Peerless Energy Inc.
TSX : PRY.A
TSX : PRY.B

Peerless Energy Inc.

January 11, 2008 08:54 ET

Peerless Energy Inc. Provides 2007 Production Exit Rate, Operational, Capital and Corporate Debt Update

CALGARY, ALBERTA--(Marketwire - Jan. 11, 2008) - Peerless Energy Inc. ("Peerless" or "the Company") (TSX:PRY.A) (TSX:PRY.B) is pleased to announce its 2007 exit production, an operational update relating to recent Saskatchewan Bakken light oil development drilling activity, and a capital spending update.

2007 Exit Production

As a result of better than anticipated results in its Freestone Bakken drilling program and an increase to the Company's 2007 capital budget, Peerless exceeded its previously stated 2007 production exit guidance. The Company's current production is in excess of 5,600 boe/d, comprised of approximately 75% light oil and liquids, and 25% natural gas.



2007 Exit Production (boe/d):

Previous Guidance Actual
----------------- ------
4,200 - 4,600 5,600


Operations

In 2007, Peerless drilled 32 (26.3 net) wells targeting Bakken light oil with a 100% success rate. All but 1 (1 net) were on production at year end. These wells are comprised of 9 (7.8 net) unstimulated "pitchfork tri-lateral horizontals" and 23 (18.5 net) single leg horizontal wells.

Peerless increased its fourth quarter well count to 13 (12 net) Bakken wells from 10 (9 net). The Company also fracture stimulated 1 (1 net) of its existing pitchfork tri-laterals during the third week of October, 2007. The operation was successful resulting in 18 (16.6 net) additional re-completion operations to add to its inventory.

Capital Spending and Corporate Debt

With the addition of 3 previously unbudgeted Bakken wells in the fourth quarter, the Company spent in excess of $31 million bringing capital expenditures for 2007 to approximately $72 million compared to previous guidance of $64 million. Included in this fourth quarter capital total is $22.0 million for drilling, completion and equipment, $2.8 million for acquisitions and $3.2 million for seismic.

It is estimated that the Company exited 2007 with a debt and working capital deficiency of approximately $61 million.

The Bakken light oil drilling program has led to an increase in the Company's light oil weighting which in turn has grown the Company's current corporate operating netback to greater than CDN $50.00/boe based on US$90 WTI and CDN$6.25 AECO pricing. This higher netback has allowed Peerless to increase its 2007 budget, while maintaining a balance sheet with a current net debt to annualized 1 month trailing cash flow ratio of less than 0.8.

Petrobank Plan of Arrangement

On November 22, 2007, Peerless announced that the Company had entered into a Plan of Arrangement ("the Arrangement") with Petrobank Energy and Resources Ltd. ("Petrobank") whereby Petrobank will acquire all of the issued and outstanding shares of Peerless.

Pursuant to the Arrangement, Petrobank will acquire (i) all of the outstanding Class A Common Shares for $0.90 in cash and 0.08 of a common share of Petrobank per Class A Common Share, and (ii) all of the outstanding Class B Common Shares for $10.00 in cash per each Class B Common Share.

On December 21, 2007, Peerless announced that it had obtained an interim order of the Court of Queen's Bench of Alberta providing for, among other things, the holding of a meeting of the shareholders of Peerless to approve the Arrangement.

A special meeting of the holders of Class A Common Shares and Class B Common Shares of Peerless (the "Peerless Shareholders") will be held in respect of the Arrangement in the Angus Northcote Room at the Bow Valley Conference Center, Suite 300, 205 - 5th Avenue S.W., Calgary, Alberta, on Friday, January 25, 2008 at 10:00 a.m. (Calgary time).

Peerless has mailed a management information circular and proxy statement respecting the meeting to the Peerless Shareholders. The information circular and proxy statement are available for viewing electronically under Peerless' profile on SEDAR at www.sedar.com.

The completion of the Arrangement is subject to certain conditions, including the receipt of the approval of the Peerless Shareholders and the final approval of the Court of Queen's Bench of Alberta and all applicable regulatory authorities. If all necessary approvals are obtained and the conditions to the completion of the Arrangement are satisfied or waived, Peerless anticipates that the Arrangement will become effective on or about January 28, 2008.

Tristone Capital Inc. has provided the Board of Directors of Peerless with a written opinion that, as of December 19, 2007, it is of the opinion that the consideration to be received by the Peerless Shareholders under the Arrangement is fair, from a financial point of view, to the Peerless Shareholders.

The Board of Directors has unanimously determined that the Arrangement is in the best interests of Peerless and its shareholders. The directors and officers of Peerless have entered into lock-up agreements with Petrobank to vote their Peerless shares in support of the Arrangement.

Peerless is a Canadian junior oil and gas company engaged in the exploration, development and production of light oil and sweet natural gas in the provinces of Saskatchewan, Alberta and British Columbia.

FORWARD LOOKING STATEMENTS

This press release may contain forward-looking statements including management's assessment of future plans and operations, expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., 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 reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other factors that could affect Peerless' operations and/or financial results are included in Peerless' reports on file with Canadian securities regulatory authorities.

This press release contains forward-looking statements concerning the anticipated date for the completion of the Arrangement. Peerless has provided this anticipated date in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the timing of receipt of the necessary shareholder, regulatory and court approvals and the time necessary to satisfy the conditions to the completion of the Arrangement. These dates may change for a number of reasons, including inability to secure necessary shareholder, regulatory or court approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the Arrangement. The Arrangement may be completed later than stated or not at all.

Readers should not place undue reliance on the forward-looking statements contained in this press release. The forward-looking statements contained in this press release are made as of the date hereof and Peerless 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.

NON-GAAP MEASURES

This release contains financial terms that are not considered measures under Canadian Generally Accepted Accounting Principles ("GAAP"), such as net debt, and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, net debt is used to evaluate the Company's financial leverage and includes bank debt plus accounts payable and accrued liabilities less current assets. Operating netback is a measure of profitability per unit of production calculated based on revenue less royalties, production and transportation expenses per unit produced.

BOE PRESENTATION

Petroleum and natural gas reserves and volumes are converted to an equivalent measurement basis referred to as a "barrel of oil equivalent" ("boe") on the basis of 6 thousand cubic feet of natural gas equal to 1 barrel of oil. This conversion is based on an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

The TSX does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Peerless Energy Inc.
    Wade Becker
    President and Chief Executive Officer
    (403) 263-1590
    or
    Peerless Energy Inc.
    Dan Toews
    Vice President, Finance and Chief Financial Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    Website: www.peerlessenergyinc.com