AGROTECH ACQUIRES NEW WEST TEXAS OIL PROPERTY, UPDATES REACTIVATION
Vancouver, B.C. December 29, 2009 - Agrotech Greenhouses Inc. (TSXV:AGV.H) (the “Company”) wishes to provide an update regarding its Reactivation on the TSX Venture Exchange (the “Exchange”) first announced in its news release dated July 27, 2009.
The Greater Joe Mill Project - Acquisition
Contact USA (see discussion below regarding “The Existing Acquisition Agreement and the Maxwell Acquisition”) has entered into a new Letter of Intent (“LOI”) with an established, private oil and gas company operating in the Permian Basin of West Texas, to acquire an interest in over 4,700 gross mineral acres. Additionally, Contact USA has the right to acquire an interest in up to 5,700 additional mineral acres under option.
Under the terms of the LOI, Contact USA will acquire a 25% net working interest in approximately 4,700 of the seller’s net mineral acres within the project area (the “Greater Joe Mill Project”) by committing to pay for Contact USA’s proportionate share of the drilling cost of the first four (4) wells and paying for its share of the associated mineral leases and existing salt water disposal (“SWD”) well. Upon closing, which is expected to occur in early January, Contact USA will pay the seller a total of US$689,902 for its share of the estimated drilling costs of the first well, mineral leases and SWD well. The drilling of the first well is expected to commence within the next 30-45 days. Drilling of the subsequent three wells is expected sometime in the second quarter of 2010. A finder’s fee will be payable by Contact USA in respect of this transaction.
The Greater Joe Mill Project
The Greater Joe Mill Project is located within the highly-prolific Permian Basin and on trend with the emerging Wolfberry trend currently being developed by the industry. Contact USA believes this project area has excellent oil potential and drilling efforts by industry participants have accelerated in recent years as a result of new completion methods and advancement in completion technologies.
The parties have identified a minimum of 35 low-risk drilling locations on 40-acre spacing within the Joe Mill Project area targeting the established Joe Mill sands, which are prolific producers in the region. Additionally, the parties believe excellent upside exists in the testing and development of both the Spraberry and deeper Wolfberry objectives, which are expected to significantly increase potential drilling locations. Contact USA and partners have identified up to eight (8) prospective pay horizons within the defined project area. The Project operator estimates well costs will average between US$1.2-1.3 million to drill and complete the proposed vertical wells down to an estimated total depth of 8,500 feet.
Contact USA has received a draft 51-101 report on the Joe Mill Project which will be filed with the Exchange.
The Existing Acquisition Agreement and the Maxwell Acquisition
As originally announced on July 27, 2009, pursuant to an agreement (the “Acquisition Agreement”) with 0856348 B.C. Ltd. (“PrivateCo”), the Company shall acquire all of the issued shares of PrivateCo by way of a take-over bid. PrivateCo together with its whollyowned subsidiary, Contact Oil & Gas USA Inc. (“Contact USA”) have entered into an agreement (the “Maxwell Agreement”) with Maxwell Operating, Inc., a Texas company (“Maxwell”) pursuant to which Contact USA will purchase an undivided 75% working interest (the “Maxwell Acquisition”) in certain oil and gas leases (the “Maxwell Property”). Maxwell will retain a 25% working interest in the Maxwell Property, and the consideration shall be a cash payment of US$2.0 million and the issuance of 400,000 shares of PrivateCo to Maxwell at closing, and a drilling commitment of US$2,500,000 to be incurred within three months of closing on the first five wells to be drilled on the Property. In addition, a finder’s fee of 600,000 shares of PrivateCo shall be payable to ABL Energy Partners LLC (“ABL”).
PrivateCo completed a private placement of 10,000,000 units at Cdn$0.30 per unit to raise Cdn$3,000,000, each unit consisting of one share of PrivateCo and one half of one warrant, each full warrant shall entitle the holder to buy one share of PrivateCo for Cdn$0.45 on or before October 2, 2011.
The closing of the Maxwell Acquisition has been delayed pending the resolution to PrivateCo’s satisfaction of certain outstanding issues between Maxwell and the holder of an underlying oil and gas lease. Management remains confident that these issues will be resolved in due course.
The Company’s Name Change and Consolidation
Shareholders of the Company have approved previously a 1 for 3 consolidation of the Company’s shares, which will reduce the Company’s issued shares to 15,484,666 shares, and a change of the Company’s name to “Contact Oil & Gas Inc.”.
Cautionary Statements
Completion of the Reactivation is subject to a number of conditions, including Exchange acceptance, shareholder approval, and the raising of additional financing. The Reactivation cannot close until the required shareholder approval is obtained. There can be no assurance that the Reactivation will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the Filing Statement being prepared in connection with the Reactivation, any information released or received with respect to the Reactivation may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transactions and has neither approved nor disapproved the contents of this news release
ON BEHALF OF AGROTECH GREENHOUSES INC.
"Colin Bowkett”Director
Neither the 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.