Tern Regulatory News (TERN)

26 January 2011

Chalkwell Investments plc

("Chalkwell" or the "Company")

Subscription, Board Changes, Change of Adviser, Suspension of Shares and Warrants, and Update on Discussions with Core Oil & Gas Inc. ("Core")

Subscription

Chalkwell, the AIM-quoted investment company with a focus on the resource sector, is pleased to announce that it has raised £1m before expenses through a subscription by existing and new institutional and other investors for 2,222,223 new ordinary shares of 0.1p each ("New Ordinary Shares") at 45p per New Ordinary Share ("Subscription").

The Subscription is conditional, inter alia, on admission of the New Ordinary Shares to trading on AIM, which is expected to become effective on 4 February 2011. The proceeds of the Subscription will be used to provide working capital for the Company over the next twelve months. Following the Subscription, the Company's issued share capital will be 4,675,080 ordinary shares of 0.1p each.

Board Changes

Following the recent appointments of John Roddison as a Non-Executive Director on 29 November 2010, and Bruce Evers as Executive Chairman and Reinhold Heus as a Non-Executive Director on 02 December 2010, the board comprises five Directors being John Roddison, Bruce Evers, Reinhold Heus, Leo Knifton and Nigel Weller.

Given that Chalkwell is an investing company focused on the resources sector, and in view of the new appointments and the fact that Mr Evers and Mr Heus have extensive experience of the oil and gas sector, Mr Knifton and Mr Weller have tendered their resignations, with immediate effect. The remaining Directors would like to express their appreciation to Mr Knifton and Mr Weller for their contribution since their appointment in February last year and in particular their assistance with the restructuring of the Company during 2010.

Change of Adviser

Chalkwell announces the appointment of Merchant Securities Limited as Nominated Adviser and Broker to the Company, with immediate effect.

Suspension of Shares and Warrants

Pursuant to Rule 15 of the AIM Rules (the Company having been an investing company for twelve months), trading in the Company's ordinary shares and warrants has been suspended from trading on AIM with immediate effect. In the event that the Company does not complete a transaction which constitutes a reverse takeover in accordance with Rule 14 of the AIM Rules within six months, admission of the Company's ordinary shares and warrants to trading on AIM will be cancelled.

Discussions with Core

On 01 November 2010, the Company announced a placing to raise £600,000, of which £500,000 was used to make an unsecured loan to Core. Core is a US-focused oil and gas company, which has a 33.3% working interest and a 29.13% net revenue interest in respect of Mustang Island in Kleburg County, Texas ("Mustang Interest"). Core used the unsecured loan to pay the first tranche ($133,000) of a total consideration of US$1,333,000 to Seadrift Management, LLC and WellMaster Exploration & Production Co., LLC (the "Vendors") in respect of the Mustang Interest, and to provide payment for a detailed reserve review of Core's oil and gas reserves by RPS Energy.

Mustang Island is a shallow inshore oil and gas asset, located in the Gulf of Mexico, with infrastructure in place and nearby oil and gas pipelines available. It is a proven behind-pipe asset, comprised of four shut-in wells previously drilled by Chevron Corporation. Core estimates that the Mustang Island asset contains total initial P90 reserves of up to 11.8 million barrels of oil equivalent ("boe") (Core's share of reserves).

Core is in discussions to acquire participation interests in respect of Budde Ferry 27.3 (Oceana County, Michigan), Baron 14-15 (Oceana County, Michigan), and Paradise 4 (Grand Traverse County, Michigan). Core estimates that these assets contain additional total initial P90/P50 reserves of up to 6.38 million boe (Core's share of reserves).

In addition, Core has a number of other oil and gas prospects in the US under active consideration. Core's strategy is to generate short-term cash flow from smaller near-term prospects whilst it develops larger reserves, including Mustang Island. 

The Company has agreed outline terms to acquire Core in an all share deal. The proposed transaction would be classified as a reverse takeover of Chalkwell under the AIM Rules and accordingly the acquisition of Core would be subject, amongst other things, to approval by the shareholders of the Company. Chalkwell's shares will remain suspended until an admission document containing full details of the proposed acquisition and of the enlarged entity is published and a general meeting of the Company is convened to approve the acquisition (if negotiations are satisfactorily concluded).  It is likely that the acquisition of Core, if made, would also involve a fund-raising to provide working capital for the enlarged group and finance exploitation of Core's assets.

Further announcements will be made as appropriate.

Executive Chairman Bruce Evers commented: "I am delighted with the support we have received from existing and new investors for the Subscription, which will provide working capital for the Company whilst we continue our discussions. I would also like to thank Leo and Nigel for their assistance with the restructuring last year. This is an exciting time for the Company."

In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies, Warren Baumann, Exploration Director, Core, qualifies as a Qualified Person for the purposes of this announcement and has approved the technical information contained in this announcement.

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