Delphi Energy Corp.
TSX : DEE

Delphi Energy Corp.

August 31, 2009 18:41 ET

Delphi Announces Closing of Wapiti/Gold Creek Acquisition and Mailing of Takeover Bid Circular for Fairmount Energy Inc.

CALGARY, ALBERTA--(Marketwire - Aug. 31, 2009) - Delphi Energy Corp. (TSX:DEE) is pleased to report that it has closed the previously announced acquisition and disposition of natural gas weighted properties located in the Gold Creek/Wapiti areas ("the Properties") of North West Alberta, strategically located between the Company's Hythe and Bigstone core properties. The following acquisition details represent Delphi's net 60 percent working interest after the disposition, unless otherwise indicated.

The total net purchase price, after interim closing adjustments, is approximately $11.8 million and includes undeveloped land and seismic. The acquisition has primarily been funded by the Company's credit facilities.

Transaction Highlights

As previously reported, the acquisition provides the following financial and operating benefits to shareholders:

- Incremental production of 400 barrels of oil equivalent per day (boe/d) and Proven plus Probable reserves effective May 31, 2009 of 1,431,000 barrels of oil equivalent (boe);

- Ownership in strategic infrastructure including three natural gas processing plants with a combined through-put capacity of 720 million cubic feet per day, ten compressor stations and 393 kilometres of gathering and transportation pipelines;

- Attractive reserves and production acquisition costs, excluding approximately $1.0 million allocated to undeveloped land, as follows:



$/BOE
----------

Proved reserves excluding future development capital ("FDC"): $12.61
Proved reserves including FDC $19.82

Proved Plus Probable reserves excluding FDC $7.43
Proved Plus Probable reserves including FDC $12.48

Production addition costs per flowing boe $26,600


- Significant development opportunities on the Properties, providing Delphi with an increased inventory and the ability to continue its strategy of adding low cost production and reserves through multi-zone exploitation;

- Increase in Delphi's undeveloped land position by eight percent to approximately 135,000 net acres. Delphi has internally ascribed approximately $1.0 million of value to the undeveloped land; and

- Provides additional leverage to rising natural gas prices.

Acquired Properties

The Company's net acquisition will be approximately 400 boe/d comprised of 77 percent natural gas and 23 percent oil and natural gas liquids. Proven reserves of approximately 843,000 boe and Proven plus Probable reserves of 1,431,000 boe have been evaluated by an independent third party in accordance with NI 51-101.

Key gas plant infrastructure being acquired includes a working interest in the Devon Wapiti Deep Cut Gas Plant, Devon Wapiti Shallow Cut Gas Plant and the BP South Wapiti Gas Plant, ten compression stations and approximately 393 kilometres of pipelines that gather and transport natural gas from an extensive land base and interconnect the three natural gas plants. In addition to the owned capacity, the three natural gas plants have excess processing capacity to accommodate significant growth opportunities that the Company has identified in the area.

To view a map of the acquired properties, please visit the following link:

http://cnrp.marketwire.com/cnrp_files/20090831-821DEE_MAP.pdf

The acquisition is consistent with Delphi's strategy of acquiring multi-zone, sweet gas and natural gas liquids production in the Deep Basin with significant low risk development potential coupled with ownership in key gas infrastructure to support future growth. The Properties are characterized by the same producing zones Delphi is currently exploiting at the Bigstone and Hythe core properties including the Doe Creek - Dunvegan, Paddy - Cadotte, Spirit River - Falher, Bluesky - Gething and Nikanassin formations. The acquisition complements the Company's successful exploitation track record of production growth which includes the use of leading technologies to access underdeveloped reservoirs in North West Alberta. An internal review of the acquired properties has identified numerous drilling, completion and optimization projects which have the potential to double the current production and reserve levels.

The Properties are situated on approximately 50,800 (20,360 net) acres of land (excluding near-term expiries), of which approximately 22,000 (9,930 net) acres are undeveloped. The Company believes upside potential exists on the 9,930 net acres of undeveloped land, an eight percent increase to Delphi's undeveloped land position. There are an additional 55,300 (29,200 net) acres of undeveloped land that expire within the next 12 months that the Company is evaluating for upside and continuation opportunities.

Takeover Bid Circular for Fairmount Energy Inc.

In addition, Delphi has mailed its takeover bid circular to the shareholders of Fairmount Energy Inc. ("Fairmount") in connection with its offer to purchase all of the issued outstanding common shares of Fairmount on the basis of 0.3571 of a common share of Delphi for each common share of Fairmount. The offer is conditional on, among other things, not less than 66 2/3 percent of the outstanding Fairmount common shares (calculated on a diluted basis) being validly deposited and not withdrawn under the Offer. The Offer will be open for acceptance until October 5, 2009 unless extended by Delphi.

Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.

Forward-Looking Statements. This release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", may", "will", "should", believe", "intends", "forecast", "plans", "guidance" and similar expressions are intended to identify forward-looking statements or information.

More particularly and without limitation, this release contains forward looking statements and information relating to the Company's risk management program, petroleum and natural gas production, future funds from operations, capital programs, commodity prices, costs and debt levels. The forward-looking statements and information are based on certain key expectations and assumptions made by Delphi, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the capital availability to undertake planned activities and the availability and cost of labour and services.

Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company's operations or financial results are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this press release are made as of the date hereof for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Basis of Presentation. For the purpose of reporting production information, reserves and calculating unit prices and costs, natural gas volumes have been converted to a barrel of oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms with the Canadian Securities Administrators' National Instrument 51-101 when boes are disclosed. Boes may be misleading, particularly if used in isolation.

Non-GAAP Measures. The release contains the terms "funds from operations", "funds from operations per share", "net debt", "cash operating costs" and "netbacks" which are not recognized measures under Canadian generally accepted accounting principles. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations is a non-GAAP measure and has been defined by the Company as net earnings plus the addback of non-cash items (depletion, depreciation and accretion, stock-based compensation, future income taxes and unrealized gain/(loss) on risk management activities) and excludes the change in non-cash working capital related to operating activities and expenditures on asset retirement obligations and reclamation. The Company also presents funds from operations per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP. The Company has defined net debt as the sum of long term debt plus working capital excluding the current portion of future income taxes and risk management asset/liability. Net debt is used by management to monitor remaining availability under its credit facilities. Cash operating costs have been defined as the sum of operating expenses, transportation expenses, general and administrative expenses and interest costs.

Contact Information

  • Delphi Energy Corp.
    David J. Reid
    President & CEO
    (403) 265-6171
    (403) 265-6207 (FAX)
    or
    Delphi Energy Corp.
    Brian P. Kohlhammer
    V.P. Finance & CFO
    (403) 265-6171
    (403) 265-6207 (FAX)
    or
    Delphi Energy Corp.
    300, 500 - 4 Avenue S.W.
    Calgary, Alberta T2P 2V6
    Email: info@delphienergy.ca
    Website: www.delphienergy.ca