COSTA Energy Inc.
TSX - V: COE
December 29, 2006
COSTA Closes $1.5 Million Financing
CALGARY - COSTA Energy Inc. announced today that it has closed the previously announced financing and has issued 9,090,910 Common Units (as defined below) at $0.11 per unit and 3,703,706 Flow-Through Units (as defined below) at $0.135 per unit on a private placement basis. Each Common Unit consists of one common share and one common share purchase warrant (a "Warrant"). Each Flow-Through Unit consists of one common share, issued on a "flow-through basis" for the purposes of the Income Tax Act (Canada), and one Warrant. Each Warrant will entitle the holder thereof to purchase one common share at a price of $0.145 per share until March 31, 2008. Gross proceeds from the issuance of the Common Units and Flow-Through Units are $1.5 million, and will be used to fund COSTA's ongoing exploration program, for working capital purposes and to repay obligations under certain outstanding debentures.
With this new financing, COSTA now has 24,403,576 common shares, 2,350,151 non voting shares, 12,794,616 warrants and 974,395 options to acquire an equivalent number of common shares issued and outstanding. MHI Energy Partners and/or their associates and affiliates (collectively, "MHI") now hold 6,669,557 common shares, 1,771,067 non-voting shares, 5,003,182 warrants and 53,970 options (approximately 30.7% of the issued and outstanding common shares (excluding non-voting shares) on a diluted basis, and approximately 33.3% of the issued and outstanding shares on a diluted basis).
The Company's board of directors is now comprised of Messrs. Curtis D. Bartlett, Terry D. Brooker, Timothy S. Granger, Ron D. Miller and Ronald E. Newman. The officers of the company will be Mr. Terry D. Brooker as President and Chief Executive Officer, and Mr. David F. Campbell as Vice President and Chief Financial Officer.
The common shares and Warrants issued pursuant to this private placement are subject to a four month statutory hold period. A commission of 5.0% of the gross proceeds was paid to registered dealers who arranged for subscribers other than MHI and its affiliates and associates.
This new funding will significantly improve the Company's financial position and allow a continuing development program to grow the Company's production base. At the same time, the Company has taken significant steps to reduce its general and administrative costs and to create a positive cash flow from the current production. The initial drilling focus will be at Veteran, subject to continuing positive production results from a new well, and a new horizontal development of an existing field at Macoun, Saskatchewan.
COSTA is a Calgary based junior oil and gas company, which explores for, develops, produces, and sells crude oil, natural gas liquids and natural gas in Alberta, British Columbia and Saskatchewan.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Forward Looking Statements: Certain information regarding COSTA in this news release including management's assessment of future plans and operations and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, COSTA's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits COSTA will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhausted. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and COSTA does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Requests for shareholder information should be directed to:
Mr. Terry D. Brooker, Vice President and Chief Operating Officer
COSTA Energy Inc.
(403) 206-3430
Email: tbrooker@costaenergy.com
