2013-03-05 13:04:38 -
Los Olivos, CA US, March 05, 2013 /FSC/ - Underground Energy Corporation (UGE - TSX Venture), ("Underground", "UGE" or the "Company") announces today that Underground Energy, Inc., the wholly-owned subsidiary of the Company (the "Operating Company"), voluntarily filed for Chapter 11 creditor protection in US Federal Court on March 4, 2013. The case was filed by the Operating Company in the United States Bankruptcy Court for the Central District of California - Northern Division, Santa Barbara. Three creditors of the Operating Company have recorded liens against wells drilled on the Operating Company's Zaca project and in response to such lien filings, the principal lessor (the "Lessor") of the Company's major property at Zaca comprising 7,750 gross acres notified the Company
that it considers uncured liens to be a breach of the lease which the Lessor believes may be grounds for termination of the lease. Negotiations and discussions with the Lessor have yet to resolve the issue. As a defensive measure and in order to help protect the Operating Company's interest in the Operating Company's major property at Zaca, the Operating Company decided to seek Chapter 11 protection in order to forestall cancellation of the Zaca lease and to forestall litigation related to the liens. The Operating Company's farmout partners have advised the Company that they are waiting for the liens to be removed or subordinated and a resolution of the alleged default by the Lessor prior to spudding wells at Zaca.
The Company had been seeking alternatives and negotiating with the Lessor and with creditors of the Operating Company in a manner that would allow the Operating Company to continue operating outside of Chapter 11, however, the Board of Directors of the Company determined that Chapter 11 protection was in the best interests of the Company, its creditors, employees, and other interested parties. While there can be no assurance that the Operating Company will emerge from Chapter 11 with a feasible plan, the Company looks forward to using the protection of Chapter 11 in an attempt to develop and obtain court approval of a plan which will allow the Company to emerge from Chapter 11 and to develop its core assets at Zaca, Burrel and Asphaltea.
About Underground Energy Corporation
Underground is focused on developing its Zaca Field Extension Project in Santa Barbara County, California. For more information on Underground, please visit www.ugenergy.com. Underground's regulatory filings are available under the Company's profile at www.sedar.com.
Statements in this press release contain forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking information"). Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, without limitation, statements with respect to the development of a court approved plan which will allow the Company to emerge from Chapter 11 protection.
Although we believe that the expectations and assumptions reflected in the forward-looking information are reasonable, there can be no assurance that such expectations or assumptions will prove to be correct. Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and is subject to a variety of risks and uncertainties and other factors (many of which are beyond the control of Underground) that could cause actual events or results to differ materially from those anticipated in the forward-looking information.
Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking information include, but are not limited to: operational risks in exploration, development and production; delays or changes in plans; competition for and/or inability to retain drilling rigs and other services; competition for, among other things, capital, acquisitions of reserves, skilled personnel and supplies; risks associated to the uncertainty of reserve and resource estimates; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; the uncertainty of estimates and projections of production, costs and expenses; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; incorrect assessments of the value of acquisitions; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; access to capital; the outcome and impact of litigation to which the Company or Operating Company may become party; turnover in the Operating Company's management, uncertainty with the proceedings under Chapter 11 protection and other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive. There is no certainty that the Operating Company will emerge from Chapter 11 protection with a workable plan or at all.
The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Underground does not undertake any obligation to update or revise any forward-looking statements to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information please contact:
Chief Financial Officer
Underground Energy Corporation
Tel: 805-845-4700 x33
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