WestFire Energy Ltd.
TSX : WFE

WestFire Energy Ltd.

May 03, 2010 08:20 ET

WestFire Announces Expanded Credit Facility, Strategic Viking Oil Acquisition, $30.0 Million Bought Deal Financing, Increased Capital Program and Upward Revisions to 2010 Guidance

CALGARY, ALBERTA--(Marketwire - May 3, 2010) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

WestFire Energy Ltd. ("WestFire" or the "Company") (TSX:WFE) is pleased to announce an expanded credit facility, a strategic Viking oil acquisition in the Provost area of Alberta (the "Provost Acquisition"), a $30.0 million bought deal financing, increased capital program and upward revisions to 2010 guidance.

EXPANDED CREDIT FACILITY AND STRATEGIC VIKING OIL ACQUISITION

WestFire's banker, ATB Financial, has approved an expanded credit facility of $42 million for the Company, up from the current bank line of $20 million on substantially the same terms. This new bank line recognizes the success of WestFire's 2009 capital activities and the closing of the Provost Acquisition.

Total consideration for the Provost Acquisition is approximately $7.5 million of cash, effective April 30, 2010. The Provost Acquisition comprises 85 boepd of high quality, high netback, long life Viking crude oil and natural gas production and 400,000 boe of proved plus probable reserves based on internal evaluation. The property is vertically developed on quarter section spacing with the opportunity to horizontally infill the undrilled 13 net undeveloped sections. Also included in the acquisition are wholly-owned processing facilities.

This acquisition represents a strategic entry point into a new Viking area that complements WestFire's existing Viking light oil resource asset base. Since year-end 2009, WestFire has grown its total undeveloped Viking land position from 183 gross (161 net) sections to 202 gross (180 net) sections.

BOUGHT DEAL FINANCING

WestFire has entered into a financing agreement, on a bought deal basis, with a syndicate of underwriters co-led by Macquarie Capital Markets Canada Ltd. and Raymond James Ltd., and including CIBC World Markets Inc., Mackie Research Capital Corporation, GMP Securities L.P., and Wellington West Capital Markets Inc., for an offering of 3,750,000 WestFire shares at $8.00 per WestFire share to raise gross proceeds of $30,000,000. The net proceeds of the offering will be used to accelerate WestFire's 2010 Viking oil development drilling program, fund the Provost Acquisition and for general corporate purposes.

The WestFire Shares to be issued under the offering will be offered by way of a short form prospectus to be filed in Alberta, British Columbia, Saskatchewan and Ontario and in the United States on a private placement basis pursuant to exemptions from the registration and prospectus requirements of the United States Securities Act of 1933.

Closing of the offering, which is subject to customary conditions and regulatory approvals, including approval of the Toronto Stock Exchange, is expected on or about May 25, 2010.

INCREASED CAPITAL PROGRAM AND UPWARD REVISIONS TO 2010 GUIDANCE

In late 2009, WestFire had set its 2010 exploration and development capital budget at $40 million. With WestFire's expanding production base and successful first quarter drilling program of 13 gross (10.9 net) wells, primarily on the Viking light oil resource trend, the Company has increased its 2010 exploration, development and acquisitions budget to $80 million. This increase will allow WestFire to accelerate the development of its large inventory of low risk, light oil projects. The expanded drilling program will result in 40 gross (36.4 net) Viking light oil horizontal wells being drilled in 2010. 

As a result of the Provost Acquisition and the expanded development program, WestFire is increasing its 2010 guidance of average production rate to 2,750 boepd (from 2,500 boepd) and December 2010 average production rate to 3,600 boepd (from 2,900 boepd). 

Cash flow corresponding to this December 2010 average rate is $3.5 million per month, using $85 WTI (US$/bbl) and $4.50 AECO (Cdn$/mcf) and an exchange rate of 0.99 (US$/Cdn$).

After the share issue is completed, WestFire expects to be debt free.

CORPORATE OVERVIEW

WestFire is a publicly-traded junior resource company in western Canada with one of the largest acreage positions in the Viking light oil resource play at Redwater and Provost, Alberta, in addition to West Central Saskatchewan. The Company continues to successfully execute its business plan and now has the following key attributes:

High Quality Production:   Revised 2010 guidance of 2,750 boepd average (greater than 50 percent oil) and 3,600 boepd exit (greater than 60% oil)
     
Significant Viking Upside Potential:   Management has identified in excess of 500 potential horizontal Viking oil development locations, with less than 10% of these recognized in WestFire's 2009 year-end independent reserve report. Our total undeveloped land position of 202 gross (180 net) sections on the Viking trend represents numerous years of drilling inventory
     
Additional Diversified Oil Upside Potential:   Greater than 35 development locations at Lloydminster, Peco and Teepee in addition to further optimization potential
     
Liquids-rich Gas Upside Potential:   Greater than 10 development locations and access to 75 gross (68 net) sections of undeveloped land and wholly-owned gas processing facilities at Bashaw

WestFire is in its first year of operations as a public entity and it believes that it is in a strong position to deliver superior per share growth. The Company has a strong balance sheet, high netback production, significant development drilling inventory and a dedicated operating team guided by an experienced board of directors. WestFire trades on the Toronto Stock Exchange under the symbol "WFE".

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Cautionary Statements

Internal Reserves Evaluation

The reserves data set forth in this press release is based upon an internal reserve evaluation of the proved plus probable reserves believed to be associated with the Provost Acquisition, and, accordingly, undue reliance should not be placed on such evaluation as it has not been evaluated by an independent reserve evaluator in accordance with the standards contained in National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators.

Forward-looking information and statements

This news release contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following: the volumes of oil and gas reserves in connection with the Provost Acquisition; the life of WestFire's reserves; the volume and product mix of WestFire's oil and gas production; 2010 production guidance, per share growth and the number, potential development drilling, the anticipated timing for closing of the offering, as well as the use of the net proceeds of the offering.

The recovery and reserve estimates of the Provost Acquisition reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of WestFire which have been used to develop such statements and information but which may prove to be incorrect. Although WestFire believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because WestFire can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund WestFire's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which WestFire operates; the timely receipt of any required regulatory approvals; the ability of WestFire to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which WestFire has an interest in to operate the field in a safe, efficient and effective manner; the ability of WestFire to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of WestFire to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which WestFire operates; the ability of WestFire to successfully market its oil and natural gas products that all necessary regulatory approvals will be obtained as and when required, that there will be no material adverse change in the Company's affairs or laws, rules or regulations relating to the Company, its securities or business, there will be no regulatory proceedings involving the Company or any of its directors or officers, or any cease trade or other order prohibiting or restricting trading in the Company's securities, no major national or international event will have occurred that has or would reasonably be expected to have a material adverse effect on financial markets or the business, operations or affairs of the Company and that at all material times the Company will be in compliance with its obligations under the underwriting agreement.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of WestFire's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of WestFire or by third party operators of WestFire's properties, increased debt levels or debt service requirements; inaccurate estimation of WestFire's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in WestFire's public disclosure documents, (including, without limitation, those risks identified in this news release and WestFire's Annual Information Form filed on).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and WestFire does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

BOE Equivalent

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

Contact Information

  • WestFire Energy Ltd.
    Lowell Jackson
    President and CEO
    (403) 718-3601
    (403) 261-9658 (FAX)
    or
    WestFire Energy Ltd.
    Stephen Burtt
    Vice President Finance and CFO
    (403) 718-3603
    (403) 261-9658 (FAX)