Redcliffe Exploration Inc.
TSX VENTURE : RXI.A
TSX VENTURE : RXI.B

Redcliffe Exploration Inc.

January 15, 2007 09:00 ET

Redcliffe and Stallion Announce Completion Results at Gold Creek and Amendment to Redcliffe-Stallion Business Combination

CALGARY, ALBERTA--(CCNMatthews - Jan. 15, 2007) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Redcliffe Exploration Ltd. (TSX VENTURE:REL.A) (TSX VENTURE:REL.B) ("Redcliffe") and Stallion Energy Ltd. ("Stallion") are pleased to announce the results of their recent discovery at Gold Creek 13-25 and Stallion's discovery at Gold Creek 4-11 and the impact to the combined Redcliffe-Stallion proposed business combination.

On November 21, 2006, Redcliffe and Stallion announced their intention to complete a business combination. In connection with the proposed business combination, Redcliffe agreed to participate for 50% of Stallion's interests in two wells in the Gold Creek area of northwestern Alberta, with half of such interest held by Redcliffe Energy Ltd., a related private company with which Redcliffe has an ongoing joint venture agreement. These two wells have been drilled resulting in one (0.225 net combined Redcliffe-Stallion interest) potential gas well and one (0.3594 net combined Redcliffe-Stallion interest) dry hole. The successful well at 13-25 identified two significant potential gas zones, which have both been completed and tested. Based on preliminary test results, the first zone flowed at 3,500 Mcfpd with associated liquids of 155 bpd after a three day period. The second zone flowed at 3,000 Mcfpd with associated liquids of 180 bpd after a four day period. Further production testing and pressure analysis will be required to quantify the significance of this discovery. Production from these two zones can be commingled with plans to produce both zones simultaneously once the well is tied in. The combined total flow rates during the respective test periods was 6,500 Mcfpd of natural gas with associated liquids of 335 bpd for a total of approximately 1,400 boepd (gross). The combined Redcliffe-Stallion interest in this well is 22.5%, while Redcliffe Energy Ltd. owns an additional 7.5%. As part of this farm-in arrangement, Redcliffe and Stallion have earned a total of five sections in addition to the four sections already held in the Gold Creek area. A follow-up to this discovery is planned during the first half of this year, which may lead to additional earned lands.

Subsequent to the announcement of the Redcliffe-Stallion transaction, the 4-11 discovery was completed and tested. Stallion holds a 40% interest in this well. The well flowed at 3,400 Mcfpd with 204 bpd of associated liquids for a total of 770 boepd (gross). Pressure buildup analysis is in progress to estimate the potential aerial extent of this discovery. Subject to this analysis, a follow-up well is planned during 2007.


As a result of these significant discoveries, Redcliffe and Stallion have agreed to amend their original amalgamation agreement, dated November 20, 2006. Under the terms of the amendment, Stallion shareholders will receive an additional 680,949 Class A shares (for a total of 13,500,000 Class A shares) of Redcliffe Exploration Inc. ("REI"), the successor entity to the business combination, and $8,000,000 cash. Stallion shareholders will be asked to approve the following: (i) Stallion changing its name to Redcliffe Exploration Inc.; (ii) Stallion consolidating its issued and outstanding share capital on a basis of 0.56925408 (previously 0.54054054) of a new common share for every one (1) presently issued Stallion common share; and (iii) Stallion reclassifying its share capital, such that all common shares of Stallion will be converted into Class A shares ("REI Class A Shares") and a new class of shares, known as Class B shares ("REI Class B Shares"), will be created, in each case having the same attributes as the Class A shares and Class B shares of Redcliffe. Upon completion of the business combination, REI is expected to have 23,800,000 REI Class A Shares and 1,102,500 REI Class B Shares outstanding, with former shareholders of Redcliffe holding approximately 43.3% of the REI Class A Shares and 100% of the REI Class B Shares, and former shareholders of Stallion holding approximately 56.7% of the REI Class A Shares and no REI Class B Shares. In addition to the amended exchange ratio and cash consideration, Redcliffe and Stallion have agreed to increase the break fees associated with this business combination from $800,000 to $1,750,000.

The two discoveries at Gold Creek and their potential follow-ups significantly impact the pro-forma production potential of the Redcliffe-Stallion combined entity. As was indicated in the January 4, 2007 news release, Redcliffe's 2006 drilling program has enjoyed excellent success. This has continued in 2007 with the casing of the Leaman 13-18 well (net W.I. 37.5%), which followed the recent casing of the Leaman 6-20 well (net W.I. 20%). Both these wells are expected to be completed during January 2007. The drilling of the 6-20 well earned Redcliffe a 37.5% interest in six sections of land.

The combined Redcliffe-Stallion entity will have estimated production capability of over 950 boepd, tax pools of $55 million and a prospect inventory of over 30 wells. It is anticipated that the capital program for the combined entity will be in the range of $15-20 million for 2007, depending upon average oil and natural gas product pricing through 2007.

Daryl Connolly, Chairman and Chief Executive Officer of Redcliffe, and Randy Harrison, Chairman and Chief Executive Officer of Stallion, jointly commented: "Both Redcliffe and Stallion are committed to the completion of the proposed business combination. The evaluation of the Gold Creek potential has been more than realized with the drilling of the 13-25 well and the completion operations at this well and the 4-11 well. The Gold Creek area fits well with Redcliffe's Wapiti-Elmworth property exposure where five to six new exploratory wells are planned for 2007. The Redcliffe-Stallion combination will provide a solid base for the development of a new junior oil and gas exploration company intent on growing through a combination of focused exploration and synergistic acquisitions."

The Joint Information Circular outlining the Redcliffe-Stallion business combination is anticipated to be mailed to all shareholders by the end of January 2007. Shareholder approval will be sought at shareholder meetings expected to be held in February 2007. Both Boards of Directors have recommended shareholder approval of the Redcliffe-Stallion transaction and shareholders voting support agreements have been obtained from shareholders of both Redcliffe (representing 49% of voting shares) and Stallion (representing 43% of voting shares).

Cautionary Statements

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Certain information set forth in this document, including managements' assessments of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond these party's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will be derived there from. Each disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities legislation.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Redcliffe Exploration Ltd.
    Daryl H. Connolly
    President & CEO
    (403) 539-8440
    (403) 539-8433 (FAX)
    Email: dconnolly@redcliffe.ca
    or
    Stallion Energy Ltd.
    Randy Harrison
    President & CEO
    (403) 263-9732
    (403) 263-9659 (FAX)
    Email: randyh@stallionenergy.ca