Grand Petroleum Inc.
TSX VENTURE : GPP

Grand Petroleum Inc.

June 07, 2005 16:59 ET

Grand Petroleum Inc. to Purchase Strategic Hazelwood Saskatchewan Assets

CALGARY, ALBERTA--(CCNMatthews - June 7, 2005) - Grand Petroleum Inc. (TSX VENTURE:GPP) ("Grand" or the "Corporation") is pleased to announce it has signed a definitive agreement to purchase approximately 200 net barrels of oil ("Bbl") per day in the Hazelwood area of southeast Saskatchewan. The gross purchase price is $8.5 million prior to adjustments and includes a 50% interest in the associated facility, approximately 6 square miles of 3D seismic and 6,808 gross (3,404 net) acres of undeveloped land (the "Acquisition"). The purchase has an effective date of April 1, 2005 and is expected to close on or before July 5, 2005.

The 13 producing wells to be acquired in the Acquisition averaged approximately 400 Bbls/d (200 Bbls/d net) in April 2005 with expected operating costs of approximately $5.50/Bbl, average royalties of approximately 14% and an average oil density of approximately 310 API. Reserve estimates by Grand's independent engineers, Gilbert Laustsen and Jung Associates Ltd. ("GLJ"), in a report dated June 6 and effective June 1, 2005 are working interest Proven reserves of 378 MBbls and Proven plus Probable reserves of 650 MBbls.

The Hazelwood pool lies within Grand's new southeast Saskatchewan exploration area and provides a strategic facility that can be utilized to process any production discovered in the area as part of Grand's planned 2005 Hazelwood exploration program. Additional drilling potential exists within the acquisition lands and Grand with its partner intend to drill 4 to 6 gross (2 to 3 net) wells this year on the acquired lands. This will increase Grand's southeast Saskatchewan drilling program to a total of 16 to 18 gross (8 to 9 net) wells.

Grand intends to utilize its existing credit facilities to complete the Acquisition. Grand now estimates after giving effect to the acquisition the Corporation will have approximately $17 million in net debt, representing approximately 0.8 times forecast annualized Q3, 2005 cash flow and will allow the remainder of the planned 2005 capital expenditure budget to be funded through cash flow and bank lines.

Grand's President and CEO Andrew Hogg commented that, "We view this Acquisition as an important base in our southeastern Saskatchewan focus area as it provides a strategic facility near existing exploration opportunities. The Acquisition and the planned 2005 exploration program exposes Grand to a well planned, long life, lower cost, high netback oil exploration and development program."

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.

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