Petrobank Energy and Resources Ltd.

Petrobank Energy and Resources Ltd.

June 12, 2006 00:25 ET

Petrobank Announces Pricing of Petrominerales Initial Public Offering

CALGARY, ALBERTA--(CCNMatthews - June 12, 2006) -


Petrobank Energy and Resources Ltd. (TSX:PBG)(TSX:PBG.NT.A)(OSLO:PBG) ("Petrobank") is pleased to announce that we have entered into an agreement with Haywood Securities Inc. in connection with the initial public offering ("Offering") of the common shares of our wholly-owned subsidiary, Petrominerales Ltd. ("Petrominerales"). The Offering, which is comprised of an underwritten portion of 16,000,000 common shares to be issued from treasury and a "best efforts" portion of 4,000,000 common shares to be issued as a secondary offering, will be priced at $3.75 per share. Total gross proceeds of the transaction, if the total 20,000,000 shares are sold, will be $75 million. The transaction is expected to close on or around June 29, 2006. Of the net proceeds to be received by Petrominerales from the treasury portion of the offering, Petrominerales expects to use US$31.5 million for development drilling and recompletions on current producing properties, US$10 million for drilling on exploration properties, US$7 million for repayment of debt to Petrobank, and the remainder for general and administrative expenses including working capital. Petrominerales will not receive any proceeds from the secondary offering of common shares sold indirectly by Petrobank through its wholly-owned subsidiary Petro International Ltd. Following the offering, Petrominerales will have 95 million common shares outstanding, 78.9 percent of which will be indirectly held by Petrobank (if the secondary offering is fully subscribed). Petrominerales has received conditional approval for listing on the Toronto Stock Exchange.

Petrominerales Ltd.

Petrominerales is engaged in the exploration for, and the acquisition, development and production of, oil resources in Colombia. Petrominerales produces oil through two Incremental Production Contracts where the Company increased production from 1,356 barrels of oil per day in the first quarter of 2006 to an average of 2,827 barrels of oil per day in April 2006. Production averaged 2,588 barrels of oil per day in May 2006, the decrease was mainly a result of taking certain wells offline during the month to perform workovers and due to expected declines.

Petrominerales has also capitalized on recent improvements to Colombia's fiscal terms for new exploration lands by signing contracts for five exploration blocks and five Technical Evaluation Agreements ("TEAs") covering a total of 2.5 million acres in the Llanos and Putumayo Basins.

Petrominerales considers three of the TEAs to be prospective for heavy oil. These areas could also provide opportunities for the application of Petrobank's patented in-situ heavy oil recovery technology, THAI™ (described below). Petrominerales has negotiated agreements with Archon Technologies International Ltd., a subsidiary of Petrobank, pursuant to which Petrominerales has access to the THAI™ technology, subject to a licensing fee equal to 10 percent of gross production.

Petrobank Energy and Resources Ltd.

Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada and Colombia. The Company operates high-impact projects through three business units. The Canadian Business Unit combines conventional oil and gas operations with two higher potential coalbed methane opportunities. The Latin American Business Unit produces oil through two Incremental Production Contracts in Colombia and has contracts on five new exploration blocks and five Technical Evaluation Agreements covering a total of 2.5 million acres in the Llanos and Putumayo Basins. WHITESANDS Insitu Ltd., Petrobank's 84% owned subsidiary, owns 38,400 acres of oil sands leases with an estimated 1.6 billion barrels of bitumen-in-place and has commenced operations at the WHITESANDS project to field-demonstrate Petrobank's patented THAI™ heavy oil recovery process. THAI™ is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil that combines a vertical air injection well with a horizontal production well. THAI™ integrates existing proven technologies and provides the opportunity to create a step change in the development of heavy oil resources globally.

Certain statements in this release are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Specifically, this press release contains forward-looking statements relating to, prospects for technologies which remain unproven and the expected amount and timing of capital projects. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: the ability to economically test, develop and utilize the technologies described herein, the feasibility of the technologies, general economic, market and business conditions; fluctuations in oil and gas prices; the results of exploration and development of drilling and related activities; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecast.

This news release shall not constitute an offer to sell or the solicitation of any offer to buy the securities in any jurisdiction. The common shares offered have not been and will not be registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

Contact Information

  • Petrobank Energy and Resources Ltd.
    John D. Wright
    President and CEO
    (403) 750-4400
    Petrobank Energy and Resources Ltd.
    Chris J. Bloomer
    Vice-President Heavy Oil and CFO
    (403) 750-4400
    Petrobank Energy and Resources Ltd.
    Corey C. Ruttan
    Vice-President Finance
    (403) 750-4400
    (403) 266-5794 (FAX)