Caracal Energy and TransGlobe Energy Announce Proposed Business Combination to Create One of the Largest Independent Africa

Caracal Energy and TransGlobe Energy Announce Proposed Business Combination to 
Create One of the Largest Independent Africa Focused
Oil Producers 
Caracal and TransGlobe joint investor conference call at 7:00 a.m.
Calgary Time, March 17, 2014 
CALGARY, ALBERTA -- (Marketwired) -- 03/15/14 --  
NOT FOR DISSEMINATION OUTSIDE OF CANADA AND THE UNITED STATES 
Caracal Energy Inc. (LSE:CRCL) ("Caracal") and TransGlobe Energy
Corporation (TSX:TGL)(NASDAQ:TGA) ("TransGlobe") announced today that
they have entered into an agreement (the "Arrangement Agreement") to
merge the two companies by way of an exchange of shares pursuant to a
plan of arrangement under the Business Corporations Act (Alberta)
(the "Arrangement"). 
Rationale for the Proposed Business Combination 
The Arrangement would create one of the largest independent Africa
focused oil producers, poised for strong growth in oil production and
reserves from development and high impact exploration in Chad and
Egypt. Based on March 14, 2014 closing prices, the merged company
would have a combined market capitalization of approximately US$1.8
billion(1) and:  


 
--  Material Onshore Oil Production - Pro forma current oil production of
    25,100 bbl/d (company working interest) and 2P reserve base of 135 MMbbl
    (company working interest) from majority operated assets in Chad and
    Egypt and additional non-operated interests in Yemen 
--  Near Term Production Growth - Average 2014E production target of 31,000-
    34,000 bbl/d (company working interest); ongoing appraisal and
    development program 
--  Catalyst Rich Exploration Program - Campaign of 30-42 high impact
    exploration wells in Chad by 2016, targeting 70+ per cent of a total 833
    MMbbl of gross risked mean prospective resources and low risk step out
    exploration in the Egyptian Eastern Desert 
--  Strong Regional Position - Enhanced scale provides a platform for future
    organic and acquisition growth in Africa, building on core operated
    positions in Chad and Egypt, with ready access to key infrastructure and
    export markets 
--  Improved Financial Position - Combined business plan remains fully
    funded, with a pro forma cash position of US$302 million and no net debt
    as at December 31, 2013, and a growing cash flow profile 
 
(1) Calculated on basic shares outstanding as of March 14, 2014 including   
    shares assuming full conversion of Caracal outstanding convertible      
    debentures into 28.6mm shares. Exchange rates based on posted Bank of   
    England Daily Spot Exchange Rates against GBP as at March 13, 2014.     

 
"This transaction will clearly benefit both companies and their
shareholders, as the enhanced scale will expedite production growth
and increase cash flow," said Gary Guidry, Caracal's President &
Chief Executive Officer. "At its core, this transaction is about
greater value creation for all shareholders of the merged company.
Through the combination of complementary asset bases, we will create
a solid regional platform for compounding reserves and production
growth."  
Added Ross Clarkson, TransGlobe's President & Chief Executive
Officer, "Consistent with our onshore, operated, oil strategy, the
combination will provide shareholders with significant organic
production and reserves growth, while providing increased country
diversification. Specifically, we're pursuing additional upside of
over four billion barrels of gross mean unrisked prospective
resource, aggressively targeted with a fully funded drilling program.
And as one of the largest independent oil producers in Africa, we
will be well positioned for future value-enhancing growth." 
The merged company will benefit from an experienced Board of
Directors, with Robert Hodgins as independent non-executive Chairman.
Other independent board members include Carol Bell, John Bentley,
Peter Dey, Ronald Royal, and Brooke Wade. It is proposed that two
directors from TransGlobe, Ross Clarkson and Lloyd Herrick, will join
the Caracal Board.  
After completion of the transaction the combined assets and employees
will operate under the Caracal name and will be led by Caracal's CEO
Gary Guidry and a combination of Caracal's and TransGlobe's current
executive teams.  
In connection with the Arrangement, Caracal is required to seek a
listing for the merged company on the Toronto Stock Exchange ("TSX"). 
Terms of the proposed transaction 
Exchange Ratio  
Pursuant to the Arrangement, each TransGlobe shareholder will receive
1.23 new common shares of Caracal ("New Caracal Shares") in exchange
for each TransGlobe common share ("TransGlobe Share") held. After
completion of the Arrangement the merged company will have
approximately 238,503,645 shares issued and outstanding prior to
adjusting for conversion of Caracal's outstanding convertible
debentures. After taking into consideration the conversion of the
convertible debentures it is expected that current Caracal
shareholders would hold approximately 65.6 per cent and former
TransGlobe shareholders would hold approximately 34.4 per cent of the
issued shares of the merged company. (2) 


