NuLoch Resources Inc.
TSX VENTURE : NLR.A
TSX VENTURE : NLR.B

NuLoch Resources Inc.

August 23, 2005 18:00 ET

NuLoch Announces Second Quarter 2005 Results

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

NuLoch Resources Inc. (TSX VENTURE:NLR.A) (TSX VENTURE:NLR.B) was incorporated on May 13, 2005 and commenced operations on July 1, 2005.

Message to Shareholders

NuLoch Resources Inc. is a new oil and natural gas exploration company based in Calgary. It is managed by the same team that successfully grew TriLoch Resources Inc. to over 1,500 boed in less than three years. Today, NuLoch's production is limited to a single natural gas well producing at low rates. We plan to grow the business with a focus on drilling. More than 40 wells are proposed before the end of 2005.

Effective July 1, 2005 NuLoch commenced operations. Through a plan of arrangement with Enerplus Resources Fund, TriLoch spun out its administrative assets, a single natural gas well and drilling opportunities to NuLoch. Former TriLoch Class A shareholders are now NuLoch shareholders. We are also pleased to welcome our new shareholders that participated in the $7.3 million private placement of Class A and Class B shares issued on July 7, 2005.

We know that many of you participated in the start-up of TriLoch three years ago and our business plan will incorporate strategies that were proven there. Our industry is in a very competitive phase fueled by oil and natural gas prices that have exceeded $US60.00 per barrel and $9.00 per GJ at AECO, respectively. Our preferred strategy is growth through the drill bit. Access to land is a key, yet challenging, factor in our success. We intend to vigourously pursue farm-in opportunities promoting our exploration skills in a win - win scenario for the farmee and the farmor. The Company has plans to establish a stable production base of shallow natural gas through the drilling of approximately 40 net wells at Enchant early in the fourth quarter. NuLoch expects to balance this low risk program with higher impact oil and natural gas exploration.

Moving quickly, the Company drilled its first exploratory location in July which has been completed and is awaiting tie-in. This 100% owned well at Shouldice Alberta encountered natural gas and associated oil and NGL within the Basal Quartz formation at approximately 1,700 metres. The well averaged 1.4 mmcfd of natural gas on a 48 hour test and production is expected to commence in September.

NuLoch is well financed and has already embarked on its exploration and development program with capital investments of $11 million planned before the end of 2005.

Management's Discussion and Analysis

NuLoch Resources Inc. ("NuLoch" or the "Company") was incorporated under the laws of the Province of Alberta on May 13, 2005. No operations were undertaken in the period from incorporation until the end of the second quarter on June 30, 2005 and, consequently, no discussion or analysis can be presented with respect to that period.

The balance sheet as at June 30, 2005 and extracts thereof provided within this MD&A, were prepared in Canadian dollars using Canadian generally accepted accounting principles (GAAP). Certain other information with respect to the Company is available on SEDAR at www.sedar.com.

Use of Barrels of Oil Equivalent (boe)

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf of natural gas to 1 bbl of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

Non-GAAP Measurement - Funds Flow

Funds flow from operations, which is determined before changes in non-cash working capital, is used by the Company as a key measure of performance. Funds flow from operations does not have a standardized meaning prescribed by Canadian generally accepted accounting principles and therefore may not be comparable with the calculation of similar measures for other companies. Funds flow from operations as presented is not intended to represent operating profits for the period nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Funds flow from operations per share is calculated using the same share bases which are used in the determination of earnings per share.

Critical Accounting Estimates

The amounts presented in the Company's financial statements depend to varying degrees on estimates made by management. An estimate is considered a critical accounting estimate if it requires management to make assumptions about matters that are highly uncertain, and if different estimates that could have been used would have a material impact.

Forward-Looking Statements

Certain statements in this document or incorporated herein by reference may constitute "forward-looking statements". These forward-looking statements can generally be identified as such because of the context of the statements including words such as the Company "believes", "anticipates", "expects" or words of a similar nature. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; successful negotiations with bankers and other third parties; the success of exploration and development activities; production levels; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); site restoration costs; and other circumstances affecting revenues and expenses.

