Admiral Bay Resources Inc.
TSX VENTURE : ADB

Admiral Bay Resources Inc.

May 04, 2009 09:39 ET

Admiral Bay Resources Acquires Cherokee Basin Assets, Arranges Common Stock Offering and Updates Activity in the Appalachian Basin and Marcellus Shale

- Admiral Bay acquires 1.2 mmcf/d of production and 8.3 Bcf of proved reserves for approximately $2.0 million (US). - Company arranges a private offering of Common Shares and Warrants to raise up to $2.0 million (CDN). GasRock Capital LLC extends an additional up to $1.8 million (US) in credit for asset purchase and development. - Admiral Bay announces a 50% working interest in up to 6,000 acres in Cambria County, Pennsylvania, prospective for Marcellus Shale development.

CENTENNIAL, COLORADO--(Marketwire - May 4, 2009) - Admiral Bay Resources, Inc. (TSX VENTURE:ADB) announced today it has acquired additional producing natural gas assets in the Kansas Cherokee Basin from an undisclosed private seller for approximately $2.0 million (US). Based on available data and Admiral Bay analysis, the assets currently have gross sales of approximately 1.2 million cubic feet of gas per day (mmcf/d) and contain proved reserves of approximately 8.3 billion cubic feet of natural gas. Located in Wilson and Neosho counties, the Thayer (Neodesha) assets are centrally located among existing Admiral Bay operations.

Admiral Bay paid approximately $0.25 per proved thousand cubic feet (mcf) of natural gas reserves and approximately $1,900 per daily producing mcf. In addition to existing production, Admiral Bay believes there are opportunities to enhance existing production through low-cost workovers and improvements to the gathering system and field compression, providing an opportunity to return production to 1.6-1.8 mmcf/d, levels realized prior to the ownership of the assets which results from its foreclosure on the field from the previous operator in 2008. The company has also identified approximately 70 additional in-fill drilling locations. Admiral Bay believes additional natural gas producing coals and shales may be accessible from existing wellbores to enhance current production with only modest expense.

This acquisition should immediately increase Admiral Bay's current base production by approximately 35% and proved reserves by nearly 20%, with additional production enhancement possible through existing well remediation and new development drilling.

"This acquisition is transformational for Admiral Bay as it adds meaningful scale to both production and reserves in the Cherokee Basin," Steve Tedesco, President and Chief Executive Officer of Admiral Bay noted. "Moreover, our ability to complete and fund this acquisition with both new equity and debt demonstrates the confidence our equity investors and lenders have in the future of Admiral Bay."

Tedesco continued, "The Thayer properties provide strong current production, a solid base of proved natural gas reserves and plenty of running room for growth at a compelling price. We consider this to be not only a reaffirmation of our commitment to the Cherokee Basin but the beginning of a period of significant growth for the company."

FIG Partners, LLC Energy Research and Capital Group served as Admiral Bay's financial advisor in the transaction.

To fund the LV Neodesha transaction, Admiral Bay has commenced a non-brokered private placement of units, to be sold to accredited investors. The placement, to be priced at $0.064 (CDN) per unit, will raise up to $2,000,000 (CDN). Each unit will consist of one common share of Admiral Bay and one-half warrant which will entitle the holder to purchase one additional common share at $0.09 (CDN) per share for a term of twelve (12) months and one-half warrant which will entitle the holder to purchase one additional common share at $0.128 (CDN) per share for a term of twenty-four (24) months. Further details of the offering can be found in the official Subscription Agreement available to accredited investors from the Company. The Company may pay a finder's fee on a portion of this private placement. The private placement is subject to conditional acceptance of the TSX Venture Exchange.

In addition, GasRock Capital LLC, will provide up to an additional $1.8 million (US) of availability for the purchase and further development of the acquired assets.

FIG Partners, LLC Energy Research and Capital Group served as Admiral Bay's global administrative agent in the equity offering.

In addition to the activity in the Cherokee Basin, Admiral Bay also announced that it has taken a 50% working interest in up to 6,000 acres in Cambria County, Pennsylvania, providing exposure to the emerging Marcellus Shale natural gas play. Along with its partner in the Revloc Appalachia Coal Bed Methane project, Admiral Bay's acreage appears to be in the fairway for Marcellus prospectivity as other major public and private exploration companies are leasing areas contiguous to the Admiral Bay leasehold. To secure take-away capacity, Admiral Bay has successfully negotiated pipeline right-of-way and a tap site is in place. Pipeline construction could begin as early as late 2009.

"Our ability to use our Appalachia Coal Bed Methane development as an opportunity to become a participant in Marcellus Shale development is also transformational for Admiral Bay and indicative of our opportunistic approach to value creation." Added Tedesco, "As the Marcellus development evolves we will look to this asset to provide a number of attractive value-enhancing options to the company."

Admiral Bay Resources Inc. (www.admiralbay.com) is an emerging unconventional gas production company focused on the development of projects in the Cherokee Basin in southeast Kansas and the Appalachian Basin in Pennsylvania. Admiral Bay is listed on the TSX Venture Exchange under the symbol ADB.

GasRock Capital LLC is a mezzanine project debt and project equity financier that invests in high quality E&P and midstream companies in the Oil & Gas industry. GasRock provides capital for development and acquisition opportunities, and their offices are located in Houston, Texas.

Statements in this release that are not historical facts are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such statements are not guarantees of future performance and that actual developments or results may vary materially from those in these "forward-looking statements".

The TSX Venture Exchange does not accept responsibility for the adequacy of this release.

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