High Plains Energy Inc.

High Plains Energy Inc.
Powermax Energy Inc.

July 28, 2005 09:00 ET

High Plains Energy Inc. Agrees to make Offer to Acquire Powermax Energy Inc.

CALGARY, ALBERTA--(CCNMatthews - July 28, 2005) - High Plains Energy Inc. (TSX VENTURE:HYE) and Powermax Energy Inc. (TSX VENTURE:PWR) are pleased to jointly announce that they have entered into an agreement pursuant to which High Plains will make an offer (the "Offer") to acquire all of the outstanding common shares of Powermax ("Powermax Shares") on the basis of cash in the amount of $0.5067 and 0.333 of a share in the capital of High Plains. The Offer will be subject to certain conditions, including the deposit of not less than 66 2/3% of the outstanding Powermax Shares (on a fully diluted basis), receipt of all required regulatory approvals and other customary conditions and a limitation that the maximum aggregate amount of cash payable pursuant to the Offer be limited to $6.9 million. High Plains' obligation to make the Offer remains subject to not less than 66 2/3% of the Powermax Shares (on a fully diluted basis) being subject to lock-up agreements whereby the holders of those shares have agreed to tender their shares to the Offer.

The Offer has the unanimous support of the board of directors of both High Plains and Powermax. The board of directors of Powermax has concluded that the Offer is in the best interests of its shareholders and will recommend that Powermax Shareholders tender their Powermax Shares to the Offer. Holders of in excess of 50% of the outstanding Powermax Shares, including all directors and officers of Powermax, have entered into lock-up agreements with High Plains whereby they have agreed to tender their Powermax Shares to the Offer. Powermax management anticipates that, prior to the Offer being made, the number of Powermax Shares subject to lock-up agreements will have increased to over 67% of the outstanding Powermax Shares (on a fully diluted basis). Northern Securities Inc. has acted as financial advisor to Powermax and has provided the board of directors of Powermax with an opinion that, from a financial point of view, the consideration to be received pursuant to the Offer is fair.

High Plains has agreed to pay Powermax a non-completion fee in the amount of $500,000 in certain circumstances if the Offer is not completed. Powermax has agreed to terminate any discussions with other parties and has agreed not to solicit or initiate discussion or negotiation with any third party with respect to alternate transactions involving Powermax and has granted High Plains a right of first refusal to match any other proposals Powermax may receive.

Mr. Ben Anderson, President and COO of High Plains says, "This first acquisition is a significant next step in the reorganization and growth of High Plains. The Powermax reserves and production offer an obvious immediate improvement to High Plains value and cash flow. Most significantly, possibly, is the substantial incremental upside of the optimization, exploitation and drilling opportunities that exist at the Powermax properties. Its strong balance sheet, enhanced value and cash flow, and inventory of opportunities well positions the Company for rapid growth".

In echoing Mr Anderson's comments, Mr. Johannes Kingma, President of Powermax, added, "We have always been aware of the significant potential of the Powermax lands. This transaction will permit the impressive expertise of the High Plains technical and management team to be applied to those lands to fully unlock that potential."

The key benefits of the Powermax properties include:

- net production in excess of 400 boe/d;

- net proved and probable reserves of some 485 Mboe with a value of more than $7 million;

- more than 85% of Powermax reserves and production, including a working interest land base of 29 sections and central battery facility, are located at its operated property in the Galahad/Red Willow area of Alberta;

- significant opportunity for incremental reserves and production increase through the numerous optimization, exploitation and drilling opportunities that exist on the Powermax properties; and

- a large undeveloped land position.

After the completion of the Offer, High Plains will have:

- approximately 15.3 million shares outstanding prior to option agreements;

- production of more than 525 boe/d;

- proved and probable reserves in excess of 1.15 million barrels of oil equivalent with a value of $19.4 million;

- approximately 145,000 undeveloped acres in Alberta and Montana; and

- significant opportunity to quickly impact growth through the substantial upside potential of the combined entity.

It is expected that the Offer will be mailed to Powermax shareholders in the middle of August and will expire approximately 35 days thereafter.

High Plains and Powermax are both Calgary-based oil and natural gas exploration and development companies. High Plains' common shares trade on the TSX Venture Exchange under the symbol "HYE". Powermax's common shares trade on the TSX Venture Exchange under the symbol "PWR".

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 High Plains 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.


BOEs 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.

Statements in this press release may contain forward-looking information including expectations of future production, operating costs, commodity prices, administrative costs, commodity price risk management activity, acquisitions and dispositions, capital spending, access to credit facilities, income taxes, regulatory changes, and other components of cash flow and earnings. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the company. These risks include, but are not limited to, the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.

The reader is further cautioned that the preparation of financial statements in accordance with generally accepted accounting principles requires management to make certain judgements and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • High Plains Energy Inc.
    Ben Anderson
    President and Chief Operating Officer
    (403) 290-0078
    (403) 266-5959 (FAX)
    Email: info@highplainsenergy.ca
    Powermax Energy Inc.
    Johannes Kingma
    President and Chief Executive Officer
    (403) 237-5535
    (403) 266-3734 (FAX)