Montana Exploration Corp. - Announces Proposed Strategic Partner, Financing, Restructuring Transactions and Repricing of Options

TSX-V SYMBOL: MTZ

CALGARY, Nov. 9, 2012 /CNW/ - Montana Exploration Corp. ("Montana") is pleased to announce that it has received a financing proposal from a private equity firm (the "Investor") which will create a relationship with an investor with significant financial resources, provide funding for Montana's existing obligations, simplify Montana's capital structure and add strong additional representation to Montana's board of directors. This financing will permit Montana to fulfill its initial obligations under the farmout and participation agreement publically disclosed on May 8, 2012 with a strategic exploration partner to drill wells and conduct seismic and other oilfield operations on Montana's substantial acreage position, an extension of the Shaunavon trend from Saskatchewan.

The major aspects of the proposal consist of, and are conditional on the following transactions:

				(i)	a private placement for $3,500,000 pursuant to which Montana will issue 17,500,000 units, each unit consisting of one common shares in the capital of Montana (the "Common Shares") and one warrant, each warrant may be exercised for a price $0.20 within 12 months of the closing of the private placement (the "Closing Date") to the Investor;
				(ii)	an offering of rights (the "Rights Offering") to purchase Common Shares for gross proceeds of up to $1,000,000 at a price of $0.20 per Common Share in order to provide existing shareholders the opportunity to purchase equity at the same price as the equity issued to the Investor. James Collins, or any affiliate or any subsidiary thereof, will provide a backstop of up to $500,000 in consideration for 625,000 warrants to purchase Common Shares at a price of $0.20 per Common Share for a term of one year from the Closing Date.  Mr. Collins is a director and a controlling shareholder of Montana who is the principal shareholder of ANG Partners, Ltd. and Rioco Partners, Ltd.  The Rights Offering will be offered to all existing holders of Common Shares and Preferred Shares.
				(iii)	the granting to the Investor of certain rights including the right to nominate up to two individuals to Montana's board of directors, preemptive rights in future financings and pre-approval rights for certain significant transactions;
				(iv)	the entering into a purchase agreement wherein the Investor will have the option, in its sole discretion, for a period of one year from the Closing Date to tender a company to Montana for a value to be equal to the confirmed value of the cash and assets of up to $4,050,000. It is the intention of the parties that the assets of the Company will be interests the Montana and the Investor have jointly identified in Toole County, Montana approximately 100 miles west of Montana's current lands.  If exercised by the Investor, Montana will pay the purchase price by the issuance of Common Shares at $0.38 per Common Share, which will result in the issuance of up to 10,657,897 Common Shares;
				(v)	that Montana amend the terms of its Series A Convertible First Preferred Shares, Series B Convertible First Preferred Shares and Series C Convertible First Preferred Shares (the "Preferred Shares") to deem the conversion of the Preferred Shares into units. The exercise price of the warrants (including the warrants currently issued and outstanding from conversion of the Preferred Shares) will be reduced from $0.80 to $0.50 and the expiry date of the warrants will be extended to the date that is one year from the Closing Date; and
				(vi)	that the principal amount owing by Montana under its senior debt to Rioco Partners, Ltd. of $2,460,677.93 be converted into Common Shares at price of $0.32 per Common Share. The principal shareholder of Rioco Partners, Ltd. is James Collins, a director and a controlling shareholder of Montana. In consideration for the agreement of Rioco Partners, Ltd. to convert the Senior Debt into Common Shares, Rioco Partners, Ltd. has requested that the 4,000,000 warrants issued to it, for providing the loan, be repriced at $0.20.

Montana is also proposing to reduce the exercise price of the 1,485,000 options to purchase Common Shares (the "Options") outstanding under its Stock Option Plan to $0.25. Options are an important component of Montana's compensation strategy providing employees, consultants, officers and directors with long-term equity-based performance incentives.  The Options will be re-priced to bring them in line with current market prices of the Common Shares.

Cornerstone Asset Management L.P. and its sub-agents have acted as financial advisors to Montana in connection with the above transactions and are entitled to receive a $25,000 plus GST working fee payable in Common Shares issued at $0.25 per Common Share and a finder's fee consisting of $210,000 in cash and 1,050,000 warrants to purchase Common Shares with an exercise price of $0.20 and a term expiring two years from the Closing Date.

Montana has entered in to extensive negotiations regarding the proposed transactions but has not entered into an definitive agreement. In addition, the proposed transactions are subject to Montana receiving regulatory approval from the TSX Venture Exchange and approval at a meeting of the shareholders of Montana.

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.

Caution Regarding Forward Looking Information

This press release contains forward-looking statements within the meaning of securities laws, including the "safe harbour" provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of 1995. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should", "could", "estimate", "predict" "propose" or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements in this press release include, but are not limited to, the completion of any of the transactions including, but not limited to, the private placement, the granting of the investor rights, the purchase agreement, the amendment of the share capital, the conversion of the senior debt, the other conditions required by the Investor and/or Montana, the rights offering and the repricing of the options, and the use of proceeds from the financing.

We caution readers that Montana has entered in to extensive negotiations regarding the proposed transactions but has not entered into an definitive agreement. In addition, the proposed transactions are subject to Montana receiving regulatory approval from the TSX Venture Exchange and approval at a meeting of the shareholders of Montana.

Forward-looking statements and information contained in this press release are based on our current beliefs as well as assumptions made by, and information currently available to, us. Although we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.

By their very nature, the forward-looking statements included in this press release involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the volatility of oil and gas prices; production and development costs and capital expenditures; the imprecision of reserve estimates and estimates of recoverable quantities of oil, natural gas and liquids; Montana's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; Montana's ability to access external sources of debt and equity capital; and Montana's ability to obtain equipment in a timely manner to carry out development activities. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Furthermore, the forward-looking statements contained in this press release are made as of the date of this document and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

SOURCE: Montana Exploration Corp.

Charles Selby, Chairman & CEO
Telephone: [phone] (ext 247)
Fax: [phone]
Email: [email protected]

Don Foulkes, President
Telephone: [phone] (ext 248)
Fax: [phone]
Email: [email protected]