Delphi Energy Corp.

Delphi Energy Corp.

June 26, 2008 17:16 ET

Delphi Energy Announces Peace River Arch Acquisition and Financing

CALGARY, ALBERTA--(Marketwire - June 26, 2008) -


Delphi Energy Corp. (TSX:DEE) is pleased to announce that it has entered into a purchase and sale agreement to acquire oil and natural gas properties producing approximately 650 barrels of oil equivalent per day (boe/d), predominantly located in the Peace River Arch and directly north of the Company's Hythe area.


The properties are characterized as stable, low decline, high netback production with an acquisition cost of $49,900 per producing barrel, primarily weighted towards natural gas (80 percent) on approximately 24,000 net acres of developed land. The Company will acquire approximately 1.2 million boe of proven reserves and 1.6 million of proven plus probable reserves at an average purchase price of $26.43 per proven boe and $20.38 per proven plus probable boe, excluding the estimated value of undeveloped land and seismic. The reserve estimates are in accordance with NI 51-101 with 98 percent of the reserves classified in the producing category.

The acquisition includes ownership in key natural gas infrastructure to support future growth from several areas. This infrastructure includes a 100 percent working interest in the Clayhurst Gas Plant with capacity of 10.0 million cubic feet per day (mmcf/d), a 5.8 percent working interest in the Progress Gas Plant with capacity of 142.0 mmcf/d and ownership in additional field compression and gathering systems throughout the properties. The Company believes significant development and exploration potential exists on the 35,000 net acres of undeveloped land (a 39 percent increase to Delphi's undeveloped land position) with 292 kilometres of 2D seismic included in the acquisition.

The total purchase price is $38.5 million, before closing adjustments, including undeveloped land and seismic with an estimated value of approximately $5.9 million. Approximately 250 boe/d of the vendor's working interest production is subject to "right of first refusal" (ROFR) provisions. The results of the ROFRs will be known no later than mid-summer, with closing to follow immediately thereafter. The acquisition will be funded from the Company's credit facilities and an equity financing.


For the financing, the Company has entered into an agreement with a syndicate of underwriters, with RBC Capital Markets and Macquarie Capital Markets Canada Ltd. as co-lead underwriters, pursuant to which such underwriters have agreed to purchase, on a bought deal basis, 6,316,000 common shares of the Company at a price of $2.85 per share and on a best efforts basis, 3,530,000 flow-through common shares of the Company at a price of $3.40 per share. Gross proceeds of the offering will be approximately $30 million.

The share issue will be an underwritten public offering in all provinces of Canada, other than Quebec, by way of a short form prospectus, and in the U.S. on a private placement basis pursuant to exemptions from the registration requirements pursuant to Rule 144A and Regulation D of the United States Securities Act of 1933, as amended.

The financing is scheduled to close on or about July 17, 2008 and is subject to regulatory approval and completion of definitive documentation.


Production for 2009 is now expected to average between 7,700 and 8,300 boe/d, assuming no ROFRs are exercised. The mid-point of 8,000 boe/d for 2009 represents an increase of approximately 25 percent over the upwardly revised forecast 2008 average volumes of 6,300 to 6,500 boe/d.

Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", may", "will", "should", believe", "intends", "forecast", "plans", "guidance" and similar expressions are intended to identify forward-looking statements or information.

More particularly and without limitation, this press release contains forward looking statements and information relating to the Company's risk management program, petroleum and natural gas production, future funds flow from operations, capital programs, natural gas prices and debt levels. The forward-looking statements and information are based on certain key expectations and assumptions made by Delphi, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the capital availability to undertake planned activities and the availability and cost of labour and services.

Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company's operations or financial results are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website ( The forward-looking statements and information contained in this press release are made as of the date hereof for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

NON GAAP Measures. The press release contains the terms "funds from operations" and "funds from operations per share" which are not recognized measures under Canadian generally accepted accounting principles. The Company uses these measures to help evaluate its performance. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations is a non-GAAP measure and has been defined by the Company as net earnings plus the addback of non-cash items (depletion, depreciation and accretion, stock-based compensation, future income taxes and unrealized gain/(loss) on risk management activities) and excludes the change in non-cash working capital related to operating activities and expenditures on asset retirement obligations and reclamation. The Company also presents funds from operations per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP.

A barrel of oil equivalent (boe), derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

    President & CEO
    (403) 265-6171
    (403) 265-6207 (FAX)
    V.P. Finance & CFO
    (403) 265-6171
    (403) 265-6207 (FAX)