CALGARY, ALBERTA--(Marketwired - Feb. 17, 2015) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Pinecrest Energy Inc. ("Pinecrest" or the "Company") (TSX VENTURE:PRY) announces that it has entered into an agreement (the "Arrangement Agreement") with Virginia Hills Oil Corp. ("Virginia Hills") and a junior dividend paying company (the "Purchaser") pursuant to which, among other things, Pinecrest will carry out a reorganization of its business which will result in Virginia Hills acquiring approximately 90% of Pinecrest's current assets and continuing on as the resulting public company and Pinecrest, then holding approximately 10% of its existing assets, will be purchased by the Purchaser for upfront proceeds to Virginia Hills of $23.5 million, subject to certain adjustments (the "Cash Consideration"). In addition to the upfront proceeds, Virginia Hills will be entitled to receive an additional payment of $5 million if during the period ending on April 26, 2015, a front month hedge is made available to the Purchaser by one or more financial institutions, financial intermediaries or credit branches at a price of $US65/Bbl WTI for a minimum of twelve (12) months. Pursuant to the plan of arrangement (the "Arrangement"), Virginia Hills will acquire all of the other assets and liabilities of Pinecrest, including Pinecrest's bank debt. Assuming the Arrangement is completed, the net proceeds from the sale of Pinecrest to the Purchaser will be utilized to reduce the indebtedness of Virginia Hills to its bankers.

As part of the Arrangement, existing shareholders of Pinecrest will exchange their common shares of Pinecrest ("Pinecrest Shares") for common shares of Virginia Hills ("Virginia Hills Shares") on the basis of one hundred (100) Pinecrest Shares for each one (1) Virginia Hills Share, and rights to acquire Virginia Hills Shares (the "Arrangement Rights") on the basis of eight (8) Arrangement Rights for each one (1) Virginia Hills Share held. All of the foregoing transactions will occur pursuant to the Arrangement under the Business Corporations Act (Alberta).

In addition, it is proposed that prior to the completion of the Arrangement, Virginia Hills will complete a non-brokered private placement of subscription receipts of Virginia Hills ("Subscription Receipts") for gross proceeds of up to $2.0 million (the "Private Placement").

Concurrent with or prior to the completion of the Arrangement, certain existing executive officers of Pinecrest will resign and the go-forward management of Virginia Hills will include a new President and Chief Executive Officer and other executive officers (the "New Management Team"). [The Private Placement and New Management Team collectively and together with the Arrangement, referred to herein as the "Transactions"].

The Arrangement is subject to the court approval, shareholder approval and other customary regulatory approvals, including approval of the TSX Venture Exchange (the "TSXV").

The Virginia Hills management team will be led by Colin Witwer, President and Chief Executive Officer; Tracie Noble, Vice President, Finance and Chief Financial Officer; Brent Conrad, Vice President, Engineering and Chief Operating Officer and Susan McNutt as Manager of Land. Pinecrest's current management; Mr. Wade Becker, President and Chief Executive Officer, Mr. Korby Zimmerman, Vice President, Business Development and Land, Mr. Brent Gough Vice President, Operations, Mr. Dan Toews Vice President, Finance and Chief Financial Officer and Mr. Joe Sobochan Vice President of Exploration will resign from the Company concurrent or prior to closing of the Arrangement.

Virginia Hills Team

Colin B. Witwer P. Eng. - President and Chief Executive Officer

Colin B. Witwer has more than 15 years of experience in the oil and gas industry and has served as Second Wave Petroleum Inc.'s President and Chief Executive Officer. Prior thereto, Mr. Witwer served as Vice President, Operations for Bear Ridge Resources Ltd. and held various operational focused engineering roles at Bear Creek Energy Ltd., Talisman Energy and Schlumberger Oilfield Services. He holds a Chemical Engineering degree from the University of Alberta.

