Shoreline Energy Corp. Signs Letter of Intent for Joint Venture with Acceleration Resources and Associated Compliance with Banking Covenants

CALGARY, ALBERTA–(Marketwired – Oct. 1, 2013) – Shoreline Energy Corp. (the “Company” or “Shoreline”) (TSX:SEQ) is pleased to announce that it has entered a letter of intent (the “Letter of Intent”) with Acceleration Resources, LLC (“Acceleration”), a U.S.-based oil and gas investment firm. The Letter of Intent envisions a loan (the “New Facility”) of up to $2,750,000 in principal amount and a joint venture (the “Joint Venture”) for up to $50mm of investment over time into Shoreline’s Niobrara assets.

Management believes there are a number of advantages to the proposed Joint Venture and New Facility, including:

• Dramatically reduce Shoreline’s debt, fully repaying an existing high interest debt facility of $5,000,000.
• Furthering the Company’s goal of achieving a debt to cash flow ratio of between 1.8 and 2.5 in 12 months.
• Providing sufficient cash to complete its short term drilling projects in the Wattenberg field and further developing its high impact Montney discoveries in Canada.
• Improved access to lower cost capital to fund future development and acquisitions.
• Reducing G&A costs through fees for providing administration and operational support to Acceleration.
• Acceleration will contribute technical resources in the identification of additional resource projects which may be attractive for development using horizontal drilling and hydraulic fracturing completions.

The New Facility is anticipated to be made to the Company’s wholly owned subsidiary, Shoreline Energy Holdings II Inc. (the “Shoreline Holdings”). The New Facility will have a 15 month term, will be secured against a portion of the Company’s US assets and will carry an initial annual interest rate of 12% per annum for three months, increasing 3% for each month thereafter with the anticipation of repayment before December 31, 2013. In addition, subject to regulatory approval, Acceleration will be issued warrants to purchase a number of common shares of the Company equal to 0.253 per each dollar amount of the New Facility (being 695,750 common shares for a $2,750,000 New Facility), issuable at an exercise price of $2.50 per share. The New Facility is scheduled to close October 11, 2013 and certain directors and officers of the Company may participate directly in the New Facility as lenders. Management understands, after consultation with ATB, that the New Facility places the Company in full compliance with its existing banking covenants.

Execution of definitive documentation and completion of the New Facility is subject to a number of customary conditions precedent, including completion of due diligence, as well as approvals of the Company’s primary lenders and approval of the TSX.

Joint Venture Agreement

In connection with completion of the New Facility, the Company and Acceleration have structured the Joint Venture arrangement pursuant to which the Company, Shoreline Holdings and Acceleration will jointly develop the Company’s assets in the heart of the Wattenberg Field of Colorado. In 2013, industry participants in Wattenberg are forecast to be investing between $3 and $5 billion drilling low risk horizontal wells targeting highly profitable light oil from up to four separate reservoir units in the Niobrara and Codell formations, a project which is considered to be in the top five of all current US domestic opportunities.

Under the terms of the Joint Venture, Acceleration will acquire up to a 50% interest in all of Shoreline’s existing Wattenberg assets, for up to 50% of Shorelines acquisition cost plus a premium of between 2% and 20% depending on the producing state of each lease. The transaction is expected to close on or before December 31, 2013.

Execution of definitive documentation and completion of the Joint Venture is subject to a number of customary conditions precedent, including completion of due diligence, as well as approvals of the Company’s lenders, the TSX and certain third parties.

“We are pleased to secure an agreement with a long term partner with an excellent track record in the oil and gas business,” stated Trevor Folk, CEO of Shoreline Energy. “The partnership with Acceleration Resources provides Shoreline with a long term capital solution allowing Shoreline to focus on further asset development and expansion, increasing cash flow and shareholder value by developing our portfolio of low risk, profitable, light oil projects.”

Acceleration Resources is a special situations energy investment firm whose investments take the form of joint ventures, working interests, royalties, equity or credit. Led by its Chief Investment Officer, Laurance Narbut, Acceleration brings a technical team of engineers and geologists with over 90 years of industry experience, and a deep bench of energy executives and investment professionals on its advisory board. Notable past investments in companies active in the Niobrara by its principals include Noble Energy, Anadarko, and PDC Energy, among others.

Acceleration’s Laurance Narbut explained, “We are pleased to be able to partner with the Shoreline team and help them accelerate realizing the full potential of their Niobrara assets. The Wattenberg Field, is a world class oil and gas field, providing the opportunity to deploy capital into high rate of return projects with rapid payout. Over the course of time, we envision deploying as much as $50mm in capital through our partnership with the Shoreline team, and applaud their vision in identifying such a high potential set of assets.”

Wattenberg Update

Shoreline extends its thoughts to those affected by the recent flooding in Colorado. While the impact of the floods have been devastating on so many, our operations team has been in communication with our operating partners and reports that there is currently no material impact on its Wattenberg production.

With area operators aggressively drilling in Wattenberg, Shoreline continues to see increased production from its holdings and estimates between 116 and 200 new horizontal wells have either been drilled, permitted, or await permit approval on its royalty lands thus far in 2013. In addition, the company has participated in the drilling of 4 directional wells, and has been notified by the operators of the intention to drill between 8 and 16 horizontal wells through the second quarter of 2014.

About Shoreline Energy

Investor Information

Shoreline is a Calgary, Alberta based corporation engaged in the exploration, development and production of petroleum and natural gas. Shoreline offers investors a combination of value growth via lower risk development of additional oil reserves and production on its current lands and pays a quarterly dividend. The Common Shares are currently listed on the TSX under the trading symbol “SEQ” and the debentures under the trading symbol “SEQ.DB”. Additional information regarding Shoreline is available under the Corporation’s profile at www.sedar.com or at the Corporation’s website, www.shorelineenergy.ca.

Forward Looking and Cautionary Statements

This news release contains forward-looking statements relating to the terms and the anticipated dates of closing of the New Facility and the Joint Venture. Forward-looking statements typically use words such as “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “should,” “plan,” and similar expressions suggesting future outcomes, and include statements that actions, events or conditions “may,” “would,” “could,” or “will” be taken or occur in the future. The forward-looking statements are based on various assumptions including expectations regarding the success of current or future drill wells; the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; estimates of future production; assumptions concerning the timing of regulatory approvals; the state of the economy and the exploration and production business; results of operations; business prospects and opportunities; future exchange and interest rates; the Corporation’s ability to obtain equipment in a timely manner to carry out development activities; and the ability of the Corporation to access capital and credit. While the Corporation considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements are subject to a wide range of assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodities prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions; delays resulting from or inability to obtain required regulatory approvals and to satisfy various closing conditions; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Shoreline believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not rely unduly on forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by applicable law, Shoreline does not undertake any obligation to publicly update or revise any forward-looking statements.