Petrobank Announces Shareholder Approval of Proposed

Petrobank Announces Shareholder Approval of Proposed Reorganization 
CALGARY, ALBERTA -- (Marketwire) -- 12/17/12 -- Petrobank Energy and
Resources Ltd. (TSX:PBG) is pleased to announce that our previously
proposed reorganization with our 56% owned subsidiary, PetroBakken
Energy Ltd. (TSX:PBN), which will result in Petrobank shareholders
effectively receiving Petrobank's share holdings in PetroBakken while
maintaining their interest in the remaining Petrobank assets (the
"Reorganization"), has been approved by the shareholders of each of
Petrobank and PetroBakken. We will seek final approval of the Court
of Queen's Bench of Alberta on Tuesday, December 18, 2012 and
anticipate that the Arrangement will be made effective on December
31, 2012 (the "Effective Date").  
The Reorganization will result in a newly incorporated company ("New
Petrobank") acquiring all of the assets and liabilities of Petrobank,
other than its PetroBakken common shares. Upon completion of the
Reorganization, each Petrobank share will entitle the holder thereof
to one share of New Petrobank, which will own and operate Petrobank's
existing Heavy Oil Business, and a number of PetroBakken shares to be
determined by dividing the number of PetroBakken shares owned by
Petrobank on December 31, 2012 by the number of Petrobank shares
outstanding (the Exchange Ratio"). As of the date of this press
release, Petrobank owns 107.855 million PetroBakken shares (including
the shares received today through our participation in PetroBakken's
dividend reinvestment plan) and has 96.615 million basic shares
outstanding, which would result in an Exchange Ratio of 1.116. The
final Exchange Ratio will be impacted by the number of Petrobank
shares issued prior to December 31, 2012 pursuant to the exercise of
share based compensation. Based on the closing price of the Petrobank
shares on December 17, 2012, the Exchange Ratio would be 1.101 on the
Effective Date. 
Following the Reorganization, New Petrobank will continue to own the
Heavy Oil Business, including cash anticipated to be in excess of $90
million. Given our cash position and the current trading price of the
PetroBakken shares, we have elected to receive the PetroBakken
December dividend, payable in January 2013, in PetroBakken shares
pursuant to PetroBakken's divi
dend reinvestment program. These
PetroBakken shares will be held by New Petrobank for investment
purposes and may be sold at a later date. Petrobank shareholders at
the Effective Date who retain the PetroBakken shares received
pursuant to the Reorganization will qualify for PetroBakken's January
2013 dividend, payable in mid-February, and may participate in
PetroBakken's share dividend program, as further described below. 
Petrobank has received confirmation from the Toronto Stock Exchange
(the "TSX") that our existing Normal Course Issuer Bid ("NCIB") will
continue to be available to New Petrobank following the
Reorganization. Our existing NCIB allows us to repurchase up to
7,784,304 of our common shares for cancellation until September 13,
2013. Petrobank has already purchased 3,466,700 common shares to date
under this NCIB, resulting in an additional 4,317,604 common shares
available for repurchase. Petrobank may not purchase more than
113,821 common shares on any trading day, subject to certain block
trade exemptions. We have cancelled our previous automatic share
purchase plan and may continue to make repurchases from time to time
depending on market conditions.  
Petrobank shareholders of record as of the Effective Date will be
entitled to receive the PetroBakken Shares to be distributed pursuant
to the Reorganization. In addition, the TSX has determined that due
bill trading procedures will be used in connection with the
distribution of the PetroBakken shares to the Petrobank shareholders