Tracie L. Noble, CA - Vice President, Finance and Chief Financial Officer

Tracie L. Noble has more than 18 years of finance, taxation and administration experience in the oil and gas industry and has previously served as Controller of Pinecrest Energy for a period of four years. Prior thereto, Ms. Noble held various management and senior financial advisor roles with several public and private oil and gas companies with a focus on optimizing processes. From 1998 to 2008, she was Vice President, Finance at Argali Oil Inc., a private oil company. She is a Chartered Accountant and holds a Bachelor of Commerce degree from the University of Saskatchewan.

Brent Conrad, P. Eng. - Vice President, Engineering and Chief Operating Officer

Brent Conrad has more than 15 years of experience in the oil and gas industry and has served as Second Wave Petroleum Inc.'s Vice President of Engineering. Prior thereto, Mr. Conrad served in various operational and management engineering roles with Crew Energy, ConocoPhillips and Ish Energy Ltd. He holds a Bachelor of Engineering degree from the University of Calgary.

Susan McNutt- Land Manager

Susan McNutt has more than 25 years of experience in the oil and gas industry and has served as Pinecrest's Land Manager for four years. Prior thereto, Ms. McNutt has worked at Triaxon Energy Inc., Peerless Energy Inc. and Clear Energy Inc. in various operational and management land roles.

Virginia Hills Board

Upon closing of the Arrangement, the board of directors of Virginia Hills (the "Virginia Hills Board") will be comprised of Messrs. Colin Witwer, John Brussa, Howard Crone, David Johnson and Robert Zakresky, all of whom, other than Mr. Witwer, are current directors of Pinecrest.

The members of the Virginia Hills Board have strong track records in both the oil and gas industry and their respective areas of expertise. The backgrounds and experience of the independent board members are as follows:

John A. Brussa

John A. Brussa is Vice Chairman of Burnet, Duckworth & Palmer LLP and focuses on tax law. He was admitted to the Alberta Bar in 1982. Mr. Brussa is a director of the following public companies: Crew Energy Inc., Enseco Energy Services Corp., Just Energy Group Inc., Long Run Exploration Ltd., RMP Energy Inc., Storm Resources Ltd., TORC Oil & Gas Ltd., Twin Butte Energy Ltd., Leucrotta Exploration Inc. and Yoho Resources Inc. He holds a Bachelor of Laws degree and a Bachelor of Arts, History and Economics degree from the University of Windsor.

Howard J. Crone

Howard J. Crone has greater than 30 years of experience in the oil and gas industry and is currently a director of Cequence Energy Ltd. ("Cequence"), Journey Energy Inc. and Beaumont Energy Inc. Before assuming his current role as director of Cequence, Mr. Crone served as its Executive Vice President and Chief Operating Officer, and its President and Chief Executive Officer. Formerly, Mr. Crone served as a director for Progress Energy Resources Corp. and Iteration Energy Ltd., was the Vice President of Operations and Chief Operating Officer at Cypress Energy Inc., and was also the Vice President and Chief Operating Officer of Cequel Energy Inc. Additionally, Mr. Crone has served as the President of a privately held oil and gas company and worked as an independent businessman for a number of years. Mr. Crone holds a Chemical Engineering degree (1984) from the University of Alberta.

David D. Johnson

David D. Johnson has 35 years of diverse experience in the oil and gas industry including a background in production, reservoir evaluation and operations. Formerly, Mr. Johnson served as Chairman of Progress Energy Resources Corp. ("Progress"). Mr. Johnson is a director and chairman of TORC Oil & Gas Ltd. and an independent director at Secure Energy Services Inc. and Cardinal Energy Ltd. Prior thereto, Mr. Johnson was the President and Chief Executive Officer of Progress, served as Executive Chairman of ProEx Energy Ltd. and the President and Chief Executive Officer of Encal Energy Ltd. Mr. Johnson is a member of the Canadian Institute of Mining, Metallurgy and Petroleum as well as the Association of Engineers, Geoscientists of Alberta and has served twice as a Governor of the Canadian Association of Petroleum Producers. Mr. Johnson holds a diploma in Petroleum Technology from the Southern Alberta Institute of Technology and a B.Sc. in Petroleum Engineering from the University of Wyoming.

