The Buffalo Oil Corporation
TSX VENTURE : BFO

The Buffalo Oil Corporation

August 29, 2005 07:00 ET

Buffalo Oil Signs Letter of Intent

CALGARY, ALBERTA--(CCNMatthews - Aug. 29, 2005) - The Buffalo Oil Corporation (TSX VENTURE:BFO) ("Buffalo") today announces that it has signed a Letter of Intent to participate with Frog Lake Energy Resources Corp. ("FLERC") in the purchase from a third party of producing oil and gas properties and undeveloped acreage situated on the reserve lands of the Frog Lake First Nation in eastern Alberta (the "Acquisition"). This transaction will further cement the existing relationship between the Frog Lake First Nation, its wholly-owned energy company, FLERC, and Buffalo and will provide the two companies with an attractive cash flow stream and considerable upside potential.

The Acquisition includes 25 producing oil and gas wells, 41 kms of 2D seismic and approximately 2,560 gross acres of undeveloped land. Current production from the properties is from the GP, Sparky and McLaren oil zones and the Colony natural gas zone. In May 2005, gross production from the Acquisition averaged 1,030 barrels of oil equivalent per day (85% heavy oil and 15% natural gas). The oil and natural gas reserves contained within the Acquisition were evaluated by independent engineers and are estimated at 717,000 barrels of oil equivalent of proved reserves and 1,015,000 barrels of oil equivalent of proved plus probable reserves.

Buffalo has agreed to pay $5.25 million, subject to normal closing adjustments, for a 65% working interest in the Acquisition, with an effective date of May 1, 2005. Buffalo will grant FLERC an option that allows FLERC to acquire an additional 15% working interest in the Acquisition upon payment of $1.25 million, subject to normal adjustments to the date of the option closing. The option is exercisable at any time up to June 30, 2006 and if exercised, would result in Buffalo and FLERC each holding a 50% working interest in the Acquisition. If completed, this transaction is expected to result in Buffalo adding proved reserves at approximately $11.15 per boe and proved plus probable reserves at approximately $7.88 per boe. Buffalo will be the operator of the properties and has identified 68 prospective drilling locations. Upon closing, this acquisition should increase Buffalo's daily production to approximately 850 boe per day assuming Buffalo retains a 50% working interest in the Acquisition.

Completion of the transaction by Buffalo is subject to FLERC completing the Acquisition from the third party, completion of normal due diligence, obtaining regulatory approvals and execution of formal agreements between Buffalo and FLERC. Buffalo plans to utilize its available funds to finance its participation in the Acquisition which is expected to close before September 30, 2005. Based on expected cash flows, Buffalo anticipates funding the remainder of its 2005 capital expenditure program from cash flow and bank credit lines.

Buffalo is an emerging junior oil and gas company engaged in the exploration, development and production of oil and gas reserves in Alberta and Saskatchewan.

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. Buffalo's actual results, performance or achievement 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 that Buffalo will derive therefrom. Buffalo disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The TSX Venture Exchange has neither approved nor disapproved this press release and does not accept responsibility for the adequacy or accuracy of the contents.

Contact Information

  • The Buffalo Oil Corporation
    Trevor Penford
    (403) 252-2462
    Email: tpenford@buffalo-oil.com
    or
    The Buffalo Oil Corporation
    William (Bill) Trickett
    (403) 252-2462
    (403) 252-1399 (FAX)
    Email: btrickett@buffalo-oil.com
    or
    The Buffalo Oil Corporation
    Suite 211, 7710 - 5th Street S.E.
    Calgary, Alberta T2H 2L9