2009-10-26-2009-09-30-2010-07-21

CANCELLED: To acquire company with assets in TX, NM, OK, gaining 49.1 MMBOE proved, 1,309 BOE/d.

Resaca Exploitation Inc., Houston, (London AIM: RSOX, RSX) plans to acquire Fort Worth, Texas-based Cano Petroleum Inc., (NYSE Amex: CFW) for approximately US$76 million in stock. Resaca will pay 2.1 shares per Cano share for an implied $1.67 per share for a 32% premium over the 30-day weighted average. Cano shareholders will own approximately 50% of the combined company. Based on the Resaca closing price on Sept. 28, the transaction implies a deal value of US$3.34 per proved barrel of oil equivalent. Cano proved reserves are 49.1 million barrels of oil equivalent (21% proved developed; 79% oil) with probable reserves of 13.9 million barrels of oil focused in Texas, New Mexico and Oklahoma. Production as of July 1 was 1,309 barrels of oil equivalent per day. Pro forma, the company will have an estimated 63.2 million barrels oil equivalent of proved reserves (81% oil). Net production will be approximately 1,960 net barrels of oil equivalent per day as of July 1. Resaca's properties are in West Texas and southeastern New Mexico. The combined company will retain the Resaca name, will be headquartered in Houston, and will be led by current Resaca chairman J.P. Bryan, who will become CEO upon completion of the transaction. The combined company's board will consist of four directors from Resaca and three from Cano. The company will continue to trade on the London AIM market. Resaca's shares that trade on the AIM under the current ticker RSOX will be traded under ticker symbol RSX. Resaca will also obtain a NYSE Amex listing as a condition to closing. Resaca chairman Bryan says, "Through this transaction, the newly combined company will enjoy the benefits of tremendous synergies and strengths. This is clearly a case of one plus one equals so much more than two going forward. Both companies share a common growth strategy of acquiring and exploiting mature properties and implementing secondary and tertiary recovery techniques. The combined assets are most complementary geographically and combine the near-term production upside from Resaca's recompletion portfolio with long-term upside from Cano's proved undeveloped waterflood reserves." Jeff Johnson, Cano chairman and CEO, adds, "Resaca's near-term production growth potential and synergies will add the cash flows needed for all shareholders to realize the long-term upside of both companies' assets. The significant financial advantages of this combination will benefit our shareholders and employees. Cano shareholders will not only receive a significant premium to its current share price, but they will also be able to participate in the upside of the stronger combined entity." In addition, Resaca's CEO John J. "Jay" Lendrum III will become vice chairman. Resaca president and COO Dennis Hammond will remain president. Resaca's CFO Chris Work will remain CFO. Cano senior vice president of engineering and operations Pat McKinney will become executive vice president of engineering and operations. Cano vice president and principal accounting officer Mike Ricketts will become vice president and chief accounting officer. Cano vice president and general counsel Phillip Feiner will hold the same title in the combined company. The deal is expected to close within three to five months. SMH Capital Inc. is financial advisor to Resaca. Haynes and Boone LLP is legal advisor. RBC Capital Markets is financial advisor to Cano and Thompson & Knight LLP is legal advisor.