Petroamerica Signs Agreement with Suroco Energy Inc. Petroamerica Signs Agreement with Suroco Energy Inc. to Acquire all of Suroco's Issued and Outstanding Common Shares CALGARY, April 28, 2014 /CNW/ - Petroamerica Oil Corp. ("Petroamerica") (TSX-V:PTA) is pleased to announce that it has entered into an arrangement agreement (the "Arrangement Agreement") with Suroco Energy Inc. ("Suroco") (TSX-V:SRN) whereby Petroamerica has agreed to acquire all of the issued and outstanding common shares of Suroco (the "Suroco Shares") by way of a statutory plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). Pursuant to the terms of the Arrangement Agreement, holders of Suroco Shares ("Suroco Shareholders") will receive 1.7627 common shares of Petroamerica ("Petroamerica Shares") for each Suroco Share held (the "Exchange Ratio"). (Note: all financial amounts are reported in United States Dollars unless otherwise indicated.) Based on Petroamerica's most recent closing price of CDN$0.325 per share on April 25, 2014, the Exchange Ratio reflects a value of CDN$0.573 per Suroco Share, representing a 36.4% premium over Suroco's closing price on April 22, 2014 of CDN$0.42 and a 66.6% premium over Suroco's 10-day volume weighted average trading price. The Arrangement is expected to close on or around June 30, 2014, provided all required Suroco Shareholder, court, stock exchange and regulatory approvals are obtained. "This transaction provides the diversification and scale we have been searching for in Colombia and offers shareholders exposure to a potentially prolific new play trend developing in the Putumayo Basin. The size of the combined company and its production, reserves and cash flow are anticipated to facilitate easier access to capital and open up additional growth opportunities." says Jeff Boyce, Executive Chairman of Petroamerica. STRATEGIC RATIONALE: •Growth and Diversification – Significant first step towards expanding and diversifying Petroamerica's portfolio by acquiring four blocks focused in the Putumayo Basin, one of the most productive basins in Colombia •Considerable Resource Upside – Suroco's acreage provides significant exposure to the prolific N Sand oil play developing in the Putumayo Basin which is proved up in neighbouring Ecuador •Added Bench Strength – Suroco's technical team has a proven ability to identify N Sand play concepts and prospects and is actively negotiating additional farm-ins and licensing opportunities in the region •Bolsters High Netback Oil Focus – Suroco's production is 100% medium oil weighted and averaged 2,461 barrels of oil per day ("bopd") (net before royalty) for the month of March 2014 •Enhances Reserves – Suroco's 3.1 million barrels ("MMbbl") of proved and probable ("2P") reserves working interest (before royalty) builds upon Petroamerica's reserve base and significantly extends Petroamerica's reserve life index •Unbooked Reserves – Ability to add unbooked reserves in the near term with low risk appraisal and development drilling of Suroco's recent Quinde West discovery •Operatorship – Suroco qualified as a restricted operator in the 2010 bid round KEY ATTRIBUTES OF THE COMBINED COMPANY: •Interests in nine E&P contracts focused on high netback light and medium oil exploration and production in the Llanos and Putumayo Basins in Colombia •Exposure to the prolific N Sand oil play in the Putumayo Basin, which is expected to fuel the future growth of the company •Production will increase 38% to approximately 8,967 barrels of oil equivalent per day (net before royalty) (March 2014 average) •2P reserves will increase 63% to 8.0 million barrels of oil equivalent net before royalty with before-tax net present value (discounted at 10%) of $284 million •Combined 2014 expected cash flow from operations of approximately $116 million funds the combined capital expenditure program of approximately $85 million, resulting in free cash flow of approximately $30 million •2014 drilling program consisting of 12 additional wells this year; 6 targeting high impact exploration and 6 lower risk appraisal and development wells, providing a number of near term catalysts •A substantial inventory of exploration prospects and leads to be worked up for future drilling to support future production growth •A strong balance sheet - it is anticipated that the combined company will have a cash balance of approximately $62 million at closing, providing opportunity to grow and consolidate in the region •Total debt of only $31.5 million •A market capitalization of approximately CDN$270 million based on Petroamerica's trading price of April 25, 2014 (assumes approximately 832 million Petroamerica shares outstanding upon completion of the Arrangement) •Suroco qualified as a restricted operator, and the combined company intends to apply to become an unrestricted operator CONFERENCE CALL AND WEBCAST INFORMATION Petroamerica will host a conference call and webcast to discuss this transaction on Tuesday, April 29, 2014 beginning at 9:00 am Mountain Time. The telephone