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Mesa Energy And Armada Oil Execute Letter Of Intent For Business Combination

Armada Oil, Inc. (OTCBB: AOIL) (“ Armada Oil”) and Mesa Energy Holdings, Inc. (OTCBB: MSEH) (“ Mesa Energy”) announced today that they have entered into a non-binding Letter of Intent to pursue a business combination. The closing of the business combination is subject to further due diligence, negotiation and execution of definitive agreements, as well as necessary consents and approvals. The Board of Directors of both Armada Oil and Mesa Energy have unanimously approved the key terms of the proposed transaction and have authorized their respective management to pursue the transaction.

The non-binding Letter of Intent provides that Armada Oil would issue 0.325 shares of its common stock to the shareholders of Mesa Energy in exchange for each Mesa Energy common share, representing an approximately 134% premium to Mesa Energy’s most recent close of $0.168 on October 3 rd, 2012. The proposed transaction would result in the current holders of equity securities of Mesa Energy owning approximately 57% of the combined company common stock, and the equity holders of Armada Oil owning approximately 43% of the combined company common stock (each on an actual basis, without giving effect to conversion or exercise of any convertible securities, options or warrants), prior to the effect of any future capital financing transactions by either company. The surviving entity will retain the name of Armada Oil, Inc. and will be headquartered in Dallas, TX.

Management of the companies believes that this contemplated transaction has several benefits:

  • It would bring together a sound, proven management team with both operational and public company experience;
  • Strong conventional, producing assets would provide cash flow and an underlying value to combined shareholders;
  • A low-cost entry into the Niobrara play with multiple underlying conventional prospects would leverage the combined company to significant upside;
  • The combined company would also have an attractive foothold in the Mississippi Lime play in Oklahoma; and
  • The combined company would have critical mass to help raise capital efficiently, facilitate liquidity and spur rapid growth, thereby creating a solid platform to recognize value for shareholders.

In addition, it is contemplated that:

  • Executive management will consist of three senior management members from Mesa Energy (Mr. Randy M. Griffin, Chief Executive Officer; Mr. Ray L. Unruh, Chief Operating Officer; and Ms. Rachel L. Dillard, Chief Financial Officer) and one senior management member from Armada Oil (Mr. James J. Cerna, Jr., President).
  • The new Board of Directors will consist of five legacy directors: Mr. Randy M. Griffin (Chairman), Mr. Ray L. Unruh, Mr. James J. Cerna, Jr., Mr. David J. Moss, Mr. Kenneth T. Hern, and two additional independent members to be mutually agreed on and selected.
  • It is anticipated that following the closing of the merger Armada Oil will conduct a reverse stock split to the extent necessary to facilitate the listing of Armada Oil’s common shares on a national exchange such as the NYSE MKT (formerly the NYSE-AMEX).

The terms of the letter of intent are non-binding and subject to change.

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