Prairie Schooner Petroleum Ltd.

Prairie Schooner Petroleum Ltd.

September 12, 2005 17:55 ET

Prairie Schooner Petroleum Ltd. Announces $26.5 Million Private Company Acquisition

CALGARY, ALBERTA--(CCNMatthews - Sept. 12, 2005) - Prairie Schooner Petroleum Ltd. (TSX:PSL) is pleased to announce that is has entered into a definitive agreement to acquire a natural gas weighted private company, whose producing properties are located in east central Alberta, for a purchase price of $26.5 million. The acquisition cost, is payable in $15.8 million cash and 700,000 shares of PSL. The acquisition has an effective date of June 1, 2005, with the closing expected by October 1, 2005. Prairie Schooner intends to finance the cash portion of the acquisition with it's recently expanded pro forma bank facility of $80 million. Subsequent to this transaction and the transaction previously announced on August 2 which is anticipated to close in late October, Prairie Schooner will have approximately $63.5 of net debt representing approximately 0.8 years current proforma cash flow.

This acquisition further expands Prairie Schooners significant drilling inventory to over 400 locations and increases its natural gas exposure to approximately 90 percent of its pro form production base of 6,300 barrels of oil equivalent per day ("boe/d"). The assets have current production of approximately 550 boe/d, of which approximately 95 percent is natural gas with an additional 200 boe/d currently being tied in to production facilities. Prairie Schooner has currently identified approximately 21 net drilling locations on the assets and is currently shooting three, 3-dimensional seismic surveys over the lands to define further upside potential.

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 properties by Paddock Lindstrom Associates Ltd. assigned proved and probable reserves of 2.5 million boe. The transaction represents attractive reserve and production acquisition costs of $10.60 per proved and probable boe and $35,300 per flowing boe of production and increases Prairie Schooner's total pro forma proven and probable reserves to over 20 million boe.

Post closing the two transactions Prairie Schooner anticipates a base exploration and development capital program of $95 million over the next 5 quarters. With anticipated continuing strong natural gas prices Prairie Schooner will generate record cash flows in 2006 which in combination with its significant drilling inventory and clean balance sheet positions it to continue with its aggressive growth oriented business plan.

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 exploitation.

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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)