pursuant to the Reorganization. As a result of the use of due bills,
purchasers of Petrobank Shares on the TSX in the period from December
27, 2012 to December 31, 2012 (the "Due Bill Period") will be
entitled to receive the PetroBakken shares notwithstanding that such
purchases will not settle until after December 31, 2012. Any trades
that are executed during the Due Bill Period will be automatically
flagged to ensure that such purchasers receive the entitlement to the
PetroBakken shares and the sellers do not. The due bills will be
redeemed on January 4, 2013 once all trades with attached due bills
entered into up to the end of the Due Bill Period have settled. As a
result of the use of due bills, all trades in Petrobank shares up to
and including December 31, 2012 should include the value of the
PetroBakken shares distributable to a Petrobank shareholder pursuant
to the Reorganization. 
The ex-distribution date for the entitlement to receive the
PetroBakken shares pursuant to the Reorganization will be January 2,
2012. Accordingly, any trades in Petrobank shares made on or after
January 2, 2012 will not include the right to receive the PetroBakken
shares to be distributed pursuant to the Reorganization.  
The Reorganization is expected to be non-taxable to Petrobank and
PetroBakken as well as Canadian resident shareholders of Petrobank.
Canadian resident shareholders of Petrobank will split their existing
adjusted cost base ("ACB") between New Petrobank and PetroBakken. The
fair market value of the New Petrobank shares received will form the
ACB of New Petrobank. The ACB of Petrobank less the ACB of New
Petrobank will form the ACB of the PetroBakken shares received.
Existing shareholders of PetroBakken will not have any ACB
adjustments and will not incur any tax liability from the
Reorganization. 
For U.S. shareholders of Petrobank, this transaction will be treated
as a taxable dividend according to U.S. tax laws. It is expected that
the dividend will be based on the fair market value of the New
Petrobank shares received and will be considered a "qualified
dividend" for U.S. tax purposes, subject to the reduced tax rates
applicable to long-term capital gains for individuals, provided
shareholders meet the holding-period requirements. It is further
anticipated that the dividend will be deemed to have been received on
December 31, 2012, at which time registered holders of Petrobank
shares will become registered holders of New Petrobank shares,
notwithstanding that the New Petrobank shares may not be received in
the accounts of beneficial shareholders until January 2013. Tax
information has been published on the websites of both Petrobank and
PetroBakken and further information regarding the estimated fair
market value of the New Petrobank shares will be posted in January;
however shareholders are encouraged to seek the advice of their own
tax professionals. 
PetroBakken Share Dividend Program 
Concurrent with the Reorganization, PetroBakken has adopted a share
dividend program ("SDP"). PetroBakken currently has a dividend
reinvestment plan in place that is available only to Canadian
PetroBakken shareholders, and PetroBakken intends to phase out the
dividend reinvestment plan with a share dividend program that would
generally be available to most PetroBakken shareholders. Although
PetroBakken expects that the SDP will ultimately replace the dividend
reinvestment plan, the dividend reinvestment plan will remain in
place for a transition period following the implementation of the
share dividend program to allow registered and beneficial
shareholders to enroll in the share dividend program.  
PetroBakken shareholders participating in the SDP can elect to
receive share dividends on all or some of their shares. Anticipated
benefits of participation in the SDP include: 


