Crest Petroleum Corp. Announces Proposed Qualifying Transaction

Crest Petroleum Corp. Announces Proposed Qualifying Transaction
  
 

CALGARY, ALBERTA--(Marketwired - Feb 27, 2014) - Crest Petroleum Corp. ("Crest") (TSX-VENTURE:CTP.P) is pleased to announce that it has entered into:

• a share purchase agreement dated February 27, 2014 (the "Share Purchase Agreement") with Indio Well Services Corp. ("Indio") and the shareholders of Indio, being Everett (Will) Willard Gray II, Sixto Medrano Jr. and Jefferey Dale Barger (collectively, the "Vendors"), in order to create a new oil and gas well services company in the Permian Basin under the direction of a new management team and board of directors (the "Proposed Transaction"). The Proposed Transaction will constitute a Qualifying Transaction as that term is defined by the TSX Venture Exchange (the "Exchange"); and
• an engagement letter with AltaCorp Capital Inc. with respect to a brokered 'best efforts' private placement of a minimum of 16,000,000 subscription receipts of Crest ("Crest Receipts") at a price per Crest Receipt of $0.25 for gross proceeds of not less than $4,000,000 (the "Private Placement").

Share Purchase Agreement

Pursuant to the Share Purchase Agreement, Crest will purchase all of the issued and outstanding shares of common stock in the capital of Indio (the "Indio Shares") from the Vendors for an aggregate purchase price of $2,500,000 to be paid by the issuance of 10,000,000 common shares in the capital of Crest ("Crest Shares") at a deemed price per Crest Share of $0.25.

The completion of the Proposed Transaction is subject to a number of conditions including, but not limited to:

1. receipt of Exchange approval;
2. completion of the Private Placement;
3. each of the Vendors having entered into executive employment agreements with Crest;
4. the Rig Contract (defined below) having not been terminated; and
5. adequate financing arrangements having been entered into to permit Indio to complete the purchase of the Rigs (defined below).

Subject to the foregoing conditions being satisfied or waived, Crest expects to close the Proposed Transaction on or about May 15, 2014 and in any event, by no later than May 31, 2014.

Private Placement

Crest has engaged AltaCorp Capital Inc. as sole agent with respect to the Private Placement. Each Crest Receipt will, upon the satisfaction of certain conditions including the completion of the Proposed Transaction, be exchanged for one Crest Share. The completion of the Private Placement is subject to a number of conditions, including, but not limited to, receipt of Exchange approval.

About Indio

Indio is a private company incorporated under the laws of the State of Nevada on February 7, 2014. Indio was incorporated with the intent to establish and grow a high quality service rig business in the Permian Basin. Since incorporation, Indio has had no operations other than identifying and evaluating the acquisition of service rigs, developing a business plan and discussing and negotiating the terms of the Share Purchase Agreement and the Rig Contract (defined below).

The Indio Shares are beneficially owned by, or subject to the direction or control of:

1. Will Gray (who beneficially owns, controls or directs approximately 33% of the issued and outstanding Indio Shares);
2. Sixto Medrano Jr. (who beneficially owns, controls or directs approximately 33% of the issued and outstanding Indio Shares); and
3. Jefferey Barger (who beneficially owns, controls or directs approximately 34% of the issued and outstanding Indio Shares).

The CEO of Indio is Will Gray, the President of Indio is Sixto Medrano Jr. and the Chief Safety Officer and Chief Operations Officer is Jefferey Barger.

Pursuant to a purchase agreement dated February 27, 2014 (the "Rig Contract") between Indio and Rig Works Inc., Indio will acquire eight new Mustang 550 service rigs (collectively, the "Rigs") for an aggregate purchase price of approximately US$7.5 million (not including sales tax) to be paid, in part, from the proceeds of the Private Placement (the "Asset Acquisition"). Indio will arrange for lease financing with respect to the remaining purchase price, being up to 80% of the aggregate. Crest will issue a press release once the lease financing terms have been finalized.

Indio's management has spent a significant amount of time evaluating the various service rigs available for purchase from different manufacturers and ultimately determined that the Rigs would best suit Indio's needs. The Rigs are heavy duty with 275,000 pounds of pulling power and an operational depth capacity of approximately 18,000 feet which will allow the Rigs to service over 90% of the current wells in the Permian Basin. Indio opted for a 104 foot mast which balances maneuvering capabilities while the mast is being transported on top of the rig and servicing capabilities while the mast is extended during operations.

The initial eight Rigs will be acquired over a six month period following completion of the Proposed Transaction. Rig Works Inc.'s design and fabrication facility is located in Odessa, Texas which is in the heart of the Permian Basin and approximately 20 miles from Midland, Texas.

The completion of the Asset Acquisition is subject to a number of conditions including, but not limited to, all conditions precedent to the completion of the Proposed Transaction having been satisfied or waived. The Asset Acquisition is expected to close concurrently with the closing of the Proposed Transaction.

