SUROCO ENERGY INC. 
By For Immediate Release
Calgary, Alberta April 28, 2014 SUROCO ENERGY INC. SIGNS AGREEMENT WITH PETROAMERICA OIL CORP. FOR THE SALE OF ALL OF SUROCO'S ISSUED AND OUTSTANDING COMMON SHARES
Suroco Energy Inc. (TSX Venture Exchange: SRN) ("Suroco") is pleased to announce that it has entered into an arrangement agreement (the "Arrangement Agreement") with Petroamerica Oil Corp. ("Petroamerica") (TSX Venture Exchange: PTA) whereby Petroamerica has agreed to acquire all of the issued and outstanding common shares of Suroco (the "Suroco Shares") by way of a statutory plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). Pursuant to the terms of the Arrangement Agreement, holders of Suroco Shares ("Suroco Shareholders") will receive 1.7627 common shares of Petroamerica ("Petroamerica Shares") for each Suroco Share held (the "Exchange Ratio").
Based on Petroamerica's most recent closing price of CDN$0.325 per share on April 25, 2014, the Exchange Ratio reflects a value of CDN$0.573 per Suroco Share, representing a 36.4% premium over Suroco's closing price on April 22, 2014 of CDN$0.42 and a 66.6% premium over Suroco's 10-day volume weighted average trading price. The Arrangement is expected to close on or around June 30,
2014, provided all required Suroco Shareholder, court, stock exchange and regulatory approvals are obtained.
Interests in nine E&P contracts focused on high netback light and medium oil exploration and production in the Llanos and Putumayo Basins in Colombia.
Exposure to the prolific N Sand oil play in the Putumayo Basin, which is expected to fuel the future growth of the company.
Production of approximately 8,967 barrels of oil equivalent per day (net before royalty) (March
2014 average).
Proved and Probable reserves of approximately 8.0 million barrels of oil equivalent (net before royalty) with before-tax net present value (discounted at 10%) of approximately $284 million.
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Combined 2014 expected cash flow from operations of approximately $116 million funds the combined capital expenditure program of approximately $85 million, resulting in free cash flow of approximately $30 million.
Go-forward 2014 drilling program consisting of 12 wells this year; 6 targeting high impact exploration and 6 lower risk appraisal and development wells, providing a number of near term catalysts.
A substantial inventory of exploration prospects and leads to be worked up for future drilling to support future production growth.
A strong balance sheet - it is anticipated that the combined company will have a cash balance of approximately $62 million at closing, providing opportunity to grow and consolidate in the region.
Total debt of only $31.5 million.
A market capitalization of approximately CDN$270 million based on Petroamerica's trading price of April 25, 2014 (assumes approximately 832 million Petroamerica shares outstanding upon completion of the Arrangement).
Suroco qualified as a restricted operator, and the combined company intends to apply to become an unrestricted operator.
Petroamerica will host a conference call and webcast to discuss this transaction on Tuesday, April 29,
2014 beginning at 9:00 am Mountain Time. The telephone number for the conference call is 866-906-
1113 or 857-288-2559 (International). To participate in the webcast you must register at
http://wsw.com/webcast/cc/pta.v.
Under the terms of the Arrangement, each Suroco Shareholder will receive consideration of 1.7627
Petroamerica Shares per Suroco Share..
It is anticipated that Petroamerica will issue an aggregate of 237. million Petroamerica Shares to Suroco Shareholders in connection with the Arrangement. On closing, Petroamerica intends to repay Suroco's credit facility, of which not more than US$21.5 million was drawn as at March 31, 2014. It is anticipated that Petroamerica will have a cash balance of US$62 million, total debt of $31.5 million and approximately 832 million Petroamerica Shares outstanding upon completion of the Arrangement.
Pursuant to the Arrangement Agreement, all of Suroco's outstanding options will be exercised in accordance with their terms, paid out in cash based on the "in-the-money" amount or otherwise terminated prior to the closing of the Arrangement. In addition, under the terms of the Arrangement Agreement, all holders of Suroco warrants and contingent value rights will be entitled to receive Petroamerica Shares, adjusted for the Exchange Ratio, in lieu of the number of Suroco Shares otherwise issuable upon the exercise thereof.
Completion of the Arrangement is subject to customary closing conditions, including requisite Suroco Shareholder, government and regulatory approvals. The Arrangement will need to be approved by not less than two-thirds of the votes cast by Suroco Shareholders, and by a majority of votes cast by Suroco Shareholders after excluding the votes cast by shareholders who are excluded shareholders under applicable securities requirements, in person or by proxy at the annual and special meeting (the "Suroco Meeting") of Suroco Shareholders to be held on or about June 25, 2014. The Arrangement also requires approval of the TSX Venture Exchange, and of the Court of Queen's Bench of Alberta.
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The Arrangement Agreement provides for, among other things, a non-solicitation obligation on the part of Suroco, with a customary "fiduciary out" provision that entitles Suroco to consider and accept a superior proposal, and a right in favour of Petroamerica to match any superior proposal. If the Arrangement Agreement is terminated in certain circumstances, including if Suroco enters into an agreement with respect to a superior proposal or if the board of directors of Suroco withdraws or modifies its recommendation with respect to the proposed Arrangement, Petroamerica is entitled to a termination payment in cash of CDN$4 million. Suroco is also entitled to a reciprocal termination payment in cash of CDN$4 million in certain circumstances. Upon completion of the Arrangement, one additional director, to be agreed upon between Suroco and Petroamerica, is expected to join the Petroamerica board, subject to TSX Venture Exchange approval. A complete copy of the Arrangement Agreement will be available under the respective issuer profiles for Suroco and Petroamerica on SEDAR at www.sedar.com.
