Mr. Kim Oishi reports

KCO CAPITAL INC. ANNOUNCES AGREEMENT FOR QUALIFYING TRANSACTION

KCO Capital Inc. has entered into a letter of intent dated May 17, 2013, regarding a proposed transaction with Grey Hawk Exploration Inc., a privately held company incorporated under the Business Corporations Act (British Columbia), which operates as an exploration company with various oil and gas interests in the state of Utah.

It is intended that the transaction will constitute KCO's qualifying transaction in accordance with Policy 2.4 of the exchange. KCO and Grey Hawk are at arm's length, and, accordingly, the transaction is not a non-arm's-length qualifying transaction. As such, it is anticipated that the approval of the shareholders of KCO will not be required. Subject to any regulatory, director or other approvals that may be required, the completion of satisfactory due diligence by KCO and other conditions contained in the agreement, it is anticipated that the transaction will involve an acquisition, merger, amalgamation, plan of arrangement, reorganization, sale of all or substantially all of the assets, or exchange of assets or securities in a similar transaction. Upon completion of the qualifying transaction, it is expected that KCO will be listed on the exchange as a Tier 2 oil and gas issuer.

KCO has engaged Canaccord Genuity Corp. as adviser for the transaction and agent for the proposed concurrent private placement as set out below.

About Grey Hawk Exploration

Grey Hawk was incorporated on May 24, 2011, pursuant to the Business Corporations Act (B.C.). Grey Hawk's head office and registered office are located in Vancouver, B.C. Grey Hawk's wholly owned subsidiary, Grey Hawk Exploration (USA) Inc., was incorporated on Jan. 26, 2012, pursuant to the Nevada Revised Statute 78.055. Since incorporation, Grey Hawk USA has been actively involved in the business of exploring and developing oil and gas concessions and has interests in two wells with associated acreage in the Uinta basin, a prolific oil and gas development area in Utah.

Grey Hawk's growth strategy will initially focus on acquiring and enhancing producing wells in the Uinta basin and sharing exploration risk with partners for drilling new wells. Grey Hawk plans to leverage its operating expertise and relationships in the Uinta basin to acquire distressed assets that it can add value to with the application of new technologies and operating efficiencies.

Grey Hawk's major shareholder is New Times Energy Corporation Ltd., an integrated natural resources company engaged in the acquisition, development, and operation of oil and gas projects in Argentina, China and the United States. New Times currently owns 45 per cent of the shares of Grey Hawk.

Grey Hawk has a 50-per-cent working interest in 80 acres of land in the West Willow area of the Uinta basin in northeastern Utah, containing two oil wells, which are currently in production and are scheduled to undergo a work program to increase production capacity.

In addition to these wells, Grey Hawk has the right to earn up to an additional 1,544.52 acres by drilling wells that will earn 320 acres each. Grey Hawk pays 100 per cent of the capital to earn an 85-per-cent working interest before payout and a 75-per-cent working interest after payout in these horizontal wells.

Oil exploration and development in the Uinta basin has been active over the last decade, with production growing from approximately 20,000 barrels per day in 2002 to more than 50,000 barrels per day by the end of 2011. In 2012, more than 275 wells were drilled in the Uinta basin. There is good infrastructure for oil and gas exploration and development in the Uinta basin, and the state of Utah has a total refining capacity of over 165,000 barrels per day. Recent merger-and-acquisition activity in the Uinta basin has included acquisitions by Anadarko Petroleum, Exxon Mobil, Crescent Point Energy and Linn Energy.

The greater Uinta-Piceance basin is a structural basin of latest Cretaceous and Tertiary age located in northeast Utah and northwest Colorado. It is subdivided into two lesser basins -- the Piceance basin, located in Colorado east of the Douglas Creek arch, and the Uinta basin, located in Utah. The Uinta basin is sharply asymmetrical with a steep north flank bounded by the Uinta Mountains and a gently dipping south flank filled by as much as 17,000 feet of Cretaceous and Paleogene lacystrine and fluvial sedimentary rocks.

A more detailed summary of financial information in respect of Grey Hawk, and an audited balance sheet, will be included in the filing statements, which will be prepared and filed by KCO on SEDAR in connection with the proposed transaction.

The transaction

KCO will acquire 100 per cent of all of the issued and outstanding securities of Grey Hawk Exploration from all of its shareholders in exchange for 23.75 million common shares of KCO valued at 50 cents per share to complete a qualifying transaction under the rules and policies of the exchange. It is anticipated that the transaction will be by way of a share exchange transaction or some other form of business combination transaction whereby KCO will acquire all of the outstanding shares issued by Grey Hawk.

Concurrently with closing of the transaction, the directors of KCO will pass a resolution to approve a change of KCO's name to Grey Hawk Energy Inc. or such other name as may be selected by KCO.

