Mr. Kevin Gibson reports

MAHA ENERGY INC. AND PALLISER OIL & GAS CORPORATION TO AMALGAMATE TO FORM AN OIL AND GAS COMPANY FOCUSED ON EXPLOITATION AND DEVELOPMENT

Maha Energy Inc. and Palliser Oil & Gas Corp. have entered into an amalgamation agreement pursuant to which Maha and Palliser will amalgamate to form a new corporation to be called Maha Energy Inc. (New Maha). Palliser has also closed a minor asset disposition with Maha and entered into two farm-out arrangements with Maha.

Amalgamation

Pursuant to the amalgamation, shareholders of Palliser will receive 0.1393 of a common share of New Maha for each common share of Palliser and shareholders of Maha will receive one New Maha share for each common share of Maha. Based on the price of $1.25 (U.S.) per Maha share, being the price at which Maha recently raised $10-million (U.S.) of gross proceeds in a private placement of Maha shares, and the July 30, 2014, Bank of Canada noon U.S.-Canadian-dollar exchange rate of 1.0909, the value of the New Maha shares to be received for Palliser shares pursuant to the amalgamation represents a 52-per-cent premium to the closing price of the Palliser shares on the TSX Venture Exchange on July 30, 2014, of 12.5 cents. The combined asset base following completion of the amalgamation will consist of heavy oil properties in the greater Lloydminster region of Alberta and Saskatchewan and a 99-per-cent interest in the LAK Ranch field, a heavy oil property located in Wyoming. At closing of the amalgamation, total production is expected to be approximately 1,650 barrels of oil equivalent per day (99 per cent oil).

Completion of the amalgamation is conditional on customary closing conditions and is subject to conditions precedent with respect to net indebtedness and transaction costs of Palliser at closing. In addition, it is a condition to the completion of the amalgamation that Maha must complete bond and/or equity financings for combined total gross proceeds of not less than $70-million (U.S.) prior to Oct. 31, 2014. The bond financing is expected to be completed in the Nordic market. The proceeds from the financings will be used to refinance Palliser's current credit facilities and assist in the financing of New Maha's go-forward capital program. Upon completion of the amalgamation, New Maha anticipates it will enhance shareholder liquidity by applying for a secondary listing in Sweden on the Nasdaq OMX First North Stock Exchange for New Maha shares.

All outstanding options of Palliser and Maha at the effective time of the amalgamation will be exchanged for options of New Maha in accordance with the Palliser and Maha option plans.

Approvals

The amalgamation is subject to receipt of customary regulatory approvals, including the approval of the TSX-V and the approval of 66-2/3 per cent of each of the Palliser shareholders and the Maha shareholders.

Further information regarding the amalgamation will be contained in a joint information circular to be prepared by Maha and Palliser, which the parties will prepare, file and mail to their respective shareholders in due course in connection with the requisite shareholder approvals of the amalgamation and associated transactions. It is expected that the Maha and Palliser shareholder meetings will take place in mid-October, with closing of the amalgamation expected to occur shortly thereafter, but in any event on or before the outside date. Further details regarding the respective shareholders' meetings will be provided in the joint information circular. All shareholders are urged to read the joint information circular once it becomes available, as it will contain additional information concerning the amalgamation.

Each of the directors and officers of Palliser, representing in total approximately 7 per cent of the issued and outstanding Palliser shares (on a non-diluted basis), have committed to vote their Palliser shares in favour of the amalgamation at the Palliser shareholder meeting.

Each of the directors and officers, and certain significant shareholders, of Maha, representing in total approximately 37 per cent of the issued and outstanding Maha shares (on a non-diluted basis), have committed to vote their Maha shares in favour of the resolutions to be considered by shareholders of Maha at the Maha shareholder meeting.

Complete details of the amalgamation are set out in the amalgamation agreement, which will be filed by Palliser on SEDAR.

Benefits of the amalgamation

The board of directors of each of Maha and Palliser believe that the combined entity, with its stronger balance sheet, will have the means to execute a 2014 and 2015 capital expenditure program that will include advancing the development of the cyclic-steam project at the LAK Ranch field as well as pursuing optimization and development opportunities in the greater Lloydminster area.

