Silk Road Energy Inc. Announces Letter of Intent for the Acquisition of Oil and Gas Assets in Alberta

V.SLK

Marketwire

CALGARY, ALBERTA--(Marketwired - Nov. 7, 2013) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Silk Road Energy Inc. (the "Corporation" or "Silk Road") (TSX VENTURE:SLK.P) is pleased to announce that the Corporation has entered into a letter of intent dated effective October 28, 2013 (the "Letter of Intent") with Gold Note Resources Inc. (the "Vendor"), whereby the Corporation has agreed to acquire certain oil production, oil and gas reserves, lands, leases and miscellaneous interests (the "Significant Assets") held by the Vendor in the Bashaw, Columbia and Thornbury areas of Alberta (the "Proposed Acquisition").

The Corporation was incorporated under the provisions of the Business Corporations Act (Alberta) and has a head office in Calgary, Alberta. Silk Road is a capital pool company under the policies of the TSX Venture Exchange (the "Exchange") and it is intended that the Proposed Acquisition will constitute the "Qualifying Transaction" of the Corporation as such term is defined in the policies of the Exchange. The completion of the Qualifying Transaction is subject to Exchange approval. Silk Road is a "reporting issuer" in the provinces of British Columbia, Alberta and Ontario.

The Vendor is a private corporation incorporated under the provisions of the Canada Business Corporation Act with its registered and head office in Montreal, Quebec. Michael Judson of Westmount, Quebec is the sole director and shareholder of the Vendor.

The Qualifying Transaction will be carried out by parties dealing at arm's length to one another and therefore will not be considered to be a Non-Arm's Length Qualifying Transaction, as such term is defined in the policies of the Exchange. As a result, a meeting of the shareholders of the Corporation to approve the Proposed Acquisition is not a condition required to complete the Qualifying Transaction. It is expected that upon completion of the Qualifying Transaction, the Corporation will meet the Initial Listing Requirements for a Tier 2 oil and gas issuer under the policies of the Exchange.

The Proposed Acquisition

Subject to any regulatory, shareholder, director or other approval that may be required, the completion of satisfactory due diligence by the Corporation and other terms and conditions contained in the Letter of Intent, it is intended that the Corporation will acquire the Significant Assets from the Vendor at an aggregate purchase price of $500,000 inclusive of applicable taxes and in Canadian funds (the "Purchase Price"), payable by way of 2,352,941 common shares of Silk Road and $100,000 cash. 

Sproule Associates Limited ("Sproule") prepared an evaluation (the "Sproule Report") of the petroleum and natural gas reserves of the Significant Assets located in Alberta, Canada with an effective date of August 31, 2013. Annual production was forecast taking into account historical production trends of the producing wells, applicable regulatory conditions, existing or anticipated contract rates, and by comparison with other wells in the vicinity producing from similar reservoirs.

The following table summarizes the undiscounted value and the present value, discounted at 5%, 10%, 15% and 20%, of the Significant Assets' estimated future net revenue based on forecast price and cost assumptions as of August 31, 2013. The price forecasts that formed the basis for the revenue projections in the table below (and the Sproule Report) were based on Sproule's August 31, 2013 pricing model. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas liquids and natural gas reserves may be greater than or less than the estimates provided herein. The information set forth below is derived from the Sproule Report which has been prepared in accordance with the standards contained in the COGE Handbook and the reserves definitions contained in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101").(1)

Alberta
SUMMARY OF THE EVALUATION OF THE P.& N.G. RESERVES
(As of Date: 2013-08-31)
 
 Remaining Reserves    Net Present Values Before Income Taxes 
 Gross Company           
 100% Gross Net @ 0% @ 5% @ 10% @ 15% @ 20%
       M$ M$ M$ M$ M$
Non-Assoc, Assoc Gas (MMcf)               
Proved Developed Producing2450 740 703 1848 1413 1130 935 797
Probable Developed Producing472 108 102 346 196 122 82 59
Total Proved + Probable2921 847 805 2194 1609 1252 1018 856
 
NGLs (Mbbl)               
Proved Developed Producing73.6 27.4 17.6 0 0 0 0 0
Probable Developed Producing7.2 2.8 1.8 0 0 0 0 0
Total Proved + Probable80.8 30.2 19.4 0 0 0 0 0
 
Grand Total (Mboe)               
Proved Developed Producing481.8 150.7 134.7 1848 1413 1130 935 797
Probable Developed Producing85.8 20.7 18.8 346 196 122 82 59
Total Proved + Probable567.7 171.4 153.5 2194 1609 1252 1018 856

Note: (1) Estimated disclosed values of future net revenue do not represent fair market value.

A copy of the Sproule Report, prepared in accordance with NI 51-101 will be submitted to the Exchange for review.

Management of the Resulting Issuer

Upon completion of the Qualifying Transaction, it is proposed that the management team of the Corporation and the board of directors of the Corporation will be comprised of the individuals outlined below (the "Proposed Management Team"). The following is a brief description of the proposed position with the Corporation, background and experience of the proposed officers and directors of the Corporation as at completion of the Qualifying Transaction:

Vladimir Katic - Anchorage, Alaska - President, Chief Executive Officer and Director

Mr. Katic is currently the Managing Director of Pacific States Energy LLC, a limited liability corporation formed in the state of California. From May 2000 to September 2009, Mr. Katic was the President, Chief Executive Officer and a director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the Exchange), an oil & gas company based in California and listed on the Toronto Stock Exchange. Mr. Katic obtained a Diploma in Petro-Chemical Engineering in 1966 from the University of Zagreb in Croatia.

