Algonquin Oil & Gas Amends Terms of Business Combination and Financing

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES. 


Algonquin Oil & Gas Limited ("Algonquin") (TSX VENTURE:AQX) announces that it
has amended the terms of the arrangement agreement dated November 12, 2011, as
amended (the "Arrangement Agreement"), entered into with Mondak Petroleum Inc.
("Mondak"), a private oil and gas company, in connection with the proposed arm's
length business combination of Algonquin and Mondak.


Mondak Option Agreement 

Mondak and its wholly-owned United States subsidiary, Mondak Petroleum (US),
Inc. ("Mondak Sub"), previously entered into an option agreement (the "Option
Agreement") with Alameda Energy, Inc. ("Alameda"), an affiliate of Slawson
Exploration Company, Inc. ("Slawson"), pursuant to which Mondak Sub had: (i) an
option to acquire a 30% non-operated working interest in certain leases held by
Alameda on approximately 34,000 acres located in Richland County, Montana and
McKenzie County, North Dakota (the "Mondak Leases"); and (ii) if it exercised
the option in respect of the Mondak Leases, an option to acquire a 10%
non-operated working interest in certain leases held by Alameda on approximately
75,000 acres located in the Dawson, Wibaux and Richland Counties of Montana (the
"False Bakken Leases"). In consideration for the granting of the options, Mondak
issued 100,000,000 Class B common non-voting shares in the capital of Mondak to
Alameda.  


The parties to the Option Agreement have agreed to amend the terms such that
Mondak Sub now has: (i) an option (the "Mondak Option") to acquire a 10%
non-operated working interest in the Mondak Leases (now comprising approximately
36,725 acres); and (ii) if it exercises the Mondak Option, an option (the "False
Bakken Option") for a period of nine months to acquire a 10% non-operated
working interest in the False Bakken Leases. The amendments to the Option
Agreement also provide that Alameda's share ownership in Mondak would be reduced
to 67,000,000 Class B common non-voting shares, however, Alameda would also be
granted 60,000,000 common share purchase warrants ("Mondak Class B Warrants"),
each such Mondak Class B Warrant entitling Alameda to acquire one Class B common
non-voting share of Mondak at a price of $0.25 per share for a period of 18
months from the date of issuance of such warrants.  


Alameda will retain the remaining working interests in the Mondak Leases if the
Mondak Option is exercised and the remaining working interests in the False
Bakken Leases if the False Bakken Option is exercised and Slawson will be the
operator of these interests. The Option Agreement provides that the purchase
price to be paid by Mondak to exercise the Mondak Option shall be US$4,000 per
net mineral acre (or an aggregate of approximately US$14,690,000) and the
purchase price to be paid by Mondak to exercise the False Bakken Option shall be
US$2,000 per net mineral acre (or an aggregate of approximately US$15,000,000). 



Slawson is a privately held oil and gas exploration company which has drilled
over 3,500 wells in various locations throughout the United States, including
the Williston Basin, the Anadarko Basin, the Gulf Coast, the Kansas Basin and
the Sacramento Basin. It is currently the 7th largest private oil producer in
the United States and is the leading private oil producer in the Williston
Bakken. Slawson has over 35 years of experience in the Williston Basin and has
grown oil production, primarily through the drill bit, from less than 1,000
barrels per day to current operated production of approximately 22,000 barrels
per day. For further information relating to Slawson, refer to its website at
www.slawsoncompanies.com.


Financing 

In order to provide Mondak with the funds necessary to exercise the options that
were originally granted pursuant to the Option Agreement, Mondak had previously
entered into an engagement agreement with Macquarie Capital Markets Canada Ltd.
("Macquarie") pursuant to which Macquarie had been engaged to lead the offering
(the "Mondak Private Placement") of up to 416,666,667 subscription receipts at a
price of $0.30 per subscription receipt for gross proceeds of up to
$125,000,000. The parties have agreed to amend the terms of the Mondak Private
Placement such that Macquarie will now lead the offering of up to 193,500,000
units ("Units") of Mondak at a price of $0.15 per Unit for gross proceeds of up
to $29,025,000. Each Unit will be comprised of one Class A common voting share
in the capital of Mondak ("Mondak Voting Share") and one-half of one common
share purchase warrant ("Mondak Class A Warrant"). Each whole Mondak Class A
Warrant will entitle the holder to acquire one Mondak Voting Share at a price of
$0.25 per share for a period of 18 months from the date of issuance of such
warrants. 