The capital expenditure program for the remainder of 2014 will be to continue the development of the LAK Ranch cyclic-steam project through the drilling and completion of at least 10 more horizontal cyclic-steam producing wells, along with the continued reactivation of existing wellbores in Alberta and Saskatchewan. Canada-based work will include high-volume lift (HVL) projects at Lloydminster, Alta., and Edam and Manitou, Sask. Cold heavy oil production with sand (CHOPS) work will be undertaken at Lloydminster, Alta., as well as at Manitou, Sask.

Jonas Lindvall, chief executive officer of Maha, stated: "We are very pleased to have completed an agreement with Palliser. The merger of our two companies and the refinancing of Palliser's debt will allow the combined management team to apply sufficient capital to New Maha's Canadian asset base to grow production and reduce per-barrel operating costs, thereby increasing operating netbacks. The forecast production profiles of Palliser and Maha are very complementary, providing a combined asset base that upon development is anticipated to result in sustainable production with a low corporate decline rate. We expect that a joint listing on Nasdaq OMX First North Stock Exchange will provide for continued strong support from Scandinavian investors." Management of Maha has determined, based on its business model that the development of the combined assets is sustainable and has highlighted a few of the key forecasted attributes below.

Pro forma operational and financial data(1)

• Production at closing of approximately 1,650 barrels of oil equivalent per day (99 per cent oil) -- Canadian assets:
  • Total proved producing reserves of approximately 1.8 million barrels of oil equivalent, future net revenue of $38.8-million (discounted at 10 per cent)(2);
  • Total proved reserves of approximately 5.5 million barrels of oil equivalent, future net revenue of $86.9-million (discounted at 10 per cent)(2);
  • Total proved plus probable reserves of approximately 9.4 million barrels of oil equivalent, future net revenue of $153.3-million (discounted at 10 per cent)(2);
  • 169 prospective well locations, of which 86 locations are not included in the current reserves report(2);
  • Undeveloped land (net) of 44,400 acres;
• U.S. assets:
  • 99-per-cent working interest ownership and operatorship of a cyclic-steam project at LAK Ranch field in Wyoming.

Notes:

1. All reserves and production figures before the deduction of royalties;
2. Palliser reserve information from the independent reserves report prepared by Sproule Unconventional Ltd. effective Dec. 31, 2013.

As described above, New Maha intends to apply for a secondary listing in Sweden on the Nasdaq OMX First North Stock Exchange for the New Maha shares. The anticipated benefits of this secondary listing will be to enhance shareholder liquidity and provide additional access to capital.

New Maha expects to continue looking for opportunities to expand its investor base and pursue strategic acquisitions targeting undervalued asset bases that complement New Maha's business. Maha's management and board of directors believe the proposed transaction will result in a combined entity that has improved access to capital, which will be used to develop and explore oil and natural gas properties in Canada, in the United States and outside North America.

Management and directors

New Maha will be led by the existing Maha management team under the leadership of Jonas Lindvall, president and CEO. Certain staff and officers of Palliser are expected to remain in their current positions as part of New Maha.

Mr. Lindvall received a BSc (petroleum engineering) from the University of Tulsa in 1991 and is currently completing a masters of energy business from the University of Tulsa. Mr. Lindvall has 25 years of experience in the oil and gas sector, including 10 years with Lundin Petroleum AB, four years with Talisman Energy Inc. and two with Petroleum Development Oman (owned 36 per cent by Royal Dutch Shell). In 2005, Mr. Lindvall merged a private company controlled by him with Tethys Oil AB (a Swedish public company) and was a director of Tethys Oil AB and managing director of Tethys Oil Oman Ltd. from 2005 to 2010.

As part of the approval of the amalgamation, the shareholders will also appoint the board of directors of New Maha for the ensuing year, proposed to be Mr. Lindvall, Ron Panchuk, Anders Ehrenblad, Wayne Thompson and one Palliser director, Jeffrey Saponja.

