Arsenal Energy Inc.
TSX VENTURE : AEI

Arsenal Energy Inc.

June 29, 2005 19:24 ET

Arsenal Acquires 350 Boe/d For $6,800,000; Raises $2,511,880 Through Private Placement and Warrant Exercise

CALGARY, ALBERTA--(CCNMatthews - June 29, 2005) - Arsenal Energy Inc. (TSX VENTURE:AEI) ("Arsenal or the Company") is pleased to announce that today it closed the property acquisition previously announced May 17, 2005. Arsenal acquired 350 boe/d and approximately 4,000 acres of P&NG leases located primarily in the Lloydminister area for total consideration of $6,800,000. The purchase price was satisfied through the payment of $5,800,000 using existing cash and credit facilities plus the issuance of 800,000 common shares of Arsenal at a price of $1.25 per common share for gross proceeds of $1,000,000. The shares were issued to the vendor on a private placement basis. With this acquisition and resolution of current shut-in production due to wet weather, Arsenal expects be producing approximately 2,000 barrels of oil equivalent per day by the end of July 2005.

In conjunction with the closing of the property acquisition, Arsenal has applied to have regulatory approval for the issuance of 681,394 common shares. Of this total, 581,394 common shares are to be issued as "flow-through common shares" at a subscription price of $1.72 per share. In addition, 100,000 common shares are to be issued at a subscription price of $1.50 per share. If the placements are fully subscribed, Arsenal will receive $1.15 million.

Arsenal has completed the first closing of the private placement of 274,715 flow-through common shares at a subscription price of $1.72 per common share for gross proceeds of $472,510. In addition, Arsenal also completed the private placement of 100,000 common shares to a director of the Company for aggregate proceeds of $150,000. Total proceeds from the first close of private placements was $622,510.

In addition has received $889,370 through the exercise of share purchase warrants at an exercise price of $1.00 per warrant.

The proposed private placements are subject to the completion of formal documentation and the conditional approval of the TSX Venture Exchange (the "Exchange"). In addition, Arsenal is required to file a formal application with the Exchange relating to the private placements within thirty (30) calendar days of this news release. Arsenal advises that insiders may subscribe to the private placements.

Arsenal intends to use the proceeds from the private placements to fund part of its 2005 capital exploration programs and to incur and renounce qualifying expenditures to flow-through common share holders. Arsenal is currently drilling the 5th well of its 28 well developmental drilling program previously announced in a news release dated May 17, 2005. All wells have been cased as potential oil wells and completion programs are currently under way, despite wet weather in the Lloydminister area. Arsenal anticipates these wells to commence production during the 3rd quarter of 2005.

Certain statements in this material may be "forward-looking statements" including outlook on oil and gas prices, estimates of future production, estimated completion dates of acquisitions and construction and development projects, business plans for drilling and exploration, estimated amount and timing of capital expenditures and anticipated future debt levels and royalty rates. Information concerning reserves contained in this material may also be deemed forward-looking statements as such estimates involve the implied assessment that the resources described can be profitably produced in the future. These statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated by Arsenal. This news release is not for distribution in the United States.

The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.

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

Contact Information

  • Arsenal Energy Inc.
    Michael S. Vandale
    President and Chief Executive Officer
    (403) 262-4854
    (403) 265-6877 (FAX)
    Email: msv@arsenalenergy.com
    or
    Arsenal Energy Inc.
    Jesse Meidl, CA
    Chief Financial Officer
    (403) 262-4854
    (403) 265-6877 (FAX)
    Email: jm@arsenalenergy.com
    or
    Arsenal Energy Inc.
    1110, 521 - 3rd Avenue SW
    Calgary, Alberta T2P 3T3
    (403) 262-4854
    (403) 265-6877 (FAX)
    Email: info@arsenalenergy.com
    Website: www.arsenalenergy.com