ARAPAHOE ENERGY CORPORATION
TSX VENTURE : AAO

ARAPAHOE ENERGY CORPORATION

September 24, 2007 21:08 ET

Arapahoe to Acquire First West Petroleum-Corporate Update and Executive Appointments

CALGARY, ALBERTA--(Marketwire - Sept. 24, 2007) - ARAPAHOE ENERGY CORPORATION ("Arapahoe" or the "Corporation")(TSX VENTURE:AAO) is pleased to announce that it has executed a letter of intent with First West Petroleum Inc. of Calgary, Alberta ("First West") which sets out the basic terms and conditions for the acquisition (the "Acquisition") of all of the issued shares of First West by a wholly-owned subsidiary of Arapahoe, along with a concurrent financing by Arapahoe of up to $14.6 Million.

ACQUISITION & FINANCING

As the first step of the Acquisition, Arapahoe will transfer its interests in its Campbell and Sarcee oil and gas properties and up to $9 Million in cash in exchange for shares. Arapahoe proposes to raise the cash component to be transferred through the exercise of warrants issued by Arapahoe in April and June 2007 for maximum proceeds of $5.6 Million. The balance of the cash component is proposed to be raised by Arapahoe through the private placement of non-flow through common shares at a price of $0.125 per share for gross proceeds of up to $3.4 Million. The aggregate proceeds from these financings of up to $9 Million will be used by First West following the completion of the Acquisition to develop the Campbell and Sarcee oil and gas properties, as well as the properties currently held by First West, including tying-in certain of First West's wells, completing a 5-well drilling program on First West lands by year-end 2007, and for working capital. Arapahoe also proposes to complete a private placement of flow-through common shares at a price of $0.14 per share for gross proceeds of up to $5.6 Million. These proceeds will be used by Arapahoe to explore its oil and gas properties.

It is anticipated that the completion of the Acquisition will occur on or before November 30, 2007.

The Acquisition is conditional upon the shareholders of Arapahoe approving the conversion feature of the debentures issued by Arapahoe in April and June 2007 at the upcoming shareholders' meeting on September 27, 2007. The Acquisition is also conditional upon the execution of a definitive agreement, completion of satisfactory due diligence, receipt of lender, director, shareholder, court (if applicable) and regulatory approval, and receipt of third party consents and other conditions customary in a transaction of this nature.

Upon completion of the Acquisition, Arapahoe will hold approximately 53.5% of the outstanding shares of First West and former shareholders of First West will collectively hold an aggregate of approximately 46.5% of the outstanding shares of First West.

ABOUT FIRST WEST PETROLEUM INC.

First West Petroleum Inc. is a private Alberta corporation engaged in oil and gas exploration and production since 2004. Its principal interest is in the exploration, development and production of hydrocarbons on its numerous properties in the province of Alberta, over 80% of which it operates. First West's oil and gas reserves have been evaluated by Chapman Petroleum Engineering Ltd. of Calgary, Alberta. First West has a highly-trained technical team that has proven evaluation, exploitation and operational skills. Its founders and principal shareholders include Sam S. Davaraj of Calgary, Alberta (17%) and Pacific Shelf Investments Ltd. (D. Barry Lee) of Vancouver, B.C. (17%). Mr. Lee also serves as a director of Arapahoe. It is anticipated that the new entity will be managed by the current management of First West following the completion of the Acquisition.

BENEFITS OF THE ACQUISITION & FUTURE CORPORATE STRATEGY

Management of Arapahoe anticipates that the benefits of the Acquisition will be new, aggressive development and stewardship by First West of Arapahoe's existing prospects in the Campbell and Sarcee areas, which includes a potentially high impact deep Mississippian target.

