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Caza Oil & Gas Announces Execution of US$50,000,000 Note Purchase Agreement

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HOUSTON, TEXAS -- (Marketwired) -- 05/24/13 -- Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX: CAZ)(AIM: CAZA) is pleased to announce today that it has entered into a Note Purchase Agreement (the "Agreement") with Apollo Investment Corporation, an investment fund managed by Apollo Investment Management, (the "Note Holder") pursuant to which the Note Holder has agreed to purchase from the Company up to US$50,000,000 of senior secured notes of the Company (the "Notes").

The Company received US$20,000,000 at the closing of the Agreement and may draw additional advances ("Advance(s)") of up to US$30,000,000 in aggregate at its discretion during the following 15 months, subject to specified performance and financial requirements. Further details of the Notes are set out below.

The Company will use the proceeds from the sale of the Notes to fund an initial program to drill up to 12 oil and gas wells on its Bone Spring properties located in Lea and Eddy Counties in southeastern New Mexico over the next 12 months. Upon completion of the initial program, the Company plans a second program to drill 12 additional oil and gas wells in the Bone Spring play, such program to be funded from the proceeds of a subsequent sale of Notes pursuant to the Agreement. Well locations for the program have been identified by the Company pursuant to the high-grading process described below, but the additional program will only be finalized by the Company (with the agreement of the Note Holder) following a detailed review of the well data from the initial program and upon satisfaction of certain criteria under the Agreement.

Management is focused on building a core asset base in the prolific Bone Spring play, having concluded that these assets represent a significant opportunity for the Company to deliver increased production, revenue growth and shareholder returns within an acceptable timeframe.

W. Michael Ford, Chief Executive Officer commented:

"We are extremely pleased to announce this financing facility with Apollo. We made significant progress in 2012, laying the groundwork for continued success in the Bone Spring play in Lea and Eddy Counties, New Mexico. However, in order to efficiently and properly advance the Company's prospects and properties in the play, additional financing of proper size and scope was needed."

"The Company intends to utilize the Apollo facility to embark on an accelerated and expanded drilling program in the Bone Spring play over the next two years. We believe this facility provides a substantial opportunity for the Company to achieve material production, revenue and reserve growth along with meaningful shareholder returns within this timeframe."

"By providing this facility, Apollo has shown confidence in the value of Caza's properties in the Bone Spring play. During our careful vetting process to find the proper financing partner, it became clear that Apollo was interested in funding Caza's drilling program in the play, but it was their willingness to work closely with management and the Board in order to tailor their financing around our specific drilling program that made Apollo's participation attractive to the Company."

"Management will begin utilizing funds for the drilling program immediately. The first six projects to be funded include: the Lennox test well, which is currently being completed; a second Caza Ridge well at Copperline; a test well at Gateway; a test well at West Copperline; a test well at Roja, which is currently drilling; and a test well at Madera. The initial drilling phase includes 12 wells in total to be drilled in 2013."

Background to the Agreement

The Company's current production revenues, existing cash resources and available financing (excluding funds available through the sale of the Notes) presently allow the Company to participate in drilling 3 to 4 wells per year. However, Management believes that accelerating and expanding the current drilling program through the utilization of funds made available through the Agreement will significantly increase both production and cash flows, which will optimize the work program and drive economies of scale.

While the Agreement does not require the approval of shareholders, Management and the Board believe that the Agreement is in the best interests of shareholders, and that the funds made available under the Agreement will provide the Company with sufficient leverage and capital to adequately exploit opportunities while mitigating equity dilution during the "value accretion" drilling phase. Obtaining this financing is a significant step in the Company's implementation of its stated strategy of achieving significant growth in reserves and production, thereby raising the Company's profile in the basin, while maximizing shareholder value.

The Properties

The Company currently plans to use the proceeds from the Notes in the initial drilling phase to develop the following properties in southeastern New Mexico, by drilling 12 oil and gas wells and two salt water disposal wells, as described below:

-- Lennox - two Bone Spring wells and one Lower Brushy Canyon well;-- Copperline - one Bone Spring well and one salt water disposal well;-- Gateway - one Bone Spring well;-- West Copperline - one Bone Spring well;-- Forehand Ranch - one Bone Spring well, one Ramsey well and one salt water disposal well;-- Mad River - one Bone Spring well;-- Roja - one Lower Brushy Canyon well;-- Madera - one Bone Spring well or one Lower Brushy Canyon well; and-- Lynch - one Bone Spring well.



Roja and Madera are operated by OXY USA Inc., and Lynch is operated by Mewbourne Oil Company. This initial drilling phase may be adjusted as mutually agreed between the Company and the Note Holder.

In selecting these properties, the Company considered prospects with attractive proven and probable reserves that could provide long-term organic growth. Additionally, in line with its stated strategy, the Company utilized the following criteria to grade these properties:

-- Company operated properties, which provide the ability to control project execution and timing of drilling operations. Exceptions were made for non-operated lease-saving operations and non-operated properties at the highest end of the grading scale;-- properties close to existing, established infrastructure, allowing for quick, efficient hook-up and lower operational execution risk;-- drilling targets in close proximity to known producing reservoirs; and-- properties with an ability to deliver at least a 25% rate-of-return on investment.



The Company expects that expanding and diversifying its producing asset base within the Bone Spring play, and the ability to adopt a portfolio approach to future exploration, will not only grow the Company but allow it to be more resilient to any single project risk. In that regard, Management conducted a detailed analysis of typical decline curves, production profiles and success rates of wells, as well as other considerations in the Bone Spring play. Management risked these factors in generating projections of production, cash flow and repayment performance to comply with the requirements of the Agreement.

