Mahalo Energy Ltd.

Mahalo Energy Ltd.

September 23, 2005 12:49 ET

Mahalo Energy Ltd. Announces Proposed Acquisition, Provides Corporate Update

CALGARY, ALBERTA--(CCNMatthews - Sept. 23, 2005) -

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Mahalo Energy Ltd. (TSX:CBM) ("Mahalo" or the "Corporation") is pleased to announce that it has entered into a letter of intent with a private US energy company to acquire interests in 50,000 gross acres (37,500 net) Caney/Woodford shale and coalbed methane (CBM) prone land in the Arkoma basin, Oklahoma, U.S.A. for total cash and equity consideration of USD $29,000,000. Current net production of the property is approximately 3.75 mmcf/d (625 boe/d) and the acquisition includes 150 miles of 2D seismic data, company owned water disposal wells, is supported by adequate infrastructure and has a significant number of drill ready CBM and Shale gas prospects along with multiple recompletion and tie in candidates. The Corporation expects to commence operations on the lands immediately after closing. An independent reserve evaluation will be completed prior to the proposed acquisition closing, which is expected to occur October 31, 2005. The cash portion of the acquisition and balance of the 2005 capital program will be funded through existing cash on hand and through the Corporation's credit facility.

GMP Securities Ltd. has been retained to act as financial advisor for the acquisition.

Corporate Update

Mahalo and its partner Vectra CBM LLC have been drilling in the State of Oklahoma since January of 2005 and currently are on their 33rd well of a 48 well CBM drilling program. To date the corporation continues to enjoy 100% success and has been consistently averaging less than a 10 day cycle time (spud to sales). The Corporation plans to complete its phase one 48 well program in early December and is on schedule with the drilling of 2 deep shale wells in Q4/05. The increase in technical staff both in our Canadian office and Tulsa office has allowed our drilling inventory to increase in both CBM and Caney/Woodford Shale locations and the Corporation is continuing to work diligently at its 2006 capital program.

In Canada, Mahalo recently purchased a 60% working interest in 8 sections of land in the highly prospective Mannville coal development areas in Corbett Creek and Judy Creek. This expanded land position in the greater Corbett Creek area further solidifies Mahalo's opportunities in this area.

Mahalo has commenced its 2005 horizontal drilling program in Canada, and is currently drilling a horizontal Mannville prospect located in the Corbett Creek field. A total of 5 horizontal Mannville drills are anticipated for 2005. Mahalo's Horseshoe Canyon drilling program will begin mid October. The program will be concentrated in the Wizard Lake and Bittern Lake areas of Central Alberta.

Mahalo is continuing to stay on track with its capital program and as of August 31, 2005 Mahalo has spent approximately $42 million of its $65 million capital budget.

Mahalo's is currently producing 5.3 mmcf /d (883 boe/d), and continues to strive to its targeted exit rate of 10.0 mmcfd, excluding the proposed acquisition.

Additional information about the Corporation and this transaction is available on SEDAR ( or the Corporation's website at

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

Forward Looking Statements

Certain information regarding the Corporation set forth in this document, including management's assessment of the Corporation's future plans and operations contains forward looking statements that involve substantial known and unknown risks and uncertainties. These forward looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's and management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, imperfection of reserve estimates, environmental risks, industry competition, availability of qualified personnel and management, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The Corporation'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 to occur or transpire from the forward looking statements will provide what, if any benefits to the Corporation.

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

Contact Information

  • Mahalo Energy Ltd.
    Duncan Chisholm
    Chief Executive Officer
    (403) 262-9623
    Mahalo Energy Ltd.
    Milton Porter
    Chief Financial Officer
    (403) 262-9623
    (403) 262-7049 (FAX)
    Mahalo Energy Ltd.
    201b, 218 8th Avenue S.W.
    Calgary, Alberta T2P 1B5