 
( 2)Calculated on basic shares outstanding as of March 14, 2014 including   
    shares assuming full conversion of Caracal outstanding convertible      
    debentures into 28.6 million shares. Exchange rates based on posted Bank
    of England Daily Spot Exchange Rates against GBP as at March 13, 2014.  

 
Treatment of TransGlobe Debentures 
Upon completion of the transaction, TransGlobe's 6.0% convertible
unsecured subordinated debentures with an aggregate principal amount
of CAD$97,750,000 (the "TransGlobe Debentures") will continue to be
obligations of TransGlobe, as a wholly-owned subsidiary of Caracal.
The conversion price of the TransGlobe Debentures will be adjusted
pursuant to the terms of the trust indenture governing the TransGlobe
Debentures based on the exchange ratio under the Arrangement. After
completion of the Arrangement, conversion rights will be into Caracal
shares.  
Following closing of the transaction, in accordance with its terms,
Caracal intends to make an offer for the TransGlobe Debentures at Par
plus accrued and unpaid interest (the amount of interest will depend
on the time of any repurchase). The repurchase offer will be made
within 30 days of closing of the proposed transaction. Should a
holder of the TransGlobe Debentures elect not to accept the
repurchase offer, the debentures will mature as originally set out in
their respective indentures. Holders who convert their TransGlobe
Debentures following completion of the Arrangement will receive
common shares of Caracal.  
Dividends 
In light of the significant capital programs for development and
exploration for the combined company, neither Caracal nor TransGlobe
will pay dividends in the interim period prior to closing. However,
the Board of the combined company will consider dividends in the
future as a part of normal course business. 
Further details of the transaction 
Caracal's CEO Mr. Guidry has recused himself from the process of
considering the Arrangement because he served as a director of
TransGlobe from October 2009 until March 11, 2014, when he resigned.
Mr. Guidry owns the following TransGlobe securities: 40,000
TransGlobe shares, CAD$100,000 in TransGlobe convertible debentures
and options to acquire 160,500 TransGlobe shares. Mr. Guidry's
TransGlobe share ownership amounts to approximately 0.05 per cent of
the 74.7 million TransGlobe shares outstanding. Mr. Guidry's
ownership of Caracal shares, including beneficial ownership, amounts
to 1,674,173 shares or approximately 1.14 per cent of the 146.7
million current basic Caracal shares outstanding. 
The Boards of Directors of Caracal (other than Mr. Guidry, who has
recused himself for the reason mentioned above) and TransGlobe have
each unanimously approved the Arrangement Agreement and have
concluded that the Arrangement is in the best interests of Caracal
and TransGlobe, respectively. The Board of Directors of Caracal has
received fairness opinions from RBC Capital Markets and Canaccord
Genuity Corp. with respect to the Arrangement. The Board of Directors
of TransGlobe has received a fairness opinion from Scotiabank with
respect to the Arrangement.  
The Boards of Directors of each of Caracal (other than Mr. Guidry,
who has recused himself for the reason mentioned above) and
TransGlobe intend to unanimously recommend to their respective
shareholders that they vote their shares in favor of the Arrangement
in the information circulars to be prepared and mailed by Caracal and
TransGlobe in connection with the Arrangement.  
In addition, each of the Directors and Executive Officers of Caracal
and TransGlobe have agreed to vote their shares in favor of the
Arrangement. In aggregate this represents 3,338,903 Caracal shares,
or approximately 2.28 per cent of the 146.7 million current basic
Caracal shares outstanding, and 3,092,054 TransGlobe shares or
approximately 4.14 per cent of the 74.7 million current basic
TransGlobe shares outstanding.  
The proposed transaction will be implemented by way of a
court-approved plan of arrangement and will require the approval of
at least 66 2/3per cent of holders of TransGlobe shares represented
in person or by proxy at a special meeting of TransGlobe shareholders
(the "TransGlobe Meeting") to be called to consider the Arrangement.
If required, the approval will consist of a "majority of the
minority" of the holders of TransGlobe shares, being a majority of
the votes cast by shareholders excluding shareholders whose votes may
not be included pursuant to Canadian Multilateral Instrument 61- 101
Protection of Minority Securityholders in Special Transactions. The
exclusion, if required, would apply only to Mr. Guidry, by virtue of
his role as a director of TransGlobe from October 2009 until March