The Suroco board of directors has unanimously approved the Arrangement Agreement and, based on the verbal fairness opinion of its financial advisor, Peters & Co. Limited, determined that the consideration to be received by the Suroco Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Suroco Shareholders, determined that the Arrangement is in the best interests of Suroco, and resolved to unanimously recommend that Suroco Shareholders vote their Suroco Shares in favour of the Arrangement. The directors and senior officers of Suroco and one Suroco Shareholder holding greater than 10% of the outstanding Suroco Shares, who collectively hold 19.18% of the issued and outstanding Suroco Shares, have entered into support agreements to vote their Suroco Shares in favour of the Arrangement at the Suroco Meeting.
The Petroamerica board of directors has unanimously approved the Arrangement Agreement. Black Spruce Merchant Capital Corp. is acting as sole financial advisor to Petroamerica with respect to the Arrangement. GMP Securities L.P. and Canaccord Genuity Corp. are acting as strategic advisors to the Arrangement. GMP Securities L.P. has provided a verbal fairness opinion with respect to the Arrangement to the board of directors of Petroamerica. Approval of holders of Petroamerica shares is not required to complete the Arrangement.
Full details of the Arrangement will be included in an information circular of Suroco to be mailed to Suroco Shareholders in accordance with applicable securities laws. A copy of the aforementioned information circular and related documents will be filed under Suroco's issuer profile on SEDAR at www.sedar.comat the applicable time.
For a complete description of Petroamerica's assets, business and financial matters, please visit their website at www.petroamericaoilcorp.comand review their publicly disclosed information available on Petroamerica's issuer profile at www.sedar.com.
For the foregoing discussions in this press release, the following terms have the following respective meanings:
"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
"barrels of oil equivalent" is at a conversion rate of 6,000 cubic feet ("cf") of natural gas for one
barrel of oil and is based on an energy equivalence conversion method. Boe may be misleading,
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particularly if used in isolation. A boe conversion ratio of 6,000 cf: 1 barrel is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.
General
Suroco 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 Colombia. The Suroco Shares trade on the TSX Venture Exchange under the symbol SRN.
For further information please contact Alastair Hill, President and Chief Executive Officer of Suroco or Travis Doupe, VP Finance and Chief Financial Officer of Suroco, or visit our website at www.suroco.com:
Telephone: (403) 232-6784
Facsimile: (403) 232-6747
Forward-Looking Statements
Certain statements included in this press release constitute forward-looking statements under applicable securities legislation. These statements relate to future events or future performance of Suroco and Petroamerica. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. Forward-looking statements or information in this press release include, but are not limited to, the timing and successful completion of the Arrangement, business strategy, priorities and plans, expected production, the evaluation of certain prospects in which Suroco holds an interest, estimated number of drilling locations, expected capital program (including its allocation), production growth, reserves growth, the receipt of and the timing of receipt of environmental licenses, the ability to sell crude volume and other statements, expectations, beliefs, goals, objectives assumptions and information about possible future events, conditions, results of operations or performance. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Business priorities disclosed herein are objectives only and their achievement cannot be guaranteed. Indicative capital estimates for 2014
These assumptions, risks and uncertainties include, among other things, the inability to obtain all necessary approvals for completion of the Arrangement; assumptions inherent in current guidance; projected capital investment levels; the state of the economy in general and capital markets in particular; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; changes in environmental and other regulations; risks associated with oil and gas operations and future exploration activities; the uncertainty of reserves estimates; the uncertainty of estimates and projections relating to production, costs and expenses; the need to obtain required approvals from regulatory authorities; product supply and demand; market competition; risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption); and other factors, many of which are beyond the control of Suroco and Petroamerica. You can find an additional discussion of those assumptions, risks and uncertainties in Suroco's and Petroamerica's respective Canadian securities filings.
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The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, Suroco disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Suroco undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above. New factors emerge from time to time, and it is not possible for management of Suroco to predict all of these factors and to assess in advance the impact of each such factor on Suroco's or Petroamerica's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement or information. The forward-looking statements contained herein are expressly qualified by this cautionary statement. Moreover, neither Suroco nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.
Statements relating to "reserves" are deemed to be forward-looking statements or information, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitable in the future. There are numerous uncertainties inherent in estimating quantities of proved reserves, including many factors beyond the control of Suroco or Petroamerica, as applicable. The reserve data included herein represents estimates only. In general, estimates of economically recoverable oil and natural gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary considerably from actual results. All such estimates are to some degree speculative and classifications of reserves are only attempts to define the degree of speculation involved.
The assumptions relating to reserves and resources are contained in the reports of GLJ Petroleum Consultants Ltd. for Suroco and Petroamerica each dated effective December 31, 2013. The estimates of reserves and future net revenue for individual properties in this news release may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Arrangement and has neither approved nor disapproved the contents of this press release.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
(Not for dissemination in the United States of America)
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