Nexstar Energy Ltd.

Nexstar Energy Ltd.

January 23, 2008 12:43 ET

Nexstar Energy Provides Corporate Update

CALGARY, ALBERTA--(Marketwire - Jan. 23, 2008) -


Nexstar Energy Ltd. ("Nexstar Energy" or the "Company") (TSX VENTURE:NXE.A) (TSX VENTURE:NXE.B) provides the following corporate update:

The Company's existing $6.0 million operating line of credit has been renewed by its Bank. The loan is on a demand basis and subject to periodic reviews. The next review is scheduled for May 31, 2008.

With respect to the Company's $5.0 million (face value) of Asset Backed Commercial Paper ("ABCP") issued by Apsley Trust, which was discussed in previous news releases, the Pan-Canadian Investors Committee ("Investors Committee") has announced an agreement in principal, regarding a comprehensive restructuring of the ABCP issued by 20 of the trusts covered by the Montreal Accord. The Investors Committee reported the following guidelines under the proposed restructuring: (i) the maturity of the ABCP will be extended to provide for a maturity similar to that of the underlying assets; (ii) certain series of ABCP, which are supported in whole or in part by underlying synthetic assets, will be pooled; (iii) mitigate the margin call obligations of the existing conduits with margin call risk and create a structure to address margin calls if they occur; and (iv) support the liquidity needs of those ABCP holders requiring it. The proposed pooling would result in floating rate notes ("Pooled Notes") being issued to noteholders in exchange for their existing ABCP, with maturities of the Pooled Notes based upon the maturities of the underlying assets. The exact pooling valuation for each of the trusts has not yet been announced by the Investor Committee, however, 37.5% of the Apsley Trust assets are excluded from the restructuring due to uncertainties as to Apsley Trust's credit quality and heightened volatility. The Bank has not indicated that the Investors Committee exclusion of this portion of the Apsley Trust assets has had any impact on the authorized limit of the operating line granted by the Bank to Nexstar Energy, which was recently confirmed at $6.0 million. The Investor Committee anticipates that the restructuring will be completed in early March, 2008.

As at December 31, 2007, the Company estimates it had incurred approximately $9.5 million of the required $12.0 million of flow-through expenditure obligations, resulting in an anticipated shortfall of approximately $2.5 million for the 2007 year. As a result of this event, the Company will recognize a contingent liability for any potential expenses relating to the shortfall. The amount of the contingent liability is not known at this time, however, it is potentially significant to the Company.

As a result of the forgoing, Nexstar Energy is currently not generating sufficient cash-flow in the short term and the long term to meet the Company's planned growth and development activities. Nexstar Energy will be relying on its operating line of credit to fund current operations and commitments. As at January 22, 2008, the amount outstanding under the operating line of credit was $4.2 million. Additional equity and continued support from its shareholders and its Bank will be required to fund the future growth of the Company. There remains significant uncertainty in the ABCP situation which may impact the Company's ability to raise additional equity.

Operationally, Nexstar Energy currently has seven (3.15 net) wells at various stages of completion. The Company operates one (0.5 net) well and six (2.65 net) wells are non-operated. The Company's operated well is currently being completed in the primary zone of interest. The completion timing of the non-operated wells is not within the Company's control, however, all are anticipated to be completed in Q1 2008. On a risked basis, these wells are anticipated to add approximately 100 boepd. The Company's current average production is approximately 80 boepd, which reflects normal decline rates.

Nexstar Energy is an emerging junior oil and gas company that is focused on drilling multi-zone crude oil and natural gas prospects in west central Alberta, complemented by strategic acquisitions.

This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances 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, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Boe's 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.

9,930,000 Class A Shares

1,080,000 Class B Shares

ADVISORY: The TSX Venture Exchange has neither approved nor disapproved the contents of this news release. The TSXV does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Nexstar Energy Ltd.
    Peter A. Carwardine
    President and CEO
    (403) 263-6133 ext. 201
    Nexstar Energy Ltd.
    Brian J. Spilchen
    VP Finance and CFO
    (403) 263-6133 ext. 202
    Nexstar Energy Ltd.
    603 - 7 Avenue SW, Suite 525
    Calgary, Alberta T2P 2T5
    (403) 263-6133
    (403) 263-3629 (FAX)