The assets of Arapahoe following the completion of the Acquisition will consist primarily of a significant cash position, the farm-in opportunities on First West properties, its shareholding in First West, and the shares of Serrano Energy Ltd. ("Serrano") to be received in consideration of Arapahoe's Freemont assets pursuant to the sale announced in a news release dated August 16, 2007. Both First West and Serrano will be companies that are well-funded and operated by competent management and technical teams that are able to fully exploit the potential of their existing and former Arapahoe properties.

Arapahoe will continue to have an active role in developing the existing as well as the expanded assets of both Serrano and First West through farm-in opportunities and joint working interests. The Corporation also intends to participate in other exploration and production opportunities as it pursues a corporate strategy of seeking undervalued oil and gas opportunities that exist in the current market environment. Arapahoe anticipates that as the junior oil and gas market continues to seek new capital and joint venture partners, its new consolidation platform will offer an attractive structure for investors and E&P partners alike.

EXECUTIVE APPOINTMENTS

President & CEO

Arapahoe announces that Robert J. Chenery has replaced Jeff Standen as its President and Chief Executive Officer, effective immediately. Mr. Standen has also resigned his position as a director of Arapahoe, and has advised the Corporation that he will not stand for election as a director at Arapahoe's shareholders' meeting to be held on September 27, 2007. Mr. Standen will remain with the Corporation with responsibilities for Business Development, sourcing new land and oil and gas opportunities, and assisting Arapahoe in pursuing its consolidation strategy.

Robert (Bob) Chenery (P.Eng, MBA), currently a director of the Corporation and the co-Chairman of its Corporate Governance Committee, has over 30 years experience in the oil and gas industry, beginning with the Elf Aquitaine Group, where he rose to a position of senior management with responsibility for reservoir assessment and corporate planning for North American assets. In the 1980's, he co-founded Chenery Dobson Resource Management Ltd., a consulting firm specializing in advising institutional investors such as the Royal Bank of Canada, the Bank of Montreal, the National Bank of Canada and the Investors Group on North American oil and gas assets, and the publisher of The Survey of Oil and Gas Consultants and Banks. Chenery Dobson has functioned for over 20 years as a basis for industry participants to transact acquisitions, evaluating oil, natural gas, and coal properties and managing Limited Partnerships. He was the Chief Operating Officer and a Director of Devran Petroleum Inc. (TSXV) from 1993 through 1995, and for the past two years has been an advisor in the Investment Banking business, focusing solely on oil and gas. He is currently a senior advisor to OilExco Incorporated (TSX, LSE), and is a member of the Board of Directors of Blackpool Exploration (TSXV).

Chief Financial Officer

Additionally, Brenda Stanger has resigned as Arapahoe's Chief Financial Officer. It is anticipated that Douglas Bailey (CGA) will be assuming the role of CFO upon the completion of the First West business combination. Mr. Bailey provided invaluable assistance to the management of Arapahoe through its recent corporate restructuring process. He has over 15 years experience in the finance and accounting industry, including in the oil and gas sector.

Correction Notice

The Corporation advises that Trapeze Asset Management is the beneficial owner, directly and indirectly, of 7,390,500 or 13.4% of the Corporation's issued and outstanding common shares. This information amends the disclosure contained in the section of the Corporation's Information Circular (the "Circular") dated August 29th, 2007 entitled "Voting Shares and Principal Holders Thereof".

Arapahoe Energy Corporation is a publicly traded junior oil and gas exploration, development and production company with operations in Western Canada. Arapahoe's shares trade on the TSX Venture Exchange under the symbol "AAO".

ON BEHALF OF THE BOARD OF DIRECTORS OF ARAPAHOE ENERGY CORPORATION

Robert J. Chenery, President & CEO

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Forward-Looking Statements

This release may contain forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements are not guarantees of future performance. Any forward-looking statements are made as of the date hereof and Arapahoe and First West do not undertake any obligation, except as required under applicable law, to publicly update or revise such statements to reflect new information, subsequent or otherwise.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Arapahoe Energy Corporation
    Robert J. Chenery
    President & CEO
    (403) 920-0040
    (403) 920-0043 (FAX)