Buffalo Resources Corp.

Buffalo Resources Corp.

March 13, 2008 08:00 ET

Buffalo Resources Announces Drilling Joint Venture and Private Placement

CALGARY, ALBERTA--(Marketwire - March 13, 2008) -


Buffalo Resources Corp. ("Buffalo" or the "Company") (TSX VENTURE:BFR) is pleased to announce that it has executed a non-binding Letter of Intent ("LOI") with Ionic Capital Corp. ("Ionic") of Vancouver, British Columbia in connection with a proposed Canadian drilling joint venture ("Joint Venture") between Buffalo and certain investment vehicles ("Participants") to be formed for the purposes of participating in the Joint Venture.

Canadian drilling joint venture:

This Joint Venture will allow Buffalo to exploit its large asset base and inventory of existing drilling opportunities more efficiently. Buffalo and the Participants will commit up to $40 million for the purposes of completing a drilling program on certain of Buffalo's properties over the next 12 months, allowing the Company to significantly expand the level of activity previously forecast. The Participants will pay a pro rata share (based upon the relative dollar amounts committed to the Joint Venture by the Participants and Buffalo) of all capital expenditures to earn the same working interest in the properties prior to payout, subject to a 10% gross overriding royalty payable to Buffalo. The Participants will retain 60% of that working interest after payout.

The final terms and structure of the Joint Venture will be as agreed by the parties once all the tax, corporate and securities laws issues have been reviewed in detail. Completion of the Joint Venture will be conditional upon, among other things, the execution of a definitive Joint Venture and other related agreements between Buffalo and the Participants and the closing of Buffalo's $11 million private placement unit offering discussed below.

Private placement:

Subject to the formation and funding of the Joint Venture, Buffalo intends to complete an $11 million "best efforts" private placement offering of units ("Units"). Each Unit will be issued at a price of $1.00 and will consist of one Buffalo common share and one common share purchase warrant ("Warrant"). Each Warrant will be exercisable for one Buffalo common share at a price of $1.50 per share for a period of 36 months and will be callable by the Company if Buffalo's common shares trade at a price which exceeds $2.25 for a period of 20 consecutive trading days.

Finders, including Ionic Securities Ltd. and Acumen Capital Finance Partners Limited, will participate in the private placement. Buffalo will pay a cash commission equal to 7% of the gross proceeds and will issue common share purchase warrants equal to 7% of the number of Units sold to the finders entitling the holders to acquire one common share of Buffalo at a price of $1.00 for a period of 12 months from the closing.

The private placement is expected to be substantially at arms length although one of Buffalo's directors is also a director, officer and shareholder of Ionic Securities Ltd. Proceeds from the private placement will be used for working capital and to increase the scope of Buffalo's capital expenditure program through its participation in the Joint Venture. Closing of the private placement will be subject to completion of due diligence and receipt of all regulatory and stock exchange approvals and is conditional upon completion of the Joint Venture with minimum funding from the Participants of $10 million.

Capital program expansion:

Completion of the above transactions will lead to a significant increase in Buffalo's capital program and, together with the Participants in the Joint Venture, could result in capital spending totalling $50 million on Buffalo's oil and gas properties in 2008.

Consequent upon the Joint Venture negotiations, Buffalo has recently spudded well 13-28-4-29W4M at Pincher Creek in southern Alberta where the Company controls 42 sections of land. This well will be drilled to the Mississippian formation at a vertical depth of 3,900 metres and then horizontally for some 800 metres through the formation and will take up to 90 days to drill. This well should set up the drilling of a follow up location later in the year. In addition, certain suspended wellbores will be re-completed in the shallower Cretaceous zones, following up recent exploration success by other parties in the immediate area that yielded sweet light oil and sweet natural gas.

At Frog Lake in northeastern Alberta where Buffalo has access to 46 sections of land through its relationship with the Frog Lake First Nation, the heavy oil drilling program will be expanded to 50 wells and will include stratigraphic drilling to quantify the oil resource in place for a potential enhanced oil recovery pilot project. Additional drilling is also planned at the Company's properties in the Peace River Arch in northern Alberta and at Viking/Killam in central Alberta.

Buffalo believes that the current Canadian oil and gas industry business environment, highlighted by negative financial market sentiment and reduced activity in the face of a rapidly improving industry cost structure, represents a unique opportunity. Bill Trickett the President and CEO of Buffalo stated, "I am pleased to have found financial partners with a long term perspective on our industry and am excited about our Joint Venture. Buffalo will strengthen its balance sheet and, at the same time, will accelerate the exploitation of its large opportunity base for the benefit of shareholders."

The Joint Venture and private placement financing are anticipated to be completed in April 2008 following which Buffalo will update its 2008 market guidance.

The securities being offered have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to any U.S. person except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

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. Buffalo's 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 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 not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.

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