More information regarding these properties can be found in the Operations section of the Company's website at www.cazapetro.com and in the Company's Annual Information Form which is available on the Company's website and in the Company's public filings at www.sedar.com.

Description of the Notes

Availability Period: Following the initial Advance, the Company may draw additional Advances up to US$30,000,000 until August 23, 2014, if at the time of the Advance the Company meets specified minimum production and drilling cost requirements for previous wells drilled under the program that were financed with funding from the Notes. In addition to these funds, the Company will have the ability to reinvest cash flow from program wells back into the drilling program. After the Company has exhausted the initial US$50,000,000 commitment under the Agreement, the Note Holder and the Company may agree to increase the commitment up to a maximum US$100,000,000.

Term: Outstanding Notes mature and are payable on May 23, 2017.

Interest Rate: The Notes bear interest at a floating rate of one-month LIBOR (with a floor of 2%) plus 10% per annum, payable monthly. In an event of default under the Agreement, additional interest will be payable at a default rate of 5% per annum, but only during the period of default.

Costs: A structuring fee, based on a percentage of the principal amount of each Note, is payable out of the proceeds of the Notes at the time of each Advance pursuant to a separate fee letter.

Financial and Performance Covenants: The Agreement provides for customary covenants. The Company is also required to comply with covenants, which are tested quarterly, providing for specified interest coverage ratios beginning in the quarter ending September 30, 2013, and asset coverage ratios and minimum production, beginning in the quarter ending March 31, 2014. In addition, the Company is required to maintain a limit on expenditures for general and administrative costs.

Prepayment: The Notes may be prepaid at the option of the Company at any time. The Notes are subject to mandatory prepayment from the proceeds of the sale of assets and from funds received from transactions outside of the ordinary course of business. Additionally, if in any period the Company fails to comply with any financial or performance covenant, 75% of net cash flow must be used to prepay the Notes. Any prepayment of Notes is subject to: (i) payment of a make-whole amount if the prepayment is made prior to 24 months after the closing of the Agreement, and (ii) a prepayment premium of up to 3%, varying based on the date of prepayment, if prepaid prior to 36 months after closing.

Security: The Notes are secured by first-priority security interests in all of the Company's assets.

Overriding Royalty Interests: At closing, the Company conveyed to the Note Holder a 2% overriding royalty interest, proportionately reduced to reflect the Company's working interest, in its properties in Eddy and Lea Counties, New Mexico. Under the Agreement, the Company is also required to convey a proportionately reducible 2% overriding royalty interest in each lease acquired with proceeds from the Notes. Upon full repayment of the Notes, the overriding royalty interests will convert to a 25% net profits interest in each property, proportionately reduced to reflect the Company's working interest as provided in the Agreement, which will reduce to a 12 1/2% net profits interest at such time as the Note Holder achieves specified investment criteria pursuant to the Agreement.

Events of Default: The Agreement provides for customary events of default. Additionally, an event of default would occur upon a change of control of the Company, which consists of (i) a shareholder acquiring more than 35% of the Company's outstanding Common Shares, (ii) a change in the composition of the board of directors by more than 1/3 during a 12-month period or (iii) a termination of service by any three of the five executive officers of the Company.

Ancillary Facilities: The terms of the Agreement permit the Company to utilize or make payments in respect of the GBP 6 million Standby Equity Distribution Agreement ("SEDA") and US$4 million of the SEDA-backed Loan Agreement entered into with YA Global Master SPV Ltd., an investment fund managed by Yorkville Advisors Global, LP. The terms of the Agreement do not restrict the Company from raising equity or drawing funds under the SEDA or SEDA-backed Loan Agreement.

About Caza

Caza is engaged in the acquisition, exploration, development and production of hydrocarbons in the following regions of the United States of America through its subsidiary, Caza Petroleum, Inc.: Permian Basin (West Texas and Southeast New Mexico) and Texas and Louisiana Gulf Coast (on-shore).

In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies, the information contained in this announcement has been reviewed and approved by Anthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineer and a member of The Society of Petroleum Engineers.

ADVISORY STATEMENT

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Such information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "schedule", "continue", "estimate", "expect", "may", "will", "hope", "project", "predict", "potential", "intend", "could", "might", "should", "believe", "develop", "test", "anticipation" and similar expressions. In particular, information regarding the timing and availability of Advances, Caza's use of the proceeds of an Advance, Caza's anticipated drilling program and the results thereof, production, revenue and reserve growth, and Caza's ability to exploit opportunities and mitigate equity dilution contained in this news release constitutes forward-looking information within the meaning of securities laws.

Implicit in this information are assumptions regarding: the timing and availability of Advances, drilling operations and the results thereof, projected revenue and expenses and well performance. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company are subject to a number of risks and uncertainties, including general economic, market and business conditions. Actual results could differ materially.

For more exhaustive information on these risks and uncertainties you should refer to the Company's most recently filed annual information form which is available at www.sedar.com and the Company's website at www.cazapetro.com. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as may be required by securities laws.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.



Contacts:
Caza Oil & Gas, Inc.
Michael Ford
CEO
+1 432 682 7424

Caza Oil & Gas, Inc.
John McGoldrick
Chairman
+65 9731 7471 (Singapore)
www.cazapetro.com

Cenkos Securities plc
Jon Fitzpatrick
+44 20 7397 8900 (London)

Cenkos Securities plc
Neil McDonald
+44 131 220 6939 (Edinburgh)

VSA Capital Limited
Andrew Raca
+44 20 3005 5004

VSA Capital Limited
Malcolm Graham-Wood
+44 20 3005 5012

M:Communications
Chris McMahon
+44 20 7920 2330



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