Grand Petroleum Inc.

Grand Petroleum Inc.

June 30, 2005 09:20 ET

Grand Petroleum Closes $10.9 Million Financing and Saskatchewan Acquisition

CALGARY, ALBERTA--(CCNMatthews - June 30, 2005) -

This press release is not for release or distribution in the United States.

Grand Petroleum Inc. (TSX VENTURE:GPP) ("Grand") has closed its previously announced financing by issuing 1,571,000 flow-through common shares (the "Flow-Through Shares") at a price of $3.70 per Flow-Through Share and 1,750,000 common shares (the "Common Shares") at a price of $2.90 per Common Share to raise total gross proceeds of $10,887,700. The proceeds of this offering will be utilized by Grand to reduce debt including the debt incurred to complete the previously announced acquisition of the Hazelwood property in southeast Saskatchewan. The bought deal was led by Haywood Securities Inc. and included First Associates Investments Inc., Canaccord Capital Corp., Orion Securities Inc. and Tristone Capital Inc. The Flow-Through Shares and the Common Shares issued are subject to a four month hold period expiring on October 31, 2005. Grand now has 23,693,523 basic and 25,548,523 fully diluted shares outstanding.

Grand has closed the previously announced acquisition of a 50% interest in an oil property at Hazelwood in southeast Saskatchewan for total proceeds, after interim adjustments of approximately $8.1 million. In the Hazelwood area, Grand recently drilled its first (0.5 net) oil well offsetting the acquisition lands and has another well (0.5 net) currently drilling on Grand's exploration lands in the area. Grand intends to drill a total of 18 gross (9 net) wells in the general Hazelwood area in 2005. With the closing of the acquisition, Grand's bankers have agreed to increase total available bank lines to $22.7 million.

Grand estimates that total net debt is currently to be approximately $6 million.
Including the production just acquired at Hazelwood, Grand now estimates, from field receipts, that total corporate production is over 1,800 barrels of oil equivalent per day ("boe/d").

At Sylvan Lake, Alberta, Grand recently tested its well at 5-29-36-4W5M (Grand 69.25% before payout, 49.25% after payout) at rates of approximately 4.3 million cubic feet per day ("mmcf/d") of natural gas at a flowing pressure of approximately 1,845 psi. Grand expects to commence pipeline operations within the next few weeks and begin production at approximately 4 mmcf/d gross (2.8 mmcf/d net) by mid-August. Also in the Sylvan Lake area, Grand has been informed by the operator of 5-33-36-5W5M (Grand 50%) that the well should commence production by mid-July and Grand expects the well to initially produce at over 150 boe/d of sales production net to Grand.

At St. Anne, Alberta, Grand expects to spud the first of 2 (2 net) wells within the next few days, weather permitting. This rig will next move to Atim, Alberta where Grand expects to drill at least 1 (0.6 net) and up to 3 (1.8 net) wells this summer. Weather permitting, Grand expects to also spud within the next week the first of 3 (1.5 net) wells at Pine Creek, Alberta, further developing the Cardium light oil and natural gas discovery made in the first quarter of 2005. Pipeline construction should commence this week and first production from this discovery is expected within 4 weeks at a rate of approximately 135 boe/d net to Grand.

Grand's East Central Alberta second quarter drilling program of 5 gross (4.5 net) oil wells resulted in 4 gross (3.5 net) oil wells all of which are expected to commence production within the next 4 to 8 weeks. The fifth well in the program resulted in a dual zone oil and gas well. Grand has completed both the oil zone (Grand 100%) and a separate gas zone (Grand 75%). The well has been completed and production tested and will initially be produced as a gas well. The well should commence production in the next 4 to 6 weeks at an estimated initial rate of between 1 mmcf/d and 2 mmcf/d (0.75 mmcf/d and 1.5 mmcf/d net to Grand).

Grand estimates that second quarter production will average between 1,200 boe/d and 1,300 boe/d up from an average of 1,092 boe/d in the first quarter of 2005. It is expected that production will increase markedly in the third quarter with the tie-in of the successful West Central Alberta wells and additional production adds from East Central Alberta drilling. Current production is estimated to exceed 1,800 boe/d and Grand remains confident it will meet or exceed its revised annual average production forecast for 2005 of 1,750 boe/d, which should generate a minimum of $0.75 of cash flow per fully diluted share based upon the April 1, 2005 price forecast utilized by Grand's independent engineers, Gilbert Laustsen Jung Associates Ltd. and the current fully diluted shares outstanding.

Certain information set forth in this press release contains forward-looking statements. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, reliance should not be placed on forward-looking statements. Grand's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Grand will derive therefrom. Grand disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • Grand Petroleum Inc.
    Andrew Hogg
    President and CEO
    (403) 231-8403
    Grand Petroleum Inc.
    Brenda Galonski
    Vice President Finance and CFO
    (403) 231-8402