Colombian

[Tackler]

Cons AGX to acquire 75% of Rubiales Holdings

2007-05-30 18:11 MT - News Release

Mr. Ronald Pantin reports

COMPANY TO ACQUIRE 37.5% INTEREST IN HEAVY OIL PROJECT IN LLANOS BASIN COLOMBIA

Consolidated AGX Resources Corp. has entered into an agreement dated May 25, 2007, to acquire 75 per cent of the outstanding shares of Rubiales Holdings Limited. Rubiales holds 50-per-cent indirect interests in certain hydrocarbon concessions pursuant to three contracts with Ecopetrol SA for the exploration and exploitation of hydrocarbons in the Llanos basin in the Meta Department of Colombia. Consideration for the acquisition is $255-million (U.S.), of which $15-million (U.S.) has been paid to the selling shareholders as a non-refundable deposit. Up to $20-million (U.S.) of the purchase price may be paid in units having the same terms as the financing units.

Through its wholly owned subsidiary, Meta Petroleum Limited (MPL), Rubiales currently produces more than 18,500 gross (5,000 net) barrels of heavy crude oil per day from its Rubiales and Piriri association contracts with previously assessed proven and probable reserves of over 375 million barrels of heavy crude oil (12.5 degrees API). These figures are believed by the company to be reliable but are subject to review and confirmation by independent engineers, which have been retained by the company to prepare reports in compliance with Canadian Securities National Instrument 51-101. The Rubiales and Piriri concessions expire in July, 2016. Along with its partner, Ecopetrol SA, MPL continues to evaluate strategies to significantly increase the production of heavy crude from the Rubiales and Piriri association contracts. Rubiales holds a majority interest in a third concession named Quifa expiring in 2031 that currently is in the exploration stage of development. The company has signed a memorandum of understanding with Pacific Stratus Energy Ltd., which would allow Pacific Stratus, subject to Colombian regulatory approval, to farm in to 50 per cent of the company's interest in the Quifa concession by financing the company's cost of seismic studies and drilling three wells, at an estimated cost of $5.3-million (U.S.).

The company is also proceeding with its previously announced acquisition of Major International Oil SA, which holds other hydrocarbon interests in the Llanos basin in Colombia.

Financing for the acquisitions and the continuing operation will be provided through a private placement led by GMP Securities LP, and including Canaccord Adams Inc., Orion Securities Inc. and Frazer Mackenzie Limited, of 470.59 million subscription receipts at a price of 85 cents per subscription receipt. The private placement will be conducted on an agency commercially reasonable best-efforts basis. Closing of the subscription receipt financing is expected to occur on July 12, 2007, with the funds from such financing to be held in escrow until closing of the acquisition of Rubiales. At closing of the Rubiales acquisition, the subscription receipts will convert to units. Each unit will consist of one common share and one-half of a common share purchase warrant. Each whole share purchase warrant is exercisable at $1.30 per common share for a period of five years from closing of the financing. All securities issued pursuant to the private placement will be subject to a four-month hold period from the closing of the financing. This private placement supersedes the $35-million financing previously announced by the company in Stockwatch on May 9, 2007.

Financing for the $15-million (U.S.) non-refundable deposit has been provided through a bridge loan from Endeavour Mining Capital Corp. (EMCC). As consideration for providing the bridge loan, EMCC will receive four million warrants. Each warrant is exercisable for one common share of the company at a price of $1.05 for one year.

Effective May 22, 2007, Ronald Pantin and Gordon Keep were appointed to the company's board of directors, and Ray Strafehl resigned from the board. The proposed board members announced in the company's May 9, 2007, news in Stockwatch, John Zaozirny and Jaime Perez-Branger, along with Augusto Lopez, have been nominated for election at the company's upcoming annual meeting to be held June 18, 2007.

Mr. Lopez is the former president of Bavaria SA, Colombia's largest producer of beverages, and sits on the boards of numerous Colombian and Latin American enterprises involved in the securities, television, airline, cellular and banking industries.

At closing of the Rubiales acquisition, German Efromovich will be appointed to the board of directors. Mr. Efromovich is an entrepreneur who has created a ship, drilling rig leasing, and manufacturing, oil production and aviation empire. Mr. Efromovich's other ventures include power plants and medical supplies. He also launched the Brazilian airline Oceanair and in 2004 bought Colombian legacy airline Avianca. Through the Sinergy group of companies, he controls Avianca, Wayraperu, VIP Ecuador and Oceanair. His oil interests are controlled through Maritima Petroleo e Engenharia Ltda.

In addition to the options granted on May 9, 2007, the company has also agreed to grant incentive stock options to directors, officers and consultants to purchase four million shares at $1.05 per share, subject to regulatory approval.

Advisory fees are payable on closing of the Rubiales acquisition to Aventia Ltd. as to $4-million (U.S.), and $3,825,000 (U.S.) is payable to GMP Securities LP and to Endeavour Financial Ltd. (as to 50 per cent each).

"We are pleased to add Rubiales to our growing interests in Colombia," noted Ronald Pantin. "Meta Petroleum is one of the premier oil and gas private operators in Colombia and we look forward to the opportunity to become one of the largest producers of heavy crude oil in Colombia."

Mr. Efromovich, chairman of Avianca Airlines and a founding shareholder in Rubiales, commented: "I look forward to the chance to work with CSX and continue our rapid growth in Colombia. Our shareholders are proud of the employees of MPL and their accomplishments in building one of the most successful firms in Colombia. We believe this alliance will further enable us to become one of the largest and most efficient producers of crude oil in the southern hemisphere."

Closing of the above transaction is subject to TSX Venture Exchange approval.