Subject to exchange approval, in connection with the transaction, by way of a finder's fee (representing 5 per cent of the transaction value, being $11,875,000), Colin Wilson will be issued 890,625 common shares in the capital of KCO and a cash finder's fee of $148,437.

Upon completion of the transaction, KCO will have 31.75 million common shares outstanding before any dilution pursuant to the issuance of the finder's fee of 890,625 common shares and the common shares issued in connection with the proposed concurrent financing.

KCO has agreed to advance Grey Hawk $100,000 in a secured loan, subject to the approval of the exchange.

Capital structure of Grey Hawk

Grey Hawk currently has 19,000,100 common shares issued and outstanding. The principal stakeholders of Grey Hawk are tabulated.

                                              Number   Per cent
Name and jurisdiction of residence         of shares  of shares

Prominent Sino Holdings Ltd. (Hong Kong)   5,000,000      26.31      
Value Train Investments Ltd. (B.V.I)       3,500,000      18.42      
Satvir Dhillon (B.C.)                      2,150,100      11.32      
Mark Schipperheijn (B.C.)                  2,150,000      11.32      

Prominent Sino Holdings and Value Train Investments are both wholly owned by New Times Energy Corp. Ltd., a Hong Kong Stock Exchange-traded company. The remaining 6.2 million Grey Hawk shares are held by approximately 19 other shareholders.

In addition, Grey Hawk also has the following convertible securities outstanding: approximately $700,000 in convertible debentures exercisable into Grey Hawk shares at an exercise price of 15 cents. The convertible debentures are held by Prominent Sino Holdings. On a fully diluted basis, Prominent Sino Holdings will own approximately 9,666,667 Grey Hawk shares or 40.84 per cent of the issued and outstanding shares of Grey Hawk.

Proposed concurrent financing

In conjunction with the transaction, it is expected that KCO will undertake a brokered private placement to raise gross proceeds of up to $3-million through the issuance of six million shares of KCO at 50 cents per share. KCO has engaged Canaccord as an agent in conjunction with the offering. The specific terms of the offering and the terms of any related agent's compensation will be disclosed in a future news release. The offering shall close concurrently with the transaction.

The proceeds from the offering will be used for exploration and development of the Grey Hawk oil and gas properties and general working capital requirements. Additional amounts have been allocated for costs required to complete the transaction and for unallocated working capital. There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for KCO to achieve its business objectives.

Sponsorship

Sponsorship of the transaction of a CPC is generally required by the exchange, unless exempted in accordance with exchange policies. KCO intends to apply for an exemption from the sponsorship requirement based on the considerations as contemplated in Section 3.4 (Exemptions from Sponsorship) of Policy 2.2.

However, there is no assurance that KCO will be able to obtain such an exemption. In the event that KCO is not able to obtain an exemption from the sponsorship requirement, Canaccord has agreed to provide sponsorship services in accordance with exchange Policy 2.2.

Resulting issuer capital structure

Assuming the close of the transaction and the offering being conducted at 50 cents per share, KCO will have the tabulated capital structure.

                                                         Number of    Per cent
                                                     common shares   of shares

Shares held by pre-existing KCO shareholders             8,000,000       18.40
Shares held by former Grey Hawk shareholders            23,750,000       54.61
Shares issued as finder's fee in transaction               890,625        2.05
CPC agent's warrants                                       400,000        0.92
Offering closed concurrently with transaction            6,000,000       13.80
Agent's warrants issued in connection with offering        480,000        1.10
Agent's corporate finance fee shares                        95,000        0.22
KCO pre-existing CPC stock option plan                     700,000        1.61
KCO new stock option plan                                3,173,563        7.30
Total (fully diluted)                                   43,489,188         100

On a non-diluted basis, KCO will have approximately 38,735,625 common shares issued and outstanding upon completion of the transaction and the offering.

On a non-diluted basis immediately after the transaction, Prominent Sino Holdings will hold approximately 25.04 per cent of KCO common share,s and Value Train Investments will hold approximately 9.07 per cent of KCO common shares, giving New Times Energy an indirect beneficial ownership of 34.11 per cent of KCO common shares. On a fully diluted basis after the close of the transaction, New Times Energy will have an indirect beneficial ownership of approximately 30.38 per cent of KCO common shares.

Closing conditions

The closing of the transaction with Grey Hawk is subject to a number of conditions, including, but not limited to, the following:

• Completion of all due diligence reviews;
• Receipt of all director and shareholder approvals as may be required under applicable laws or regulatory policies;
• Execution of a formal agreement;
• Entry into any regulatory required escrow agreements by Grey Hawk shareholders;
• Completion of the proposed offering;
• Confirmation of ownership of key oil and gas properties in Utah;
• Confirmation acquisition of all shares of Grey Hawk being free and clear of all liens, claims, charges or encumbrances;
• No material actions, suits or proceedings at time of closing involving either party;
• No material adverse change to assets, liabilities, business, operations or financial condition at time of closing of either party;
• Completion or exemption of sponsorship;
• Receipt of all required regulatory approvals, including the approval of the exchange, of the transaction;
• Satisfaction of the minimum listing requirements of the exchange and all requirements under the exchange rules relating to completion of a qualifying transaction;
• A new slate of directors be appointed as agreed by the parties.

