Mission Oil & Gas Inc.
TSX : MSO

Mission Oil & Gas Inc.
Bison Resources Ltd.
TSX VENTURE : BIS.A

Bison Resources Ltd.

October 26, 2005 18:34 ET

CORRECTION FROM SOURCE: Mission Oil & Gas Inc. to Acquire Bison Resources Ltd. and Announce Bought Deal Financing

CALGARY, ALBERTA--(CCNMatthews - Oct. 26, 2005) - In the release issued at 4:45pm ET Oct. 26, 2005 for Mission Oil & Gas Inc. ("Mission") (TSX:MSO) and Bison Resources Ltd. ("Bison") (TSX VENTURE:BIS.A) there were multiple revisions to the second paragraph. The complete and corrected version follows:

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Mission Oil & Gas Inc. ("Mission") (TSX:MSO) and Bison Resources Ltd. ("Bison") (TSX VENTURE:BIS.A) are pleased to announce they have entered into an arrangement agreement (the "Arrangement Agreement") which provides that Mission will acquire all of the issued and outstanding common shares of Bison ("Bison Shares") pursuant to a plan of arrangement under the Business Corporation Act (Alberta) (the "Arrangement").

The purchase price payable by Mission for each Bison Share will be, at the election of the holder, $8.65 in cash or 1.0949 common shares of Mission ("Mission Shares"). A total of 4,324,012 Mission Shares will be issued to holders of Bison Shares pursuant to the Arrangement. In the event that the Bison shareholders elect, in the aggregate, to receive more than 4,324,012 Mission Shares, the amount of Mission Shares to be received by a holder electing to receive Mission Shares for a Bison Share will be reduced pro rata and the balance of the purchase price for that Bison Share will be paid in cash. In the event that the holders of Bison Shares elect to receive less than 4,324,012 Mission Shares, the amount of cash to be received by a holder electing to receive cash with respect to a Bison Share will be reduced pro rata and the balance of the purchase price for that Bison Share will be paid in Mission Shares.

Started in 1998, Bison's management team has grown the company with $4.4 million in equity raised to a realized value of $113.9 million based on this transaction. This transaction is the culmination of eight years of work on the part of Bison's management team and dedication on the part of Bison's shareholder group. Over this time Bison management has focused on exploring for oil and gas, growing the company entirely by the drill bit. In September 2003 Bison discovered the Bakken Formation light sweet oil resource play in the greater Viewfield area and since then has drilled a total of 37 wells into the formation.

This transaction consolidates ownership and operations in the exciting Bakken light sweet oil play in SE Saskatchewan, establishing Mission as the dominant player in the greater Viewfield area. Mission will continue to be managed by its current executive team and board of directors.

TRANSACTION DETAILS

The management of Mission believes that this transaction is an exciting, strategic growth opportunity, and together with Mission's current assets, provides Mission with significant breadth and depth of identified upside inventory, based on the following:

1. Strategic Rationale

Over the course of the last two years, Mission and Bison have been aggressively pursuing land acquisition and development of the Bakken light oil (42 degrees API) play in SE Saskatchewan. Both companies' land base and operations are immediately adjacent to each other and are extremely complementary.

Through consolidation of the Bakken light oil play, Mission will have the dominant interest in potentially more than half a billion barrels (gross) of original oil in-place ("OOIP") of light sweet crude and significant high heat content, liquids rich associated natural gas reserves. Only 15 light oil pools with more than 500 million barrels of OOIP have been discovered in Western Canada, the last of which was discovered in 1965. Light sweet crude production is highly sought after as world production trends to heavier, sour barrels while the majority of the world's existing refining base is unable to handle significant incremental heavy volumes.

Play consolidation will also lead to enhanced operational efficiencies and improved economics, particularly with respect to the construction of a gas plant and subsequent monetization of the Bakken associated natural gas and natural gas liquids reserves.

Based on the wells drilled to date by Mission and Bison, Mission believes the lands controlled by the two companies encompass a large resource play for light sweet oil in the Bakken. By consolidating the play and capturing the opportunity, Mission believes it can continue to unlock the large resource potential through continued improvements in technology, including potential secondary and tertiary recovery schemes. As with all resources plays, improvements in technology result in continuous increases in production and reserves and decreases in costs over the long lifespan of these types of developments.

2. Operational Overview

Bison's entire asset base is highly focused in the greater Viewfield area in SE Saskatchewan and all of its production is located within a 20 mile radius of Mission's lands. Bison's assets are high quality, high net back light oil, with a corporate average oil gravity of 36 degrees API. Production is 100 percent working interest, operated and includes 100 percent interests in four oil batteries and associated infrastructure. Current field operating net backs, assuming US$60.00 per Bbl WTI are $43.40 per Bbl.

