Nighthawk Energy Regulatory News (HAWK)

NIGHTHAWK ENERGY PLC

("Nighthawk" or "the Company")

Acquisition of further 25% interest in and Operatorship of Jolly Ranch Project

Convertible Loan to raise £10 million

Open Offer to raise up to £4.15 million

Nighthawk, the US focused oil development and production company (AIM: HAWK and OTCQX: NHEGY), announces that its wholly owned subsidiary, Nighthawk Production LLC, has entered into an acquisition agreement (the "Acquisition Agreement") with Running Foxes Petroleum Inc. ("RFP") to acquire a further 25% working interest in the Jolly Ranch Project in the Denver-Julesburg Basin, Colorado (the "Jolly Ranch Project") from RFP, together with the operatorship, for an initial consideration of US$12.5 million, to be satisfied as to US$8.5 million in cash and US$4 million in new ordinary shares in the Company (the "Acquisition").

Following completion of the Acquisition Agreement, which is expected to occur on 23 January 2012, Nighthawk Production LLC will hold a 75% working interest in, and will be operator of, the Jolly Ranch Project.

Highlights

·; Acquisition of a 25% working interest in the Jolly Ranch Project from RFP for an initial consideration of US$12.5 million, US$8.5 million in cash and US$4 million in Nighthawk shares, equating to approximately US$122 per acre

·; Nighthawk to become operator of Jolly Ranch Project

·; Significant work program planned to commence early in Q2 2012 with workovers of existing wells, followed by up to five new wells

·; Issue of 10 million zero coupon unsecured loan notes to raise £10 million, convertible at 2.5p per share

·; Placing to raise up to £4 million planned to be undertaken in January 2012 with completion simultaneous with the Acquisition, Open Offer and issue of convertible loan notes (the "Proposed Placing")

·; Existing shareholders to have the opportunity to participate in the fundraising via an open offer of new ordinary shares at 2.5p per share to raise up to approximately £4.15 million (the "Open Offer")

In addition, Nighthawk has been informed that RFP has signed a separate letter of intent and has entered into exclusive discussions with a third party, independent of Nighthawk, to sell the 25% balance of its working interest in the Jolly Ranch Project by 30 April 2012.

The Acquisition and the associated fundraising as described in this announcement are conditional, amongst other matters, on the passing of certain resolutions of shareholders of the Company ("Shareholders") and on admission to trading on AIM of the ordinary shares of 0.25p each in the capital of the Company ("Ordinary Shares") to be issued pursuant to the Acquisition and such fundraising and such admission becoming effective in accordance with the AIM Rules for Companies ("Admission").

Stephen Gutteridge, Chairman of Nighthawk, said:

"This acquisition will propel Nighthawk to a position of majority partner and operator of a potentially major early stage US shale oil play, with funding available to press ahead with further development. We enter the New Year as a fundamentally different company with transformed prospects and a clear break with the past."

Principal Terms of the Acquisition

On 23 December 2011, Nighthawk Production LLC, a wholly owned subsidiary of the Company, entered into the Acquisition Agreement with RFP to acquire a further 25% working interest in the Jolly Ranch Project, subject to certain conditions set out in the Acquisition Agreement. Following the Acquisition, Nighthawk and its subsidiaries (the "Group") will own a 75% working interest (60% net revenue interest) in, and will become operator of, the Jolly Ranch Project.

The initial consideration for the Acquisition is US$12.5 million (approximately £8.0 million), to be satisfied as to US$8.5 million in cash and US$4 million through the issue by the Company of 102,236,422 new Ordinary Shares at a price of 2.5p per share. On completion of the Acquisition ("Completion"), assuming full subscription for the Ordinary Shares in the Open Offer (the "Open Offer Shares"), but before the impact of the Proposed Placing, RFP would hold approximately 14.1% of the enlarged issued share capital of the Company.

In addition, in the event of a sale or disposal by the Company of all or a portion of its working interest in the Jolly Ranch Project to a third party within five years, the Company will pay RFP a portion of the cash proceeds (or the fair market value for any non-cash proceeds) which it receives in connection with such sale or disposal up to a maximum aggregate amount of US$5 million.