11, 2014. 
It is expected that the Arrangement will be exempt from the
registration requirements of the U.S. Securities Act of 1933, as
amended, pursuant to the court approval exemption afforded by section
3(a)(10) under that Act. The proposed transaction is also subject to
obtaining the approval of a majority of the votes cast by the holders
of Caracal shares at a special meeting of Caracal shareholders (the
"Caracal Meeting") to be called to consider the Arrangement and the
issuance of New Caracal Shares in connection with the proposed
transaction. 
The Arrangement Agreement provides that each party is subject to
non-solicitation provisions and provides that the board of directors
of each party may, under certain circumstances, terminate the
agreement in favour of an unsolicited superior proposal, subject to
payment of a termination fee of US$9.25 million to the other party
and subject to a right in favour of Caracal to match the superior
proposal. In addition, each party has agreed to pay a termination fee
of US$9.25 million to the other party in certain circumstances.  
Trading, Listings And Regulatory Approvals 
Subsequent to the completion of the Arrangement, the TransGlobe
shares will cease trading and be delisted from the TSX and the
NASDAQ. Under the Arrangement, Caracal is required to apply to the
TSX to list Caracal shares, including the New Caracal Shares, on the
TSX. It is a condition to the completion of the Arrangement that such
a listing shall have been approved, subject only to routine filings. 
The Arrangement is classified as a reverse takeover for Caracal under
the Listing Rules of the United Kingdom Listing Authority ("UKLA").
Consequently, Caracal will be required to re-apply for and, on
completion of the Arrangement, satisfy the relevant requirements for
listing on the premium segment of the Official List of the UKLA.  
Advisors 
For Caracal, RBC Capital Markets is acting as financial advisor. Each
of RBC Capital Markets and Canaccord Genuity Corp. provided a
fairness opinion to Caracal's Board. FirstEnergy Capital Corp. is
acting as a strategic advisor. Stikeman Elliott LLP is the legal
advisor. 
For TransGlobe, Scotiabank is acting as financial advisor and has
provided a fairness opinion to TransGlobe's Board. Blake Cassels &
Graydon LLP is the legal advisor. 
Information Circulars 
Further information regarding the proposed transaction will be
contained in information circulars that Caracal and TransGlobe will
prepare, file and mail in due course to their respective shareholders
in connection with the Caracal Meeting and TransGlobe Meeting. Prior
to the closing of the transaction, Caracal will also publish a
prospectus in connection with the issue of the New Caracal Shares and
the required re-application for listing of such shares on the
Official List and to trading on the London Stock Exchange's ("LSE")
main market for premium listed securities ("Prospectus").  
It is expected that the TransGlobe Meeting and the Caracal Meeting
will take place in June 2014, with closing expected to occur as soon
as possible thereafter subject to regulatory approval. All Caracal
and TransGlobe shareholders are urged to read the relevant
information circular once it becomes available, as it will contain
additional important information concerning the proposed transaction
and the Arrangement. 
A copy of the Arrangement Agreement will be filed on Caracal's and
TransGlobe's SEDAR profiles and will be available for viewing at
www.sedar.com.  
Investor conference call and presentation details  
TransGlobe and Caracal will host a joint conference call and webcast
to discuss the Arrangement on March 17, 2014: 
Time: 7:00 a.m. Calgary Time (Mountain Time) (9:00 a.m. Eastern Time) 
Dial-in: 416-340-8530 or toll free at 1- 800-766-6630  
http://www.gowebcasting.com/5234 
Shortly after the conclusion of the call, a replay will be available
by dialing (905) 694-9451 or toll-free at 1-800-408-3053. The pass
code is 5119337#. The replay will expire at 23:59 p.m. (Eastern Time)
on March 23, 2014. Thereafter, a copy of the call can be accessed
through a link on TransGlobe's Web site at www.trans-globe.com and at
Caracal's website at www.caracalenergy.com. 
A joint presentation has been prepared to accompany the conference
call. The presentation is also available for review on the Caracal
and TransGlobe websites.  
Exchange Rates 
For reference purposes only, the following exchange rates were
prevailing on March 13, 2014 as per the Bank of England Daily Spot
Exchange Rates against GBP (being the latest practicable date prior
to publication of this announcement):  
GBP 1.00 = CAD $1.8445  
GBP 1.00 = US$1.6677  
US$1.00 = CAD$1.1060  
