Petrobank Energy and Resources Ltd.
TSX : PBG
OSLO STOCK EXCHANGE : PBG

Petrobank Energy and Resources Ltd.
Peerless Energy Inc.
TSX : PRY.A
TSX : PRY.B

Peerless Energy Inc.

November 22, 2007 20:52 ET

Petrobank to Acquire Peerless Energy

CALGARY, ALBERTA--(Marketwire - Nov. 22, 2007) - Petrobank Energy and Resources Ltd. ("Petrobank") (TSX:PBG) (OSLO:PBG) together with Peerless Energy Inc. ("Peerless") (TSX:PRY.A) (TSX:PRY.B) are pleased to announce that we have entered into an arrangement agreement whereby Petrobank will acquire all of the issued and outstanding shares of Peerless (the "Acquisition").

Peerless is currently producing approximately 4,250 barrels of oil equivalent per day ("boepd"), consisting of light oil, primarily from the Bakken play in Saskatchewan, and natural gas from Alberta and British Columbia. Peerless also has over 100,000 net acres (156 sections) of undeveloped land. Petrobank and Peerless have both achieved significant light oil production growth over the last year from the Bakken play in southeast Saskatchewan. Our combined current production from the Bakken play is approximately 7,900 barrels of oil per day ("bopd"). This Acquisition further strengthens Petrobank's Bakken growth potential by adding 18 net sections of undeveloped land and current production of approximately 1,900 bopd. The Peerless assets will complement Petrobank's Bakken facility and infrastructure plans, allowing us to recover natural gas and liquids production while minimizing operating costs.

The Acquisition will be accomplished through a Plan of Arrangement (the "Arrangement") wherein each Class A share of Peerless will be exchanged for $0.90 cash and 0.08 of one Petrobank common share and each Class B share of Peerless will be exchanged for $10.00 cash. Based on the five-day weighted average share price of Petrobank ending on November 22, 2007 of $54.33/share, the effective price per Peerless Class A share is $5.25. The total Acquisition cost is expected to be approximately $334 million, including assumption of debt and costs of the transaction. It is expected that approximately 4.0 million Petrobank common shares will be issued to effect the Arrangement.

The Acquisition is expected to be accretive to Petrobank shareholders on a production, cash flow and reserves basis and is adding current production of approximately 4,250 boepd, weighted 64% to light oil and 36% to natural gas. During 2007, Peerless undertook an intensive capital program, focused primarily on the Bakken. Approximately 1,900 bopd of Peerless' current production is Bakken light oil strategically located within Petrobank's core properties in southeast Saskatchewan. High commodity prices for light oil, the Saskatchewan royalty regime, and relatively low operating costs all contribute to the very attractive, high netbacks for Bakken light oil. Petrobank's Bakken light oil operating netback during the third quarter of 2007 was $66.75 per barrel. Reserves for the acquired properties will be evaluated by Petrobank's independent reserves evaluator at year end.

With this Acquisition, Petrobank will have a Bakken drilling inventory of 600 (565 net) well locations, based on a future well density of only four wells per prospective section. Petrobank plans on pursuing this drilling inventory by operating seven rigs within the Bakken play, allowing more than 110 (100% Working Interest) horizontal wells to be drilled during 2008. The Bakken light oil resource play is expected to be Petrobank's primary conventional Canadian focus area in 2008 and for years to come. This Acquisition, combined with recent land purchases, and Petrobank's highly effective drilling and stimulation program, further solidifies Petrobank as a key, long-term Bakken player.

The information circular for the Arrangement is expected to be mailed to Peerless shareholders in late December 2007 and it is anticipated that the special meeting of Peerless' shareholders will be held in January 2008. The successful completion of this transaction is subject to the requisite approval of the Peerless shareholders, along with customary regulatory, court and other approvals.

The Board of Directors of both Petrobank and Peerless unanimously approved the Arrangement. The Board of Directors of Peerless concluded that the transaction is in the best interests of the Peerless shareholders from a financial perspective and resolved to recommend that shareholders vote their shares in favour of the Arrangement. The directors and officers of Peerless have also entered into lock-up agreements with Petrobank to vote their Peerless shares in support of the Arrangement.