Board of directors' recommendation

The board of directors of Palliser has unanimously approved the amalgamation and, based in part on the verbal fairness opinion from National Bank Financial Inc. (as discussed below), unanimously determined that the amalgamation is in the best interests of Palliser.

The board of directors of Maha has unanimously approved the amalgamation and unanimously determined that the amalgamation is in the best interests of Maha.

Under the terms of the amalgamation agreement, each of Maha and Palliser shall not solicit or initiate any inquiries or discussions regarding any other business combination or sale of assets, subject to the fiduciary duty of the Maha or Palliser board of directors, respectively, in the event that an unsolicited superior proposal is received by either Maha or Palliser. In certain circumstances as set forth in the amalgamation agreement, Palliser has agreed to pay Maha a termination fee of $2-million. Similarly, in certain circumstances as set forth in the amalgamation agreement, Maha has agreed to pay Palliser a termination fee of $800,000.

National Bank Financial Inc. acted as financial adviser to the board of directors of Palliser with respect to the amalgamation and has provided the board of directors of Palliser with the verbal opinion that, as of the date of approval of the amalgamation agreement, and subject to its review of the final form of the documentation effecting the amalgamation, the consideration to be received by Palliser shareholders pursuant to the amalgamation is fair, from a financial point of view, to the Palliser shareholders. National Bank Financial Inc. is expected to provide a written fairness opinion relating to the amalgamation to the board of directors of Palliser in addition to the verbal fairness opinion that has already been provided to the board of directors of Palliser.

In addition, Ivy Capital Partners Ltd., a corporation controlled by Stephen Hayden, a director of Palliser, has provided and has agreed to continue to provide certain services to Palliser in connection with the amalgamation and associated transactions, including structuring advice and advice with respect to negotiating and implementing the amalgamation and associated transactions. In consideration of providing such services to Palliser, Ivy Capital will receive a work fee upon the consummation of the amalgamation equal to $100,000, for such services.

Due to Mr. Hayden's interest in the fee payable to Ivy Capital, such agreement is a related party transaction pursuant to Multilateral Instrument 61-101, protection of minority security holders in special transactions. Palliser is relying on an exemption from the valuation and minority approval requirements of MI 61-101. Specifically, pursuant to subsections 5.5(a) and 5.7(a) of MI 61-101, a formal valuation and minority approval are not required if, at the time the transaction is agreed to, neither the fair market value of the subject matter of nor the fair market value of the consideration for the transaction, insofar as it involves interested parties, exceeds 25 per cent of the issuer's market capitalization. Palliser's three disinterested directors have determined that the terms of the agreement meet these exemptions and are reasonable in the circumstances. The payment of the fee is subject to certain conditions, including completion of the amalgamation.

Concurrent asset transactions

Concurrent with entering into the amalgamation agreement, Palliser has closed the sale of a 50-per-cent working interest in its Manitou, Sask., assets to Maha for $2.15-million (approximately $1.95-million after interim adjustments). The production associated with the Manitou sale is approximately 125 barrels per day of oil. Net proceeds from the Manitou sale will be used to address Palliser payables. Palliser will remain the operator of the wells subject to the Manitou sale.

Palliser has also entered into two farm-out arrangements with Maha with a view to generating production in the near term from several priority prospects of Palliser.

In the first instance, Palliser, on behalf of Maha, will recomplete and equip four wells targeting the GP formation on its Marwayne, Alta., prospect in its Lloydminster core area for Maha to earn an undivided 30-per-cent working interest in associated spacing units and wellbores. Maha will pay 100 per cent of the recompletion costs and Palliser will provide certain requisite surface equipment.

Under a second farm-out arrangement in its Manitou, Sask., core area, Palliser, on behalf of Maha, will drill, case, and complete or abandon a Sparky test well. Maha will be responsible for 100 per cent of the costs under the Manitou farm-out to earn a 70-per-cent interest before payout, reducing to a 50-per-cent interest after payout.

Subject to rig availability, the recompletion well program under the Marwayne farm-out is expected to begin in early August, 2014, and the test well under the Manitou farm-out is expected to commence in mid-August, 2014.