number for the conference call is 866-906-1113 or 857-288-2559 (International). To participate in the webcast you must register at https://wsw.com/webcast/cc/pta.v. THE ARRANGEMENT Under the terms of the Arrangement, each Suroco Shareholder will receive consideration of 1.7627 Petroamerica Shares per Suroco Share. It is anticipated that Petroamerica will issue an aggregate of 237 million Petroamerica Shares to Suroco Shareholders in connection with the Arrangement. On closing, Petroamerica intends to repay Suroco's credit facility, of which not more than $21.5 million was drawn as at March 31, 2014. It is anticipated that Petroamerica will have a cash balance of approximately $62 million, total debt of $31.5 million and approximately 832 million basic Petroamerica Shares outstanding upon completion of the Arrangement. Pursuant to the Arrangement Agreement, all of Suroco's outstanding options will be exercised in accordance with their terms, paid out in cash based on the "in-the-money" amount or otherwise terminated prior to the closing of the Arrangement. In addition, under the terms of the Arrangement Agreement, all holders of Suroco warrants and contingent value rights will be entitled to receive Petroamerica Shares, adjusted for the Exchange Ratio, in lieu of the number of Suroco Shares otherwise issuable upon the exercise thereof. Completion of the Arrangement is subject to customary closing conditions, including requisite Suroco Shareholder, court, government and regulatory approvals. The Arrangement will need to be approved by not less than two-thirds of the votes cast by Suroco Shareholders, and by a majority of votes cast by Suroco Shareholders after excluding the votes cast by shareholders who are excluded shareholders under applicable securities requirements, in person or by proxy at the annual and special meeting (the "Suroco Meeting") of Suroco Shareholders to be held on or about June 25, 2014. The Arrangement also requires approval of the TSX Venture Exchange, and of the Court of Queen's Bench of Alberta. The Arrangement Agreement provides for, among other things, a non-solicitation obligation on the part of Suroco, with a customary "fiduciary out" provision that entitles Suroco to consider and accept a superior proposal, and a right in favour of Petroamerica to match any superior proposal. If the Arrangement Agreement is terminated in certain circumstances, including if Suroco enters into an agreement with respect to a superior proposal or if the board of directors of Suroco withdraws or modifies its recommendation with respect to the proposed Arrangement, Petroamerica is entitled to a termination payment in cash of CDN$4 million. Suroco is also entitled to a reciprocal termination payment in cash of CDN$4 million in certain circumstances. Upon completion of the Arrangement one additional director to be agreed upon between Suroco and Petroamerica is expected to join the Petroamerica board, subject to TSX Venture Exchange approval. A complete copy of the Arrangement Agreement will be available under the respective issuer profiles of Petroamerica and Suroco on SEDAR at www.sedar.com. The Suroco board of directors has unanimously approved the Arrangement Agreement and, based on the verbal fairness opinion of its financial advisor, Peters & Co. Limited, determined that the consideration to be received by the Suroco Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Suroco Shareholders, determined that the Arrangement is in the best interests of Suroco, and resolved to unanimously recommend that Suroco Shareholders vote their Suroco Shares in favour of the Arrangement. The directors and senior officers of Suroco and one Suroco Shareholder holding greater than 10% of the outstanding Suroco Shares, who collectively hold 19.18% of the issued and outstanding Suroco Shares, have entered into support agreements to vote their Suroco Shares in favour of the Arrangement at the Suroco Meeting. The Petroamerica board of directors has unanimously approved the Arrangement Agreement. Black Spruce Merchant Capital Corp. is acting as sole financial advisor to Petroamerica with respect to the Arrangement. GMP Securities L.P. and Canaccord Genuity Corp. are acting as strategic advisors to the Arrangement. GMP Securities L.P. has provided a verbal fairness opinion with respect to the Arrangement to the board of directors of Petroamerica. Approval of holders of Petroamerica shares is not required to complete the Arrangement. Full details of the Arrangement will be included in an information circular of Suroco to be mailed to Suroco Shareholders in accordance with applicable securities laws. A copy of the aforementioned information circular and related documents will be filed under Suroco's issuer profile on SEDAR at www.sedar.com at the applicable time. For a complete description of Suroco's assets, business and financial matters, please visit their website at www.suroco.com, and review their publicly disclosed information available on Suroco's issuer profile at www.sedar.com.