The Arrangement prohibits Peerless from soliciting or initiating any discussion regarding any other business combination or sale of material assets, contains provisions for Petrobank to match competing, unsolicited proposals and, subject to certain conditions, provides for a $12.5 million termination fee payable to Petrobank.

Tristone Capital Inc. is acting as financial advisor to Peerless with respect to this transaction and has advised the Board of Directors of Peerless that they are of the opinion, as of the date hereof, that the consideration to be received by the Peerless shareholders is fair, from a financial point of view, to Peerless shareholders. Clarus Securities Inc. acted as strategic advisor to Peerless. Haywood Securities Inc. and TD Securities Inc. acted as financial advisors to Petrobank.

Investor Conference Call

Management of both Petrobank and Peerless will hold a conference call for investors on Monday, November 26, 2007 at 9:00am (Mountain Time) to discuss the Arrangement. John D. Wright, President and Chief Executive Officer of Petrobank, and Wade Becker, President and Chief Executive Officer of Peerless, will co-chair the conference call. The investor conference call details are as follows:



Date: Monday, November 26, 2007
Time: 9:00am (Mountain Time)
Dial-in Number: (416) 641-6139 or 1-866-303-7746

Taped Re-play: (416) 695-5800 or 1-800-408-3053
Reference Number: 3243751
Available until: Monday, December 3, 2007


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 is developing a solid production platform from low risk gas opportunities in central Alberta and an extensive inventory of Bakken light oil locations in southeast Saskatchewan, complemented by new exploration projects and a large undeveloped land base. The Latin American Business Unit, operated by Petrobank's 76.6% owned TSX-listed subsidiary, Petrominerales Ltd. (trading symbol: PMG), is a Latin American-based exploration and production company producing oil from three blocks in Colombia and has contracts on 13 exploration blocks covering a total of 1.5 million acres in the Llanos and Putumayo Basins. WHITESANDS Insitu Ltd., Petrobank's wholly-owned subsidiary, owns 70,720 net acres of oil sands leases with an estimated 2.6 billion barrels of gross bitumen-in-place and operates the WHITESANDS project which is field-demonstrating 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 integrates existing proven technologies and provides the opportunity to create a step change in the development of heavy oil resources globally. THAI™ and CAPRI™ are registered trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources Ltd.

Peerless Energy Inc.

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.

Barrels of Oil Equivalent

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

Non-GAAP Measures

This release contains financial terms that are not considered measures under Canadian Generally Accepted Accounting Principles ("GAAP"), such as net debt, and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, net debt is used to evaluate the Company's financial leverage and includes bank debt plus accounts payable and accrued liabilities less current assets. Operating netback is a measure of profitability per unit of production calculated based on revenue less royalties, production and transportation expenses per unit produced.

Forward-Looking Statements

Certain information provided in this release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "believe", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to an acquisition. 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. You can find a discussion of those risks and uncertainties in Petrobank's and Peerless' Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability, outcome of exploration contract negotiations; 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 Petrobank and Peerless. Although Petrobank and Peerless believe that these statements are based on information and assumptions which are current, reasonable and complete, these statements are necessarily subject to a variety of risks and uncertainties. While Petrobank and Peerless make these forward-looking statements in good faith, should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected. There is no representation by Petrobank or Peerless that actual results achieved during the forecast period will be the same in whole or in part as those forecasts. Except as may be required by applicable securities laws, neither Petrobank nor Peerless assume any obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

Contact Information

  • Petrobank Energy and Resources Ltd.
    John D. Wright
    President and Chief Executive Officer
    (403) 750-4400
    or
    Petrobank Energy and Resources Ltd.
    Chris J. Bloomer
    Vice-President Heavy Oil
    (403) 750-4400
    or
    Petrobank Energy and Resources Ltd.
    Corey C. Ruttan
    Vice President Finance and Chief Financial Officer
    (403) 750-4400
    (403) 266-5794 (FAX)
    Email: ir@petrobank.com
    Website: www.petrobank.com
    or
    Peerless Energy Inc.
    Wade Becker
    President and Chief Executive Officer
    (403) 263-1590
    or
    Peerless Energy Inc.
    Dan Toews
    Vice President, Finance and Chief Financial Officer
    (403) 263-1590