Painted Pony In Montney Acquisition

Painted Pony Petroleum Ltd. has entered into a share purchase agreement to acquire all of the issued and outstanding shares of UGR Blair Creek Ltd., a privately held 100 per cent controlled subsidiary of Unconventional Resources Canada, LP (URC), a portfolio investment held in certain private equity funds advised by ARC Financial Corp. and EnCap Investments, L.P.

UGR operates high working interest Montney assets with established production, infrastructure and land holdings jointly with and adjacent to Painted Pony's assets in northeast British Columbia.

Pursuant to the agreement, total consideration of 41 million common shares of Painted Pony will be issued to URC. Based on the price per Painted Pony share in respect of the offering of $5.60, implying total share consideration of $229.6 million.

At closing, Painted Pony will assume UGR's net debt which at Dec. 31, 2016 was approximately $47 million. Painted Pony will also assume other expected transaction costs of ARC, EnCap, URC and UGR.

In addition, Painted Pony has entered into an agreement with a syndicate of underwriters led by Cormark Securities Inc. and TD Securities Inc.pursuant to which the underwriters have agreed to purchase for resale to the public, on a bought-deal basis, 18,018,100 Painted Pony shares at a price of $5.60 per Painted Pony share for gross proceeds of approximately $100.9 million.

A portion of the proceeds will be used to fund drilling on the acquired assets and on existing Painted Pony lands. The balance of the proceeds will be used to reduce bank indebtedness and general corporate purposes.

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