Tuesday, December 27, 2005

Arapahoe Buys Xoil

Trouble at the India Pakistan Border a
s Bush-CIA-Carlyle connected oil company
starts explorations in Rajasthan

Arapaho Announces Signing of Letter of Intent to Acquire XOil

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 23, 2005) -


Arapaho Capital Corp. ("Arapaho") (TSX VENTURE:AHO) announced today that it has entered into a letter of intent dated December 23, 2005 with Gynia Holdings Ltd., a private company incorporated in British Virgin Islands ("Gynia"), pursuant to which Arapaho will acquire all of the issued and outstanding shares of INXOil (Cyprus) Ltd., a private company being incorporated in Cyprus ("XOil") by way of a share exchange with the shareholders of XOil that will result in the shareholders of XOil receiving shares of Arapaho (the "Acquisition"). Pursuant to the terms of the letter of intent, Arapaho has agreed to issue approximately 42.4 million common shares of Arapaho for all of the common shares of XOil, which will represent approximately 68.9% of the issued and outstanding shares of Arapaho post Acquisition, but prior to the financing described below.

XOil is being established to acquire, from Focus Energy Ltd., a private company incorporated in India and beneficially owned by Gynia ("Gynia"), a 50% participation interest in a production sharing contract with the Government of India dated September 23, 2005 relating to an oil and gas exploration property located in India and identified as Block RJ-ONN-2003/2 ("block"), covering an area of approximately 3,260,550 acres, located in North West Rajasthan state. Virtually no exploration, apart from 127 km of 2D seismic and a low resolution gravity survey, has been undertaken in the block so far.

Pursuant to the terms of the letter of intent, it will be a condition of closing that Arapaho or a subsidiary enter into a purchase and sale agreement to acquire all of the issued and outstanding shares of XOil II Holdings Ltd., a private company being incorporated in Mauritius ("XOil2") in exchange for approximately 33.9 million common shares of Arapaho which, when exercised, will result in Gynia and its affiliates holding approximately 80% of the issued and outstanding common shares of Arapaho. XOil2 is being established to acquire from Birkbeck Investments Ltd., a private company incorporated in Mauritius and beneficially owned by Gynia, a 40% participation interest in the said block from Birkbeck.

The block is located adjacent to and north of Block RJ-ON-90/1, in which Cairn Energy, PLC, a UK oil explorer, has drilled 84 wells. Cairn has announced a discovery named as "Mangla", located approximately 50 km from the southern boundary of Block RJ-ONN-2003/2. As per independent technical consultant estimates, Mangla has in place 2P reserves of 1,067 mmbbls of oil as of March 2005. Cairn has had an average exploration success ratio of 32.4% in Block RJ-ON-90/1 with wells in the northern part having encountered reservoirs with excellent oil flow rates.

No production has yet been established in Block RJ-ONN-2003/2 so far and no reserves are claimed as of this date.

Chapman Petroleum Engineering Ltd. of Calgary, Alberta has been retained by Arapaho to provide an independent oil and gas report on Block RJ-ONN-2003/2. A more detailed press release containing a summary of the Chapman report and an audited opening balance sheet of XOil will be forthcoming shortly.

It is anticipated that the following directors and management of XOil, who have extensive technical, operational and commercial experience in India, will serve as directors of Arapaho upon completion of the Acquisition. Mr. Anil Aggarwal is also the controlling shareholder of Gynia:

Mr. Anil Aggarwal, New Delhi, India. Mr. Aggarwal has owned and managed a diverse range of businesses during the past 22 years, including businesses engaged in business process outsourcing, footwear marketing, hospitality and commodities trading.

Mr. Ajay Kalsi, New Delhi, India. Mr. Kalsi has managed several businesses engaged in a diverse range of industries including oil and gas exploration and footwear manufacturing. He is the key individual responsible for negotiating and acquiring the production sharing contract for the block on behalf of Gynia's affiliates. Mr. Kalsi holds a M. Phil in Business Economics from Cambridge University and a Bachelor of Science (Economics) from the University of London.

The board will be suitably expanded to incorporate independent directors and other directors in line with the requirements of Arapaho.