Robert J. Zakresky

Robert J. Zakresky has held the position of President and Chief Executive Officer of Leucrotta Exploration Inc. since August 2014. From 1993 to August 2014, Mr. Zakresky has sequentially held the positions of President, Chief Executive Officer and director of Bellator Exploration Inc., Viracocha Energy Inc., Chamaelo Energy Inc, Chamaelo Exploration Ltd. and Crocotta Energy Inc. Mr. Zakresky obtained his Bachelor of Commerce from the University of Saskatchewan in 1988. He obtained his Chartered Accountant designation with PricewaterhouseCoopers in 1990.

Corporate Strategy

Following completion of the Arrangement, Virginia Hills will have production of approximately 1,530 boe per day (97% light oil and NGLs) of high net back low decline light oil with a risked drilling inventory exceeding 50 gross (45.0 net) undeveloped horizontal light oil locations solely focused in the greater Red Earth area on the Slave Point formation. In addition Virginia Hills will own approximately 152,900 gross (134,500 net) undeveloped acres within the greater Red Earth area with an unrisked drilling inventory of approximately 100 gross (90.0 net) horizontal light oil drilling locations in the Slave Point formation. Pinecrest has built out a significant operated infrastructure foot print and has established seven individual waterflood projects in the Slave Point formation as it transitions to a lower decline production base.

Virginia Hills will be focused on a strategy of utilizing its extensive infrastructure foot print to maximize the full cycle economics of the development of its Slave Point light oil resource in the Red Earth area through multi-stage frac horizontals and the implementation of secondary recovery. Virginia Hills anticipates providing operational guidance for 2015 after the Transactions have closed.

Arrangement Rights

As part of the Arrangement, each shareholder of Virginia Hills (including the former shareholders of Pinecrest) will receive Arrangement Rights which will be outstanding for thirty (30) days following the effective date of the Arrangement (the "Expiry Date"). Shareholders of Virginia Hills (including former shareholders of Pinecrest) will be issued eight (8) Arrangement Rights for each Virginia Hills Share held. Each Arrangement Right will entitle the holder thereof to purchase one Virginia Hills Share at a price of $0.25 on or before the Expiry Date, following which all outstanding Arrangement Rights shall terminate and expire. Further, each holder of Arrangement Rights who has exercised all their Arrangement Rights will have an additional subscription right to acquire additional Virginia Hills Shares to the extent that other holders of Arrangement Rights do not exercise their Arrangement Rights in full.

Private Placement

Pursuant to the Private Placement, the Virginia Hills Management Team, the Virginia Hills Board and certain other investors will subscribe for Subscription Receipts at a price of $0.25 per Subscription Receipt for gross proceeds of up to $2 million. Each Subscription Receipt will entitle the holder thereof to one unit of Virginia Hills (a "Unit") upon completion of a proposed acquisition by Virginia Hills of approximately 110 boe per day located in close proximity to the assets of Pinecrest. The Acquisition is expected to close following the completion of the Arrangement ("Acquisition").

Each Unit will be comprised of one (1) Virginia Hills Share issued on a flow-through basis under the Income Tax Act (Canada) and two common share purchase warrants (each a "Warrant"). Of the two Warrants, one will be exercisable at a price of $0.30 and the other at a price of $0.35. Each Warrant will entitle the holder to purchase one Virginia Hills Share for a period of five (5) years. The Warrants will vest and become exercisable in tranches of 1/3 upon the 20 day weighted average trading price of the Virginia Hills Shares equalling or exceeding $0.35, $0.40 and $0.45, respectively.

Proceeds from the Private Placement will be placed in escrow pending closing of the Acquisition. If the Acquisition closes on or before 5:00 p.m. (Calgary time) on April 30, 2015, the escrowed funds and the interest earned thereon will be released to Virginia Hills and Virginia Hills will utilize such funds for its 2015 capital expenditure program. If the Acquisition is not completed by April 30, 2015, the agreement governing the Acquisition is terminated in accordance with its terms at any earlier time, or if Virginia Hills has announced that it does not intend to proceed with the Acquisition, holders of Subscription Receipts will be entitled to receive their full subscription price together with any interest that was earned thereon during the term of escrow.

