NAL Oil & Gas Trust
TSX : NAE.UN

NAL Oil & Gas Trust
Alberta Clipper Energy Inc.
TSX : ACN

Alberta Clipper Energy Inc.

March 23, 2009 08:00 ET

NAL Oil & Gas Trust Enters Into Arrangement Agreement to Acquire Alberta Clipper Energy Inc.

CALGARY, ALBERTA--(Marketwire - March 23, 2009) - NAL Oil & Gas Trust (the "Trust" or "NAL") (TSX:NAE.UN) and Alberta Clipper Energy Inc. ("Alberta Clipper") (TSX:ACN) jointly announce that they have entered into an arrangement agreement (the "Arrangement Agreement") pursuant to which NAL will acquire all of the issued and outstanding common shares of Alberta Clipper (the "Transaction") by way of a Plan of Arrangement under the Business Corporations Act (Alberta) (the "Arrangement"). The total consideration for the transaction is $115 million which will be paid through the issuance of approximately 5.7 million trust units of the Trust representing $37 million at a deemed price of $6.45 per trust unit and the assumption of an estimated $78 million in Alberta Clipper net debt at closing Based on an exchange ratio of 0.078875 NAL trust units for each Alberta Clipper share, the offer represents a price of $0.51 per common share and a 34% premium over the preceding 20-day volume weighted average share price. This transaction is expected to close on or about June 1, 2009.

Concurrent with the execution of the Arrangement Agreement, the Trust has entered into a letter agreement with its strategic partner, The Manufacturers Life Insurance Company ("Manulife" or "MLI"), pursuant to which Manulife has agreed, subject to the satisfaction of certain conditions, including the preparation of definitive documentation, to purchase a 50% working interest in all of the assets of Alberta Clipper for a cash purchase price of approximately $57.5 million adjusted to approximately $52.5 million to reflect the Trust's disproportionate interest in the tax pools of Alberta Clipper. It is expected that the closing of the sale of assets to Manulife will occur immediately following completion of the acquisition of Alberta Clipper by the Trust. All of the cash proceeds received from Manulife will be used to pay down debt assumed by the Trust in this transaction. The letter agreement between the Trust and Manulife contains provisions whereby Manulife will indemnify the Trust for Manulife's 50% share of certain potential corporate liabilities of Alberta Clipper.

A presentation containing corporate maps and transaction highlights is available on NAL's website at: www.nal.ca



ALBERTA CLIPPER OVERVIEW

Alberta Clipper - 100% Trust Interest - 50%
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Production (boe/d) - March 2009 3,100 1,550

Production Weighting (%)

Oil / NGL 35 35

Natural Gas 65 65

Reserves (MMboe)

Proved 5.6 2.8

Probable 3.0 1.5
--------------------------------------------
Proved plus Probable 8.6 4.3

Undeveloped Land ('000) 220 110

Tax Pools ($MM) 268 216


All further references to acquisition values and metrics within this press release are represented as the Trust's 50% net interest, after giving effect to the asset sale to Manulife.

KEY ACQUISITION BENEFITS

- Strategic fit within NAL's core areas at Sylvan Lake and west central Alberta and the addition of new gas focused assets in northeast British Columbia at Trutch and Beg

- Adds current production of 1,550 boe/d - a 7% increase to NAL's current production

- 4.3 MMboe of proved plus probable reserves - a 6% increase over NAL's year end 2008 reserves

- Strengthens NAL's relatively low risk drilling portfolio

- Adds 110,000 of net undeveloped acres - a 35% increase over NAL's year end 2008 undeveloped land base

- Adds approximately $216 million of tax pools

- Proximity of acquired assets to existing NAL infrastructure present operational and G&A synergies and facilitate ease of integration into NAL's asset portfolio

- Partnering with Manulife allows NAL to maintain balance sheet strength and financial flexibility to complete future transactions.