Pursuant to an engagement letter dated December 23, 2005, Jones, Gable & Company Limited has agreed to act as agent on a "best efforts" basis in connection with a proposed financing (the "Pre-Acquisition Financing") of subscription receipts of Arapaho at a minimum price of Cdn. $2.00 per subscription receipt (the "Issue Price") to raise gross proceeds of not less than Cdn. $25 million. Each subscription receipt will entitle the holder to receive one unit (a "Unit") of Arapaho without payment of any additional consideration, subject to adjustment in certain events. The gross proceeds of the offering less the agent's estimated out-of-pocket expenses will be held in escrow and will be released to Arapaho upon satisfaction of certain escrow release conditions and the subscription receipts will be automatically exercised upon the satisfaction of the escrow release conditions. If the escrow release conditions are not satisfied prior to March 31, 2006, the escrowed proceeds will be used by Arapaho, together with other funds on hand, to repurchase the subscription receipts. Each Unit will consist of one common share of Arapaho and one-half of one common share purchase warrant. Each whole common share purchase warrant will entitle the holder thereof to acquire one common share of Arapaho for a period of two years at an exercise price of Cdn. $3.00; provided that if the common shares of Arapaho close at Cdn. $4.00 or higher for 20 consecutive days at any time after four months following the Closing Date (the "Forced Acceleration Event"), the expiry date of the common share purchase warrants will occur 30 days after the dissemination of a press release announcing the accelerated expiry date (the "Force Acceleration Expiry Date"). In connection therewith, Jones, Gable will receive a cash commission of 5% of the aggregate gross proceeds raised and that number of broker warrants that is equal to 5% of the number of subscription receipts sold exercisable at the Issue Price into Units until the earlier of one year after the Closing Date and the Forced Acceleration Expiry Date if the Forced Acceleration Event occurs. The net proceeds of the Pre-Acquisition Financing will be used for exploration of the block and for general corporate purposes.

Jones, Gable has also agreed, if required and subject to completion of satisfactory due diligence, to act as sponsor in connection with TSX Venture Exchange listing matters. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Acquisition or the likelihood of completion.

The Acquisition is subject to several conditions that must be satisfied or waived by the parties before the Acquisition can be completed. In addition to the usual conditions, the Acquisition is conditional upon the completion of the Pre-Acquisition Financing substantially on the basis described above, XOil, XOil2 and Arapaho not having any material liabilities (contingent or otherwise) other than XOil and XOil2's commitments under its agreement with the Government of India with respect to the block, receipt of the approval of the TSX Venture Exchange and any other required regulatory approvals and the approval of the shareholders of Arapaho and of XOil.

Upon completion of the Acquisition and the Acquisition Financing, Arapaho will have issued and outstanding approximately 61,483,333 common shares distributed as follows:

Number of Common Shares Holders
----------------------- -------------------------------------------

6,600,000 the current shareholders of Arapaho

42,383,333 the former shareholders of XOil

12,500,000 common shares issued in the Pre-Acquisition

Arapaho will continue to have approximately 6,250,000 common shares issuable upon the exercise of common share purchase warrants issued in the Pre-Acquisition Financing. In addition, options will be issued to officers and directors of Arapaho to acquire common shares of Arapaho. An additional 33,906,667 common shares of Arapaho would be issued on completion of the purchase of all of the issued and outstanding shares of XOil2.

Completion of the Acquisition is subject to a number of conditions, including TSX Venture Exchange acceptance and disinterested shareholder approval. The Acquisition cannot close until required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Acquisition, any information released or received with respect to the Acquisition may not be accurate or complete and should not be relied upon. Trading in the securities of Arapaho should be considered highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the proposed Acquisition and has neither approved nor disapproved the contents of this press release.

The shares of Arapaho have been halted from trading and will remain halted until the TSX Venture Exchange has had an opportunity to review additional documentation.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.


Arapaho Capital Corp.
Brian E. Bayley
(604) 689-1428
(604) 681-4692 (FAX)


Focus Energy Ltd.
Vikas Agarwal
General Manager
91 98112 91643 or 91 11515 00515

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