ann out -update, reconstruction proposal etc..

SHAREHOLDER UPDATE/RECONSTRUCTION PROPOSAL
AND APPOINTMENT OF NEW DIRECTOR
KEY POINTS:
 Golden Eagle Gas Field
 General Overview and Forward Strategy
 Restructure & Recapitalisation Proposal
 Appointment of Director
Golden Eagle Gas Field
The Golden Eagle Gas Field consists of a number of leases formulated into a unit, designated as the ?Golden Eagle 70 Unit?. The United States Federal Bureau of Land Management ("BLM") administers the unit in accordance with the provisions of a unit agreement ("Unit Agreement").
The Company's leases on the Golden Eagle 70 Unit, which currently consists of approximately 22,500 acres in aggregate, have an initial term of five years from first approval (15 May 2006) and if not extended, will terminate on 15 May 2011. The Company is required to demonstrate an economic case for the Paradox Basin #3 well located within Golden Eagle 70 Unit as a ?paying well? to the satisfaction of the BLM by the 15 May 2011 expiry deadline. This is in order to retain the lands within the Golden Eagle 70 Unit area from which the well obtains its production of gas ("participating area"), which area has not yet been determined. Should a ?paying well? determination be achieved, to retain the remainder of the lands in the Golden Eagle 70 Unit outside of the participating area, a new well must be in progress on the anniversary of the fifth year from the date of first approval (being 15 May 2006).
The Company has placed priority on securing the Golden Eagle Gas Field and is making a considerable effort to meet both of the above requirements. In this regard, the Company is working in conjunction with Interactive Exploration Solutions, Inc. ("Inexs", our new US based geological and engineering service provider) and other support teams.
ABN 39 063 074 635
Unit 18, 40 St Quentin Avenue Claremont, WA, 6010 PO Box 216 Claremont, WA, 6910
Tel: 08 9385 0700 Fax: 08 9385 4400 Email: [email protected]
General Overview and Forward Strategy
In 2006, the Company issued a prospectus which outlined a vision for the exploration and exploitation of the highly promising Golden Eagle Gas Field prospect. It appears that the planned development of the field has been adversely affected by operational difficulties, the nature of certain advice received and historically record low gas prices. Nevertheless, the directors still believe that the Golden Eagle Gas Field is potentially of high value to the Company and contains a number of highly prospective targets which have not yet been explored. It is envisaged that in conjunction with our new geological advisors, Inexs, the Company will focus on these over the second five-year term of the Golden Eagle 70 Unit, if the extension of the unit is approved by the BLM.
As noted above, there is some uncertainty surrounding the Company's ability to extend its leases on the Golden Eagle 70 Unit. Further, the Company's past experience indicates that future development of the Golden Eagle Gas Field will be subject to significant time lags due to the need to obtain regulatory approvals and to raise funds required to develop the field. The directors have therefore decided that a new project or projects are required to generate new interest in the Company and better position the Company to raise funds, and at the same time allowing the progressive development of the Golden Eagle Gas Field.
The Company's strategy moving forward will focus on the following considerations:
 clear time frames and definitive goals;
 realise the Golden Eagle 70 Unit extension, to secure value in the field;
 maximise production capacity from Paradox Basin #3 (currently only 16ft of approximately 110ft of zones have been accessed);
 explore prime targets which are identified;
 provide funding for Golden Eagle Gas Prospect development and or procurement of a new project or projects; and
 seek investor support to inject fresh life into the Company.
Restructure & Recapitalisation Proposal
The Company has entered into a reconstruction deed with Otsana Pty Ltd trading as Otsana Capital ("Otsana Capital") which will facilitate the Company?s strategic and forward plan ("Reconstruction Deed").