The Manitou sale, the Marwayne farm-out and the Manitou farm-out will provide Palliser with working capital to carry out additional development and to assist in maintaining production.

Palliser update

Operations

In the second quarter of 2014, Palliser reactivated one (one net) well at Lloydminster.

Average production for the quarter was 1,715 barrels of oil equivalent per day, based on field estimates for June, 2014, representing an 8-per-cent decrease over the previous quarter.

Financial and outlook

Palliser achieved average production of 1,826 barrels of oil equivalent per day in the first quarter of the year, but saw production decline in the second quarter to 1,715 barrels of oil equivalent per day, due to the limited capital program that was executed in the first half of 2014. These declines combined with the Manitou sale will result in forecast net production in the third quarter of 1,360 barrels of oil equivalent per day. However, production growth from a seven-well capital program in the third quarter is expected to boost Palliser's net production to between 1,550 and 1,650 barrels of oil equivalent per day in the fourth quarter.

The capital program will be undertaken at no cost to Palliser, with the exception that surface equipment for all the wells will be supplied from Palliser's inventory of surplus equipment. At Manitou Lake, one (0.3 net before payout and 0.5 net after payout) well will be drilled in mid-August; at Marwayne, four (2.8 net) wells will be reactivated in August and September; and at Neilburg, two (1.15 net) wells will be drilled by the end of September, with all wells expected to be on production late in the third quarter or early in the fourth quarter.

Palliser has a significant undeveloped landholding in the Lloydminster area (34,042 net acres) and has identified a heavy oil prospect inventory of 169 locations. Approximately half of these future locations (83 of 169) are reflected in the year-end reserve report as proved developed non-producing, proved undeveloped and probable reserves, while the rest are not reflected in the report. Palliser's undeveloped land base and extensive prospect inventory provide significant upside potential for future growth, once financing is available to mount a meaningful capital expenditure program.

About Maha

Maha is a private Canada-based, international upstream oil and gas company. Maha's main business activities include exploration, development and production of crude oil, natural gas liquids and natural gas.

Maha was incorporated in February, 2013, and is the 99-per-cent working-interest owner and operator of the LAK Ranch heavy oil field, located on the eastern edge of the multibillion-barrel Powder River basin in Wyoming.

Maha's core expertise is primary, secondary and enhanced oil and gas recovery technologies, and its business strategy is to target and develop underperforming hydrocarbon assets. While Maha is currently focussing primarily on the enhanced recovery of heavy oil, other asset type opportunities are being and will be considered as they arise. By focusing on assets with proven hydrocarbon presence and applying state-of-the-art tailored solutions to recover the hydrocarbons in place, Maha's primary risk is not uncertainty in reservoir content but fluid extraction.

As Maha grows in size and value, its objective is to create a well-balanced portfolio of assets with low to medium risk. Ideally, 40 per cent of Maha's assets will be in extraction and development projects, 40 per cent will be in delineation and development projects, and the remaining 20 per cent will be in near-field or low-risk exploration.

The LAK Ranch field requires the application of heat, in the form of steam, to reduce (thin) the viscous oil and allow it to flow to the producing wellbores. A pilot project initiated in 2005, in which three vertical wells supplied continuous steam into the Upper Newcastle sandstone reservoir, has mobilized over 55,000 barrels from a three-acre area to a horizontal producing wellbore yielding an estimated recovery factor of 37 per cent to date.

Since Maha acquired the LAK Ranch heavy oil field in 2013, Maha has converted six existing wells to cyclic-steam wells and drilled five near-horizontal cyclic-steam wells and one vertical delineation well on Section 19 that established the presence of additional oil in the Lower Newcastle sandstone. New Maha plans to drill an additional 10 cyclic-steam and producing wells in the fall of 2014, thereby increasing the production area to approximately 75 acres. Maha owns two steam generators at the field capable of producing sufficient steam to generate 2,000 barrels per day of oil production. Additional steam-generating capability is planned to be added as part of New Maha's business plan.

Maha currently has 35,799,304 common shares outstanding (38,640,185 common shares on a fully diluted basis).

We seek Safe Harbor.