- The Transaction is accretive to production, reserves and net asset value on a per unit basis

NAL's President and CEO, Mr. Andrew Wiswell commented: "The assets of Alberta Clipper provide a strong strategic fit with NAL's asset base. The addition of prospective acreage and production in existing core areas is consistent with NAL's strategic direction to add assets with ongoing upside potential as we move toward converting to a yield-oriented corporation by 2011. Further, we believe asset purchase and consolidation opportunities will be available in this market. NAL will continue to evaluate these opportunities and remains well positioned to execute additional transactions".

Production in NAL's Sylvan Lake region will be increased by approximately 900 boe/d. Alberta Clipper's assets and infrastructure will be easily integrated into NAL's existing operations at Sylvan Lake and provide additional potential locations in the Pekisko, Leduc and Ostracod horizons.

In west central Alberta, NAL will add 350 boe/d of production in the Kaybob, Bigstone and Kakwa areas with additional gas prospects in the Gething, Cadomin and Montney zones.

In northeast B.C., the Beg and Trutch areas will add 300 boe/d and offer long-term gas opportunities with significant upside potential in the Halfway, Montney and Debolt horizons. During 2008, Alberta Clipper made considerable investment in facilities and infrastructure to accommodate future production in the Trutch area. This investment has paved the way for a significant gas development program with better capital efficiency and potential by using common pads for horizontal wells with multi-stage fracs in the Halfway. The Trust expects to proceed with plans for a six well development program that will be ready for execution in Q1 2010 should gas prices move above C$6.00 per Mcf.

RESERVES

The Trust's evaluation of Alberta Clipper's reserves effective December 31, 2008 recognizes 8.6 MMboe (4.3 MMboe net to the Trust) of proved plus probable reserves, 65% of which are classified as proved. The acquired reserves are weighted 66% toward natural gas.

Going forward, NAL has identified opportunities for reserves additions through incremental drilling and increased recovery factors.

Alberta Clipper expects to release its 2008 year-end reserves evaluation, financial and operating results on March 25, 2009. Alberta Clipper has retained GLJ Petroleum Consultants Ltd. ("GLJ") to evaluate its reserves effective December 31, 2008, which may not be consistent with the reseves evaluation as recognized by NAL.

RESERVE LIFE INDEX (RLI)

NAL's RLI remains essentially flat due to the relative size of the transaction.



NAL Alberta Clipper NAL Pro forma

Proved RLI (years) 6.3 5.0 6.1
Proved and Probable RLI (years) 8.8 7.7 8.6


UNDEVELOPED LAND

The Transaction will add 110,000 net undeveloped acres to the Trust, an increase of 35% over NAL's 2008 year end land position.



NAL Alberta Clipper NAL Pro forma

Net Undeveloped Acreage (acres) 310,852 110,000 420,852


ACQUISITION METRICS

The Transaction is accretive to production, reserves and net asset value on a per trust unit basis in both 2009 and 2010, while the impact on NAL's cash flow and balance sheet remains neutral to positive due to the relative size of the acquisition. After adjusting for undeveloped land valued at $10 million, the acquisition metrics are as follows:

Trailing 12 Month Cash Flow Multiple:

- 2.6 times

Production:

- $33,500 per boe/d

Reserves:

- $12.09 per proved plus probable boe

- $18.57 per proved boe

REVISED 2009 GUIDANCE

Based on the expected mid-year completion of the Transaction, NAL is revising its full year 2009 average daily production guidance by approximately 700 boe/d, while maintaining its current capital expenditure program of $95 million for 2009.

NAL continues to implement its commodity risk management strategy, using a combination of swaps and collars, all with Canadian chartered banks that are in the Trust's banking syndicate. The Trust intends to hedge a portion of the net production volumes of Alberta Clipper into 2010.

The Trust's hedge portfolio has a mark to market value of approximately $80 million as of March 20, 2009.

NAL will continue to have a relatively strong balance sheet and unutilized credit capacity of approximately $140 million following the close of the Transaction.

