Au Revoir? - Toreador Takes A New Direction

Stymied by French legislation banning hydraulic fracturing in unconventional hydrocarbon resource extraction, Paris based Toreador Resources Corp. is setting off in a new direction.

Toreador has announced that it has entered into an agreement to merge with a ZaZa Energy LLC, privately held oil and gas company based in Houston, Texas.

The merged portfolio comprises Toreador's Paris Basin play in France together with ZaZa's holdings in the Eagle Ford core and the emerging Eagle Ford/Woodbine (Eaglebine) resource plays in Texas with a current total of 423,000 net acres. Both the Eagle Ford and Paris Basin businesses have strategic partnerships with subsidiaries of Hess Corporation.

Some may view the deal as being driven by the difficult situation that Toreador finds itself as a result of French government position on fracking, particularly after the company had undergone an extensive corporate reorganization to focus solely on France's Paris Basin shale play.

Toreador said that a one-rig oil exploration drilling program targeting traditional reservoirs is expected to commence by late 2011 in the Paris Basin. The Liassic drilling program comprising six wells (without the use of hydraulic fracturing) is expected to commence by year-end pending final review of permits by the French Administration.

However, the future focus of the combined entity is likely telegraphed by the fact that ZaZa equity holders will hold 75 percent of the new company, ZaZa Energy Corporation.

The transaction is subject to Toreador stockholder approval, regulatory approvals and other customary closing conditions. The transaction is expected to close in the fourth quarter of 2011.