All amounts in this announcement expressed in the above currencies
have, unless otherwise stated, been calculated using the above
exchange rates. 
About Caracal 
Caracal Energy Inc. is an international exploration and development
company focused on oil and gas exploration, development and
production activities in the Republic of Chad, Africa. In 2011,
Caracal entered into three production sharing contracts ("PSCs") with
the government of the Republic of Chad. These PSCs provide exclusive
rights to explore and develop reserves and resources over a combined
area of 26,103 km2 in southern Chad. The PSCs cover two world-class
oil basins with oil discoveries, and numerous exploration prospects.
The Caracal common shares trade on the LSE under the symbol CRCL.  
About TransGlobe  
TransGlobe is a Calgary-based, growth-oriented oil and gas
exploration and development company focused on the Middle East and
North Africa region with production operations in the Arab Republic
of Egypt and the Republic of Yemen. TransGlobe's common shares trade
on the TSX under the symbol TGL and on the NASDAQ Exchange under the
symbol TGA. TransGlobe's Convertible Debentures trade on the TSX
under the symbol TGL.DB. In TransGlobe's audited financial statements
for the financial year ended December 31, 2013, TransGlobe reported
gross assets of US$675.8 million and profits before tax of US$143.9
million. 
Cautionary Statements  
This announcement contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws and are based on the expectations, estimates and
projections of management of the parties as of the date of this news
release unless otherwise stated. The use of any of the words
"expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward-looking statements or information. More particularly and
without limitation, this announcement contains forward-looking
statements and information concerning: the anticipated benefits of
the Arrangement to TransGlobe and its securityholders and to Caracal
and its securityholders, including anticipated synergies; the timing
and anticipated receipt of required regulatory, court and
securityholder approvals for the transaction; the ability of
TransGlobe and Caracal to satisfy the other conditions to, and to
complete, the Arrangement; the anticipated timing of the mailing of
the information circulars regarding the Arrangement, the holding of
the TransGlobe Meeting and the Caracal Meeting and the closing of the
Arrangement and the listing of Caracal's shares on the TSX or the
Official List.  
In respect of the forward-looking statements and information
concerning the anticipated benefits and completion of the proposed
Arrangement, the anticipated timing for completion of the Arrangement
and the listing of Caracal's shares on the TSX or the Official List,
Caracal and TransGlobe have provided such in reliance on certain
assumptions that they believe are reasonable at this time, including
assumptions as to the time required to prepare and mail
securityholder meeting materials, including the required information
circulars and Prospectus; the ability of the parties to receive, in a
timely manner, the necessary regulatory, court, securityholder, stock
exchange and other third party approvals, including but not limited
to the receipt of applicable regulatory approvals; the ability of the
parties to satisfy, in a timely manner, the other conditions to the
closing of the Arrangement; and expectations and assumptions
concerning, among other things: customer demand for the merged
company's services; commodity prices and interest and foreign
exchange rates; planned synergies, capital efficiencies and
cost-savings; applicable tax laws; future production rates; the
sufficiency of budgeted capital expenditures in carrying out planned
activities; and the availability and cost of labour and services. The
anticipated dates provided may change for a number of reasons,
including unforeseen delays in preparing meeting materials, inability
to secure necessary securityholder, regulatory, court or other third
party approvals in the time assumed or the need for additional time
to satisfy the other conditions to the completion of the Arrangement.
Information relating to reserves and resources is deemed to be
forward-looking information, as it involves the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated,
and can be profitably produced in the future. 
Accordingly, readers should not place undue reliance on
forward-looking information which by its nature is based on current
expectations regarding future events that involve a number of
assumptions, inherent risks and uncertainties, which could cause
actual results to differ materially from those anticipated.