About Crest

Crest is a "reporting issuer" in the Provinces of Alberta, British Columbia and Ontario and was incorporated under the laws of the Province of British Columbia on January 24, 2012. The Crest Shares are listed for trading on the Exchange under the trading symbol "CTP.P" and Crest is classified as a "capital pool company" pursuant to Policy 2.4 of the Exchange. As a capital pool company, the current business of Crest is to identify and evaluate potential acquisitions of commercially viable businesses and assets that have the potential to generate profits and add shareholder value. Except as specifically contemplated in the policies of the Exchange, until the completion of a Qualifying Transaction, Crest will not carry on business, other than the identification and evaluation of companies, businesses or assets with a view to completing a Qualifying Transaction. Since incorporation, Crest has had no operations other than identifying and evaluating potential acquisitions of oil and gas related businesses, including Indio, and discussing and negotiating the terms of the Share Purchase Agreement.

The President and CEO of Crest is Toby Pierce and the CFO and Corporate Secretary of Crest is James Greig.

Post-Transaction

Upon completion of the Proposed Transaction, Crest, through Indio, will acquire, operate and utilize the Rigs to assist oil companies in exploiting their oil and gas properties in the Permian Basin which represents the largest service rig market in the US. Services to be provided will include: workovers, completions, downhole interventions and potentially, plugging and abandonment work. Through Indio, Crest, will provide the Rigs, service equipment and crews for the foregoing tasks, which are performed on both oil and natural gas wells.

Upon completion of the Proposed Transaction, the board of directors of Crest will consist of Toby Pierce (Chair), David Schmidt, Will Gray, Sixto Medrano Jr. and Peter Mark Stark and the officers of Crest will consist of Will Gray (Chief Executive Officer), Sixto Medrano Jr. (President), Jefferey Barger (Chief Safety Officer and Chief Operating Officer), Toby Pierce (Executive Director), Anthony Jackson (Chief Financial Officer) and Janan Paskaran (Corporate Secretary). Sixto Medrano Sr. will serve as an advisor to the Board. Crest will draw heavily from Sixto Medrano Jr. and Sixto Medrano Sr.'s 85 years of combined well servicing experience in the Permian Basin.

Set forth below is information on each individual that is currently anticipated to be a director, officer or advisor of Crest upon completion of the Proposed Transaction:

Will Gray - Chief Executive Officer & Director; Midland, Texas: has over 10 years of experience in the energy industries, which includes senior executive experience through his roles as Executive Vice President and Head of Capital Markets and Business Development at Resaca Exploitation, Inc., Chairman and Chief Executive Officer of Cross Border Resources, Inc. where Mr. Gray arranged for over $80 million in both debt and equity financing for the company and was solely responsible for $73 million worth of acquisition and disposition transactions, Chairman and Chief Executive Officer of Well Renewal Inc., a micro-cap exploration and production company, Founder of WS Oil and Gas Limited, a mergers and acquisitions and capital raising consulting company to the energy sector and gained experience from various sales and marketing positions with a number of Fortune 500 companies including Prudential Financial Inc., Pharmacia Corp., Medtronic, Inc., and Guidant Corp. Mr. Gray holds a Bachelor of Science in Business Management from Texas State University. Mr. Gray is currently Secretary and director of Westcott Products Corp.

Sixto Medrano Jr. - President & Director; Midland, Texas: has over 35 years of experience in the energy services industry, with an emphasis on well servicing, focused within the Permian Basin, including his roles ranging from operator to supervisor at Key Energy Services, Inc. and rig supervisor at Pioneer Well Services, a wholly owned subsidiary of Pioneer Natural Resources Company where he played a key role in growing the rig fleet from 8 to 30 well servicing rigs.

Jefferey Barger - Chief Safety Officer & Chief Operating Officer; Midland, Texas: has over 15 years of experience in the health and safety industry, including his roles at several Fortune 500 medical device companies, including Medtronic, Inc., St. Jude Medical Inc. and Boston Scientific Corporation and serving for 4 years in the armed forces as a combat medic which included rotations in both the Gulf War and Korea. Mr. Barger is a registered nurse.

Toby Pierce - Executive Director & Chair; London, United Kingdom: has over 17 years of experience in the geological, resource and financial industries, including his roles as Partner and Senior Oil Equity analyst with GMP Securities L.P. and Tristone Capital Global Inc. in London, England, where he built up extensive experience in merger and acquisition transactions, initial public offerings, fund raisings, equity and asset valuations and investment advice. Mr. Pierce has worked across North and Latin America as a geologist in the mining and exploration industry and owned and operated a company that provided well-site geological services in the Western Canadian Sedimentary Basin. Mr. Pierce holds a Master of Business Administration from the Rotman School of Business and a Bachelor of Earth Sciences from the University of Victoria. Mr. Pierce is currently a director of North Country Gold Corp., Chelsea Oil and Gas Ltd., Trigold Resources Inc., Jordan Energy and Mining Ltd. (a UK private company) and Redtail Metals Corp.

