Prairie Schooner Petroleum Ltd.

Prairie Schooner Petroleum Ltd.

August 02, 2005 08:14 ET

Prairie Schooner Petroleum Ltd. Announces $108 Million Asset Acquisition and a $37.6 Million Bought Deal Financing

CALGARY, ALBERTA--(CCNMatthews - Aug. 2, 2005) -


Prairie Schooner Petroleum Ltd. (TSX:PSL) is pleased to announce that is has entered into a definitive agreement to acquire natural gas weighted producing properties and undeveloped lands predominantly in west central Alberta for a purchase price, including adjustments at closing, of approximately $108 million. These assets are characterized as high working interests, with a significant undeveloped land position, seismic database and facility infrastructure. The acquisition cost, is payable in $62.3 million cash and approximately 3,000,000 shares of PSL. The acquisition has an effective date of July 1, 2005, with the closing expected by October 31, 2005. The completion of the acquisition is subject to customary regulatory approvals and other conditions. Prairie Schooner intends to finance the cash portion of the acquisition with a combination of the proceeds of a $37.6 million "bought deal" financing entered into with a syndicate of underwriters and an expanded bank facility.

The acquisition is consistent with Prairie Schooner's strategy of acquiring operated properties with infrastructure, undeveloped land and significant lower-risk development potential. With this acquisition, Prairie Schooner further expands its growing west central Alberta production base and maintains its significant natural gas exposure. The assets have current production of approximately 2,450 barrels of oil equivalent per day ("boe/d") of which approximately 85 percent is natural gas. This transaction will increase Prairie Schooner's current production by approximately 70% to over 5,800 boe/d. The assets include approximately 123,000 net acres of undeveloped land independently evaluated at $10.6 million and a significant 2D and 3D seismic database. Prairie Schooner has currently identified approximately 40 drilling locations, as well as numerous recompletions and workovers, operating cost optimization and coal bed methane opportunities on the assets.

The subject transaction is accretive to Prairie Schooner's cash flow, reserves, production and net asset value, all on a per share basis. An independent evaluation of the acquired properties by Gilbert Laustsen Jung Associates Ltd. effective July 1, 2005 assigned total proved reserves of approximately 5.4 million boe and proved and probable reserves of 7.2 million boe. The transaction represents attractive reserve and production acquisition costs (after an allocation to undeveloped land) of $18.10 per proved boe, $13.48 per proven and probable boe, and $40,000 per flowing boe of production and increases Prairie Schooner's total proven and probable reserves by 70% to 17.5 million boe.

The cash to close the acquisition of approximately $62 million will be funded through a combination of bank debt and an issuance of subscription receipts ("Subscription Receipts"). In conjunction with the acquisition, Prairie Schooner has entered into an agreement to sell, on a bought deal basis, 2,455,000 Subscription Receipts at a price of $15.30 per Subscription Receipt for gross proceeds of $37.6 million on a private placement basis through a syndicate of underwriters led by GMP Securities Ltd and including Peters & Co. Limited, Tristone Capital Inc. and FirstEnergy Capital Corp.. The underwriters have the option to increase the offering by an additional 245,000 Subscription Receipts, also for $15.30 per receipt, which if exercised in full would increase the total gross proceeds to $41.3 million. The issuance of the Subscription Receipts is subject to regulatory approval.

Each Subscription Receipt represents the right to receive one share of Prairie Schooner on the closing of the acquisition. The proceeds from the offering of Subscription Receipts will be deposited in escrow pending closing of the acquisition. If the proposed acquisition closes on or before November 15, 2005, the net proceeds from the offering of Subscription Receipts will be released to Prairie Schooner to finance a portion of the acquisition. However, if the acquisition fails to close by November 15, 2005 the escrow agent will return the net proceeds and pro rate entitlement to interest thereon to holders of the Subscription Receipts.

Prairie Schooner is a growth orientated, junior natural gas exploration, development and production company whose common shares trade on the Toronto Stock Exchange under the symbol PSL. Prairie Schooner's fundamental focus continues to be on increasing shareholder value through a combination of grassroots exploration, strategic acquisitions and subsequent exploration.

Please visit our website at for detailed corporate information.

This news release shall not constitute and offer to sell or the solicitation of an offer to buy the Subscription Receipts, or the Common Shares that they are exchangeable into, in any jurisdiction. Such securities have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, or to a U.S. person, absent registration, or an applicable exemption therefrom.

Disclosure in respect of boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: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 wellhead.

Forward Looking Statements - Certain information regarding Prairie Schooner set forth in this document, including management's assessment of the acquisition and Prairie Schooner's future plans and operations, contain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Prairie Schooner's control, including: the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, volatility of commodity prices, currency fluctuations, geological and engineering risks, imprecision of reserve estimates, environmental risks, ability to access sufficient capital from internal and external sources, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Prairie Schooner's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurances can be given that any of these events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefit Prairie Schooner will derive therefrom.

Contact Information

  • Prairie Schooner Petroleum Ltd.
    Mr. Jim Saunders
    CEO and Chairman
    (403) 303-3750
    (403) 266-8681 (FAX)
    Prairie Schooner Petroleum Ltd.
    Mr. Jerry Sapieha, CA
    Vice President, Finance and CFO
    (403) 303-3762
    (403) 266-8681 (FAX)