Plan of Arrangement

Subsequent to the period, effective July 1, 2005 a plan of arrangement invloving Enerplus Resources Fund, TriLoch Resources Inc. and NuLoch became effective. Pursuant to the Plan, Enerplus acquired TriLoch and virtually all of its assets in exchange for units of Enerplus. TriLoch received shares in NuLoch that were distributed to Class A shareholders of TriLoch and NuLoch received certain properties and opportunities previously held by Triloch.

Capital Expenditures

As part of the arrangement the Company agreed to acquire certain administrative assets and Canadian petroleum and natural gas properties from TriLoch and associated environmental liabilities in exchange for the issuance of 2,012,695 Class A shares at an ascribed value of approximately $0.21. The assets transferred will be recorded at the historic amount in TriLoch following the continuity of interest method. The arrangement was completed in July 2005.

The oil and gas properties acquired through the arrangement are located at Shouldice Alberta and consist of one gas well (0.38 net) and a 50% interest in 160 acres of undeveloped lands. Pursuant to a farm-in agreement, a 1,700 metre test well (1.0 net) was drilled early in the third quarter at a cost of approximately $800,000.

Late in the third quarter, and subject to regulatory approvals and partner participation including the waiver of rights-of-first-refusal, the Company has plans to commence a 42 well (39.6 net) shallow gas development program in the Second White Specks Formation ("SWS") at Enchant Alberta. The SWS is characterized by marine-sand reservoirs with low-rate, long-life deliverability profiles. If fully developed, up to 75 locations (62 net) may be drilled across the Company's lands at Enchant.

Revenue

The Company's production operations did not commence until subsequent to the end of the second quarter of 2005 and consists of the single natural gas well (0.38 net) at Shouldice Alberta. Production rates are low and are expected to contribute only nominal amounts of cash flow.

The Company anticipates continuing strength in the markets for oil and natural gas through the balance of 2005 and into next year. Natural gas is expected to be the primary focus of the Company's development program in 2005. Futures contracts for delivery in October 2005 through March 2006 have recently been trading at approximately $9.00 per GJ at AECO. Contracts for future delivery of oil have been trading at approximately $US60.00 WTI for the same period.

Royalties

Production from Shouldice is encumbered by a 16% freehold lessor royalty and a 7.5% overriding royalty. The Second White Specks program at Enchant will be drilled primarily on Crown land with royalty rates expected to fall within the 5% to 10% range and eligible for ARTC refund that is currently at 25% of the royalties payable. In addition, the SWS is being drilled pursuant to farm-ins which provide for the payment of 15% overriding royalties to the farmors.

Operating

Operating costs are difficult to forecast as can vary significantly depending on such factors as production rates, reservoir quality, water content and available infrastructure. The Company's target is to maintain average rates per boe below $10.00.

Interest

The Company has excess funds on hand that are invested in short term deposits that earn modest amounts of interest. A credit facility has not yet been established with the Company's bank.

General and Administrative (G&A)

The Company has seven employees at it head office in Calgary and will use external consultants on an as-needed basis to assist with the regular operation of the business. First year annualized gross G&A is budgeted at $1.3 million of which as much as 50% is expected to be re-allocated to the capital projects to which they relate.

Income Taxes

The Company does not expect to incur any income or capital taxes in its first year of operations. There is an obligation to shareholders to renounce $7,250,000 in eligible Canadian Exploration Expense with respect to 2005. Some of the expenditures will be incurred in 2005. To the extent that the balance of the expenditures are made in 2006, there will be a tax obligation equivalent to interest on the amount unspent at the end of each month after January 2006.

Funds Flow and Net Earnings

Meaningful estimates of funds flow and net earnings for the balance of 2005 cannot be made until results from the drilling program are known.

Liquidity and Capital Resources

On July 6, 2005 the management of NuLoch subscribed for 2,800,000 Class A common shares of the Company at $0.25 per share pursuant to a private placement.

