Paramount Resources Ltd.

Paramount Resources Ltd.

March 03, 2005 08:00 ET

Paramount Resources Ltd.: Meeting Called For Approval Of Proposed Trust Spinout Transaction


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: PARAMOUNT RESOURCES LTD.

TSX SYMBOL: POU

MARCH 3, 2005 - 08:00 ET

Paramount Resources Ltd.: Meeting Called For Approval
Of Proposed Trust Spinout Transaction

CALGARY, ALBERTA--(CCNMatthews - March 3, 2005) - Paramount Resources
Ltd. ("Paramount")(TSX:POU) announces that the special meeting of
securityholders to consider its previously announced trust spinout
transaction (the "Trust Spinout") is scheduled to be held on Monday,
March 28, 2005. The Trust Spinout is to be effected through an
arrangement under the Business Corporations Act (Alberta). The
Information Circular in respect of the meeting to approve the
arrangement is in the process of being mailed to securityholders, has
been filed on SEDAR (www.sedar.com) and is available on Paramount's
website (www.paramountres.com). The transaction is subject to approval
by the shareholders and optionholders of Paramount, the Court of Queen's
Bench of Alberta and regulatory authorities.

At the meeting, holders of Paramount common shares and options will be
asked to approve the Trust Spinout which would result in Paramount
shareholders receiving units of a new energy trust, to be known as
Trilogy Energy Trust ("Trilogy"). Upon completion of the Trust Spinout,
Paramount shareholders will own 100% of post-reorganization Paramount
and 81% of the outstanding units of Trilogy. Paramount will own the
remaining 19% of the outstanding units of Trilogy. Shareholders will
receive one trust unit for each existing common share. Based on the
number of Paramount shares outstanding on February 25, 2005, there are
expected to be approximately 63.9 million common shares of Paramount and
78.9 million units of Trilogy outstanding upon completion of the Trust
Spinout.

Trilogy will indirectly own certain of Paramount's existing assets with
current production of approximately 25,000 Boe/d (80% natural gas).
These assets, in the Kaybob and Marten Creek areas of Alberta, are
primarily low-risk, high working interest, lower decline properties that
are geographically concentrated with numerous infill drilling
opportunities and good access to infrastructure and processing
facilities to be operated and controlled by Trilogy. The balance of
Paramount's assets, consisting of its predominantly growth-oriented
assets, will remain with Paramount. Current production from these assets
is approximately 20,000 Boe/d (75% natural gas). Through Paramount,
shareholders will participate in the potential upside of its remaining
predominantly growth-oriented assets. Through Trilogy, unitholders will
receive regular distributions of cash derived from the cash flow
produced by Trilogy's low-risk development assets. Due to Trilogy's
extensive development drilling portfolio, it is anticipated that Trilogy
will retain approximately 35% of its cash flow for capital expenditures
with the remaining 65% of its cash flow being distributed to unitholders
in monthly distributions. This extensive development drilling portfolio
is expected to make Trilogy less reliant on the competitive acquisition
market for developed assets to maintain and grow distributions.

Paramount believes that the Trust Spinout will enhance value for
shareholders by dividing Paramount's assets into two specific groups,
consisting of (i) the higher free cash flow Kaybob and Marten Creek
assets which will be owned through Trilogy and (ii) the predominantly
growth oriented assets that will continue to be owned by Paramount. The
Trust Spinout will allow shareholders to participate either separately
or on a combined basis in the growth potential and low-risk development
qualities of Paramount's assets. Paramount believes that the
post-transaction structure better aligns risks and returns from each
asset class in a way that is both sustainable and tax effective.

In order to preserve the economic benefit of holders of existing
Paramount stock options, the existing stock options of Paramount will be
replaced with new options to acquire Paramount common shares at an
adjusted exercise price and other options whose value will be tied to
the value of the units of Trilogy. The new options will have the same
aggregate exercise price as the original options and each option will
relate to the same number of Paramount common shares and units of
Trilogy as the number of common shares issuable under the existing
Paramount options. The Trust Spinout will not result in the early
vesting of any Paramount options.

