Benchmark Energy Snaps Up Private Canadian Co., 3 Blocks in Colombia

Benchmark has executed an arm's-length binding letter of intent to acquire 100% of Delavaco Energy
Inc. for consideration equivalent to C$27,000,000. Delavaco is a private Canadian company with exploration and production interests in three producing blocks in Colombia.

With this transaction, Benchmark continues its strategy of developing a suite of South American oil and gas assets with a balance of low risk development and exploration upside. The acquisition of Delavaco provides
shareholders of Benchmark with:

  • in excess of 350 square miles of land (gross) over three strategic blocks;
  • a platform to build from in Colombia, an attractive regime for oil and gas development and exploration; and
  • development projects on blocks with recently drilled wells and discoveries.

"Delavaco is exactly the opportunity we have been seeking for our shareholders," said David Robinson, CEO of Benchmark. "It has excellent assets in Colombia with the right team led by Bob Szczuczko to successfully create value for the shareholders of the combined company."

The Agreement has been approved by the Boards of Directors of each of Benchmark and Delavaco and is subject to a number of conditions (to be satisfied on or prior to December 19, 2008) to the entering into of a
definitive agreement (the "Definitive Agreement") with respect to the Transaction, including:

  • the terms and conditions of the Definitive Agreement being mutually satisfactory to both Benchmark and Delavaco;
  • the board of directors of Benchmark and Delavaco unanimously approving the Transaction and the form of Definitive Agreement;
  • the parties satisfactorily conducting and completing their investigation and due diligence with respect to each other party and their respective subsidiaries, assets and businesses;
  • receipt by Benchmark of a report evaluating the crude oil, natural gas liquids and natural gas reserves, resources and future net production revenues attributable to 100% of the properties of Delavaco which complies with the requirements of applicable securities laws; and
  • such other conditions as are customary for a transaction of this nature.

The Definitive Agreement will supersede the Agreement in its entirety and a further comprehensive news release with respect to the Transaction will be issued in connection with the entering into of the Definitive Agreement.

Trading of Benchmark's common shares (the "Benchmark Shares") has been halted by the TSXV and the Benchmark Shares will remain halted in accordance with TSXV policies until all required documentation with respect to the Transaction has been received, including receipt of a sponsorship acknowledgment form with respect to a sponsor for the Transaction.

Consideration paid to Delavaco shareholders will consist of the issuance of 165,590,859, at a deemed price of $0.16 per share, subject to adjustment with respect to Delavaco Shares issuable pursuant to the terms of the Delavaco Private Placement (as defined below). Delavaco currently has 49,713,900 common shares (the "Delavaco Shares") outstanding and therefore each Delavaco shareholder will receive 3.3309 shares of Benchmark in exchange for each share of Delavaco (the "Exchange Ratio"). Any Delavaco Shares issued in connection with the Delavaco Private Placement will be acquired by Benchmark based on the Exchange Ratio. Closing of the transaction is expected to occur on or about February 28, 2009.

There are currently 25,758,578 Benchmark Shares outstanding. At a meeting of the holders of Benchmark Shares (the "Benchmark Shareholders") to approve the Transaction, Benchmark intends to, among other items of special business, consolidate its shares on the basis of six pre-consolidation common shares of
Benchmark for each one post-consolidation common share of the combined entity and to change its name to "Delavaco Energy Corp."

Delavaco is currently undertaking a "best efforts" private placement financing (the "Delavaco Private Placement") co-led by Cormark Securities Inc., Clarus Securities Inc. and Thomas Weisel Partners to raise up to an aggregate of C$15 million by way of an offering of common share subscription receipts ("Delavaco Share Subscription Receipts") and convertible debenture subscription receipts of Delavaco ("Delavaco CD Subscription Receipts").

The closing of the Delavaco Private Placement is not a condition precedent to the closing of the acquisition of Delavaco and Delavaco is not required to complete any minimum offering amount under the Delavaco Private
Placement. The proceeds from the Delavaco Private Placement will be used to satisfy capital commitments and for working capital purposes. Following the closing of the Transaction, and assuming successful completion of the Delavaco Private Placement, Delavaco Energy Corp. expects to have approximately C$12.4
million of cash.

As part of the closing of the Transaction, Bob Szczuczko will become the President and Chief Executive Officer of Delavaco Energy Corp., Andrew DeFrancesco, current Executive Chairman of Delavaco will become Co-Chairman of the Board of Directors of Delavaco Energy Corp., David Robinson, current President and Chief Executive Officer of Benchmark will become Co-Chairman of the Board of Directors of Delavaco Energy Corp. and Chris Cooper will continue as acting Chief Financial Officer of Delavaco Energy Corp. until a permanent
replacement can be retained.

As part of the closing of the Transaction, the number of Board members of Delavaco Energy Corp. shall be increased to 7 members, composed of 3 members of the current board of Benchmark and four members to be agreed to by Delavaco, but to include Bob Szczuczko and Andrew DeFrancesco. The Benchmark representatives of the Board will be Larry Youell, David Robinson and Brian Petersen.

"I am very excited to become the President and CEO of Delavaco Energy Corp. and provide the Delavaco shareholders an opportunity to move forward as a public company with access to the capital needed to develop our high quality asset base," said Bob Szczuczko.

Overview of Delavaco

Delavaco is a private oil and gas exploration and production company headquartered in Calgary, Canada with a regional operations office in Bogota, Colombia. Management of Delavaco has represented that Delavaco has interests in three producing blocks in Colombia, each with exploration and development upside, as set forth below:

Rio Magdalena Block

  • 228 square mile block
  • 51% working interest
  • Recent discovery well (June 2008) with initial production of approximately 1,500 boe/d, currently under a long-term test at 800 boe/d
  • Two additional prospects ready to drill. Significant drilling inventory expected from recent discovery.

Carbonera Block

  • 100 square mile block
  • 39% working interest
  • Over one billion barrels of oil have been produced in neighbouring fields in Venezuela
  • New well to be drilled in early 2009

La Punta Block

  • 31 square mile block
  • 3.6% to 9.0% working interest, depending upon which horizon within the block is produced from
  • Very successful step-out well drilled in early 2008 with initial production of 4,600 boe/d
  • Three additional look-alike structures on trend with eight to ten drilling locations identified