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

Peerless Energy Inc.

September 29, 2005 09:01 ET

Peerless Energy Inc. Announces Strategic Northeast British Columbia Asset and Private Company Acquisitions and a $31.08 Million Bought Deal Financing

CALGARY, ALBERTA--(CCNMatthews - Sept. 29, 2005) - Peerless Energy Inc. (TSX VENTURE:PRY.A) (TSX VENTURE:PRY.B) ("Peerless" or the "Company") is pleased to announce a $45.5 million asset acquisition (the "Acquisition") of multi-zone, operated, long life natural gas reserves and production in the Company's northeast British Columbia project area. The aggregate consideration is comprised of $40,690,000 in cash and 1,300,000 in Peerless Class A shares.

In addition, Peerless has agreed to a non-arm's length purchase of the shares of a private Alberta oil and gas company ("Private Co") for $2.50 million net of working capital adjustments. The assets acquired are in the Company's Northeast British Columbia and Alberta project areas. Certain officers, directors and employees of Peerless own approximately 57% of the shares of Private Co and are exchanging their interest in Private Co for 380,951 Peerless shares at $4.20 (close of market on September 28, 2005) and $300,000 cash. In total, the shareholders of Private Co have agreed to take 595,238 Peerless shares and $300,000 cash. The acquisition was approved by an independent committee of the Peerless Board of Directors based on an engineering report by its third party engineers.

The closing of both transactions is anticipated to occur by November 8, 2005, and is subject to standard due diligence conditions and applicable regulatory, including stock exchange approvals.

The combined $48 million acquisition is comprised of $44.5 million for the reserves and $3.5 million in undeveloped land and seismic. The assets are characterized by the following:

- accretion: greater than 300% reserves/share; greater than 100% production/share; greater than 100% cash flow/share

- entry into the Company's core area of Northeast British Columbia;

- control and operatorship of a 225 Bcf OGIP sweet natural gas pool, including the producing infrastructure;

- 2.65 mmboe of proved plus probable reserves as evaluated by independent third party engineers, utilizing NI 51-101 reserve definitions, not including any identified drilling locations;

- current production of 3.75 mmcf/day and 100 bbls/day of liquids (725 boe/d) (6:1);

- reserve life index of over 10 years proved plus probable;

- focused, operated assets (95%) with a high working interest (approx. 70%);

- 26 (19 net) in-fill/step-out development drilling locations and 20 (14 net) re-completion opportunities, none of which are included in the third party engineering report; and

- approximately 13,000 net acres of undeveloped land (20 net sections).


These acquisitions provide Peerless with long life multi-zone natural gas properties with high working interests, a large inventory of prospective undeveloped land and significant developmental drilling opportunities.

Upon closing of the transaction, Peerless will have over 45 net development and exploitation drilling opportunities in inventory, over 25 net exploration locations, access to approximately 130,000 net acres (more than 200 net sections) of undeveloped land, and access to approximately 500 km2 of 3-D and 2,000 km of 2-D seismic.

In conjunction with the acquisitions, 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, Orion Securities Inc., Scotia Capital Inc., and MGI Securities Inc., to issue up to 8,400,000 Class 'A' common shares at an issue price of $3.70 for total gross proceeds of $31.08 million. The shares will be subject to a hold period of 4 months from closing.

Closing of the financing is subject to the concurrent closing of the Acquisition and regulatory approval and is expected to occur on or about November 8, 2005. Proceeds from the financing will be used to partly fund the above noted acquisitions.

At the closing of the financing, the Company will have 21.5 million Class A shares and 855,000 Class B shares issued and outstanding.

At the completion of the acquisitions, Peerless will have corporate debt net of working capital of approximately $6.2 million and will have its revolving term credit facility increased to $18 million.

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