Forward-looking information is not based on historical facts but
rather on current expectations and assumptions regarding, among other
things, the timing and scope of certain of Caracal and TransGlobe's
operations and the timing and level of production from their
properties, plans for and results of drilling activity and testing
programmes, future capital and other expenditures (including the
amount, nature and sources of funding thereof), continued political
stability, and timely receipt of any necessary government or
regulatory approvals. Although the expectations and assumptions
reflected in such forward-looking information are believed to be
reasonable, they may prove to be incorrect. Forward-looking
information involves significant known and unknown risks and
uncertainties. A number of factors could cause actual results to
differ materially from those anticipated by Caracal or TransGlobe
including, but not limited to, the merged company's ability to
integrate efficiently new businesses following the successful
completion of the transaction; the merged company's ability to
achieve the anticipated financial and other benefits resulting from
the successful completion of the transaction, risks associated with
the oil and gas industry (e.g. operational risks in exploration and
production; inherent uncertainties in interpreting geological data;
changes in plans with respect to exploration or capital expenditures;
interruptions in operations together with any associated insurance
proceedings; reductions in production capacity, the uncertainty of
estimates and projections in relation to costs and expenses and
health, safety and environmental risks), the risk of commodity price
and foreign exchange rate fluctuations, the uncertainty associated
with negotiating with foreign governments, risk associated with
international activity, including the risk of political instability,
the risk of adverse economic market conditions, the actual results of
marketing activities and the risk of regulatory changes.
Forward-looking information cannot be relied upon as a guide to
future performance. Well-test results are not necessarily indicative
of long-term performance or ultimate recovery. 
Risks and uncertainties inherent in the nature of the Arrangement
include the failure of TransGlobe or Caracal to obtain necessary
security holder, regulatory, court and other third party approvals,
or to otherwise satisfy the conditions to the Arrangement, in a
timely manner, or at all. Failure to so obtain such approvals, or the
failure of TransGlobe or Caracal to otherwise satisfy the conditions
to the Arrangement, may result in the Arrangement not being completed
on the proposed terms, or at all. In addition, the failure of one
party to comply with the terms of the Arrangement Agreement may
result in that party being required to pay a non-completion or other
fee to the other party, the result of which could have a material
adverse effect on the paying party's financial position and results
of operations and its ability to fund growth prospects and current
operations.  
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on other factors that could affect
the operations or financial results of the parties, and the combined
company, are included in reports on file with applicable securities
regulatory authorities, including but not limited to; TransGlobe's
Annual Information Form for the year ended December 31, 2013 which
may be accessed on TransGlobe's SEDAR profile, and Caracal's Final
Short Form Prospectus dated October 24, 2013 on Caracal's SEDAR
profile at www.sedar.com.  
The forward-looking statements and information contained in this
announcement are made as of the date hereof and the parties undertake
no obligation to update, review or revise such forward-looking
information contained in this announcement to reflect any change in
its expectations or any change in events, conditions or circumstances
on which such information is based unless required to do so by
applicable law.  
Reserves Disclosure 
Terms related to reserves and resources classifications referred to
in this announcement are based on definitions and guidelines in the
Canadian Oil and Gas Evaluation Handbook ("COGE") which are as
follows.  
"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.  
The qualitative certainty levels referred to in the definitions above
are applicable to individual reserves entities (which refers to the
lowest level at which reserves calculations are performed) and to
reported reserves (which refers to the highest-level sum of
individual entity estimates for which reserves estimates are
presented). Reported reserves should target the following levels of
certainty under a specific set of economic conditions:  


