Farmout Agreement

25 Feb 2008 07:01

Caza Oil & Gas, Inc.25 February 2008 25 February 2008 Caza Oil & Gas, Inc. ("Caza" or the "Company") Farmout Agreement with Singular Houston, Texas (February 25, 2008) - Caza (CAZA AIM SYMBOL/CAZ TORONTO SYMBOL)is pleased to announce that it has entered into a farmout agreement withSingular Oil & Gas Sands, LLC ("Singular") on the Wilcox 116 Property in SouthTexas. Under the terms of the agreement Singular has acquired a 10.00% interest in theWilcox 116 Property. In return Singular will bear 13.33% of the drilling coststhrough completion of the Jonell Cerny Gas Unit #1 test well (the "Cerny Well")and 10.00% of all costs on the Wilcox 116 Property thereafter. Singular willalso pay US$64,625 of back costs associated with this property to Caza. Thistransaction has been entered into by the Company's subsidiary, Caza Petroleum,Inc. ("Caza Petroleum") in accordance with standard industry practices andmanagement's risk management strategy. The Wilcox 116 Property is located in Wharton County, Texas. Within thisproperty, the Cerny Well commenced drilling on 15 January 2008, and isanticipated to take up to 60 days to drill to a depth of 16,500 feet. The CernyWell is targeting gas in the Deep Wilcox Sands, which are analogous to sandscurrently producing in Caza's nearby Matthys-McMillan Gas Unit #1 well (the "Matthys-McMillan Well"). The Cerny Well, if successful, will establish numerousdevelopment locations. The dry well cost of the Cerny Well is estimated to beUS$8.3 million. Caza, through Caza Petroleum, is the operator of the Wilcox 116 Property and,following the disposal noted above, now holds a right to earn a 29.88% workinginterest (which reduces to a 27.81% working interest after completion of theinitial well with a corresponding 20.86% net revenue interest). For the purposes of the AIM Rules for Companies (the "AIM Rules"), the Companyis treating Singular as an associate of Sercor Limited, which is a substantialshareholder of Caza, and therefore as a related party of the Company under theAIM Rules. The Company is also treating Singular as a related party of theCompany under Canadian securities laws and therefore this farmout agreement isbeing treated by the Company as a related party transaction for the purposes ofboth the AIM Rules and Canadian securities laws. The transaction has been approved by Caza's board of directors, all of whom areunrelated to Singular. The board of directors of Caza considers, havingconsulted with its nominated adviser, Noble & Company Limited, that the terms ofthis related party transaction are fair and reasonable insofar as the Company'sshareholders are concerned. This transaction is exempt from the formalvaluation and minority shareholder approval requirements of MultilateralInstrument 61-101 of the Canadian Securities Administrators because the board ofdirectors of Caza has determined that the fair market value of the subjectmatter of the transaction does not exceed 25% of Caza's market capitalization. In March 2007, Caza entered into a farmout agreement with Singular on the HiteOffset Property to drill the Matthys-McMillan Well in Wharton County, Texas.Under the terms of that agreement Singular paid 15.67% of the drilling costs tocasing point of the Matthys-McMillan Well to earn a 14.01% interest in theproperty thereafter. "Casing point" is the point at which operations tocomplete the well as a producer are commenced. The Hite Offset Property and Matthys-McMillan Well are located in WhartonCounty, Texas. Drilling began on the Matthys-McMillan Well in March 2007, and itwas drilled to a depth of 17,700 feet. In September 2007 this well wasperforated in the Upper Wilcox section and is currently flowing at 4.6 MMcf/d. Caza holds a 19.62% working interest (14.32% net revenue interest) in the HiteOffset Property. Mike Ford, Chief Executive Officer of the Company, commented: "Like the recent transaction with Sojitz, this transaction consolidates ourrelationship with Singular in the Wharton West Wilcox area following ourcollaboration on the successful Matthys-McMillan Well." For further information contact: John McGoldrick, Executive Chairman, Caza Oil & Gas, Inc. +1 281 363 4442 Nick Naylor / Jamie Boyd, Noble & Company Limited +44 (0) 20 7763 2200(Nominated Adviser and Joint Broker) Peter Reilly, Aquila Financial Ltd +44 (0) 20 7202 2601(Financial Public Relations Advisers) www.cazapetro.com About Caza Caza is engaged in the acquisition, exploration, development and production ofhydrocarbons in the Texas Gulf Coast (on-shore), south Louisiana, southeast NewMexico and the Permian Basin of West Texas regions of the United States ofAmerica through its subsidiary, Caza Petroleum, Inc.. In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies,the information contained in this announcement has been reviewed and approved byAnthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineerand a member of The Society of Petroleum Engineers. ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests of providingCaza shareholders and potential investors with information regarding Caza,including management's assessment of Caza's and its subsidiaries' future plansand operations, certain statements contained in this news release areforward-looking statements or information within the meaning of applicablesecurities legislation, collectively referred to herein as "forward-lookingstatements." Forward-looking statements in this news release include, but arenot limited to: future economic and operating performance (including per sharegrowth, cash flow and increase in net asset value); future drilling costs;anticipated growth and success of resource plays and the expectedcharacteristics of resource plays; free cash flow which may be generated in 2008and beyond, and potential uses for such free cash flow; anticipated productionand sales of oil, natural gas and NGLs in 2008; anticipated impact and successof Caza's price hedging strategy, if any; anticipated costs; anticipated pricesfor oil and natural gas; anticipated capital investment in 2008 and theallocation thereof; anticipated capital inflation; anticipated capital andoperating cost efficiencies; anticipated growth in hydrocarbon production;forecast cash flow for 2008 and the anticipated ability to meet guidancetargets. Readers are cautioned not to place undue reliance on forward-looking statements,as there can be no assurance that the plans, intentions or expectations uponwhich they are based will occur. By their nature, forward-looking statementsinvolve numerous assumptions, known and unknown risks and uncertainties, bothgeneral and specific, that contribute to the possibility that the predictions,forecasts, projections and other forward-looking statements will not occur,which may cause the company's actual performance and financial results in futureperiods to differ materially from any estimates or projections of futureperformance or results expressed or implied by such forward-looking statements.These risks and uncertainties include, among other things: volatility of andassumptions regarding oil and gas prices; assumptions based upon the company'scurrent guidance; fluctuations in currency exchange and interest rates; productsupply and demand; market competition; risks inherent in the company's marketingoperations, including credit risks; imprecision of reserve estimates andestimates of recoverable quantities of oil, natural gas and liquids fromresource plays and other sources not currently classified as proved; thecompany's ability to replace and expand oil and gas reserves; the company'sability to generate sufficient cash flow from operations to meet its current andfuture obligations; the company's ability to access external sources of debt andequity capital; the timing and the costs of well and pipeline construction;blowouts, fires, explosions and other sudden emergencies; drilling difficulties,such as lost circulation; the company's ability to secure adequate producttransportation; changes in royalty, tax, environmental and other laws orregulations or the interpretations of such laws or regulations; the risk ofterrorist threats; risks associated with future lawsuits and regulatory actionsmade against the company; and other risks and uncertainties described from timeto time in the reports and filings made with securities regulatory authoritiesby Caza. Although Caza believes that the expectations represented by such forward-lookingstatements are reasonable, there can be no assurance that such expectations willprove to be correct. Readers are cautioned that the foregoing list of importantfactors is not exhaustive. Furthermore, the forward-looking statementscontained in this news release are made as of the date of this news release,and, except as required by law or regulation, Caza does not undertake anyobligation to update publicly or to revise any of the included forward-lookingstatements, whether as a result of new information, future events or otherwise.The forward-looking statements contained in this news release are expresslyqualified by this cautionary statement. The Toronto Stock Exchange has neither approved nor disapproved the information contained herein. This information is provided by RNS The company news service from the London Stock Exchange