The Ordinary Shares received by RFP in part-consideration (the "Consideration Shares") will be subject to lock-in arrangements whereby RFP has undertaken that, subject to certain exceptions, it will not sell or otherwise dispose of, or agree to dispose of the shares for a period of 12 months following Completion.  RFP has also agreed orderly marketing provisions for a further 12 months.

In addition, on Completion the existing options to subscribe for 1,250,000 Ordinary Shares at a price of 53p held by Steven Tedesco, the CEO of RFP, will be cancelled and warrants to subscribe for 1,250,000 Ordinary Shares at a price of 5p per share at any time on or before the third anniversary of Admission will be issued to him.

On Completion, Nighthawk has also agreed to assign all of its rights, title and interest in the properties owned by it in the Cisco Springs Project in Grand County, Utah, USA for nil consideration.

Subject to the satisfaction of the conditions relating to the Acquisition, Completion is expected to take place on 23 January 2012.

RFP has agreed to make available to Nighthawk the services of appropriately experienced and qualified personnel on a transitional basis. RFP will invoice the Group on a monthly basis. These transitional arrangements will remain in effect for one year from Completion with no minimum or maximum commitment by Nighthawk.

Nighthawk has been informed that RFP has entered into exclusive discussions to sell its remaining 25% working interest to a third party with completion no later than 30 April 2012. In the event that this transaction does not complete by that date, Nighthawk has agreed to pay RFP an additional US$1 million.

Rationale for the Acquisition

Following the Acquisition, Nighthawk will be in a position to control the speed and method of development at Jolly Ranch going forward. A number of lessons have been learnt from the progress to date which will be applied in seeking to improve the performance of the asset from existing and new well bores. By controlling the development, the directors of the Company (the "Directors") believe that Nighthawk will be able to deliver greater value to shareholders by focusing on a number of key development factors, including well design and drilling operations, logging and well completion design and the increased use of horizontal wells. Of the multiple shale formations present on the Jolly Ranch Project, principally within the Pennsylvanian formations, the Cherokee shales will be the primary objective during the first phase of development as operator.

In order to assist in this objective, the board of Directors recruited Chuck Wilson as Chief Operating Officer in August 2011. Chuck has strong experience of managing drilling and completions in shale oil operations similar to those at Jolly Ranch and the forward work program has been designed under his guidance.

Potential Impairment of Jolly Ranch Project

The aggregate potential Acquisition consideration of US$13.5 million implies a gross value for the Jolly Ranch Project of approximately $54.0 million. In Nighthawk's audited consolidated accounts for the year ended 30 June 2011, Nighthawk carried its 50% working interest in the Jolly Ranch Project at approximately US$46.0 million, being the total investment by the Company into the project to that date, which implied a gross value of approximately US$92.0 million. Whilst the Directors are firmly of the opinion that the Jolly Ranch Project is materially undervalued, it is likely that the Company will impair the value attributed to the project in its consolidated balance sheet upon publication of its interim results for the period to 31 December 2011 in line with best practice accounting guidelines. This does not detract from the Directors' opinion that the value of the Jolly Ranch Project will only be enhanced by Nighthawk gaining operatorship of the asset and implementing a program of workovers, scientific work and new wells.

Focused Operations and Development Plan

Nighthawk will focus the first phase of development as operator on the Cherokee formation as well as testing the Niobrara formation in the north of the acreage currently held. This focused development plan is a culmination of the work undertaken to date by the Group and the work by other operators in the vicinity of the Jolly Ranch Project.

The Company's proposed work program assumes the deployment of up to US$7 million (gross) during 2012 in the development of the Jolly Ranch Project. Of this amount, it is intended that approximately US$0.8 million will be assigned to workovers on a selection of the existing wells, together with additional scientific work, such as seismic check shots and reinterpretation of existing 3D seismic surveys. Investment of US$6.2 million is planned to be deployed in drilling up to five new wells, four vertical and one horizontal side track. The initial phases of this work program will be fully funded by the issue of the £10 million convertible loan notes. Additional funds raised through the Open Offer and Proposed Placing will be invested to complete the 2012 work programme and potentially fund further work in early 2013.