 
--  at least a 90 percent probability that the quantities actually recovered
    will equal or exceed the estimated proved reserves. This category of
    reserves can also be denoted as 1P; 
    
--  at least a 50 percent probability that the quantities actually recovered
    will equal or exceed the sum of the estimated proved plus probable
    reserves. This category of reserves can also be denoted as 2P; and 
    
--  at least a 10 percent probability that the quantities actually recovered
    will equal or exceed the sum of the estimated proved plus probable plus
    possible reserves. This category of reserves can also be denoted as 3P. 

 
Additional clarification of certainty levels associated with reserves
estimates and the effect of aggregation is provided in the COGE
Handbook. The estimates of reserves and future net revenue for
individual properties may not reflect the same confidence level as
estimates of reserves and future net revenue for all properties, due
to the effects of aggregation.  
"Prospective resources" are those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects.
Prospective resources have both an associated chance of discovery
(geological chance of success) and a chance of development (economic,
regulatory, market, facility, corporate commitment or political
risks). The chance of commerciality is the product of these two risk
components. The prospective resource estimates referred to herein
have not been risked for either the chance of discovery or the chance
of development.  
There is no certainty that any portion of the prospective resources
will be discovered. If a discovery is made, there is no certainty
that it will be developed or, if it is developed, there is no
certainty as to the timing of such development or that it will be
commercially viable to produce any portion of the prospective
resources.  
Figures related to Caracal's reserves and resources are derived from
a report prepared by McDaniel & Associates Consultants Ltd.
("McDaniel"), an independent qualified reserves evaluator, evaluating
the prospective resources of Caracal effective as of June 30, 2013
(the "McDaniel Resource Report") and a report prepared by McDaniel
evaluating the reserves of Caracal effective as of December 31, 2013
(the "McDaniel Reserve Report"). A description of the uncertainties
and significant positive and negative factors associated with the
estimates of resources in respect of the June 30, 2013 McDaniel
Report is contained in Caracal's July 25, 2013 material change
report. Copies of these documents are available on the internet under
Caracal's profile at www.sedar.com.  
Figures related to TransGlobe's reserves and resources are derived
from a report prepared by DeGolyer & MacNaughton Canada Limited
("DeGolyer"), an independent qualified reserves evaluator, evaluating
the prospective reserves and resources of TransGlobe effective as of
December 31, 2013 (the "DeGolyer Report") with a report date of
January 15, 2014. A description of the uncertainties and significant
positive and negative factors associated with the estimates of
resources in respect of the DeGolyer Report is contained in
TransGlobe's Annual Information Form dated March 13, 2014 for the
year ended December 31, 2013. Copies of these documents are available
on the internet under TransGlobe's profile at www.sedar.com.
Contacts:
Caracal Energy Inc.
Gary Guidry, President and Chief Executive Officer
Trevor Peters, Chief Financial Officer
+1 403-724-7200 
For North American Media Inquiries
Longview Communications
Alan Bayless
+1 604-694-6035 
Longview Communications
Joel Shaffer
+1 416-649-8006 
TransGlobe
Steve Langmaid
Investor Relations
(403) 444-4787
investor.relations@trans-globe.com
www.trans-globe.com
 
 
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