Spitfire Energy Ltd.

Spitfire Energy Ltd.

January 06, 2005 14:31 ET

Spitfire Announces Proposed Acquisition


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SPITFIRE ENERGY LTD.

TSX VENTURE SYMBOL: SEL

JANUARY 6, 2005 - 14:31 ET

Spitfire Announces Proposed Acquisition

CALGARY, ALBERTA--(CCNMatthews - Jan. 6, 2005) - Spitfire Energy Ltd.
(the "Corporation") (TSX VENTURE:SEL) announces that it has reached an
agreement in principal with Spitfire Exploration Ltd. ("Spitfirex"), a
private non-arm's length corporation to acquire all of Spitfirex's
outstanding shares for cash consideration of $738,500 (plus or minus
working capital). The purchase price attributable to the petroleum and
natural gas assets was arrived at by using the same formulae used in the
Corporation's acquisition of the Fosterton asset from Spitfirex in
November 2003 and the assets of Cashel Resources Inc. in February 2004,
which was the 15% Discounted Net Present Value, constant pricing, as
evaluated independently by Gilbert Laustsen Jung Associates Ltd.
("GLJ"). Spitfirex's properties have been independently evaluated by GLJ
effective September 30, 2004 (the effective date of this transaction).
Based on GLJ's report, the proved plus probable reserves comprising
Spitfirex's properties, using a 15% Discount Net Present Value with
constant pricing, are valued at approximately $501,000 (however, these
values may not necessarily be the fair market value of these reserves).
The remainder of the purchase price is attributable to Spitfirex's fixed
assets and the $200,000 convertible debenture (convertible at $0.50 per
share) previously issued by the Corporation to Spitfirex (upon closing
of the transaction the convertible debenture will be cancelled).

This acquisition is the last of five recently negotiated transactions
whereby the Corporation consolidated various joint venture interests in
its active areas prior to drilling. The Spitfirex transaction is
expected to add 17 barrels of oil equivalent per day (based on current
production), fixed assets and 8,229 gross acres (1020 net acres).

The completion of this acquisition is subject to the approval of the TSX
Venture Exchange and all other necessary regulatory approval.

Not for distribution to U.S. Newswire services or for dissemination in
the United States of America.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Spitfire Energy Ltd.
    Keith N. Chase
    President and Chief Executive Officer
    (403) 205-3400
    (403) 205-3403 (FAX)
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of the contents of this press release.