LGX Oil + Gas Inc. Announces Significant Light Oil Asset Acquisition and $47.5 Million Bought Deal Financing

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CALGARY, ALBERTA--(Marketwire - Oct. 18, 2012) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

LGX Oil + Gas Inc. ("LGX" or the "Company") (TSX VENTURE:OIL) is pleased to announce the acquisition of highly focused, high working interest, operated producing oil assets in southeast Alberta, consisting of light oil production, reserves and undeveloped land in the Manyberries area (the "Acquisition"). To finance the cash portion of the acquisition and for general corporate purposes, the Company has entered into an agreement, on a bought deal basis, with a syndicate of underwriters to raise $47.5 million.

SUMMARY OF THE ACQUISITION

Through the Acquisition, LGX is acquiring 600 Boe/d of high quality, high netback, light oil assets focused in the Manyberries area of southeast Alberta for total consideration of $46 million (subject to customary closing adjustments) consisting of $42.5 million in cash and approximately 4.07 million LGX common shares. With the Acquisition, LGX increases its oil and NGL weighting to approximately 67 percent of proforma production.

The Acquisition has the following characteristics:

Current Production:   600 Boe/d (95% light oil - 35° API)
Proved plus Probable Reserves (1):   2.9 MMBoe (96% light oil)
Proved plus Probable RLI (2):   13.3 years
Base Decline Rate   16%
Average Working Interest   85%
Seismic   26 square miles - 3D, 69 miles - 2D
Total Drilling Locations:   46 gross (40.0 net)
Operating Netback (3):   $41.00/Boe
     
  1.   Gross Company Reserves. Reserves evaluated by GLJ Petroleum Consultants Ltd. in accordance with National Instrument 51-101 effective March 31, 2012, and "look ahead" evaluated as of September 30, 2012. Gross Company Reserves means the Company's working interest reserves before the calculation of royalties, and before the consideration of the Company's royalty interests.
  2.   Based on current production rate.
  3.   Based on US$90.00/Bbl WTI and US$/CDN$exchange rate of 1.00 and calculated by subtracting royalties and operating costs from revenues.

LGX has deposited $2.3 million under the terms of the asset acquisition agreement, which is refundable to LGX if the Acquisition does not close, except in the event of default by LGX. Closing of the Acquisition is expected to occur on or about November 6, 2012 and is subject to certain conditions and the receipt of all regulatory approvals, including the approval of the TSX Venture Exchange ("TSXV").

TRANSACTION METRICS

The Acquisition is highly accretive to LGX on cash flow per share and brings to the Company a low decline, free cash flow generating light oil property with development upside.

The transaction metrics are as follows:

Production:   $76,667 per Boe/d
Proved plus Probable Reserves (1):   $15.78/Boe
Proved plus Probable Recycle Ratio (2):   2.6 times
     
  1.   Reserves as disclosed above.
  2.   Utilizing Netback shown above.

FINANCING

In furtherance of the Acquisition, LGX has entered into an agreement, on a bought deal basis, with a syndicate of underwriters co-led by FirstEnergy Capital Corp. and Raymond James Ltd. and including GMP Securities L.P., Macquarie Capital Markets Canada Ltd., National Bank Financial Inc., Scotia Capital Inc. and BMO Capital Markets Inc. for an offering (the "Financing") of 49,500,000 subscription receipts ("Subscription Receipts") at a price of $0.86 each and 4,810,000 common shares issued on a flow-through basis ("Flow-Through Shares") at a price of $1.04 each to raise gross proceeds of $47,572,400. LGX will grant the underwriters an option to purchase an additional 7,425,000 Subscription Receipts exercisable at the offering price for a period of 30 days from the closing date for additional gross proceeds of approximately $6,385,500 million. Closing of the Financing is expected to occur on or about November 6, 2012 and is subject to customary conditions and regulatory approvals, including the approval of the TSXV.

The net proceeds of the Financing will be used to fund the cash purchase price payable by LGX pursuant to the Acquisition and for general corporate purposes. The Subscription Receipts will be issued pursuant to a short form prospectus to be filed by LGX in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and Ontario, and will also be offered for sale internationally pursuant to applicable registration or prospectus exemptions as permitted.

Legacy Oil + Gas Inc., which currently holds approximately 33% of the outstanding common shares of LGX, may purchase Subscription Receipts under the Financing in an amount to be determined.