On July 7, 2005 the Company issued 7,250 units at $1,000 per unit on a flow-through basis. Each unit consisted of 400 Class A flow-through shares at $0.25 each and 90 Class B flow-through shares at $10.00 each. The Company is committed to incur and renounce qualifying Canadian Exploration Expense in the amount of $7,250,000 prior to December 31, 2006.

The capital program has been established at $11,000,000 for the last half of 2005. A shortfall in available funds may be satisfied with bank borrowings or further equity issues if appropriate. If these or other sources of funding are insufficient, then prudent reductions in the capital program may be warranted.

Outstanding Share Data

The Class A common shares of the Company trade on the TSX Venture Exchange under the symbol NLR.A. Of the 7,712,695 Class A shares outstanding, 5,700,000 were issued in early July 2005 and are subject to a four month hold ending in early November 2005 pursuant to prospectus-exemption securities regulations. The Class B common shares of the Company have not commenced trading due to the same four month hold period. A total of 652,500 Class B common shares are outstanding.

The Company established a stock option plan to allow grants of options to acquire Class A common shares to officers, directors, employees and consultants. On July 7, 2005 a total of 822,500 options were granted with an exercise price of $0.35 each.



NULOCH RESOURCES INC.

Balance Sheet
As at June 30,
2005
(unaudited)
-------------
Assets

Current assets:
Cash and cash equivalents $ 1
=============

Shareholders' Equity

Share capital (note 2) $ 1
=============

Subsequent events (note 3)


See accompanying notes.


Notes to the Balance Sheet

As at June 30, 2005
(unaudited)


1. Nature of business

NuLoch Resources Inc. (the "Company") was incorporated under the laws of the Province of Alberta on May 13, 2005. The Company has not carried on active business since incorporation.

2. Share capital

(a) Authorized

An unlimited number of Class A, Class B and Class C shares have been authorized.

Class B shares are exchangeable for Class A shares. The number of Class A shares obtained upon conversion of each Class B share will be equal to $10.00 divided by the greater of $1.00 and the 30-day average closing price for Class A common shares immediately prior to the effective date of conversion. Conversion may be effected by the Corporation in 2009 or 2010 or, if not converted before 2011, then at the option of the Class B shareholder in January 2011 or otherwise automatically on February 1, 2011.



(b) Issued and outstanding

Common
Shares Amount
------------- -------------

Class A common shares
Issued on incorporation 1 $ 1

------------- -------------
Balance, June 30, 2005 1 $ 1
============= =============


3. Subsequent events

As part of an arrangement agreement effective July 1, 2005 involving Enerplus Resources Fund, Enermark Inc., TriLoch Resources Inc. ("Triloch") and the Company (the "Arrangement"), the Company has agreed to acquire certain administrative assets and Canadian petroleum and natural gas properties from TriLoch and associated environmental liabilities in exchange for 2,012,695 Class A shares at an ascribed value of approximately $0.21 each to Class A shareholders of TriLoch. The assets transferred will be recorded at the historic amount in TriLoch following the continuity of interest method with an effective date of July 1, 2005.

On July 6, 2005 the management of NuLoch subscribed for 2,800,000 Class A common shares of the Company at $0.25 per share pursuant to a private placement for gross proceeds of $700,000.

On July 7, 2005 the Company issued 7,250 units at $1,000 per unit on a flow-through basis. Each unit consisted of 400 Class A flow-through shares at $0.25 each and 90 Class B flow-through shares at $10.00 each for gross proceeds of $7,250,000.

The Company established a stock option plan to allow grants of options to acquire Class A common shares to officers, directors, employees and consultants. On July 7, 2005 a total of 822,500 options were granted with an exercise price of $0.35 each.

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

Contact Information

  • NuLoch Resources Inc.
    James N. McIndoe
    President and CEO
    (403) 920-0455
    (430) 920-0457 (FAX)
    Email: nuloch@nuloch.ca
    or
    NuLoch Resources Inc.
    2200, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8