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Voyager expands Williston Basin footprint with Emerald Oil acquisition

Voyager Oil & Gas Inc.

Voyager Oil & Gas Inc. and Emerald Oil Inc., a wholly owned subsidiary of Emerald Oil & Gas NL, have entered into a securities purchase agreement whereby Voyager will acquire Emerald Oil to create a US-based oil and gas company that will focus on select oil and gas basins in the Rocky Mountain region. The transaction will combine the companies’ oil-producing assets in the Williston Basin, specifically in the Bakken and Three Forks plays located in North Dakota and Montana, with Emerald Oil’s acreage position focusing on the Niobrara shale in the Sandwash Basin located in Colorado and Wyoming.

The transaction will significantly expand the acreage position of both companies in the Williston Basin. The combination is intended to create an oil and gas company with operating capabilities that has the ability to effectively manage a multi-rig drilling program in the Rocky Mountains and extract maximum value from both of its operated and non-operated drilling programs. The combined company will begin the transition from a non-operating business model to an operating business model with its first operated well in Dunn County, North Dakota, which is planned to spud in early 2013 and will be followed by a continuous single-rig drilling program in 2013. The combined company intends to leverage its extensive technical Williston Basin well database to optimize the designs of future wells.

The combined company will operate as Emerald Oil and will be headquartered in Denver, Colorado and maintain its lease acquisition program from Billings, Montana focused on the Williston Basin.

“The untapped oil and gas reserves in the Western United States have reshaped the North American energy markets,” said McAndrew Rudisill, president of Emerald Oil. “The combination of Voyager and Emerald Oil underscores our commitment to developing an operated US shale oil company. Today’s announcement accelerates our strategy of using our position in the Williston Basin to create a company focused on Bakken and Three Forks development, two of the most prolific and extensive shale oil plays in the US.”

Upon closing, the combined company will control the following operated and non-operated leasehold positions:

Williston Basin
The combined company will hold approximately 43,500 net acres in the Williston Basin.

•Operated: approximately 6,900 net acres in Dunn County, North Dakota;

•Non-Operated: approximately 6,800 net acres in core focus areas available for conversion to operated model; and

•Non-Operated: approximately 29,800 net acres with a majority of acreage in Williams, McKenzie, Dunn and Mountrail Counties in North Dakota and Richland County, Montana.

Sandwash Basin Niobrara
The combined company will hold 45,000 net acres in the Sandwash Basin Niobrara shale oil play in Moffat and Routt Counties, Colorado and Carbon County, Wyoming.

•Non-Operated: approximately 45,000 net acres in the Sandwash Basin Niobrara, with Emerald Oil able to propose operations under its joint venture agreements.

Heath shale oil
The combined company will hold approximately 33,500 net acres prospective for Heath shale oil in Musselshell, Petroleum, Garfield and Fergus Counties, Montana.

•Operated: approximately 13,700 net acres; and

•Non-Operated: approximately 19,800 net acres.

Tiger Ridge Gas Play
The combined company will hold approximately 74,700 net operated acres prospective for the Tiger Ridge gas play in Blaine, Hill and Chouteau Counties, Montana.

Denver-Julesburg (DJ) Basin Niobrara
The combined company will hold approximately 2,400 net non-operated acres in the DJ Basin Niobrara.

New management
The combined management team and directors will own approximately 9% of the combined company immediately after the transaction closes.

•J.R. Reger, Voyager’s current CEO, will become executive chairman of the combined company. Reger has 18 years of experience in oil and gas lease management. Prior to serving as CEO of Voyager, Reger was the president of South Fork Exploration LLC.

•Mike Krzus, currently a director and CEO of Emerald Oil, will serve as a director and as the CEO of the combined company. Krzus has 29 years of experience with Woodside Petroleum and Shell Oil.

•McAndrew Rudisill, currently chairman and president of Emerald Oil, will serve as a director and the president of the combined company. Rudisill has 11 years of experience in natural resource investment and management. Prior to joining Emerald Oil, Rudisill was founder and managing partner of Pelagic Capital Advisors.

•Paul Wiesner, Emerald Oil’s current CFO, will be the CFO of the combined company. Wiesner was formerly CFO of Tracker Resource Development II LLC, a pure play Williston Basin operator that sold its assets to Hess for $1 billion in December 2010.

•Karl Osterbuhr will serve as vice president of exploration and business development for the combined company. Osterbuhr has over 20 years of US oil and gas exploration and operations experience.

•Mitch Thompson, Voyager’s current CFO, will serve as chief accounting officer for the combined company.

•Marty Beskow, Voyager’s current executive vice president, will become vice president of Finance/Capital Markets for the combined company.

In connection with the closing of the acquisition of Emerald Oil, five of the members of Voyager’s Board of Directors will resign. Following the closing, J.R. Reger, McAndrew Rudisill and Mike Krzus will serve as directors of the combined company, as will the following:

•Lyle Berman, Voyager’s current chairman of the board, who is also the chairman and CEO of Lakes Entertainment.

•Duke Ligon was formerly general counsel of Devon Energy.

•Seth Setrakian, who is a managing member of First New York Securities.

•Dan Spears, who is a partner and portfolio manager of Swank Capital LLC.

Transformation to an operating E&P focused on shale oil
The combined company will be focused on the Williston Basin. The combined company’s operating team will begin to execute its initial multi-well development program in Dunn, ND, guided by well results from nearby wells, including several successful wells where the combined company will hold a non-operated interest.

All non-operated well authorizations for expenditure (AFEs) will be analyzed based upon geological characteristics, geographic position within the basin, technical aspects of the proposed well and completion design, past operator performance and quantitative analysis of directly offsetting well production performance. Capital efficiency and rate of return will be guiding metrics for capital deployment to the combined company’s operated and non-operated drilling portfolio.

With respect to land management, the combined company is expected to be in a position to benefit from lease turnover in the Williston Basin. The land team is ready to focus on high grading its large non-operated acreage position as a first step in the company’s strategy to convert to operated positions in selected areas in a capital-efficient manner.

Transaction highlights
Under the terms of the securities purchase agreement, Voyager will acquire 100% of Emerald Oil’s outstanding equity interests in exchange for up to 19.9% of Voyager common stock (approximately 11.6 million shares) and assume approximately USD 19.0 million of Emerald Oil’s outstanding debt. Upon closing, Voyager’s existing shareholders will own approximately 80% of the combined company with Emerald owning the remaining 20%. The common stock to be issued by Voyager to Emerald Australia is not being registered under federal or state securities laws.

The Boards of Directors of both Voyager and Emerald Australia have unanimously approved the transaction. The transaction is expected to close by the end of July 2012.

Canaccord Genuity acted as financial advisor to Voyager, and Mayer Brown LLP acted as legal counsel. Johnson Rice & Company LLC acted as financial advisor to Emerald Oil, and Messner Reeves LLC acted as legal counsel.

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