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Sea Dragon Announces Acquisition of NPC Egypt

Source: www.gulfoilandgas.com 3/8/2012, Location: Egypt

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Sea Dragon Energy Inc. (“Sea Dragon”) announces that further to its announcements of January 8, 2012, January 9, 2012, January 31, 2012 and February 24, 2012, it has reached a non-binding understanding with Golden Crescent Investments Ltd. (“Golden Crescent”) related to revised terms for the acquisition of National Petroleum Company Egypt Limited.

Under the revised terms of the Acquisition, it is proposed that Sea Dragon will acquire, directly or indirectly, all of the issued and outstanding shares of NPC Egypt in consideration of the issuance of 437.5 million common shares of Sea Dragon at a deemed price of US$0.20 per share (the “Common Share Consideration”) and US$60 million of redeemable, convertible, non-voting preferred shares (the “Preferred Shares”) to be issued, directly or indirectly, to Golden Crescent at the closing of the Acquisition (the “Preferred Share Consideration”), subject to adjustments to be included in an amendment to the existing purchase and sale agreement dated January 6, 2012 (“Purchase Agreement”) to be negotiated and finalized between the Parties.

The Preferred Shares will bear a preferred cumulative dividend of seven (7%) percent per annum for the first twelve months after issuance, ten (10%) percent per annum for the next nine months and twelve (12%) percent per annum thereafter until converted or redeemed. Any unpaid dividend shall, at Sea Dragon’s option, be capitalized and added to the face amount of the Preferred Shares on an annual basis. The Preferred Shares may be redeemed by Sea Dragon at any time after issuance in increments of not less than US$20 million upon 45 days’ written notice. Golden Crescent has the right to convert the Preferred Shares, in whole or in part, into common shares of the Corporation at a conversion price of US$0.15 per common share at any time after the first anniversary of the date of issuance. Golden Crescent shall not be entitled to transfer the Preferred Shares until after the first anniversary of the issuance date.

It is anticipated that Sea Dragon will have 50 days from the date of execution of an amended and restated Purchase Agreement to complete the transaction (subject to a 10 day extension) while Golden Crescent will have a 40 day non-exclusivity period to seek alternative proposals without any: (a) penalty or payment in favour of Sea Dragon of the previously contemplated termination fee; and (b) right of Sea Dragon to match any alternative proposals.

The revised terms of the Acquisition are subject to certain conditions precedent including the negotiation and finalization of a binding amended and restated Purchase Agreement; receipt of Sea Dragon shareholder approval; receipt of all necessary consents and approvals from Sea Dragon’s existing senior secured lenders; completion of certain amendments to Sea Dragon’s senior secured reserve-based credit facility agreement and related agreements with BNP Paribas and HSBC; regulatory and stock exchange approvals; and completion of the International Finance Corporation proposed US$40 million financing announced by the Corporation on January 31, 2012, consisting of a US$20 million private placement of common shares of the Corporation and a US$20 million loan (the “IFC Financing”).

Other than as set forth above, the terms of the Acquisition, including the terms of the pre-closing reorganization, the net profits interest and the termination fee payable by Sea Dragon (with the inclusion of the failure of Sea Dragon to obtain the requisite lender consents and approvals to complete the Acquisition or to complete the amendments to its senior secured reserve-based credit facility agreement and related agreements with BNP Paribas and HSBC, the failure of Sea Dragon to complete the IFC Financing and the failure of Sea Dragon to deliver an officer’s certificate at the completion of Golden Crescent’s non-exclusivity period confirming Sea Dragon’s ability to close the Acquisition as additional termination fee events) remain substantially unchanged from the terms announced in the Corporation’s January 8, 2012 and January 9, 2012 press releases.

Commenting on the proposed revised terms of the Acquisition, Said Arrata, CEO and Chairman of Sea Dragon said: “We are pleased to continue our good working relationship with Golden Crescent and have renegotiated terms together for the acquisition of NPC Egypt. In our view, NPC Egypt offers an attractive portfolio of assets with production, certified reserves and material growth potential. The Muzhil field, fully drilled and appraised, carries certified proven and probable reserves. It is partly developed and in our opinion requires low-risk engineering work to reach first oil and generate anticipated significant cash flow in 2013. We also appreciate that the portfolio exhibits material exploration upside and high working interests that Sea Dragon can pursue on its own or with potential partners”.

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