If the necessary securityholder and court approvals are obtained and
other conditions are satisfied, the Trust Spinout is expected to be
completed on or about April 1, 2005. If the Trust Spinout is completed
as planned, Trilogy's first cash distribution is expected to be $0.16
per unit and is expected to be paid on May 15, 2005 to unitholders of
record on May 2, 2005.

The board of directors of Paramount has unanimously concluded that the
Trust Spinout is in the best interests of Paramount and its
securityholders and recommends that securityholders vote in favour of
the Trust Spinout. BMO Nesbitt Burns Inc. has provided an opinion that
the consideration to be received by shareholders pursuant to the Trust
Spinout is fair, from a financial point of view, to the shareholders.

In conjunction with the approval of the Information Circular, the board
of directors of Paramount also approved the content and inclusion in the
Information Circular of reserves evaluations for the year ended December
31, 2004. The evaluation of the reserves which will continue to be owned
by Paramount was prepared by McDaniel & Associates Consultants Ltd. and
the evaluation of the reserves which will be indirectly owned by Trilogy
was prepared by Paddock Lindstrom & Associates Ltd.

The following tables summarize the reserves evaluated for Paramount as
at December 31, 2004, assuming the completion of the Trust Spinout,
using McDaniel's forecast prices and costs. Column sums and Boe
calculations may be influenced by rounding.




Before Tax Net
Present Value
($ millions)
Gross Proved and Probable Reserves Discount Rate
----------------------------------- -------------

Light and
Medium Natural
Natural Crude Gas
Gas Oil Liquids Total
(Bcf) (MBbl) (MBbl) (MBoe) 0% 5% 10%
---------------------------------------------------------
Reserves
Category
---------

Canada
Proved 136.5 2,252 1,022 26,019 586.3 491.1 427.7
Probable 126.1 1,155 186 22,350 520.8 386.8 299.7
------------------------------------------------------
Total Proved
plus Probable
Canada 262.5 3,407 1,208 48,368 1,107.1 877.9 727.4
------------------------------------------------------
------------------------------------------------------

United States
Proved 0.4 2,108 - 2,169 29.5 25.0 21.6
Probable - 431 - 437 6.0 3.9 2.7
------------------------------------------------------
Total Proved
plus Probable
United States 0.4 2,539 - 2,606 35.5 28.8 24.3
-----------------------------------------------------
------------------------------------------------------
Total
Total Proved 136.8 4,359 1,022 28,188 615.8 516.0 449.4
Total
Probable 126.1 1,586 186 22,787 526.8 390.7 302.4
------------------------------------------------------
Total Proved
plus
Probable 262.9 5,946 1,208 50,975 1,142.6 906.7 751.7
------------------------------------------------------
------------------------------------------------------


The following tables summarize the reserves evaluated for Trilogy as at
December 31, 2004, assuming the completion of the Trust Spinout, using
Paddock's forecast prices and costs. Column sums and Boe calculations
may be influenced by rounding.



Before Tax Net
Present Value
($ millions)
Gross Proved and Probable Reserves Discount Rate
----------------------------------- -------------

Light and
Medium Natural
Natural Crude Gas
Gas Oil Liquids Total
(Bcf) (MBbl) (MBbl) (MBoe) 0% 5% 10%
---------------------------------------------------------
Reserves
Category
---------

Proved 210.4 4,339 5,320 44,722 1,028.9 830.2 706.6

Probable 95.3 1,746 1,902 19,532 429.8 276.7 201.0
------------------------------------------------------
Total Proved
plus
Probable 305.7 6,085 7,222 64,254 1,458.7 1,106.8 907.6
------------------------------------------------------
------------------------------------------------------


Paramount 2004 Operational Highlights

The following table summarizes certain operational highlights of
Paramount for the year ended December 31, 2004 as compared to the year
ended December 31, 2003. The following information is actual results for
Paramount and does not give effect to the Trust Spinout.




