Canex Energy Inc.
TSX VENTURE : CXO

Canex Energy Inc.

March 27, 2006 08:00 ET

Canex Energy Inc. Announces Sale to Crescent Point Energy Trust and the Creation of a Peace River Arch Focused Exploration Company

CALGARY, ALBERTA--(CCNMatthews - March 27, 2006) - Canex Energy Inc. ("Canex" or "the Company") (TSX VENTURE:CXO) announces that it has entered into a Plan of Arrangement (the "Plan") with Crescent Point Energy Trust ("Crescent Point") (TSX:CPG.UN) whereby Crescent Point will acquire the majority of Canex's development focused properties in Alberta. The balance of the assets will be transferred into a new publicly listed exploration company "Exploreco" for the benefit of all Canex shareholders.

Pursuant to the Plan, Canex shareholders will receive $0.5876 per share cash, 0.1003 Crescent Point units and a share in Exploreco with a net asset value of approximately $0.40/share. Based on Crescent Point's last market close the total value to Canex shareholders is $3.24/share. In addition, Canex shareholders will receive one-third of a common share purchase warrant of Exploreco for each Canex share. Crescent Point will assume net debt of $12,300,000.

Since the start of 2005, Canex has achieved significant growth attributed primarily to successful development drilling at its main property at Worsley. Through an aggressive drilling program, the company doubled its corporate reserves and net asset value per share and achieved record cash flow and earnings. Over the past few months however, difficulties arising from limited gas processing capacity at Worsley and regulatory constraints began to influence planned production growth. The Worsley property accounts for 70% of the Company's production.

In the first quarter of 2006, Crescent Point acquired the non-operated working interest in the Worsley property and subsequently entered into discussions with Canex regarding possible transactions. After reviewing a number of alternatives, the Canex Board of Directors agreed to pursue a transaction that would allow a partial liquidity event and simultaneously expose all shareholders to the high impact, growth opportunities that the Canex team has assembled. Canex shareholders would benefit from having Crescent Point, a well financed and well managed trust, which is in a stronger position to help realize the upside potential at Worsley and the other properties.

The proposed transactions will be effected pursuant to a Plan of Arrangement under the Business Corporations Act (Alberta) and subject to shareholder approval. The definitive Arrangement Agreement must be concluded on or before April 15, 2006 for inclusion in the Information Circular - Proxy Statement to be mailed to all shareholders on or before April 28, 2006. Should Canex shareholders approve the transactions, the Effective Date is expected to be on or before May 30, 2006. The Board of Directors has unanimously approved the proposed transactions and recommends shareholder approval. The directors and officers of Canex have entered into lock-up agreements with Crescent Point to tender all of their securities, representing approximately 40% of the fully diluted shares. Tristone Capital Inc. is acting as financial advisor to Canex and has provided the Canex Board of Directors with its opinion that the consideration to be received by Canex shareholders is fair, from a financial point of view.

Reserves and Value:

The Company has an independent reserve report completed by Trimble Engineering Associates Ltd. ("Trimble Report") dated February 22, 2006 and effective December 31, 2005. The following table summarizes the key aspects of the Trimble Report based on forecasted prices and costs as of December 31, 2005 and without ARTC:



Proven + Proven +
Proven Probable Proven Probable
BOE BOE NPV 10% NPV 10%
Property mstboe mstboe M$ M$
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Total Sellco 3,101 4,086 68,662 85,308
Total Explorco 131 191 4,070 4,989
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Total 3,232 4,278 72,732 90,297
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Exploreco:

Exploreco will have initial production of approximately 105 boepd. It will be a Peace River Arch focused exploration company that intends to primarily pursue multi-zone, Triassic and Cretaceous light oil and gas plays at depths less than 2000 meters. Management intends to utilize its strong technical and operational expertise to expose shareholders to significant growth opportunities. Exploreco will commence with a large undeveloped land position, proprietary 3D seismic and certain prearranged farm-in deals resulting in a sizable prospect inventory. Expenditures incurred on Exploreco subsequent to February 1, 2006 are estimated as $3,300,000 and will reside as initial debt in Exploreco.

At Clear Hills, on trend from Canex' multi-zone Triassic 6 million barrel light oil and gas discovery, Exploreco will have access to over 21,000 acres (12,600 net) of undeveloped land, 25 square miles of proprietary 3D seismic data and a number of cased wellbores with untested hydrocarbon potential. Exploreco will also have exposure to over 13,000 acres (8,700 net) of undeveloped land at Teepee, Pouce Coupe and West Kaybob with a number of drill ready prospects.

In conjunction with the formation of Exploreco, management, employees, directors and key service providers will be offered the opportunity to participate in a private placement for Exploreco shares. The private placement of 7,200,000 flow through shares at $0.50 per share will result in gross proceeds of $3,600,000.

In addition, Canex shareholders will receive one-third of a common share purchase warrant of Exploreco for each Canex share. The purchase warrants can be converted into Exploreco shares for $0.50/share. Assuming 26,420,772 fully diluted Canex shares there will be 8,806,924 purchase warrants for gross proceeds of $4,403,462.

The Net Asset Value of Exploreco is estimated at $0.38-0.43/share based on the following:



NAV (M$) Source
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Proven + Probable NPV @10% 4,989 Trimble Report
Undeveloped Land 4,200 Township Land Report
Q1 Capital Spending 4,282 estimate at cost
Debt ($3,300) estimate at closing

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Exploreco Net Asset Value (NAV) 10,171 -
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NAV (M$) Shares (2) $/share
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Current Outstanding 10,171 24,514,772 $0.41
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Fully Diluted (1) 10,171 26,420,772 $0.38
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Management Financing 3,600 7,200,000 $0.50
Purchase Warrants 4,403 8,806,924 $0.50
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Assuming all rights are exercised 18,174 42,427,696 $0.43
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(1) Assumes all Canex Options are exercised and none are cancelled
(2) Prior to a 2:1 share consolidation for Exploreco


Upon completion of the private placement, it is expected that all employees and management of Canex (9 people) will assume similar positions with Exploreco.

Exploreco's Board of Directors will be comprised of two management and four independent directors as follows:

Stephen Kapusta, President and CEO

Mark Birchard, VP Exploration

C. Lal Narang - Independent

William Hess - Independent

Steve Dabner - Independent

Additional Independent Director to be named prior to closing the plan of arrangement.

Prior to the Crescent Point transaction, management and directors owned 35% of Canex. Assuming all rights are exercised, management and the board of directors will own approximately 50% of Exploreco. One third of the management position will have been acquired on a flow through basis.

Assuming the maximum number of shareholder rights are exercised and the proposed private placement to management, Exploreco will have 42,427,696 shares outstanding, (21,213,848 after a two to one consolidation) will begin trading on the TSX Venture Exchange have cash resources of approximately $4,000,000 and no debt.

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

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