Masters Energy Inc.
TSX : MSY

Masters Energy Inc.

June 07, 2005 09:00 ET

Masters Energy Inc. Announces Closing of Peace River Arch Acquisition and Provides Operations Update

CALGARY, ALBERTA--(CCNMatthews - June 7, 2005) - Masters Energy Inc. (TSX:MSY) ("Masters" or "the Company") has closed its previously announced purchase of oil and natural gas properties in the Northern Peace River Arch area (the "PRA Properties") for $7.6 million after closing adjustments. The acquired properties are contiguous to existing land interests held by Masters thereby establishing a focused core area for future exploration and development.

The PRA Properties, located in northwest Alberta, currently produce approximately150 boe per day and are weighted 98 percent towards natural gas. An independent reserves evaluator report prepared for the vendor, effective January 1, 2005, assigned proved reserves of 0.3 million boe and proved plus probable reserves of 0.5 million boe. The reserve life index based on current production is approximately seven years on a proved and probable basis. The highlights of the acquisition include the following:

- Current net production of approximately 150 boe per day, 190 boe per day completed and awaiting tie-in and a further 120 boe per day tested and behind pipe.

- 38,000 (9,500 net) undeveloped acres of prospective lands, the majority of which is accessible year round.

- Ownership in one gas plant, five compressor stations and associated infrastructure.

- A licensed copy of a large seismic data base associated with the acquired properties.

- Numerous opportunities identified for tie-in, reactivation and drilling.

For the remainder of 2005 Masters plans to drill five to seven wells in the area, targeting multi-zone natural gas reserves.

Operations Update

To date for 2005 Masters has drilled a total of 11 wells (8.8 net), 10 of which were operated by the Company. The drilling program resulted in three (3.0 net) oil wells, seven (4.8 net) natural gas discoveries and one (1.0 net) dry hole for an overall success rate of 91 percent. Currently six wells are on production and the remaining four wells are awaiting completion and tie-in and are anticipated to be producing by the third quarter.

Southern Alberta

In Southern Alberta eight (7.5 net) wells were drilled resulting in three (3.0 net) oil wells and two (1.5 net) natural gas wells at Little Bow and two (2.0 net) natural gas wells at Hector. The wells at Hector are currently being tested and completed and are anticipated to be tied-in during the third quarter.

During the remainder of 2005 the Company will be active in the Little Bow area. Expansion of the water flood facilities is underway and further infill drilling targeting the existing glauconite oil pool is being planned.

In Southern Alberta Masters intends to drill nine wells prior to year-end at Little Bow, Grand Forks and two new exploration areas.

North/Central Alberta

In North/Central Alberta Masters has drilled three (1.3 net) wells resulting in two (1.0 net) natural gas wells at Tangent and one (0.3 net) natural gas well at Roche. The drilled Tangent wells will be tied into the facilities acquired with the PRA Properties. The Tangent area is prospective in several geological formations and Masters anticipates drilling 5 - 7 wells on internally generated exploration prospects. A number of exploitation and tie-in projects have been recognized on the acquired PRA Properties and work will be carried out on these opportunities during the remainder of the year.

Outlook

Masters is currently producing in excess of 1,400 boe per day (53% oil and NGL's) and has additional production capability behind pipe that is expected to be onstream prior to year-end. Based on the exploitation opportunities to be completed and further drilling Masters forecasts average production of 1,500 boe per day and a forecasted exit rate of 1,900 boe per day for 2005. The majority of the new production for the remainder of 2005 is anticipated to come from exploitation projects including reactivations, recompletion of new productive zones in existing wells, infill drilling and water flood optimization.

Masters currently has a bank facility of $16 million with approximately $13 million drawn after the PRA Property acquisition. Estimated debt to current annualized cash flow is approximately 1.1 times. Based on the available bank facility and expected cash flow from operations, Masters anticipates an exploration and development capital program of $12 million for 2005.

Masters Energy Inc. is an Alberta-based corporation engaged in the acquisition, exploration and development of petroleum and natural gas reserves in western Canada. Masters' common shares are listed on the Toronto Stock Exchange under the trading symbol "MSY".

ADVISORY

Certain information regarding the Company, including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, impression of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources: as a consequence, actual results may differ materially from those anticipated. The Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contemplated by the forward-looking statements.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • Masters Energy Inc.
    Geoff Merritt
    President and CEO
    (403) 290-1785
    or
    Masters Energy Inc.
    Randall Boyd
    Chief Financial Officer
    (403) 290-1785
    Website: http://www.mastersenergy.com