 
--  Dividends will be paid in the form of shares to those shareholders who
    elect to participate in the SDP at 95% of the weighted average market
    price calculated 5 days before the payment date. 
 
--  Participation in the SDP is not expected to generate dividend income for
    Canadian PetroBakken shareholders holding their shares in taxable
    accounts. Shares issued under the SDP are expected to have a nominal
    cost for Canadian tax purposes and, as a result, receipt of stock
    dividends under the SDP will effectively result in a downward adjustment
    to the shareholder's cost base and would be taxed as a capital gain or
    loss upon the eventual sale of the shares. In addition, Canadian
    PetroBakken shareholders participating in the SDP may also benefit if
    the tax rate on capital gains is lower than the tax rate on dividend
    income applicable to their individual circumstances. 
 
--  Non-Canadian shareholders holding PetroBakken shares in a taxable
    account who elect to participate in the SDP are not expected to be
    subject to Canadian withholding taxes that typically range from 15% -
    25% on dividends paid by PetroBakken. Therefore the number of shares
    received under the SDP will reflect the entire amount of the stock
    dividend. 
 
--  Shareholders with tax-deferred accounts are not expected to be impacted.

 
All shareholders are advised to consult their own tax advisors
regarding the tax consequences to them of receiving cash or share
dividends on their PetroBakken shares. For more details discussing
the potential tax consequences of the SDP, please refer to
PetroBakken and Petrobank's Joint Management Information Circular
dated November 16, 2012 filed on SEDAR and available on our website
at http://www.petrobank.com.  
Shareholders wishing to participate in the SDP with respect to the
PetroBakken shares received pursuant to the Reorganization should
contact their broker or intermediary or, in the case of registered
shareholders, contact PetroBakken's transfer agent, Olympia Trust
Company. Further information in respect of the SDP, as well as the
necessary enrolment forms, will be available prior to year end on
PetroBakken's website at www.petrobakken.com.  
Petrobank Energy and Resources Ltd. is a Calgary-based oil and
natural gas exploration and production company with operations in
western Canada. The Company currently operates high-impact projects
through two business units and a technology subsidiary. Petrobank's
56% currently owned TSX- listed subsidiary, PetroBakken Energy Ltd.
(TSX:PBN), is an oil and gas exploration and production company
combining light oil Bakken and Cardium resource plays with
conventional light oil assets. Whitesands Insitu Partnership, a
partnership between Petrobank and its wholly-owned subsidiary
Whitesands Insitu Inc., applies Petrobank's patented THAI(R) heavy
oil recovery process in the field. THAI(R) is an evolutionary in-situ
combustion technology for the recovery of bitumen and heavy oil.
THAI(R) and CAPRI(R) are registered trademarks of Archon Technologies
Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources
Ltd., for specialized methods for recovery of oil from subterranean
formations through in-situ combustion techniques and methodologies
with or without upgrading catalysts. Used under license by Petrobank
Energy and Resources Ltd. 
Forward-Looking Statements. Certain information provided in this
press release constitutes forward-looking statements. Specifically,
this press release contains forward-looking statements relating to
the terms of and timing for completion of the Reorganization, payment
of future dividends, expected tax treatment of the Reorganization and
the future business of Petrobank. Forward-looking statements are
necessarily based upon assumptions and judgments with respect to the
future including, but not limited to, the receipt of required
regulatory approvals and satisfaction of other conditions to the
Reorganization, the outlook for commodity markets and capital
markets, the performance of producing wells and reservoirs, well
development and operating performance, general economic and business
conditions, weather, the regulatory and legal environment and other
risks associated with oil and gas operations. The reader is cautioned
that assumptions used in the preparation of such information,
although considered reasonable at the time of preparation, may prove
to be incorrect. Actual results achieved during the forecast period
will vary from the information provided herein as a result of
numerous known and unknown risks and uncertainties and other factors.
You can find a discussion of certain of those risks and uncertainties
in our Canadian securities filings. Such factors include, but are not
limited to: general economic, market and business conditions;
fluctuations in oil prices; the results of exploration and
development drilling, recompletions and related activities; timing
and rig availability, outcome of exploration contract negotiations;
fluctuation in foreign currency exchange rates; the uncertainty of
reserve estimates; changes in environmental and other regulations;
risks associated with oil and gas operations; risks associated with
the receipt of regulatory approvals and the satisfaction of other
conditions to the Reorganization, and other factors, many of which
are beyond the control of Petrobank and PetroBakken. There is no
representation by Petrobank or PetroBakken that actual results
achieved during the forecast period will be the same in whole or in
part as those forecast. Except as may be required by applicable
securities laws, neither Petrobank nor PetroBakken assumes any
obligation to publicly update or revise any forward-looking
statements made herein or otherwise, whether as a result of new
information, future events or otherwise.
Contacts:
Petrobank Energy & Resources Ltd.
John D. Wright
President and Chief Executive Officer
403.750.4400 
Petrobank Energy & Resources Ltd.
Chris J. Bloomer
Senior Vice President and Chief Operating Officer
403.750.4400 
Petrobank Energy & Resources Ltd.
Peter Cheung
Vice President Finance and Chief Financial Officer
403.750.4400
ir@petrobank.com
www.petrobank.com
 
 
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