Canacol Energy Ltd. and Shona Energy Co. Inc. announced that they have entered into an agreement whereby Canacol will acquire 100% of the issued and outstanding class "A" common shares of Shona and series "A" preferred shares of Shona, in exchange for common shares of Canacol and cash, by way of a statutory plan of arrangement.

The combined company will have net 2P reserves and deemed volumes of approximately 32 MMboe with a pre-tax net present value (NPV10) of $736 million, and will have interests in 29 E&P contracts totaling 3.3 million net acres.

Core exploration and production areas will include conventional heavy oil in the Caguan-Putumayo Basin, conventional and non-conventional light oil in the middle and upper Magdalena Basin, gas in the lower Magdalena Basin, and light oil in the Llanos Basin in Colombia, and light oil in the Oriente Basin of Ecuador.

The transaction is expected to close on or around Dec. 20, 2012.