Under the Reconstruction Deed, the Company will seek shareholder approval to (at a shareholders; meeting to be held no later than 15 May 2011 ("Shareholder Meeting"):
a) consolidate its existing shares on a 1 for 2 basis; and
ABN 39 063 074 635
Unit 18, 40 St Quentin Avenue Claremont, WA, 6010 PO Box 216 Claremont, WA, 6910
Tel: 08 9385 0700 Fax: 08 9385 4400 Email: [email protected]
b) undertake the following capital raisings:
(i) an offer of up to 320,000,000 shares at an issue price of $0.01 per share (on a post consolidation basis) payable in full on application, to raise up to $3,200,000; and
(ii) an offer of 300,000,000 options each to acquire a share, exercisable at $0.02 on or before 31 January 2015, issued at an issue price of 0.1 cents each (on a post consolidation basis).
Otsana Capital has agreed to support the above capital raisings.
It is also proposed that the directors of the Company will have an ability to participate in the proposed $3.2 million capital raising and will each be issued 20,000,000 options on the above terms (subject to shareholder approval).
In addition to these capital raisings, under the Reconstruction Deed, the Company has agreed to conduct a non-renounceable rights issue to existing shareholders on the basis of 1 share for every 5 shares held on the record date, at an issue price of $0.01 per share (post consolidation), together with 1 attaching option on the same terms as per the above (exercisable at $0.02 on or before 31 January 2015, issued at an issue price of 0.1 cents each) for every share subscribed for.
Funds raised under the capital raisings are intended to enable the Company to act quickly in the event a new project is identified by the Company, and also to meet commitments on the Golden Eagle 70 Unit (should the leases be extended).
Under the Reconstruction Deed, the Company has also agreed to appoint a new director nominated by Otsana Capital to the board of the directors of the Company, being Mr Anthony Kain. Further information on Mr Kain is provided below.
As noted above, the recapitalisation proposal is subject to shareholder approval. A notice of meeting will be mailed to shareholders in due course. The Company expects the Shareholder Meeting to take place within 6 weeks.
Appointment of Director
The directors of the Company are pleased to announce the appointment of Mr Anthony Kain as a Non-Executive director of the Company.
Anthony spent 15 years as an executive in the oil and gas industry before his current role as a private investor and special counsel, focused on mining and oil & gas, consulting to law firm Talbot Olivier. He has played and continues to play a key role in the formation and development of numerous privately owned and publicly listed companies working in the resources sector with
ABN 39 063 074 635
Unit 18, 40 St Quentin Avenue Claremont, WA, 6010 PO Box 216 Claremont, WA, 6910
Tel: 08 9385 0700 Fax: 08 9385 4400 Email: [email protected]
his most recent focus on the development of resource assets in Mongolia. His experience includes national and international capital raising, joint ventures and mergers and acquisitions through his exposure to a diverse range of development opportunities, working with technical teams primarily in the energy, energy equipment and resources sector throughout the Asia-Pacific, Europe, Canada and the USA.
In the late 1990?s Mr Kain and a partner formed NorthSun Energy Ltd ("NorthSun") and a team which included an AGIP Vice President and the former Exploration Manager who discovered the North Rankin and Goodwyn fields that underpin the NorthWest Gas Shelf project. The company business plan was the acquisition of gas assets that had not been developed to their full potential and NorthSun focused on a niche play targeting assets in the Po Valley Northern Italy.
A major part of the 30 trillion cubic feet of gas discovered in Italy was discovered in the Po Valley and when Italy joined the EEC, strict new rules governing monopolies led to change and movement in the Po Valley. NorthSun emerged from this change with a strategic position and Mr Kain was one of the key executives involved day to day in running the company until it was ultimately rolled into Po Valley Energy in 2002 (ASX listed ?PVE?).
From 2004 through to 2008 Anthony was Managing Director and CEO of ASX listed oil and gas company Nuenco NL and presided over the acquisition and development of a US acreage position in California to capitalize on high US natural gas prices at the time. The company focused on the extension of the major Lost Hills Oil Field in California?s San Joaquin Basin drilling multiple wells while also building one of the largest acreage positions of any foreign company in the Basin at that time.
Mr Kain brings a welcome diverse range of corporate experience to the board of the Company.
On behalf of the board,
Richard Sciano
Managing Director