Crew Energy Inc.

Crew Energy Inc.

October 18, 2006 08:32 ET

Crew Energy Inc. Announces Agreement to Acquire Private Company With Assets in its Ferrier Core Area

CALGARY, ALBERTA--(CCNMatthews - Oct. 18, 2006) - Crew Energy Inc. ("Crew") (TSX:CR) is pleased to announce it has entered into an agreement (the "Agreement") pursuant to which Crew will make an offer (the "Offer") to acquire 100% of the shares of a private Alberta based oil and natural gas company ("Privateco") with operations in Crew's core area of Ferrier in west central Alberta for approximately 5.33 million common shares of Crew and the assumption of estimated net debt of $3.1 million. The transaction is subject to certain conditions including the tendering of a minimum of 90% of the shares of Privateco ("Privateco Shares") to the Offer, receipt of TSX approval and other customary conditions. Holders of in excess of 70% of the outstanding Privateco Shares, including all directors and officers of Privateco, have entered into lock-up agreements with Crew whereby they have agreed to tender their Privateco shares to the Offer.

Acquisition Summary

- Crew shares to be issued (5.33 million) $61,827,000(i)
- Net debt 3,100,000
- Undeveloped land and seismic (2,150,000)
- Stock option proceeds (902,000)

(i) Based on Crew's volume weighted average trading price over
the past 10 trading days on the TSX - $11.60.

Deal Metrics
boe $/boe
------- ----------
- Estimated production (boe/d) 1,100 $ 56,250
- Estimated proven plus probable reserves (mboe) 3,407 $ 18.16

Operating and Financial Highlights of the Transaction

- The acquisition is accretive to cash flow per share, reserves per share and production per share while reducing Crew's estimated debt per run rate cash flow at closing by approximately 10%.

- The acquired production is split 59% natural gas and 41% natural gas liquids and light oil.

- Crew's undeveloped land will increase by 10,730 acres to approximately 200,000 net undeveloped acres.

- Privateco's producing assets are in a concentrated geographic area in Crew's core area of Ferrier in west central Alberta offering operational synergies.

- The transaction allows Crew to maintain its low operating costs estimated to be $5.40 per boe after closing.

- Crew has identified 15 net drilling locations, one of which is a deep Leduc exploration well expected to be drilled in 2007 and a number of re-completion opportunities on the acquired assets.

- The acquired properties have a reserve life index of 8.5 years based on 1,100 boe per day of production.

- Administrative efficiencies resulting from the transaction are expected to reduce Crew's general and administrative costs per boe by approximately 15% after closing.

- On completion of the Offer and assuming 100% of the Privateco Shares are tendered, Crew would have approximately 41.4 million common shares outstanding. The Offer will be completed by way of an exempt take-over bid to be mailed to shareholders of Privateco in late October and will expire approximately 20 days thereafter.

The Offer has the unanimous support of the board of directors of both Crew and Privateco. The board of directors of Privateco has concluded that the Offer is in the best interests of its shareholders and will recommend that shareholders tender their shares to the Offer. FirstEnergy Capital Corp. has acted as financial advisor to Privateco and has provided the board of directors with their opinion that the consideration to be received pursuant to the Offer is fair, from a financial point of view.

Privateco has agreed to pay Crew a non-completion fee in the amount of $2.5 million in certain circumstances if the Offer is not completed. Privateco has agreed to terminate any discussions with other parties and not to solicit or initiate discussion or negotiation with any third party with respect to alternate transactions.

Crew Energy Inc. is a Calgary-based oil and natural gas exploration and development company. Crew's common shares trade on the Toronto Stock Exchange under the symbol CR.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities in any jurisdiction. The common shares of Crew will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, or to a U.S. person, absent registration or applicable exemption therefrom.


Forward-Looking Statements: Certain information regarding the Company in this news release including management's assessment of future plans and operations, production estimates, drilling inventory and wells to be drilled, timing of drilling and tie-in of wells, productive capacity of new wells, capital expenditures and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, the timing and length of plant turnarounds and the impact of such turnarounds and the timing thereof, delays resulting from or inability to complete the transaction or obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, the Company'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 events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits the Company will derive therefrom.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (, and the Company's website ( Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE Disclosure: Disclosure provided herein in respect of barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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