OPERATING 2004 2003 % Change
------------------------
Fourth Quarter Production
Natural Gas (MMcf/d) 198 141 40%
Crude oil and liquids (Bbl/d) 8,903 5,877 51%
Total production (Boe/d) @ 6:1 41,878 29,353 43%

Reserves (MBoe)(1)
(as of December 31, 2004)
Proved 72,910 50,883 43%
Proved plus Probable 115,229 67,413 71%

Estimated present value before tax
(discounted @ 10% using forecasted
prices and costs)(1)
(as of December 31, 2004)
Proved ($ millions) 1,156.0 597.4 94%
Proved plus Probable ($ millions) 1,659.3 733.6 126%

Land (as of December 31, 2004) (2)

Gross undeveloped land (thousands
of acres) 5,536 4,756 16%
Net undeveloped land (thousands
of acres) 3,442 2,800 23%
Net undeveloped land value ($ millions) 185.4 98.2 89%



Notes:

(1) The total Paramount reserves and estimated present value before
tax were derived by combining the reserves evaluation of
McDaniel, effective December 31, 2004, with the reserves
evaluation of Paddock effective December 31, 2004.

(2) Undeveloped land refers to land with no attributed reserves as at
December 31, 2004.


For the year ended December 31, 2004, Paramount replaced its annual
production by 2.7 times for Proved reserves and by 4.6 times for Proved
plus Probable reserves.

Finding and development costs for 2004 were $13.57 on a proved basis and
$9.48 on a proved plus probable basis. Finding and development costs for
2003 were $18.93 on a proved basis and $15.73 on a proved plus probable
basis.

Advisory Regarding Oil and Gas Information

In this news release, certain natural gas volumes have been converted to
Boe on the basis of six thousand cubic feet (Mcf) to one barrel (Bbl).
Boe may be misleading, particularly if used in isolation. A Boe
conversion ration of 6 Mcf:1 Bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent equivalency at the well head.

Finding and development costs were calculated for each year shown by
dividing exploration and development costs plus changes in estimated
future development costs less the increase in value of undeveloped land
and capital associated with long term development projects by reserve
additions for the year. The increase in value of undeveloped land and
capital associated with long term development projects was excluded from
the numerator as these items are not associated with reserve additions
for the year. The 2003 figures do not include technical revisions, a
significant portion of which were associated with the adoption of
National Instrument 51-101 in September 2003. The aggregate of the
exploration and development costs incurred in 2004 and the change during
that year in estimated future development costs generally will not
reflect total finding and development costs related to reserve additions
for that year.

Advisory Regarding Forward Looking Statements

This news release contains forward-looking statements within the meaning
of applicable securities laws. Forward-looking statements include
estimates, plans, expectations, opinions, forecasts, projections,
guidance or other statements that are not statements of fact. The
forward-looking statements in this news release include statements with
respect to the magnitude of oil and natural gas reserves. Although
Paramount believes that the expectations reflected in such
forward-looking statements are reasonable, undue reliance should not be
placed on them because we can give no assurance that such expectations
will prove to have been correct. Factors that could cause actual results
to differ materially from those set forward in the forward looking
statements include general economic business and market conditions,
fluctuations in interest rates, production estimates, our future costs,
future crude oil and natural gas prices, and our reserve estimates.
Paramount's forward-looking statements are expressly qualified in their
entirety by this cautionary statement. We undertake no obligation to
update our forward-looking statements except as required by law.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Paramount Resources Ltd.
    C.H. (Clay) Riddell
    Chairman and Chief Executive Officer
    (403) 290-3600
    or
    Paramount Resources Ltd.
    J.H.T. (Jim) Riddell
    President and Chief Operating Officer
    (403) 290-3600
    or
    Paramount Resources Ltd.
    B.K. (Bernie) Lee
    Chief Financial Officer
    (403) 290-3600
    (403) 262-7994 (FAX)
    or
    Paramount Resources Ltd.
    4700 Bankers Hall West
    888 3rd Street SW
    Calgary, Alberta T2P 5C5