At the Meeting (as defined below), Pinecrest Shareholders will be asked to approve an ordinary resolution to authorize the Private Placement. The resolution must be passed by a majority of the votes excluding the votes cast in respect of Pinecrest Shares held, directly or indirectly, or over which control or direction is exercised, by any person who will participate in the Private Placement or their associates or affiliates.

Shareholder and Stock Exchange Approvals

There are currently 217,212,365 Pinecrest Shares issued and outstanding. Upon completion of the Private Placement and exercise of the Arrangement Rights (assuming the Private Placement is fully subscribed for and the Arrangement Rights are fully exercised) and after giving effect of consolidation occurring as part of the Arrangement, there will be approximately 27,959,113 Virginia Hills Shares and 8,000,000 Subscription Receipts outstanding. Furthermore, assuming the completion of the Acquisition, the conversion of the Subscription Receipts into Units and the exercise of the Warrants forming part of the Units, there will be approximately 63,094,984 Virginia Hills Shares outstanding. In addition, as consideration for making available credit facilities to Virginia Hills, it has agreed to issue the syndicate of lenders common share purchase warrants ("Bank Warrants") representing 10% of the issued and outstanding Virginia Hills Shares thirty (30) days following the completion of the Arrangement. The Banks Warrants will be exercisable at a price of $0.30 for a period ending on the earlier of five (5) years from the date of issue or thirty (30) days following the date on which the credit facility matures.

The Transactions are subject to a number of conditions and approvals including, but not limited to, the approval of the TSXV and, in the case of the Arrangement, shareholder approval.

The Arrangement is to be effected by way of plan of arrangement under the Business Corporations Act (Alberta). Completion of the Arrangement, which is anticipated to occur on March 20, 2015 is subject to, among other things, the approval at the Meeting of: (i) the shareholders holding at least 66 2/3% of the Pinecrest Shares for voting on the Arrangement; and (ii) a majority of the votes cast by Pinecrest Shareholders present in person or voting by proxy at the Meeting after excluding votes required to be excluded by Multilateral Instrument 61-101 - Protection of Minority Shareholders in Special Transactions, the approval of the Court of Queen's Bench of Alberta, the receipt of all necessary regulatory and stock exchange approvals and certain closing conditions that are customary for a transaction of this nature.

The directors of each of Pinecrest and the Purchaser that are eligible to vote have unanimously approved the Arrangement and the board of directors of Pinecrest (other than the directors who were not eligible to vote) resolved to recommend that the Pinecrest shareholders vote in favor of the Arrangement. Messrs. John Brussa and David Johnson, directors of both Pinecrest and the Purchaser, abstained from voting on the Arrangement.

Pinecrest has agreed not to solicit or initiate any discussions regarding any business combination or sale of material assets and has granted the Purchaser a right to match competing unsolicited proposals. The Arrangement Agreement provides for a non-completion fee payable by Pinecrest that is either $200,000 or $1,500,000 in certain circumstances if the Arrangement is not completed. Complete details of the terms of the Arrangement are set out in the Arrangement Agreement, which will be filed by Pinecrest and available for viewing under Pinecrest's profile at www.sedar.com.

Financial Advisor and Fairness Opinion

Peters & Co. Limited ("Peters & Co.") is acting as financial advisor to Pinecrest and Peters & Co., has provided the board of directors of Pinecrest with an opinion that, subject to the review and execution of the final documentation relating to the Arrangement, as of the date of the opinion, the Cash Consideration to be received by Pinecrest for the assets to be retained by Pinecrest and the tax attributes of Pinecrest, with the right to receive this consideration effectively transferred from Pinecrest to Virginia Hills through completion of the Arrangement, is fair, from a financial point of view, to Pinecrest.

Pinecrest Special Meeting

Pinecrest's special meeting of shareholders is scheduled for March 19, 2015 at 8:00 a.m. at the offices of Burnet, Duckworth & Palmer, LLP, located at 2400, 525 - 8^th Avenue S.W., Calgary Alberta (the "Meeting").

