The Buffalo Oil Corporation

The Buffalo Oil Corporation
Choice Resources Corp.

Choice Resources Corp.

May 01, 2007 08:30 ET

Buffalo and Choice Combine "Positioned for Rapid Growth"

CALGARY, ALBERTA--(CCNMatthews - May 1, 2007) -


The Buffalo Oil Corporation (TSX VENTURE:BFO) ("Buffalo") and Choice Resources Corp. (TSX VENTURE:CZE) ("Choice") are pleased to jointly announce that they have entered into an agreement to effect a business combination whereby Buffalo will acquire all of the outstanding common shares of Choice in exchange for common shares of Buffalo. Pursuant to the transaction Choice shareholders will receive 0.474 of a Buffalo common share for each Choice common share held.

The Board of the resulting company (hereinafter referred to as "The Merged Company") will consist of Richard A. Shaw, QC (Co-Chair) and William A. Trickett from the Buffalo board and A. Murray Sinclair (Co-Chair) and Gordon D. Harris from the board of Choice. The remainder of the Board will be comprised of three nominees of Buffalo and one nominee of Choice.

The initial officers of The Merged Company will be:

William A. Trickett, President and Chief Executive Officer

Gordon D. Harris, Senior Vice President and Chief Operating Officer

Trevor G. Penford, Senior Vice President and Chief Financial Officer

This executive team all have in excess of 25 years of industry experience. Mr. Trickett, Chairman and C.E.O. of Buffalo, previously as President and C.E.O. of Morgan Hydrocarbons Inc., guided that company from a small junior to an intermediate size oil and gas company with production in excess of 20,000 boed. Mr. Harris is currently President and C.E.O. of Choice and Mr. Penford is President and C.F.O. of Buffalo.

Highlights of the new company following the merger of Buffalo and Choice are:

- Strong management/technical team to guide the company through the next levels of growth.

- Production base of 4000 boed balanced between oil and natural gas, with opportunities to increase production significantly through the drill bit.

- Operating 2007 cash flow projected at over $30 million with an estimated year-end debt to cash flow ratio of approximately 1.5 times.

- Land base of over 130,000 net undeveloped acres with three known resource plays at Pincher Creek, Frog Lake and Viking in Alberta, to provide strong organic growth.

- Proved plus probable reserve base of nearly 15 million boe weighted approximately two-thirds to natural gas.

- A reserve life index of over 10 years positioning the company in the top tier for junior oil and gas companies.

- Depreciation, depletion and amortization rate of approximately $12.50 per boe or about 50% of industry average which allows the company to actively pursue additional acquisitions.

"The Merged Company will be well positioned with a solid balance sheet, solid operating fundamentals, proven leadership and a strong technical team as it embarks upon an aggressive growth plan" said Bill Trickett, Chairman of Buffalo.

Based on the 20 day volume weighted average trading prices of Buffalo and Choice shares to April 27, 2007 and an enterprise value of Choice of approximately $105 million, the metrics of the transaction are as follows:

- 22.2% premium to Choice trading value

- approximately $55,500 per flowing boepd

- approximately $10.84 per boe of proved plus probable reserves

Based on the April 27, 2007 closing price of Buffalo shares and the 20 day volume weighted average price of Choice shares, the offer represents a 30% premium to Choice shareholders.

"We are pleased to present this merger opportunity to our shareholders since the combined companies are much stronger in the current acquisition environment and the management team of Choice looks forward to working with Mr. Trickett and his team to add to shareholder value" said Gord Harris, President and C.E.O. of Choice.

The proposed transaction is conditional upon the execution of a definitive agreement, completion of satisfactory due diligence by each party, receipt of shareholder, court and regulatory approvals and other conditions customary in a transaction of this nature. The parties anticipate entering into a definitive agreement respecting the transaction on or before May 15, 2007.

Subject to finalizing the structure of the transaction, once all of the tax, corporate and securities laws issues have been reviewed in detail, it is expected that the transaction will be effected by way of a "plan of arrangement" pursuant to the Business Corporations Act (Alberta). Following completion of due diligence and entering into the definitive agreement respecting the transaction, the parties anticipate being in a position to mail materials in late May 2007 for the Buffalo and Choice shareholder meetings to be held to approve the transaction. It is anticipated that the shareholder meetings will be held, all other approvals will be obtained, and the transaction will be completed in late June 2007.

The senior officers and directors of each of Buffalo and Choice are fully supportive of the proposed transaction and are expected to vote their shares in favour of the transaction. It is a condition to the entering into of the definitive agreement respecting the transaction that senior officers and directors of each of Buffalo and Choice enter into lock-up agreements respecting the transaction.

Each of Buffalo and Choice has agreed not to solicit proposals from, or initiate discussions or negotiations with, any third party for any business combination involving Buffalo or Choice. Buffalo and Choice have agreed to pay to the other party a termination fee of $1.0 million if the transaction is not completed in certain circumstances, and a break fee of $2.5 million in the event that the transaction is not completed under certain other circumstances.

Buffalo's financial advisor in connection with the transaction is Research Capital Corporation. Choice has engaged Salman Partners Inc. as its financial advisor in connection with the transaction.

Certain information set forth in this press release contains forward looking statements. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, reliance should not be placed on forward-looking statements. Actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits may be derived therefrom. Buffalo and Choice disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe's) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf of gas equals 1 Bbl of oil is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

Contact Information

  • The Buffalo Oil Corporation
    Trevor Penford
    President and C.F.O.
    (403) 252-2462
    The Buffalo Oil Corporation
    William (Bill) Trickett
    Chairman and C.E.O.
    (403) 252-2462
    The Buffalo Oil Corporation
    Suite 180, 1209 - 59th Avenue S.E.
    Calgary, Alberta T2H 2P6
    (403) 252-2462
    (403) 252-1399 (FAX)
    Choice Resources Corp.
    Gordon Harris
    President & C.E.O.
    (403) 216-5821
    Choice Resources Corp.
    Steve Austin
    (403) 216-5821
    Choice Resources Corp.
    Suite 1100, 550 11th Avenue S.W.
    Calgary, Alberta T2R 1M7
    (403) 216-5821
    (403) 216-5828 (FAX)