Mr. Barry Olson reports

TORO ANNOUNCES STRATEGIC ACQUISITIONS OF ALBERTA VIKING ASSETS

Toro Oil & Gas Ltd. has entered into a definitive purchase-and-sale agreement to acquire high-quality, low-decline, light-crude-oil-producing assets located in east-central Alberta from an arm's-length oil and gas producer. The current production of the assets is approximately 400 barrels of oil equivalent per day, all from the Viking formation, with potential for considerable light oil growth. Total consideration paid for the assets is approximately $25-million, of which $22.5-million will be paid in cash and the issuance of 29,797,378 preconsolidated common shares of Toro, subject to normal adjustments based on an Oct. 1, 2014, effective date. The closing of the acquisition is subject to customary conditions, including approval of the TSX Venture Exchange, and is expected to close on or about Dec. 19, 2014.

Acquisition overview

The acquisition consists of an operated, 100-per-cent-working-interest, largely unitized, low-decline, crude oil property located in the Provost area of east-central Alberta. The assets to be acquired contain large oil-in-place estimates with high light oil and gas net back production. The assets include more than 60 net sections of land, of which greater than 78 per cent of that acreage has been contributed to a legacy unit. The assets have conventionally produced over 16 million barrels of oil to date and have been conventionally drilled thus far on a vertical basis at 320-acre well spacings. Through recent advancements in drilling and completion technologies, the company anticipates to increase production and recovery factors over time, of which only 5 per cent has been recovered to date. The company has identified over 100 low-risk drilling locations on the assets and believes there is significant long-term upside through the application of horizontal drilling, multistage fracture stimulations and the reactivation of the waterflood on the assets.

"This acquisition is a first critical step to building a leading junior oil and gas company," commented Barry Olson, president and chief executive officer of Toro. "In the midst of today's market volatility, we will continue to be vigilant to source prudently sized transactions, all with the goal of increasing shareholder value."

Along with a previously acquired asset described below, the company will hold a total of 93 net sections of land in the prolific Viking light oil fairway.

Acquisition metrics

Highlights of the acquisition include the following:

• Purchase price: The purchase price for the acquisition is $25-million, subject to normal closing adjustments with an Oct. 1, 2014, effective date. The purchase price will be satisfied at closing through a cash payment of $22.5-million and the issuance of 29,797,378 common shares.
• Light oil production: Current production relating to the acquisition is approximately 400 boe/d, with a significant weighting to 35-degree API oil. Net of an internally assigned land value of $2.0-million, transaction metrics equate to approximately $57,500 per flowing boe.
• Annual cash flow: Annualized cash flow from the assets, based upon recently observed pricing for Edmonton light oil and AECO C gas and using current production levels, is estimated to be approximately $4.3-million with the potential to materially increase this level as the company drives down per-unit operating costs with anticipated increased production from the property.
• Long-life oil reserves: The acquisition adds total proved (TP) reserves of 780,000 boe (80 per cent crude oil) and proved plus probable (P&P) reserves of 1.21 million boe (60 per cent crude oil) as independently evaluated by McDaniel & Associates Consultants Ltd., effective Dec. 31, 2013, in accordance with National Instrument 51-101. Based on current production, the assets have a long reserve life index of more than 8.3 years (P&P).
• Significant resources: Internal estimates of significant original oil in place (OOIP) of 300 million barrels of which only 5 per cent has been recovered to date. The company has identified over 100 low-risk horizontal drilling locations on the lands comprising the assets.
• Producing infrastructure: Ownership of key producing infrastructure, including oil batteries, pipelines and waterflood facilities.
• Operatorship and high working interest in a largely unitized block: The assets include 30,500 gross (30,500 net) acres of land with an average working interest of 100-per-cent ownership. Additional lands located outside of the unit to be acquired are 4,352 gross acres and 3,357 net acres. Along with a previously acquired asset, the company holds a total of 93 net sections of land in the Viking light oil fairway.

The acquisition is accretive to the company on a per-share basis on all key metrics.

Strategic rationale and additional Viking land acquisition

Since the closing of the recapitalization of Kallisto Energy Corp. on Oct. 1, 2014, Toro has taken significant strides in executing its stated business plan. In less than 60 days, the company has sourced a significantly accretive transaction in an increasingly exciting area in the Western Canadian sedimentary basin. This acquisition is expected to provide the basis for the company to develop and accumulate additional light oil properties with robust economics across a spectrum of underlying commodity prices.

Toro also announces that in an unrelated transaction, it acquired 32.5 net sections of Viking prospective acreage from two companies, of which one was controlled by Don Sabo, executive vice-president and director of Toro. The value was independently negotiated and assessed at $1.6-million and was fully satisfied through a cash payment. The acreage consists of two separate areas, Esther and Consort, near the Alberta/Saskatchewan border.

Together, and upon closing of the acquisition, Toro will own 93 net sections of producing and highly prospective Viking acreage which it believes provides an anchor position in one of the company's intended core areas.

Pro forma share capital

Assuming successful completion of the acquisition, full takeup of the currently outstanding rights offering, conversion of all warrants outstanding pursuant to the recapitalization financing which closed on Oct. 1, 2014, and excluding outstanding employee share options, on a postconsolidated basis using one new common share for every 25 old common shares, Toro will have approximately 47.4 million common shares outstanding. Excluding the conversion of existing warrants, Toro will have approximately 35.5 million common shares outstanding. At this point, no stock options have been granted to management and other insiders.

We seek Safe Harbor.