August 10, 2005 10:32 ET

Arapahoe Energy Corporation and Banks Energy Inc. Agree to Business Combination

CALGARY, ALBERTA--(CCNMatthews - Aug. 10, 2005) - Arapahoe Energy Corporation ("Arapahoe") (TSX VENTURE:AAO) and Banks Energy Inc. ("Banks") (TSX VENTURE:BKL) are pleased to announce that they have entered into an agreement pursuant to which, subject to satisfaction of certain conditions, Arapahoe will acquire all the issued and outstanding common shares of Banks (the "Transaction"). Under the terms of the Transaction, Banks shareholders will receive 0.5 of an Arapahoe common share for each common share of Banks held. Arapahoe will incorporate a wholly-owned subsidiary which will amalgamate with Banks, and former shareholders of Banks will receive Arapahoe common shares, pro rata to their respective shareholdings in Banks. Upon completion of the Transaction, the combined company will have approximately 37,838,253 common shares outstanding.

Arapahoe and Banks are arm's length parties and the Transaction has the unanimous support of the respective directors of Arapahoe and Banks.

Security holders of Banks will be asked to consider the Transaction at a special meeting of shareholders expected to be held on or about September 28, 2005. Banks expects to mail an Information Circular to shareholders on or about August 28, 2005. The Transaction will require the approval of 66?% of the votes cast by Banks shareholders and will be subject to all requisite regulatory approvals and other customary conditions, including approval of the TSX Venture Exchange. Closing is expected to occur shortly after the shareholder meeting. Shareholders of Banks (including management and directors) holding approximately 13% of the outstanding shares of Banks have agreed to vote in favour of the Transaction.

Banks is a Calgary-based exploration and production company, currently producing oil from its core area in western Saskatchewan on Poundmaker Cree Nation lands. Arapahoe is a junior oil and gas exploration company engaged in the exploration, development and production of oil and natural gas in Western Canada. Arapahoe's primary area of exploration focus is the Alberta Foothills, specifically on the Tsuu T'ina First Nation (Sarcee Area) immediately west of the City of Calgary.

The Board of Directors of each of Arapahoe and Banks believe that the transaction will create a number of corporate synergies in addition to a balanced exploration and drilling portfolio. The Banks assets provide shallow depth, low cost and lower risk prospects; and the Arapahoe prospects, which consist of high graded, deeper depth prospects, will provide significant reward opportunities. The amalgamated company will actively explore its 17,705 Hectare (43,745 Acre) land base, which will include drilling six new oil locations in the Freemont Area, Saskatchewan, selected from the company's proprietary 3D seismic program. Up to four new gas exploration targets will be drilled on the Senlac Area, Saskatchewan property, and at least two additional Colony gas locations will be drilled on the Poundmaker Area, Saskatchewan property. There are currently two wells drilling and/or being completed on the Arapahoe properties, the high impact C1 et al Sarcee 12-13 Mississippian Test Well and the Highview Strachan 1-11 Test Well. These wells will provide numerous multi zone oil and gas development drilling locations. The entity will begin shooting several new 2D and 3D seismic programs on previously acquired exploration lands on both the Arapahoe and Banks prospects. The entity will continue to participate in wells in accordance with its natural gas exploration program targeting prospects containing larger gas reserve potential. The entity's forward looking strategy will continue to be focused on exploration weighted towards natural gas, negotiating and acquiring access to larger aboriginal land bases on a joint venture basis, plus adding to its management team in order to continue to create new drilling, land and corporate acquisition opportunities.

On the successful completion of the Transaction, Arapahoe will have, on a consolidated basis, a production base of approximately 360 BOE/D with combined loss carry forwards and tax pools of approximately $9,000,000, outstanding debt of approximately $3,000,000 and approximately $500,000 in cash. Combined debt adjusted Net Asset Value (NAV) based on independent engineering evaluations prepared by Gilbert Lausten Jung, as at April 30, 2005, and by Chapman Petroleum Engineering Ltd., at December 31, 2004, and in house land evaluations is approximately $30,000,000 (CDN.).

Arapahoe's proposed new Management and Board of Directors will consist of Jeffrey L. Standen, President , C.E.O. and Director, Ross Moulton, Vice President - Exploration, Brenda Stanger Chief Operating Officer, H. Barry Hemsworth, Director, Michael Atkinson, Director and D. Barry Lee, Director.

Boe's 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.

Completion of the Transaction is subject to a number of conditions, including, but not limited to, shareholder approval and TSX Venture Exchange acceptance. The Transaction cannot close until the required approvals are obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Information Circular to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.

Information provided herein contains forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, which are considered reasonable by Arapahoe and Banks at the time of preparation may prove to be incorrect. Actual results achieved will vary from the information provided and the variations may be material. There is no representation by Arapahoe or Banks that actual results achieved will be the same in whole or in part as those indicated in the forward-looking statements.

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

Contact Information

  • Arapahoe Energy Corporation
    Jeffrey L. Standen
    Chief Executive Officer and President
    (403) 920-0040 (ext.1)
    Banks Energy Inc.
    D. Barry Lee
    (604) 689-8336