NAL's upwardly revised guidance reflecting the acquisition for 2009 is summarized as follows:



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Average annual production (boe/d) 22,700 - 23,700
Capital expenditures ($MM) 95
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BOARD RECOMMENDATIONS

The Board of Directors of NAL Energy Inc. ("NAL Energy") has unanimously approved the Transaction. The Board of Directors of Alberta Clipper has unanimously approved the Transaction and based, in part, on the fairness opinion from Alberta Clipper's financial advisor discussed below, determined that the Transaction is in the best interests of Alberta Clipper and the holders of its common shares and is fair from a financial point of view to such holders. Therefore, the Board has resolved to recommend that such holders vote their shares in favour of the Transaction. The directors, officers and significant shareholders of Alberta Clipper, collectively holding approximately 21% of the outstanding common shares of Alberta Clipper, have entered or agreed to enter into agreements to vote their securities in favor of the Arrangement. The Arrangement Agreement provides for a non-completion fee of $3.6 million to be payable by Alberta Clipper to NAL in certain circumstances.

Closing of the Transaction is expected to occur on or about June 1, 2009, subject to the satisfaction of certain conditions including approval of the Transaction by Alberta Clipper's shareholders and the Court of Queen's Bench of Alberta. A special meeting to vote on the proposed Arrangement Agreement by Alberta Clipper shareholders is to be held in May 2009. Upon successful execution of the arrangement agreement, shareholders of Alberta Clipper will be eligible to receive the NAL distribution for June 2009 that is expected to be payable on July 15, 2009.

FINANCIAL ADVISORS

BMO Capital Markets acted as exclusive financial advisor to NAL with respect to the Transaction.

GMP Securities L.P. acted as financial advisor to Alberta Clipper in respect of the Transaction and has advised the Board of Directors of Alberta Clipper that it is of the opinion, as of the date hereof, that the consideration to be received by Alberta Clipper shareholders pursuant to the Arrangement is fair, from a financial point of view, to Alberta Clipper shareholders.

FirstEnergy Capital Corp. acted as strategic advisor to Alberta Clipper.

FORWARD LOOKING STATEMENTS

This press release contains statements that constitute "forward-looking information" or "forward-looking statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding: the Transaction, the completion of the Transaction and the outcome of the Transaction, including regarding transaction values and accretion; the follow-on sale of assets to Manulife and the completion and outcome of such sale; estimates of reserves and reserve life index; plans for drilling; estimates of production; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.

Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this press release. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by NAL and described in the forward-looking information contained in this press release. Undue reliance should not be placed on forward-looking information. The material risk factors include, but are not limited to: failure to receive approval of the Transaction from Alberta Clipper shareholders, the Court of Queen's Bench of Alberta or applicable regulatory authorities, failure to realize anticipated synergies, failure to complete the follow-on sale of assets to Manulife, the uncertainty of estimates and projections relating to production and reserves; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; changes in tax laws; changes in royalty rates; and the results of NAL's risk mitigation strategies; and NAL's ability to implement its business strategy. Readers are cautioned that the foregoing list of risk factors is not exhaustive.

Forward-looking information is based on the estimates and opinions of NAL's management at the time the information is released.

BOE CONVERSION

Throughout this press release, the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.

ABOUT NAL

NAL Oil & Gas Trust provides investors with a yield-oriented opportunity to participate in the Canadian Upstream Conventional Oil and Gas Industry. The Trust generates monthly cash distributions for its Unitholders by pursuing a strategy of acquiring, developing, producing and selling crude oil, natural gas and natural gas liquids from pools in southeastern Saskatchewan, central Alberta, northeastern British Columbia and Lake Erie, Ontario. Trust units trade on the Toronto Stock Exchange under the symbol "NAE.UN".

ABOUT ALBERTA CLIPPER

Alberta Clipper Energy Inc. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western Canada. The Company's shares trade on the Toronto Stock Exchange under the symbol "ACN".

Contact Information

  • NAL Oil & Gas Trust
    Mr. Andrew Wiswell
    President & CEO
    (403) 294-3636
    or
    NAL Oil & Gas Trust
    Clayton Paradis
    Manager, Investor Relations
    (403) 294-3620 or Toll Free: 1-888-223-8792
    (403) 515-3407 (FAX)
    Email: investor.relations@nal.ca
    Website: www.nal.ca
    or
    Alberta Clipper Energy Inc.
    Mr. Kel Johnston
    President & CEO
    (403) 440-3499
    Website: www.albertaclipperenergy.com