Production comes predominately from the Frobisher and the Bakken formations. Bison has drilled 22 vertical and 15 horizontal Bakken wells to date. With two drilling rigs currently working for Bison in Viewfield, it is expected that seven additional Bakken wells will be drilled by year end.

3. Reserves

Bison's independent engineers booked company interest before royalty interest reserves of 5.59 million Boe of proven plus probable ("P+P"), at December 31, 2004 (NI51-101 compliant). Based on Bison's ongoing drilling program, Mission's internal engineering estimate of Bison for the year ending December 31, 2005, indicate additional P+P reserves of approximately 750,000 Boe above the current independent reserve bookings. At the completion of this year's drilling program, Mission will be commissioning an independent reserves evaluation of the assets of both Bison and Mission.

4. Production

Current Bison production is approximately 2,000 Boepd, all light oil. Non-Bakken production from conventional SE Saskatchewan Mississippian aged reservoirs comprises approximately half of Bison's current production.

5. Land and Working Interests

Bison has in excess of 47,000 gross (47,000 net) acres of undeveloped land (valued at $10.7 million as per an independent evaluation) of which 26,600 gross (26,600 net) acres are in the greater Viewfield area.

Together with the Bison lands, Mission will now have interests in 157 gross (111 net) sections, or 71,040 net acres, of Bakken prospective land in the greater Viewfield area, becoming the single largest interest holder in this resource play.

Bison has a 100 percent working interest in all of its assets which provides significant control to Mission with respect to its capital spending and daily operations.

6. Upside

Mission has identified the potential for more than 95 horizontal drilling locations for light oil on Bison lands. This drilling inventory would include a number of Frobisher locations and a multi-year program of Bakken locations, based on 400 metre inter-well spacing. .

Potential future downspace opportunity to 200 metre inter-well spacing exists on the Bakken lands, which would increase the horizontal drilling inventory to more than 195 horizontal locations on Bison lands alone. The majority of conventional SE Saskatchewan Mississippian aged reservoirs have been horizontally drilled to 150 metre inter-well spacing and there are a number of 75 metre inter-well spacing developments currently underway.

Combined with Mission's drilling inventory, Mission will have the potential for more than 400 drilling locations on its asset base including Bakken horizontal locations based on 400 metre inter-well spacing and the potential for more than 900 drilling locations including horizontal Bakken locations based on 200 metre inter-well spacing.

Construction of a gas plant in Viewfield will be aggressively pursued to monetize the significant volumes of associated natural gas and natural gas liquids from the Bison and Mission production. The light sweet oil production is associated with high gas-oil-ratio (1000 scf/Bbl), high heat content ( greater than 1400 Btu/scf) and liquids rich ( greater than 100 Bbl/MMcf) natural gas. Construction is expected to be completed by July 2006. A number of production optimization and facility consolidation opportunities have also been identified.

7. Transaction Metrics

The acquisition is accretive to Mission on a per share basis, on all key indicia. The estimated reserves and production value on closing is $119.8 million, net of the independently evaluated undeveloped land value of $10.7 million. Utilizing current Bison production of 2,000 Boepd and Bison's independently engineered company interest before royalty interest P+P reserves of 5.59 million Boe, as of December 31, 2004, the transaction metrics are as follows:



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Acquisition cost per Boe P+P reserves $21.43
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Acquisition cost per producing Boepd $59,900
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Cash flow multiple(1) 3.9 times
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P+P reserves per fully diluted share accretion(2) 44%
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Production per fully diluted share accretion 22%
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Cash flow per fully diluted share accretion(3) 36%
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(1) Based on US$60.00/Bbl WTI, CDN$10.00/GJ AECO
(2) Based on Mission's December 31, 2004 independent engineering report and
Bison's December 31, 2004 independent engineering report
(3) Based on estimated annualized Q4 2005 for Bison and Mission at US$60.00/Bbl
WTI, CDN$10.00/GJ AECO

Based on Mission's internal estimate of Bison's P+P reserves at the completion of the 2005 drilling program (6.3 million Boe), the acquisition cost for P+P reserves is $18.94 per Boe.

MISSION 2006 PRELIMINARY ESTIMATES

Mission's strategy will be to continue the development and exploitation of the Bakken resource play while executing further development and exploration on its light oil and natural gas properties in Saskatchewan, Central Alberta and the Peace River Arch. As a result of this transaction, Mission management preliminary 2006 estimates, subject to Mission Board of Directors approval of a formal capital budget, are as follows:



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Key Operating and Financial Information(1) Mission 2006
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Average production 4,500 Boepd
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Exit 2006 production 4,850 Boed
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Operating net-back $39.00/Boe
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Operating costs $8.10/Boe
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G&A $1.60/Boe
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Undeveloped land 126,720 net acres
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(1) Based US$55.00/Bbl WTI, CDN$9.00/GJ AECO and 0.85 $US/$CDN

Mission will provide official 2006 guidance immediately following completion of the Arrangement.

