Following closing of the transactions contemplated under the Assignment Agreement, Subscription Agreement and Loan Agreements, the Company will own 90% of the shares of Cheetah BC. Cheetah BC indirectly holds interests in approximately 8.4 million acres of land prospective for oil and natural gas in Papua New Guinea (the "PNG Lands"). A National Instrument 51-101 report evaluating the prospective resources has been prepared by Chapman Petroleum Engineering Ltd., of Calgary, Alberta, and will be filed on SEDAR upon approval.
The closing of the transactions are subject to a number of conditions including: (a) regulatory approval; (b) completion of a financing of not less than US $25.0 million by the Company; and (c) closing of the transactions on or before October 3, 2007.
The PNG Lands
Cheetah BC indirectly holds interests in the following licenses through permits received from the Minister of Petroleum and Energy for Papua New Guinea.
----------------------------------------------------------- LICENSE BLOCKS ACREAGE Working Interest PRL #13 2 40,028 98.65% PPL #246 25 500,350 98.65% PPL #245 125 2,501,750 98.65% PPL #249 75 1,501,050 100% PPL #250 100 2,001,400 100% PPL #252 92 1,841,288 100% ----------------------------------------------------------- TOTAL 419 8,385,866
The Loan Agreements
Cheetah is indebted to Macquarie Holdings under various loan and security documents for approximately US $7,800,000. Under the Loan Agreements, K&P has the right to acquire the Macquarie Indebtedness together with certain share purchase warrants to acquire shares of Cheetah for an aggregate purchase price of US $7,550,000. K&P has advanced US $1,000,000 to Macquarie as a non-refundable deposit in regard to the Macquarie Indebtedness. K&P has assigned its rights and obligations under the Loan Agreements to the Company.
The Subscription Agreement
Under the Subscription Agreement K&P has the right to acquire shares of Cheetah BC which upon issuance will represent 90% of the outstanding shares of Cheetah BC. The subscription price for such shares is US $15,000,000 which will be satisfied by a cash payment of US $7,450,000 and the assignment of the Macquarie Indebtedness to Cheetah BC (at a value of US $7,550,000). K&P has also agreed that on or before December 31, 2008 it will make an additional contribution of capital to Cheetah BC of US $10,000,000. K&P has assigned its rights and obligations under the Subscription Agreement to the Company.
Cheetah BC will use the cash portion of subscription proceeds for working capital purposes and to fund an exploration program on the PNG Lands.
The Assignment Agreement
Under the Assignment Agreement, K&P has agreed to transfer all of its right title and interest in and to the Subscription Agreement and the Loan Agreements in consideration of a cash payment of US $3,250,000. Under the terms of the Assignment Agreement closing is to occur on or before August 15, 2007, however the Company has the right to extend the closing until October 2, 2007 by making a non-refundable extension payment of US $750,000 to K&P, which K&P will in turn pay to Macquarie as a further non-refundable deposit under the Loan Agreements. If the transactions contemplated under the Loan Agreements do not close by October 3, 2007 K&P will forfeit the non-refundable deposits paid to Macquarie, and in turn the Company will forfeit any extension payment paid to K&P.
K&P is a private company incorporated pursuant to the laws of the Province of British Columbia and is based in Vancouver, British Columbia.
The Company currently has approximately CDN $1,000,000 in working capital. Successful completion of the transactions will require a total of approximately US $25.0 million. The Company is currently negotiating a brokered private placement with a syndicate of brokerage houses experienced in funding international oil and gas ventures. There are currently no agreements in place for such financings and therefore the terms and conditions have not been determined, and the Company can offer no assurance that it will be successful in closing such financings. If the Company is unable to raise sufficient financing it will be unable to acquire K&P's interests under the Subscription Agreement and Loan Agreements.
Upon completion of the transactions proposed pursuant to the Subscription Agreement, the Company proposes to appoint Ian MacKinnon as a director of the Company. Ian McKinnon has over thirty-five years experience, primarily focused in the energy sector ranging from oilfield trucking, oil and gas well drilling and contracting. He was a director and shareholder of Norscot Holdings Ltd., a diversified holding company, with interests in communication, transportation construction and the energy sector. He has also held senior executive positions in oil and gas drilling, contracting and energy transportation companies. Mr. McKinnon is currently the Chairman of Cheetah.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. There can be no assurance that the transaction will be completed as proposed or at all.
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