Pinecrest Update

Pinecrest has a credit facility in place with its bankers of which approximately $111.5 million is drawn. Current net debt, including working capital deficit, is approximately $114.5 million. The Cash Consideration received from the Purchaser under the Arrangement will be paid to the banks to reduce the outstanding indebtedness of Virginia Hills to its bankers to approximately $89.5 million at closing.

Pinecrest is currently producing approximately 1,700 boe per day.

Virginia Hills Credit Facility

Virginia Hills has entered into a commitment letter to establish aggregate credit facilities of up to $94.3 million with its lenders, which is conditional upon satisfaction of a number of conditions which include: closing of the Arrangement Agreement and Private Placement and the execution of the credit facility on or before March 20, 2015. Further, as consideration for the establishment of the credit facility, Virginia Hills has agreed to issue the Bankers Warrants. The credit facility is a revolving will bear interest at the bank's prime lending rate plus a variable rate of up to 4%, depending on certain financial covenants.

Advisory

The information in this press release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. In particular, forward-looking statements in this press release includes, but are not limited to: the timing of the special meeting of Pinecrest shareholders; the timing and completion of the Transactions (including the Arrangement)and the Acquisition; the benefits of the Arrangement to the Pinecrest shareholders; the payment of the additional $5 million by the Purchaser during the period ended April 26, 2016; the gross proceeds to be raised under the Private Placement; the number of Subscription Receipts to be issued under the Private Placement; the date of completion of the Acquisition; the number of Bank Warrants to be issued; the members of the Virginia Hills management team and the Virginia Hills Board upon completion of the Arrangement; the adjustments to be made to the Cash Consideration; the number of Arrangement Rights and Warrants that will be exercised; the number of Virginia Hills Shares outstanding following the completion of the Transactions and the Acquisition; Virginia Hills' ability to obtain a credit facility on completion of the Arrangement; receipt of regulatory approvals; and, Virginia Hills liquidity following the Arrangement.
These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Pinecrest and Virginia Hills' control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves. Pinecrest's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Pinecrest will derive from them. Forward-looking statements are made as of the date herein except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements.

The forward-looking statements are founded on the basis of expectations and assumptions made by Virginia Hills and the New Management Team which include, but are not limited to, including assumptions as to the time required to prepare and mail Pinecrest's shareholder meeting materials, including the required information circular; the ability of the parties to receive, in a timely manner, the necessary regulatory, court, shareholder and other third party approvals and the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Arrangement; participation in the Private Placement and exercise of the Arrangement Rights, the anticipated use of proceeds of the Private Placement; the completion of the Acquisition; the future operations of and transactions completed by Virginia Hills as well as the satisfaction of other conditions pertaining to the completion of the Arrangement and the Transaction.

Risks and uncertainties inherent in the nature of the Arrangement include the failure of Pinecrest, Virginia Hills or the Purchaser to obtain necessary securityholder, regulatory, court and other third party approvals, or to otherwise satisfy the conditions to the Arrangement, in a timely manner, or at all. Failure to so obtain such approvals, or the failure of Pinecrest, Virginia Hills or the Purchaser to otherwise satisfy the conditions to the Arrangement, may result in the Arrangement not being completed on the proposed terms, or at all. In addition, the failure of Pinecrest to comply with certain terms of the Arrangement Agreement may result in Pinecrest being required to pay a non-completion fee to the Purchaser, the result of which could have a material adverse effect on Pinecrest's financial position and results of operations and its ability to fund growth prospects and current operations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of Pinecrest are included in reports on file with applicable securities regulatory authorities, including but not limited to: Pinecrest's Annual Information Form for the year ended December 31, 2014, which may be accessed on Pinecrest's SEDAR profile at www.sedar.com.

Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources or reserves described can be profitably produced in the future.

Barrels of Oil Equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6MCF:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This press release discloses drilling locations for unbooked locations. Unbooked locations are internal estimates based on Virginia Hills prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked locations have specifically been identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves data on prospective acreage and geologic formations. The drilling locations on which Virginia Hills will actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results and other factors.

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 press release.