It is expected that M. Bruce Chernoff and/or associates, affiliates or entities
in close association with Mr. Chernoff will acquire a sufficient number of Units
under the Mondak Private Placement such that, after giving effect to the Mondak
Private Placement and the Arrangement (as defined below), it is expected that
Mr. Chernoff will be considered a new control person of Algonquin. As a result,
prior to completing the Arrangement, Algonquin will be required to obtain the
written approval of shareholders holding in aggregate more than 50% of the
current issued and outstanding Algonquin common shares (excluding any Algonquin
common shares currently owned or controlled by Mr. Chernoff and/or the proposed
new directors of the Corporation upon completion of the Arrangement) to the
creation of Mr. Chernoff as a new control person upon completion of the
Arrangement. 


Mondak intends to use the net proceeds of the Mondak Private Placement to fund
the exercise of the Mondak Option immediately prior to the completion of the
Arrangement (as defined below) and also to commence a drilling program on the
Mondak Leases and for general corporate purposes. Closing of the Mondak Private
Placement is expected to occur on or before March 7, 2012.


The Arrangement Agreement 

The arm's length business combination of Algonquin and Mondak is proposed to be
effected by way of a plan of arrangement (the "Arrangement"), the details of
which are set forth in the Arrangement Agreement. The Arrangement Agreement and
the amendments thereto are available for review under Algonquin's profile on
SEDAR (www.sedar.com) and the material terms of the Arrangement Agreement were
summarized in Algonquin's Information Circular dated December 22, 2011 (also
available for review under Algonquin's profile on SEDAR). The parties have
amended the terms of the Arrangement Agreement in order to give effect to the
amendments to the Option Agreement and the Mondak Private Placement. In addition
to the matters contemplated in this press release, the material amendments to
the Arrangement Agreement provide for the following:




--  the holders of the issued and outstanding Mondak Class A Warrants will
    receive common share purchase warrants of Algonquin on a one-for-one
    basis entitling such holders to acquire common voting shares of
    Algonquin on the same terms and conditions provided for by the Mondak
    Class A Warrants; and 
--  the holders of the issued and outstanding Mondak Class B Warrants will
    receive common share purchase warrants of Algonquin on a one-for-one
    basis entitling such holders to acquire common non-voting shares of
    Algonquin on the same terms and conditions provided for by the Mondak
    Class B Warrants. 



At an annual and special meeting of the holders (the "Algonquin Shareholders")
of all of the issued and outstanding common shares of Algonquin that was held on
January 24, 2012, the Algonquin Shareholders approved all of the matters
provided for in Algonquin's Information Circular dated December 22, 2011,
including:




--  approving a new board of directors of Algonquin to hold office effective
    immediately following completion of the Arrangement ; 
--  approving an amendment to the share capital structure of Algonquin
    providing for certain amendments to the rights, privileges and
    restrictions attaching to the Algonquin common voting shares and the
    creation of convertible, common non-voting shares of Algonquin, which
    amendments will be effected immediately prior to the completion of the
    Arrangement; 
--  approving a consolidation of the issued and outstanding shares of
    Algonquin on a "1 new for 10 old" basis which will be effected
    immediately after completion of the Arrangement; and 
--  in connection with the Arrangement, authorizing Algonquin to change its
    name to "PetroShale Inc.". 



On February 27, 2012, Mondak received the final order of the Court of Queen's
Bench of Alberta approving the Arrangement, as amended. Completion of the
Arrangement remains subject to customary regulatory and TSX Venture Exchange
("TSXV") approvals. Provided that all regulatory and TSXV approvals are
obtained, closing of the Arrangement, as amended, is expected to occur on or
before March 7, 2012.