The gross proceeds from sale of the Subscription Receipts will be held in escrow pending the receipt by the escrow agent and the underwriters of notice from LGX that all conditions precedent to the completion of the Acquisition have been satisfied or waived. If such notice is received on or before December 31, 2012, the proceeds will be released to LGX to fund the Acquisition and each Subscription Receipt will be exchanged for one common share of LGX for no additional consideration. If the Acquisition is not completed on or before December 31, 2012, holders of Subscription Receipts will receive a cash payment equal to the offering price of the Subscription Receipts and any interest that was earned thereon during the time of escrow.

FINANCIAL ADVISORS

GMP Securities L.P. and FirstEnergy Capital Corp. acted as financial advisors and Raymond James Ltd. acted as strategic advisor to LGX with respect to the Acquisition.

STRATEGIC RATIONALE

The Acquisition represents the successful initiation of LGX's business plan to acquire high quality light oil assets that can deliver significant development drilling and exploitation opportunities through the application of new technology while contemporaneously building a sustainable, predictable production base that provides internally generated free cash flow to fund LGX's extensive light oil exploration drilling inventory on its dominant land holdings on the Southern Alberta Bakken.

The Acquisition provides LGX a predominately operated, high working interest in a shallow, light oil production and land base complementary to the Company's extensive undeveloped land holdings in the Southern Alberta Bakken play.

The Company has identified 46 (40.0 net) vertical development drilling locations targeting banked oil within existing pools. In addition, LGX has identified numerous well reactivations and water injection conversions. Potential may exist for a significant infill horizontal drilling inventory targeting the Swift formation. A successful Swift horizontal well was drilled on offsetting acreage in late 2011 that had initial production of approximately 120 Boe/d. Evaluation of this horizontal drilling potential is underway.

Proforma the Acquisition, LGX has the following characteristics:

Current Production   1,000 Boe/d (67% light oil and NGL's)
Proved plus Probable Reserves (1):   4.7 MMBoe (68% light oil and NGL's)
Proved plus Probable RLI (2):   12.9 years
Undeveloped Land:   186,800 net acres
     
  1.   Gross Company Reserves.Reserves evaluated by GLJ Petroleum Consultants Ltd. as at December 31, 2011 for LGX and by GLJ Petroleum Consultants Ltd. as at March 31, 2012and "look ahead" evaluated as of September 30, 2102 for the Acquisition, both in accordance with National Instruments 51-101. Gross Company Reserves means the Company's working interest reserves before the calculation of royalties, and before the consideration of the Company's royalty interests.
  2.   Based on current production.

LGX will incorporate the Acquisition into its 2013 budget, which is currently being prepared and will provide formal guidance upon approval by the board of directors. The new budget is expected to be approved and disseminated in early 2013.

LGX is a uniquely positioned, technically driven, junior oil and natural gas company with a proven management team committed to aggressive, cost‐effective growth of light oil reserves and production in large hydrocarbon in‐place assets and resource plays. LGX's common shares trade on the TSX Venture Exchange under the symbol OIL.

This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning the anticipated dates for the closing of the Acquisition and Financing, the potential exploration and development opportunities and drilling locations associated with the Acquisition and the anticipated release of LGX's 2013 budget.

The forward-looking statements contained in this document are based on certain key expectations and assumptions made by LGX, including: (i) with respect to the anticipated closing dates of the Acquisition and Financing, expectations and assumptions concerning timing of receipt of required regulatory approvals and third party consents and the satisfaction of other conditions to the completion of the Acquisition and Financing; (ii) with respect to the potential exploration and development opportunities and drilling locations associated with the Acquisition, expectations and assumptions concerning the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the successful application of technology, prevailing commodity prices and royalty regimes and the geological characteristics of the Acquisition; and (iii) with respect to the timing of the release of LGX's 2013 budget, expectations and assumptions respecting the time required to complete the preparation of the budget and receive necessary approval from the board of directors.

Although LGX believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because LGX can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the Acquisition and Financing, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes to existing laws and regulations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in LGX's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this document are made as of the date hereof and LGX undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Meaning of Boe: When used in this press release, Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 1 Boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact:
LGX Oil + Gas Inc.
Trent J. Yanko, P.Eng.
President + CEO
403.441.2017
403.441.2300

LGX Oil + Gas Inc.
Matt Janisch, P.Eng.
Vice-President, Finance + CFO
403.441.2017
403.441.2300
www.lgxoil.com

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