Richard Derrick Colling - Sherwood Park, Alberta - Chief Financial Officer and Director

Mr. Colling is a member of the Society of Certified Management Accountants of Alberta with more than 25 years of experience in the field of accounting, both in the banking industry and private practice. He holds a Bachelor of Management (Commerce) from the University of Lethbridge.

Patrick Devlin - North Vancouver, British Columbia - Corporate Secretary and Director

Mr. Devlin has over 29 years of experience in the securities industry, as a lawyer, regulator, certified management accountant and entrepreneur. From March 2004 to April 2009, Mr. Devlin was a Director and then President, Chief Executive Officer and Director (August 2004 to April 2009) of NEMI Northern Energy & Mining Inc., a mining company listed on the Toronto Stock Exchange. Mr. Devlin was also a Director of Pacific Energy Resources Ltd. (formerly Shamrock Resources Inc. - listed on the Exchange), an oil & gas company, from 1993 to November 2010. Mr. Devlin obtained a Diploma of Technology in Finance from the British Columbia Institute of Technology in May 1974, the designation of Certified Management Account from the University of British Columbia in May 1976, and his Bachelor of Laws from the University of British Columbia in 1981.

Zulfikar Rashid - Calgary, Alberta - Director

Mr. Rashid has been the owner of Rodeo Express Delivery Ltd., a mail and courier service, since January 1976. He obtained a Bachelor of Engineering in Electrical and Electronics Engineering from the University of Napier in Edinburgh, Scotland in 1974. Mr. Rashid has also been a member of the Association of Science and Engineering Technology Professionals of Alberta (ASET) since 1976.

Michael Judson - Westmount, Quebec - Director

Mr. Judson has 20 years of experience forming, financing and operating private and public companies. He has raised approximately $185 million for natural resource exploration and production projects through two public company vehicles. Mr. Judson graduated from Concordia University in 1986 with a Bachelor of Arts (Communication Studies), graduated from the Institute of Corporate Directors (ICD) and the Desautels Faculty of Management, McGill University Directors Education Program in 2007 and became an Institute-Certified Director (ICD.D) in 2011.

Dr. Paul Craig - Anchorage, Alaska - Director

Dr. Craig is a board-certified clinical neuropsychologist with over twenty-five years of experience. Recognized for his excellence in the field, Dr. Craig has evaluated and/or treated more than 10,000 patients with a broad array of known or suspected psychological and neuropsychological conditions. Dr. Craig is a Clinical Professor in the Department of Psychiatry & Behavioral Sciences at the University of Washington School of Medicine. He has also served as an elected member of the Board of Directors of the American Psychological Association and American Board of Clinical Neuropsychology.

Sponsorship

The Corporation intends to apply to the Exchange for an exemption from sponsorship requirements in connection with the Proposed Acquisition. There is no assurance that such exemption will be granted and the Corporation will engage a sponsor should a sponsorship exemption not be granted.

Trading Halt

In accordance with the policies of the Exchange, the common shares of the Corporation are currently halted from trading. The Corporation intends that its common shares will remain halted until completion of the Proposed Acquisition.

Additional Information

Silk Road, the Vendor and the Proposed Management Team will provide further details in respect of the Proposed Acquisition, in due course once available, by way of press releases.

A filing statement in respect of the proposed Qualifying Transaction will be prepared and filed in accordance with Policy 2.4 of the Exchange on SEDAR at www.sedar.com no less than 7 business days prior to the closing of the proposed Qualifying Transaction. A press release will be issued once the filing statement has been filed as required pursuant to Exchange policies.

Completion of the Proposed Acquisition is subject to a number of conditions including, but not limited to, the satisfaction of the Corporation and of the Vendor in respect of certain due diligence investigations to be undertaken by each party, the completion of a definitive agreement setting forth the terms and conditions set out in the Letter of Intent, closing conditions customary to transactions of the nature of the Proposed Acquisition, Exchange acceptance and, if required by Exchange policies, majority of the minority shareholder approval. Where applicable, the Proposed Acquisition cannot close until the required shareholder approval is obtained and there can be no assurance that the Proposed Acquisition will be completed as proposed or at all. 

If and when a definitive agreement between the Corporation and the Vendor is executed, in accordance with the policies of the Exchange, the Corporation will issue a subsequent press release containing the details of the definitive agreement and additional terms of the Proposed Acquisition, including information relating to sponsorship, summary financial information in respect of the Significant Assets, and to the extent not contained in this press release, additional information with respect to the proposed directors, officers, and insiders of the resulting issuer upon completion of the Proposed Acquisition.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Proposed Acquisition and associated transactions and has neither approved nor disapproved the contents of this press release.

Cautionary Statements:

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the Proposed Acquisition and associated transactions, including statements regarding the terms and conditions of the Proposed Acquisition and associated transactions. Readers are cautioned not to place undue reliance on forward-looking statements. Although the Corporation believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Proposed Acquisition and associated transactions, that the ultimate terms of the Proposed Acquisition and associated transactions will differ from those that currently are contemplated, and that the Proposed Acquisition and associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, the Properties or their respective financial or operating results or (as applicable), their securities. Barrels of oil equivalent (hoe) are calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf':1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Neither TSXV Venture Exchange Inc. nor its Regulations Services Provided (as that term is defined in the policies of the TSXV Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. 

Silk Road Energy Inc.
Zul Rashid
Director
(403) 240-1821


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