SOURCE: Fellows Energy Ltd.

June 05, 2007 09:58 ET

Fellows Energy Restructures Holdings to Refocus Project Development Activities in Two Transactions Valued at $6.5 Million

Provides for Redemption of Floating Rate Convertible Debentures

BROOMFIELD, CO--(Marketwire - June 5, 2007) - Fellows Energy Ltd. (OTCBB: FLWE), an early stage oil and gas company focused on exploration and production of natural gas and oil in the Rocky Mountain Region, announced today that it has entered into two transactions with Thunderbird Energy Corp., its joint venture partner, valued at $6.5 million. These include the sale to Thunderbird of its interests in the Carbon County project and joint venturing for further development on the Weston County project.

The sale of the Carbon County interests is expected to close on or before July 15, 2007, for a total sale price of $3.0 million, payable in cash and the assumption of debt. Fellows will retain its interests in the 5,242 acres held in the adjacent Gordon Creek project. Development drilling on the Carbon County project by Thunderbird after closing the sale will be in relative proximity to the Gordon Creek acreage, potentially enhancing its value and serving to promote its ultimate development.

In addition, Thunderbird and Fellows have agreed for the expenditure of funds by Thunderbird for the drilling and completion of three wells to the Dakota formation on the Weston County project, upon its final acquisition of a 50% interest in that project. Fellows estimates that the cost of such drilling will be approximately $3.5 million. Upon the completion of such expenditures within the next 24 months, Thunderbird will receive an additional 25% working interest in the Weston County project. Fellows will reserve the option to commence drilling under the previous joint venture structure if Thunderbird does not commence drilling by May 31, 2008.

Fellows has further negotiated, subject to final documentation and applicable approvals, to redeem the outstanding balance of its floating rate convertible debentures held by Palisades Master Fund, L.P. and Crescent International Ltd. (including those formerly held by JGB Capital L.P.). The redemption will take the form of a cash payment from a portion of the funds derived from the sale of the Carbon County interests, and the conversion of the balance of the debentures at a price of $0.1375, well above the current trading value of the Company's stock. Upon closing, all of the floating rate convertible debentures now owed by Fellows will be fully redeemed.

In addition, Fellows continues its leasing activities on the Bacaroo project in Colorado, and now holds interests in over 16,000 acres in an area delineated by Thomasson Partner Associates, Inc. on the basis of over 4,000 line miles of seismic data. Fellows is currently reviewing further joint venture proposals for the drilling and development of the project with industry partners.

"We are excited to retire the debentures through the sale of some of our interests," said Fellows president, George Young. "Not only does the sale price represent a significant gain over what we paid for those interests a year ago, but it will also strengthen our capital structure, improve our balance sheet by retiring debt, and at the same time provide for the potential development of our properties, including the adjacent Gordon Creek acreage. We now expect to have three quality projects advancing in their development through the expenditures of joint venture partners."

About Fellows Energy Ltd.

Fellows is an early stage oil and gas company led by an experienced management team which is focused on exploration and production of natural gas and oil in the Rocky Mountain Region using both traditional and new technologies. The current strategy is to pursue both short- and long-term opportunities to leverage its large acreage position in the Rockies, which management believes are characterized by reasonable entry costs, favorable economic terms, high reserve potential relative to capital expenditures and the availability of existing technical data. For additional information please go to www.fellowsenergy.com.

Safe Harbor Statement

This press release may contain forward-looking information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the safe harbor created by those sections. Examples of such forward-looking information would be statements regarding financing, acquisition of properties, and terms including "probable," "possible," or "recoverable" reserves among others. There are many risk factors that could cause our expectations and beliefs to fail to materialize: competition for new acquisitions; availability of capital; unfavorable geologic conditions; the complexity of coal bed methane exploration and production; and prevailing prices for natural gas and general regional economic conditions. Management hopes these transactions will bring additional value to the shareholders of Fellows Energy. There is no guarantee that the projects that Fellows has recently acquired will increase the value of its shares of common stock, or that Fellows will acquire rights to explore and operate any other such projects, or that in the event that it acquires rights to explore and operate other such projects, that these actions will be successful or increase the value of Fellows' common stock.

Cautionary Note to U.S. Investors -- The United States Securities and Exchange Commission ("SEC") permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this press release, such as probable, possible and potential, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 10-KSB, File No. 0-33321, available from us at 370 Interlocken Boulevard, Suite 400 Broomfield, Colorado 80021. You can also obtain this form from the SEC by calling 1-800-SEC-0330. Fellows assumes no obligation to update the information contained in this press release.

Contact Information

  • Contacts
    Fellows Energy Ltd.
    George S. Young
    Shane Reeves
    303-926-4415

    Investor & Public Relations
    Harvey Goralnick/Alison Hart
    212-752-9445
    Email Contact