form the basis of the next phase of activity and as such is currently seeking funds to complete the appropriate activities. These funds are expected to be raised via the Canadian markets where Directors believe that its proposed resource exploration activities in Canada will allow its shares to be issued to qualify as 'flow-through shares' under the Income Tax Act (Canada).
Flow-through shares are a tax-assisted investment vehicle for Canadian investors. The shares are issued pursuant to an agreement in writing under which the Company agrees to expend the funds raised on certain resource exploration activities. Expenses can then be renounced to the purchasers of the shares who can deduct up to an amount equal to the price they paid for the shares in computing their Canadian income tax liabilities.
The Company intends to raise C$2.2 million which equates to approximately GBP1.4 million at current exchange rates. The money will be raised in units which will consist of one share at a price of 18p, and one half purchase warrant. Each full warrant will allow the subscriber to purchase one additional share at a cost of 30p for a period of 18 months from the date of closing.
The Directors expect the fundraising to be completed in the next 7 days and will update shareholders accordingly.
Future Plans
Upon completion of the fundraising the Company will move immediately to implement the next stages of our workover plans on PAP#1-ST3. Subject to regulatory approvals this will involve an acid stimulation followed by a chemical injection soak and then a well test to determine the results of those activities. Once commenced, the activities prior to the well test are expected to take approximately 6 weeks.
In addition, the funds raised will be used to further advance seismic activities over PL2002-01 and the Company will update shareholders on this and operations on PAP#1-ST3 as appropriate.
Alan Minty, CEO of Enegi Oil, commented:
"We have been pleased by the pressure recovery rates and production data that has been observed during the work programme to date. This has encouraged us to take decisive and positive action so that we can control all the activities involved in and move forward, in a more timely manner, with the work programme we had planned.
Additionally, we believe that our actions are creating significant value for shareholders because by terminating the farm-in agreements and raising funds via 'flow-through' shares we are recovering a 40% interest in our near term production asset for a dilution to shareholders of approximately 12% if all warrants are exercised. "