A filing statement in respect of the proposed transaction will be prepared and filed in accordance with Policy 2.4 of the exchange on SEDAR no less than seven business days prior to the closing of the proposed transaction. A news release will be issued once the filing statement has been filed as required pursuant to exchange policies.

Directors of resulting issuer

Following the completion of the transaction, the directors of the resulting issuer (as defined in exchange Policy 2.4) will be as follows.

Satvir Dhillon

Mr. Dhillon has worked in the banking, investment and securities industries for the past 20 years for various companies in both the public and the private markets. Mr. Dhillon has been involved in raising over $75-million for the venture capital markets during this time. He has been involved in the growth, development and corporate communications of U.S. Geothermal Inc. since the early stages of the company publicly listing on the TSX Venture Exchange in 2004, as well as providing his skills and knowledge to several other private and public companies.

Kim Oishi

Mr. Oishi has 20 years of experience in financing and advising growth companies and has served in senior management and board positions on a number of public and private companies. Mr. Oishi is the founder and president of Grand Rock Capital Inc., a company that invests in growth companies and provides consulting services for investor relations, corporate finance, business development, and mergers and acquisitions for companies listed on the Toronto Stock Exchange. He is currently a director of China Health Labs & Diagnostics Ltd. and Great Northern Gold Exploration Corp. Since June, 2011, Mr. Oishi has been serving on the board of directors of Liberty Mines Inc.

Previously, Mr. Oishi served from June, 2007, until December, 2012, on the board of Zongshen PEM Power Systems Inc., a company that manufactured and sold gas and electric motorcycles in China. He was the senior vice-president, finance and business development, of Hanwei Energy Services Corp., an energy services company with products for oil, wind, power and clean coal in China, a position he held from May, 2007, to May, 2010. Mr. Oishi was also a director of Hanfeng Evergreen Inc., a specialty fertilizer manufacturer in China, from March, 2006, to March, 2008, and served as president until March, 2006. He was a director of Cantronic Systems Inc., a developer of infrared imaging and night vision systems, from March, 2009, to June, 2010. Mr. Oishi was a director of Grand Power Logistics Group Inc., a logistics and freight forwarding company, from December, 2007, until November, 2010. Mr. Oishi received a bachelor of sciences degree and an MBA from the University of British Columbia.

Robert Maddigan

Mr. Maddigan received a bachelor of science and engineering from the University of Alberta in 1986. He is a professional engineer and has held various positions with private and public companies. From 2000 to 2009, Mr. Maddigan was the owner and chief executive officer of FSC International, a private company that was engaged in the design, build and construction of various projects in Russia with an aggregate value of $450-million. Mr. Maddigan was the president and chief executive officer of Taman Petroleum, the corporation's wholly owned subsidiary with oil and gas interests in Russia. Mr. Maddigan has and continues to serve as a director, officer and/or consultant to various public junior mining companies.

Tommy Cheng

Mr. Cheng is the chief executive officer and a director of New Times Energy. Mr. Cheng has over 10 years of corporate finance and operational experience in the People's Republic of China. He founded Neo & Thompson Group Inc. in 2003, a private equity investment firm focusing on direct investment opportunities in the PRC. He was the former vice-president of Mandra Capital from July to November, 2003. Prior to that Mr. Cheng was an assistant general manager of New World China Land Ltd. from 1995 to 2003, a real estate developer in China, and an assistant to managing director of New World Development Company Ltd. from 1995 to 2003, a diversified conglomerate and a constituent stock of the Hang Seng Index of the Hong Kong Stock Exchange. During his tenure, he has worked with credit rating agencies to secure investment-grade ratings for New World Development's bond issuance and was involved with New World Development's various equity offerings. Mr. Cheng was the chairman, chief executive officer and chief financial officer of Neo Alliance Minerals Inc. (now known as Synergy Acquisitions Inc.), a TSX-V-listed company, from March 29, 2006, to March 19, 2007. Mr. Cheng received his bachelor of commerce in accounting from the University of Alberta in Canada.

Mr. Oishi owns a total of 2.16 million shares of KCO indirectly through his holding company Grand Rock Capital. Mr. Dhillon owns a total of 2,150,100 shares of Grey Hawk. None of the other proposed directors and officers, and/or companies controlled by them, own any securities of KCO or Grey Hawk.

New incentive stock option plan

As part of the transaction, KCO intends to implement a new incentive stock option plan, the terms and conditions of which will be implemented and determined by the board of directors of KCO, but will not allow for the issuance of options to acquire in excess of 10 per cent of the issued and outstanding shares of KCO.

We seek Safe Harbor.