Cyries Energy Inc.

Cyries Energy Inc.

July 25, 2005 09:05 ET

Cyries Energy Inc. Announces Increase to its 2005 Capital Expenditure Program, $57 Million Acquisition and $50 Million Bought-Deal Financing

CALGARY, ALBERTA--(CCNMatthews - July 25, 2005) -


Cyries Energy Inc. ("Cyries") (TSX:CYS) announces today that it has increased its capital expenditure program to $85 million.

As a result of positive momentum from the first half of our 2005 drilling program, Cyries' Board of Directors has approved an increase in the 2005 capital budget from $65 million to $85 million. Cyries had previously increased its capital expenditure program from $55 million to $65 million in April of this year. Cyries continues to exhibit strong results through its drilling program, having completed 20 wells in the first two quarters of 2005 with a 95% success rate. Since the inception of the company in July 2004, Cyries has drilled a total of 37 wells with a 97% success rate. The company has two rigs operating currently and a third rig is expected to be active shortly. The increase in the capital expenditure program will allow Cyries to drill 40-45 wells in 2005, an increase from its initial projection for 2005 of 30-35 wells.

Cyries has also entered into a Share Purchase Agreement with a private oil and gas company and it's wholly-owned subsidiary ("Newco"), pursuant to which Cyries has agreed to purchase all of the issued and outstanding shares in the capital of Newco for $57 million. Newco currently has daily production of approximately 1,300 barrels of oil equivalent per day ("boepd"). The Newco assets compliment Cyries' existing assets and increase Cyries' production base by approximately 600 boepd in or near Cyries' existing core area in the Peace River Arch and adds a new core area at Hotchkiss in NW Alberta with approximately 550 boepd. The acquisition is expected to close mid August 2005.

Cyries expects to achieve a number of key financial and operational benefits from the acquisition, including:

- Cyries' production is expected to increase by approximately 1,300 boepd, 70% of which is natural gas;

- Based on the independent reserves evaluation of Newco, effective April 1, 2005, Cyries' proved reserves are expected to increase by approximately 2,900 mboe and proved plus probable reserves are expected to increase by 4,294 mboe; and

- Cyries' undeveloped land is expected to increase by 19,000 net acres.

As a result of the expanded drilling program and the proposed acquisition, Cyries production will increase to about 7,000 boepd in August. Cyries expects production to exceed 8,000 boepd by the end of December 2005.

Cyries has also entered into a bought-deal financing agreement with a syndicate of underwriters led by FirstEnergy Capital Corp. and including Peters & Co. Limited, GMP Securities Ltd., Raymond James Ltd., Tristone Capital Inc. and Clarus Securities Inc. to issue 803,300 units on a private placement basis at a price of $62.25 per unit for gross proceeds of $50.0 million. Each unit will be comprised of two (2) common shares of Cyries (at a price of $12.45 per common share) and three (3) subscription receipts of Cyries (at a price of $12.45 per subscription receipt).

The net proceeds from the sale of the common shares will be released to the Corporation upon closing of the offering to fund its increased capital expenditure program and for general corporate purposes. The gross proceeds of the subscription receipts will be held in escrow. If the proposed acquisition closes on or before August 31, 2005, the net proceeds of the offering of subscription receipts will be released to Cyries to finance a portion of the acquisition and one common share will be issued for each one subscription receipt held without payment of additional consideration. However, if the acquisition fails to close by August 31, 2005, the escrow agent will return to the holders of subscription receipts the issue price of each subscription receipt and such holder's pro-rata entitlement to interest earned thereon.

Completion of this financing is subject to receipt of all requisite regulatory approvals. The financing is expected to close on or about August 11, 2005.

Conference Call

Cyries will be holding a conference call to discuss the proposed acquisition, financing and Cyries' increase to its capital expenditure program for 2005 on:

Monday, July 25, 2005 at 9:00 a.m. (mt) 11:00 a.m.(et).

Dial in 15 minutes prior to: 1-888-334-9269 or 1-416-695-7896

(Playback recording for 7 days, dial 1-888-509-0082 or 1-416-695-5275).

Forward Looking Statements

This news release contains forward-looking information and the reader is cautioned that some estimates are used and may prove to be incorrect. Actual results realized may vary materially from the information provided in this release. As a result, there is no representation by Cyries that actual results realized in the future will be the same in whole or in part as those presented herein.

This news release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction. The Cyries securities proposed to be distributed have not been and will not be registered under the United States Securities Act of 1933, and they may not be offered or sold in the United States absent registration or an exemption from registration.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Cyries Energy Inc.
    Donald F. Archibald
    Chairman & C.E.O.
    (403) 262-9609
    (403) 262-0055 (FAX)