Board and Management

Over the past seven months the board and management structure has been strengthened through the appointment of Richard Swindells as Chief Financial Officer, Chuck Wilson as Chief Operating Officer and Stephen Gutteridge as Non-Executive Chairman.

The Acquisition will mark the completion of the strategic aim which the Company has worked towards over the past year. It also marks the step at which the focal point of the Company moves away from the UK to Colorado, and the newly strengthened team will be deployed in the optimum way to ensure a successful next stage in building shareholder value.

On Completion, Tim Heeley will step down as Chief Executive and as a Director to work with the existing Denver team to set up and manage the operational and commercial structure and execution required to deliver sustainable, profitable production from the Jolly Ranch Project.

Stephen Gutteridge will assume the role of Executive Chairman, based in London. As a result the Board will comprise Chairman, Chief Financial Officer and one Non-Executive Director. The Board intends to appoint a second Non-Executive Director as soon as practicable following Completion.

Details of the Convertible Loan Notes

The Company has conditionally raised approximately £10 million (gross) pursuant to commitments from two existing shareholders, Johan Claesson and Peter Gyllenhammar, who have undertaken that either they or their associates, will subscribe for £8 million and £2 million respectively of convertible unsecured loan notes which carry a zero coupon and are convertible at the option of the holders of the notes at a price of 2.5p per Ordinary Share before the third anniversary after Admission (the "Convertible Loan Notes").

In lieu of paying interest in respect of the Convertible Loan Notes, the Company has conditionally undertaken to issue to the subscribers for the Convertible Loan Notes 100,000,000 warrants to subscribe for Ordinary Shares at a price of 5p per share exercisable at any time on or before the third anniversary of Admission in the proportion of 10 warrants for every £1 of Convertible Loan Notes subscribed (the "Warrants").

The Convertible Loan Notes may not be converted and/or the Warrants exercised to the extent that, immediately following such conversion and/or exercise were the Ordinary Shares which are the subject of such conversion and/or exercise to be issued, the interests in Ordinary Shares held by the relevant Convertible Loan Note or Warrant holder together with persons acting in concert (as defined in the City Code on Takeovers and Mergers) with such holder would carry 30% or more of the voting rights of the Company, save where such conversion or exercise is effected as part of a sale of the entire issued share capital of the Company.

The issue of the Convertible Loan Notes is conditional, amongst other matters, upon the passing of the necessary resolutions at the general meeting of the Company scheduled for 20 January 2012 (the "General Meeting"), on Admission and the Acquisition Agreement becoming unconditional in all respects.

The issue of Convertible Loan Notes is not being underwritten, in whole or in part, by Westhouse Securities Limited ("Westhouse") or by any other party.

Details of the Open Offer

Nighthawk is proposing to raise up to £4,154,500 (before expenses) pursuant to an open offer of 166,180,000 new Ordinary Shares at a price of 2.5p per share to be made by the Company to shareholders whose names appear on the register of members of the Company at 5.00 p.m. on 29 December 2011 (the "Record Date") other than shareholders with a registered address in, or who are resident or ordinarily resident in, or a citizen of, certain restricted jurisdictions ("Qualifying Shareholders"). The Open Offer will be made on a pre-emptive basis, allowing all Qualifying Shareholders the opportunity to participate.

The expected timetable of the Open Offer is as follows:

The number of Ordinary Shares being made available to Qualifying Shareholders under the Open Offer is limited to the maximum number of Ordinary Shares which the Company can make available to Shareholders on a pre-emptive basis without having to issue a prospectus. The Directors understand that the preparation of a prospectus is significantly more burdensome than a circular and a prospectus would need to be approved by the Financial Services Authority.

In order to maximise the number of Ordinary Shares which may be offered pursuant to the Open Offer, shareholders resident in jurisdictions within the European Union which have not implemented Directive 2010/73/EU of 24 November 2010 as at the date of this announcement (including the Republic of Ireland), which enables the Company to offer Open Offer Shares having an aggregate value equal to €5 million without the need to issue a prospectus, are excluded from participation in the Open Offer. As at 23 December 2011, being the latest practicable date prior to this announcement, approximately 83.3% of Shareholders, owning 96.0% of the issued share capital, had registered addresses within the United Kingdom.

