Peerless Energy Inc.
TSX VENTURE : PRY.A
TSX VENTURE : PRY.B

Peerless Energy Inc.

August 16, 2005 09:00 ET

Peerless Energy Inc. Announces Southeast Saskatchewan Private Company Acquisition and $10.05 Million Bought Deal Financing

CALGARY, ALBERTA--(CCNMatthews - Aug. 16, 2005) - Peerless Energy Inc. (TSX VENTURE:PRY.A) (TSX VENTURE:PRY.B) ("Peerless" or the "Company") is pleased to announce that it has agreed to purchase all of the shares of an arm's length private oil and gas company ("Private Company") with assets in the Company's core area of southeast Saskatchewan for $10.5 million cash.

The closing of this transaction is anticipated to occur by August 26, 2005, and is subject to standard due diligence conditions and applicable regulatory, including stock exchange, approvals. The assets of the Private Company are located in Southeast Saskatchewan and are characterized by the following:

- a strategic entry into the Company's core area of southeast Saskatchewan;

- current production of 215 boe/d comprised of 30 degrees API oil;

- focused, operated assets (80%) with a high working interest (77%) in one pool;

- 11 (9 net) horizontal drilling locations not included in the independent third party engineering evaluation;

- 390,000 boe of proved plus probable reserves as evaluated by independent third party engineers, utilizing NI 51-101 reserve definitions, not including any of the locations identified above;

- a foothold in the high impact, emerging Bakken sand exploration play; and

- the potential to lower operating costs.

This acquisition provides Peerless with operatorship and strategic control over a large oil-in-place pool where management sees a number of opportunities to add value including, optimization of horizontal pool development, operating cost reductions and exploration drilling via additional 3D seismic acquisition.

In conjunction with the acquisition, Peerless is also pleased to announce that it has entered into a bought deal financing agreement with a syndicate of underwriters led by FirstEnergy Capital Corp., and including Tristone Capital Inc., Canaccord Capital Corporation and Orion Securities Inc., to issue up to 3,000,000 common Class 'A' shares at an issue price of $3.35 for total gross proceeds of $10.05 million. The shares will be subject to a hold period of 4 months from closing.

Although the private placement will be substantially at arm's length, insiders of the Company will be purchasing up to 400,000, or approximately 13%, of the available shares. Closing of the financing is subject to the completion of the Private Company acquisition and regulatory approval and is expected to occur on or about September 7, 2005.

At the closing of the financing, the Company will have 11,200,001 Class A shares and 855,000 Class B shares will be issued and outstanding.

The acquisition will be accretive to cash flow, production, reserves, and net asset value per share.

Peerless Energy Inc. is a junior oil and gas company engaged in the exploration for, and development and production of, natural gas and light oil reserves primarily in the provinces of Alberta, Saskatchewan, and British Columbia.

Peerless' Class A and Class B shares trade on The TSX Venture Stock Exchange under the symbols, PRY.A and PRY.B respectively.

This press release does not constitute an offer to sell the securities in the United States. The securities offered have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable states securities laws.

ADVISORY

This press release may contain forward-looking statements including management's assessment of future plans and operations, expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other factors that could affect Peerless' operations and/or financial results are included in Peerless' reports on file with Canadian securities regulatory authorities.

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

Contact Information

  • Peerless Energy Inc.
    Wade Becker
    President and Chief Executive Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    or
    Peerless Energy Inc.
    Dan Toews
    Vice President, Finance and Chief Financial Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    Website: www.peerlessenergyinc.com