Anthony Jackson - Chief Financial Officer; Vancouver, British Columbia: has extensive experience in the financial services industry, including his roles as Principal at BridgeMark Financial Corp., Founder of Jackson & Company Chartered Accountants, senior analyst at a boutique investment banking firm, an accountant with Ernst & Young LLP and most recently director and chief financial officer positions at publicly traded corporations in the metals and mining industry. Mr. Jackson is a chartered accountant.

David Schmidt - Director; Vancouver, British Columbia: has over 13 years of experience in the mineral exploration industry through his role as a consultant to mineral exploration companies where he assists with financings, corporate and financial disclosure and corporate development. Mr. Schmidt is a director and Vice President of Corporate Development of Ryan Gold Corp., a director and Chief Executive Officer of Oceanside Capital Corp., and a director of Waymar Resources Ltd. and Nanton Nickel Corp.

Peter Mark Stark - Director; Fair Oaks Ranch, Texas: has over 29 years of experience at the chief financial officer level in energy, agribusiness, commercial real estate and manufacturing/distribution industries, including his roles as Vice President of Finance of Forge Energy, LLC, a consultant to Doral Energy Corp. and subsequently the Chief Financial Officer and Treasurer of Cross Border Resources, Inc., Vice President-Treasurer and Chief Financial Officer of TXCO Resources, Inc., Chief Financial Officer of Venus Exploration Inc. and Chief Financial Officer of Dawson Production Services Inc. Mr. Stark holds a Master of Business Administration from Southern Methodist University and a Bachelor of Business Administration from the University of Texas and is an active member of Financial Executives International.

Janan Paskaran - Corporate Secretary; Calgary, Alberta: is a partner at the law firm of Torys LLP. His practice focuses on corporate and securities law, with an emphasis on international transactions. Mr. Paskaran has extensive experience representing public and private issuers in a wide variety of financing, business combination and merger and acquisition transactions, including both private and publicly traded issuers. Mr. Paskaran holds a law degree from the University of Western Ontario.

Sixto Medrano Sr. - Advisor; Midland, Texas: has over 54 years of experience in the energy services industry focused within the Permian Basin, including his current role as Vice President of Operations of Key Energy Services, Inc. (formerly, Yale E. Key). Over the past 54 years, Mr. Medrano Sr. has worked every facet of well servicing units and has supervised hundreds of employees while displaying an unparalleled safety record and has extensive knowledge of completion and work over operations within the Permian Basin.

Indio will be headquartered in Midland, Texas.

The Crest Shares will remain halted pending receipt of applicable documentation by the Exchange. Crest will be categorized in the Exchange's "Industrial" sector.

Arm's Length Qualifying Transaction

The Proposed Transaction was negotiated by the parties who are dealing at arm's length with each other and therefore, in accordance with the policies of the Exchange, is not a Non-Arm's Length Qualifying Transaction, as that term is defined by the Exchange. As a result, approval of the Proposed Transaction by holders of the Crest Shares is not required under the policies of the Exchange as a condition to the completion of the Proposed Transaction.

Sponsorship

The Exchange also requires the Proposed Transaction to be sponsored by a participating organization of the Exchange. Based on the fact that Crest intends to complete the Private Placement prior to May 15, 2014, Crest will apply to the Exchange for an exemption from the sponsorship requirement in connection with the Proposed Transaction. However, there is no assurance that the exemption will be granted. If such exemption is not granted, Crest will be required to engage a sponsor for the Proposed Transaction.

Further Information

Pursuant to Policy 2.4 of the Exchange, it is expected that Crest will file on SEDAR a Filing Statement in respect of the Proposed Transaction at least seven business days prior to the closing of the Proposed Transaction. The Filing Statement will include full disclosure regarding the Proposed Transaction, Crest, Indio and the Rigs.

Reader Advisory

The completion of the Proposed Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed 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 has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved of the contents of this press release.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws (collectively, "forward-looking statements"). The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this news release contains forward-looking statements concerning the terms of the Proposed Transaction, the Asset Acquisition and the Private Placement, the completion of the Proposed Transaction, the Asset Acquisition and the Private Placement, the filing of the Filing Statement, the proposed directors and officers of Crest and Crest's business upon completion of the Proposed Transaction. The forward-looking statements are based on certain key expectations and assumptions made by Crest, including expectations and assumptions concerning the results of its due diligence review of Indio and the Rigs, Crest's ability to complete the Proposed Transaction and the Private Placement and the ability of Indio to complete Asset Acquisition, including Indio's ability to obtain adequate lease financing with respect to the Rigs. Although Crest believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Crest can give no assurance that they will prove to be correct. By its nature, such forward-looking statements are subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to, the results of the due diligence review of Indio or the Rigs being less than satisfactory, Crest being unable to complete the Proposed Transaction or the Private Placement, Indio being unable to complete the Asset Acquisition and that the proposed directors and officers of Crest are unable to serve as directors and officers of Crest. Readers are cautioned not to place undue reliance on these forward-looking statements, which are given as of the date hereof, and to not use such forward-looking statements for anything other than their intended purpose. Crest undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

All figures are in Canadian dollars except where noted.

Crest Petroleum Corp.Toby PiercePresident and Chief Executive Officer+44 7517 131 747