Trading Update 

Trading of the common shares of Algonquin will remain halted pending receipt and
review by the TSXV of acceptable documentation regarding the amendments to the
Option Agreement, the Mondak Private Placement and the Arrangement. 


About Algonquin 

Algonquin is a junior oil and gas company primarily focused on petroleum and
natural gas production, lease acquisition and exploration, and development of
crude oil and natural gas properties in Ontario, Canada. Algonquin's primary
holdings of oil and gas rights, both producing and undeveloped, are certain
leases near Colchester, Ontario, both onshore and offshore in Lake Erie.  


Reader Advisory

Completion of the Arrangement is subject to a number of conditions, including
but not limited to, TSXV acceptance, as well as any other necessary regulatory
approvals. There can be no assurance that the Arrangement will be completed as
proposed or at all. 


All information contained in this news release with respect to Algonquin and
Mondak was supplied by Algonquin and Mondak, respectively, for inclusion herein.
Algonquin and its directors and officers have relied on Mondak for any
information concerning Mondak.  


Statements in this press release contain forward-looking information within the
meaning of applicable securities law. Forward-looking information is frequently
characterized by words such as "plan", "expect", "project", "intend", "believe",
"anticipate", "estimate" and other similar words, or statements that certain
events or conditions "may" or "will" occur. In particular, forward-looking
information in this press release includes, without limitation, statements with
respect to: timing and completion of the Arrangement, the Mondak Private
Placement, the share capital amendment, the share consolidation, the name
change, the exercise of the option under the Option Agreement, and trading in
the common shares of Algonquin. Readers are cautioned that assumptions used in
the preparation of forward-looking information may prove to be incorrect.
Although we believe that the expectations reflected in the forward-looking
information are reasonable, there can be no assurance that such expectations
will prove to be correct. We cannot guarantee future results, level of activity,
performance or achievements. Consequently, there is no representation that the
actual results achieved will be the same, in whole or in part, as those set out
in the forward-looking information. 


Forward-looking information is based on the opinions and estimates of management
at the date the statements are made, and are subject to a variety of risks and
uncertainties and other factors (many of which are beyond the control of
Algonquin and Mondak) that could cause actual events or results to differ
materially from those anticipated in the forward-looking information. Some of
the risks and other factors could cause results to differ materially from those
expressed in the forward-looking information include, but are not limited to:
general economic conditions in Canada, the United States and globally, the risks
associated with the oil and gas industry, failure to obtain all approvals
required to implement the transactions contemplated herein, including all
requisite shareholder approvals, financing and capital market risks,
transactional risks, commodity prices and exchange rate changes. Industry
related risks could include, but are not limited to: operational risks in
exploration, development and production; delays or changes in plans; competition
for and/or inability to retain drilling rigs and other services; competition
for, among other things, capital, acquisitions of reserves, undeveloped lands,
skilled personnel and supplies; risks associated to the uncertainty of reserve
estimates; governmental regulation of the oil and gas industry, including
environmental regulation; geological, technical, drilling and processing
problems and other difficulties in producing reserves; the uncertainty of
estimates and projections of production, costs and expenses; unanticipated
operating events or performance which can reduce production or cause production
to be shut in or delayed; incorrect assessments of the value of acquisitions;
the need to obtain required approvals from regulatory authorities; stock market
volatility; volatility in market prices for oil and natural gas; liabilities
inherent in oil and natural gas operations; access to capital; and other
factors. Readers are cautioned that this list of risk factors should not be
construed as exhaustive. 


The forward-looking information contained in this news release is expressly
qualified by this cautionary statement. Algonquin does not undertake any
obligation to update or revise any forward-looking statements to conform such
information to actual results or to changes in our expectations except as
otherwise required by applicable securities legislation. Readers are cautioned
not to place undue reliance on forward-looking information. 


This press release does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities described herein. The securities have not
been and will not be registered under the United States Securities Act of 1933,
as amended (the "U.S. Securities Act"), or any state securities laws and may not
be offered or sold within the United States or to United States Persons unless
registered under the U.S. Securities Act and applicable state securities laws or
an exemption from such registration is available.