MERGER-ACQUISITIONS / CanArgo Energy Inc. Announces Letter of
Intent With Fountain Oil
CDN SYMBOL: CNAR
JANUARY 27, 1998
CALGARY, ALBERTA--CanArgo Energy Inc. ("CanArgo") announced today
that a letter of intent has been executed with Fountain Oil
Incorporated ("Fountain") under which a business combination would
be effected on approximately a 50/50 basis taking into account
anticipated dilution. To implement the business combination,
CanArgo would prepare and submit for CanArgo shareholder approval
a Plan of Arrangement under which CanArgo would become a wholly
owned subsidiary of Fountain and CanArgo shareholders would
receive the right to 1.6 shares of Fountain Common Stock for each
share of CanArgo Common Stock held. It is proposed that the
combined company be renamed CanArgo Energy Corporation and that
Fountain's listings on the Nasdaq National Market System and the
Oslo Stock Exchange be maintained.
Execution of a definitive agreement governing the business
combination of Fountain and CanArgo is subject to satisfactory
completion of the due diligence examinations of the parties and
final approvals by the Boards of Directors of Fountain and
CanArgo. The Boards of Directors are expected to meet to consider
a definitive agreement during the first week of February 1998.
Consummation of any definitive agreement is expected to be subject
to satisfaction of various conditions, including approval by the
shareholders of both companies.
Fountain Oil has been developing oil and gas projects in Ukraine,
Southern Russia and Albania. It also owns a patented technology
for electrically enhanced oil recovery used to increase the
production of heavy oil. Other assets include approximately US$
11 million in cash plus rigs & equipment valued at approximately
US$ 5 million. 22,447,489 shares of Fountain's common stock are
outstanding.
The managements of CanArgo and Fountain have reached a preliminary
understanding regarding the business plan for the combined entity.
Initial emphasis would be placed on further development of
CanArgo's Ninotsminda and West Rustavi projects in the Republic of
Georgia. The combined company would also pursue Fountain's
Stynawske project in Ukraine and the Gorisht-Kocul project in
Albania together with further exploration in Georgia. The
remaining Fountain Oil projects are still being evaluated, but
there are no plans to develop these projects.
Under the preliminary business plan, the Board & senior management
of the combined company would consist of David Robson, Chairman &
Chief Executive Officer, Michael Binnion, Vice Chairman and Chief
Financial Officer, John McLeod, President and Director, Einar H.
Bandlien, Executive Vice President - Business Development, Russel
Hammond, Director, Robert Halpin, Director, Peder Paus, Director
and Nils N. Trulsvik, Director. The head office of the combined
company would be located in Calgary, Canada.
Commenting on the proposed combination, David Robson, Chairman --
designate of the proposed CanArgo/Fountain said, "The combined
Company will seek to become one of the most profitable and
successful independent companies in the oil, gas and energy sector
in Eastern Europe, with its focus on the Caucasus and Black Sea
area. The Company aims to achieve this by consolidating its
current portfolio, focusing on cash flow and reducing costs whilst
seeking and developing opportunities which promise good future
potential."
CanArgo is a Canadian public company quoted on the Canadian CDN
(Toronto). The closing price for a share of CanArgo common stock
on January 26, 1998 was CDN$2.30 (US$1.59), providing a market
capitalization of US$19.2 million for CanArgo based on the
12,074,988 presently outstanding common shares. The principal
asset of CanArgo is a 55.9 percent interest in Ninotsminda Oil
Company Limited, which holds a production sharing agreement for
the Ninotsminda field, the West Rustavi field and the Manavi
prospect, all located in the independent Republic of Georgia. The
Ninotsminda field is located 40 km east of Tblisi, consists of
26,800 acres and is currently producing approximately 2,000
barrels of oil per day plus associated gas from seven wells. West
Rustavi is about to commence test production, and additional
seismic data will be collected to assess the Manavi prospect. The
oil is sold on the international market based on a Brent market
price. |