MANAGEMENT AND BOARD RECOMMENDATIONS

The Arrangement has the unanimous support of the board of directors of both Bison and Mission. In addition, the Board of Directors of Bison will recommend that shareholders of Bison vote in favour of the Arrangement and all of Bison's officers and directors, representing approximately 35.5 percent of the fully diluted outstanding Class A shares, have entered into lock-up agreements whereby they have agreed to vote in favour of the Arrangement. The Arrangement Agreement contains a mutual non-completion fee in the amount of $3.5 million, which is payable by Bison or Mission to the other, as the case may be, in certain circumstances if the Arrangement is not completed. The completion of the Arrangement is subject to various conditions, including receipt of all required regulatory, shareholder and Court approvals. A special meeting of shareholders of Bison will be called in January 2006 to consider the Arrangement. An information circular detailing the Arrangement is anticipated to be mailed to Bison shareholders by late November.

Orion Securities Inc. and BMO Nesbitt Burns Inc. are acting as financial advisors to Mission and CIBC World Markets is acting as strategic advisor to Mission in connection with the transaction. Emerging Equities Inc. is acting as financial advisor to Bison in respect of the Arrangement and Emerging Equities has advised it will be in a position to provide an opinion to the board of directors of Bison that the consideration offered pursuant to the Arrangement Agreement is fair, from a financial point of view, to Bison shareholders.

FINANCING

Concurrent to the Arrangement Agreement, Mission has entered into a bought deal financing agreement with a syndicate of underwriters co-led by Orion Securities Inc. and CIBC World Markets Inc. and including Tristone Capital Inc., BMO Nesbitt Burns Inc., FirstEnergy Capital Corp. and Haywood Securities Inc., to issue on a private placement basis 11,300,000 subscription receipts of Mission at a price of $7.90 each and 500,000 flow-through common shares of Mission at a price of $10.00 each for gross aggregate proceeds of $94,270,000 ("the Offering"). Closing of the Offering is scheduled for November 16, 2005.

The proceeds of the offering of the flow-through common shares of Mission will be released to Mission upon the closing of the Offering. The proceeds of the offering of the subscription receipts will be held in escrow pending Mission's receipt of all necessary regulatory approvals, the receipt of the approval of the shareholders of Mission to the offering of the subscription receipts to be obtained a meeting to be held prior to the completion of the Arrangement and the completion of the Arrangement and the issue of the underlying Mission Shares thereunder. Upon these conditions being met, the proceeds of the offering of the subscription receipts will be released to Mission and each subscription receipt will be exchanged for one Mission Share without additional payment. If closing of the Arrangement does not take place by 5:00 p.m. (Calgary time) on January 30, 2006, the Arrangement is terminated at any earlier time or Mission or Bison has announced to the public that it does not intend to proceed with the Arrangement, holders of the subscription receipts will be entitled to a return of their full subscription price and their pro rata entitlement to the interest earned on the escrowed funds. Subscription receipts issued pursuant to the private placement will be subject to a hold period from the date of closing of the Offering until the closing of the Arrangement. The Offering is subject to the receipt of all necessary regulatory, shareholder and stock exchange approvals.

Mission is also pleased to announce an increase to its existing credit facility with a major Canadian chartered bank from $12.5 million to $24 million. Mission anticipates the credit facility to be expanded further to approximately $44 to $46 million after the closing of the Arrangement.

Proceeds from the Offering will also position Mission at closing of the Arrangement to aggressively pursue its capital growth plan on the Bakken as well as its other properties, including the construction of the gas plant at Viewfield and the on-going exploration program in Mission's Peace River Arch core area. At closing of the Arrangement, Mission estimates it will have approximately $24 million in debt, which is 0.5 times annualized estimated fourth quarter 2005 cash flow.



Mission Oil & Gas Inc. Bison Resources Ltd.
Suite 800, 205 - 5 th Avenue S.W. Suite 500, 505 - 8th Avenue S.W.
Calgary, Alberta T2P 2V7 Calgary, Alberta T2P 1G2


A Boe is a barrel of oil equivalent on the basis of 1 Boe to 6 Mcf of natural gas. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 1 Boe for 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Information provided herein contains forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, which are considered reasonable by Mission at the time of preparation, may prove to be incorrect. Actual results achieved will vary from the information provided and the variations may be material. There is no representation by Mission that actual results achieved will be the same in whole or in part as those indicated in the forward-looking statements.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The common shares 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 in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable states securities laws

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Mission Oil & Gas Inc.
    Trent J. Yanko
    President and Chief Operating Officer
    (403) 263-9964
    (403) 263-9965 (FAX)
    www.missionoilgas.com
    or
    Bison Resources Ltd.
    Nicolas S. Swagor
    President, C.E.O.
    (403) 265-5565
    (403) 266-8886 (FAX)
    www.bisonresources.com