Quattro Closes Aquisition Of Interests In Western Canada Producing 950 BOE/d

Acquired certain oil and gas interests in central and northwest Alberta, northeast B.C. and Saskatchewan.

Quattro Exploration and Production Ltd. (TSXV: QXP) closed an arms-length agreement on Nov. 5 with an Alberta-based private oil and gas E&P company for the acquisition of certain oil and gas interests in central Alberta, northwest Alberta, northeast British Columbia and Saskatchewan.

The foundation of the acquisition is located in three regions of Western Canada currently producing more than 950 barrels of oil equivalent per day (BOE/d) of which greater than 25% is oil and liquids, including developed land of some 91,312 net acres, undeveloped lands of 92,770 net acres for a total of 184,082 net acres of exploration land in the provinces of Alberta, British Columbia and Saskatchewan. Recent production is supported by a Dec. 31, 2012 Sproule & Associates engineering report showing that the acquisition assets produced an average of more than 1,000 BOE/d of production in 2012 of which 276 barrels per day (bbl/d) of oil were medium to light oil and liquids. Prior to the completion of the acquisition, AJM Deloitte independently confirmed the continuing performance of the assets for Quattro in July.

Quattro will operate the majority of the assets being acquired and will own a 75% to 87% working interest in these conventional oil and gas fields in Western Canada. The effective date of the acquisition is Jan. 1, with a purchase price of $7.8 million plus G.S.T. and customary closing adjustments. Funding of the acquisition will be completed through a combination of a $5.5 million four-year term debt facility with Business Development Bank of Canada at favorable rate of 7.15% per annum and assumed working capital.

In addition to this financing, the company will continue to work towards an additional financing of up to $4.5 million by way of convertible debentures with a three-year term paying an annual interest rate of 8% with a conversion price of $0.50 per share and 125 bonus warrants priced at $0.50 per share for each $1,000 debenture issued.

"We are very pleased this acquisition has been completed as proposed earlier this year. The company wishes to thank its stakeholders for their continuing support as the company pursues its vision to become a significant domestic and international oil and gas producer, through internally-funded development opportunities and complementary acquisitions," Leonard Van Betuw,president and CEO, said in the release.

"The term debt facility of $5.5 million and the subsequent planned debenture financing of $4.5 million, for a total of $10 million, will position the company to operate in a conservative manner with a strong balance sheet. This will also allow the company to continue to execute its business plan in Canada and Guatemala with deliberate and predictable results. Upon the completion of its financing, the company shall commence the execution of a remediation and development budget with plans to exit 2013 with production greater than 1,200 BOE/d working towards a target of 2,000 BOE/d by June 30, 2014. The goal of the company is to generate in 2014 cash-flow in excess of $10 million while maintaining less than 1X net debt to cash-flow," he said.

The company intends to continue to add personnel in a manner that is measured and sustainable while pursuing low risk material growth in Western Canada as well as its established business plan in Canada and Central and South America. The closing of this acquisition is anticipated to result in an average net production of 1100 BOE/d by year end, with a pro-forma more than 1,000 boe/d for 2013.

Upon the completion of the acquisition the enterprise value of the company, as supported by the independent engineered evaluation of the acquisition assets (NPV20%) of some $33 million, is calculated to be some $50 million or $1.41 per share with book value of $0.98 per share based on some 35 million shares currently issued and outstanding.

In addition to the acquisition and financing the company is pleased to announce the receipt of notices from certain officers and shareholders to convert $250,000 of outstanding debentures to equity at an issue price of $0.15 per share.

Quattro Exploration and Production Ltd. will continue to focus on the conventional exploration and development of oil and natural gas reserves in Western Canada. The company is based in Calgary.