October 11, 2012 – Santa Barbara, California – Underground Energy Corp. (“Underground”, “UGE” or the “Company”) (TSX VENTURE: UGE; OTCQX: UGGYF) announced today that its Chief Operating Officer, Bruce Berwager, and its Vice-President Exploration and Development, David Hoyt, have agreed to termination without cause as officers of the Company, effective October 31, 2012. The departure of Messrs. Berwager and Hoyt from Underground comes as part of the Company's plans to reduce general and administrative costs and focus its capital and resources on the development of its projects at its Greater Zaca (Zaca Extension Project, Asphaltea and Santa Rita) and Burrel property areas. In order to help ensure a smooth transition of their duties, Messrs. Berwager and Hoyt have each agreed to continue in a part-time consulting relationship with the Company through January 2013.
Under the terms of their employment agreements with the Company, Messrs. Berwager and Hoyt are entitled to twelve months’ severance, accrued vacation and deferred bonus amounts. In lieu of a cash payment, Messrs. Berwager and Hoyt have agreed to take an option (expiring January 31, 2013) entitling them to acquire, for no additional consideration, up to 13,800 net acres of petroleum leases comprising certain of the Company's non-core asset areas (collectively, the "Subject Assets") at its Buttonwillow, Devil’s Den, Pyramid Hills and Burrel exploratory prospects (subject to the Company retaining the Burrel leases comprising its operating Gabriel 1-35 well and surrounding Gabriel drilling unit acreage).
The Subject Assets are undeveloped, non-producing properties and were attributed no reserves in Underground's independent reserve report effective as of December 31, 2011 prepared by GLJ Petroleum Consultants Ltd. and were attributed no resources in Underground's independent resource evaluation effective August 1, 2012 prepared by Netherland, Sewell and Associates, Inc. Additionally, Underground has budgeted no capital for the development of the Subject Assets in 2012 or 2013 and absent fulfilment of the required work commitments by Underground, the leases for the Subject Assets would expire and revert to the original owners prior to the end of 2013.
These leases were included in the $2.9 million impairment provision in the Company’s second quarter financial statements (see Note 6 to the financial statements for the three and six months ended June 30, 2012) and are currently recorded in the Company’s accounting records at $349,450. Underground will receive spud fees of $10,000 for each future well drilled at Burrel and Buttonwillow and $5,000 for each future well drilled at Devil’s Den.
As a result of these arrangements with Messrs. Berwager and Hoyt, and the resulting reduction in its ongoing lease payments on these non-core assets, the Company will be able to reduce its overhead and focus its resources on the continued exploitation of its principal properties at Greater Zaca and Burrel where the Company has deployed the majority of its capital to date.
These arrangements are subject to the approval of the TSX Venture Exchange.
About Underground Energy Corporation
Underground is focused on developing its Zaca Field Extension Project in Santa Barbara County, California. In total, Underground currently holds mineral rights on approximately 65,000 net acres of prospective lands in California and Nevada (prior to any election under the option with Messrs. Berwager and Hoyt) with an initial focus on the Monterey Shale in California. Underground is listed on the TSX Venture Exchange under the ticker symbol “UGE” and quoted on the OTCQX trading platform under the ticker symbol “UGGYF”. 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.
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:
Peter Ballachey Simon Clarke
Chief Financial Officer Vice President, Corporate Development
Underground Energy Corporation Underground Energy Corporation
Tel: 805-845-4700 x 17 Tel: 604-551-9665