The Open Offer entitles Qualifying Shareholders to apply to acquire Open Offer Shares pro rata to their holdings of Ordinary Shares as at the Record Date on the following basis:

4 Open Offer Shares for every 11 existing Ordinary Shares

and so in proportion for any other number of existing Ordinary Shares then held ("Basic Entitlements"). Entitlements to apply to acquire Open Offer Shares will be rounded down to the nearest whole number and any fractional entitlement to Open Offer Shares will be disregarded in calculating the Qualifying Shareholder's entitlement.

Qualifying Shareholders should note that the Open Offer Shares have not been placed subject to clawback nor have they been underwritten, and that the Acquisition is not conditional upon the number of applications received under the Open Offer.

Excess Applications

The Open Offer will be structured to allow Qualifying Shareholders to subscribe for Open Offer Shares at the Issue Price pro rata to their holdings of Existing Ordinary Shares. Qualifying Shareholders may also make applications in excess of their pro rata initial entitlement ("Excess Applications"). To the extent that pro rata entitlements to Open Offer Shares are not subscribed by Qualifying Shareholders, such Open Offer Shares will be available to satisfy such Excess Applications. To the extent that applications are received in excess of the available Open Offer Shares, Excess Applications from Qualifying Shareholders will be scaled back accordingly.

Qualifying Shareholders should note that the Open Offer is not a rights issue. Qualifying non-CREST Shareholders should be aware that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should also be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market nor will they be placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer.

Proposed Placing

Prior to the General Meeting on 20 January 2012, the Company plans to undertake a conditional placing through Westhouse to raise up to £4 million at 2.5p per share. Completion of the Proposed Placing is planned to be simultaneous with completion of the Acquisition, the issue of the Convertible Loan Notes and the Open Offer on Admission.

Certain Directors have indicated that they intend to subscribe for Ordinary Shares in the Proposed Placing as follows:

Use of Proceeds

The Company expects to raise approximately £10 million (gross) (approximately US$15.6 million) pursuant to the issue of the Convertible Loan Notes, or £9.2 million (approximately US$14.4 million) net of fees, commissions and expenses payable by the Company.

The net proceeds of the issue of Convertible Loan Notes will be used, amongst other matters, to meet the cash consideration payable under the Acquisition Agreement and to provide working capital, in particular to commence the work program at the Jolly Ranch Project as referred to above.

In addition, the Open Offer, which is not underwritten, will raise up to approximately £4.15 million and the Proposed Placing is planned to raise up to £4 million. The funds raised through the Open Offer and the Proposed Placing will be applied primarily to the further development of the Jolly Ranch Project as referred to above and potentially extending the planned work program.

The Consideration Shares, the Open Offer Shares and Ordinary Shares issued pursuant to the Proposed Placing (the "New Shares") will rank pari passu with existing Ordinary Shares. Application will be made for the New Shares to be admitted to trading on AIM and it is expected that such admission will become effective and that the terms of the Acquisition Agreement will completed on or around 23 January 2012.

Share Options

On Completion, it is proposed that options to subscribe for Ordinary Shares will be granted to the Directors and Senior Management as follows (the "Options"):

The exercise price of the Options is 5p per share. For each option holder, it is proposed that 30% of the Options will vest on the achievement of gross average production of 350 bbls per day for 90 days before 31 March 2013.

The remaining 70% of the Options will vest in the event that the 30 day average mid-market price of the Ordinary Shares is 12p or higher within three years of Completion. Once vested, the Options may be exercised at any time until the date 10 years from Completion.

Related Party Transactions

The subscription by Johan Claesson (and his associates) for Convertible Loan Notes constitutes a related party transaction under the AIM Rules for Companies. The Directors, having consulted with Westhouse, the Company's nominated adviser, consider the terms of such subscription to be fair and reasonable insofar as shareholders are concerned.

Circular and General Meeting

A circular containing further details of the Acquisition, the Convertible Loan Notes and the Open Offer and incorporating notice of a general meeting of the Company to be held on 20 January 2012 is expected to be sent to shareholders by 4 January 2012.

Ends

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