Prairie Schooner Petroleum Ltd.

Prairie Schooner Petroleum Ltd.

October 31, 2005 09:00 ET

Prairie Schooner Petroleum Ltd. Announces Closing of $108 Million Asset Acquisition and a $41.3 Million Subscription Receipts Financing

CALGARY, ALBERTA--(CCNMatthews - Oct. 31, 2005) - Prairie Schooner Petroleum Ltd. (TSX:PSL) is pleased to announce that effective October 27, 2005 it has closed the previously announced (August 2, 2005) $108 million asset acquisition from Purcell Energy Ltd. The acquisition includes gas weighted producing properties and undeveloped lands predominantly in west central Alberta. The assets are characterized as high working interests, with a significant undeveloped land position, seismic database and facility infrastructure. The acquisition cost, was payable by $65.3 million in cash and approximately 2,800,000 shares of PSL. The Prairie Schooner shares will be widely distributed to Purcell shareholders pursuant to their plan of arrangement. The acquisition has an effective date of July 1, 2005. Concurrently, with the asset purchase closing Prairie Schooner has closed its $41.3 million Subscription Receipts financing and expansion of its credit facility to $80 million.

As a result of the closing of the asset acquisition, the gross proceeds of $41.3 million from the August 2005 private placement of subscription receipts have now been released from escrow and applied as partial payment of the purchase price of the Purcell properties. In accordance with the subscription receipt agreement, the subscription receipts will be deemed to be exercised for common shares of Prairie Schooner on October 28, 2005 without any further action on the part of the holders of subscription receipts.

The acquisition is consistent with Prairie Schooner's strategy of acquiring operated properties with infrastructure, undeveloped land and lower-risk development potential. With this acquisition, Prairie Schooner further expands its substantial west central Alberta production base and maintains its significant natural gas exposure. The assets are currently producing approximately 2,550 barrels of oil equivalent per day ("boe/d") of which approximately 85 percent is natural gas. The assets include approximately 123,000 net acres of undeveloped land and a significant 2D and 3D seismic database. Prairie Schooner is currently surveying 45 drilling locations on the acquired lands and has identified numerous recompletions and workovers, operating cost optimization and coal bed methane opportunities on the assets. Since signing the binding acquisition agreement 12 wells have been drilled on the assets at a 100% success rate.

Following the completion of the subject transaction Prairie Schooner is producing approximately 6,500 boe/d (93% natural gas) which is forecast to lead to in excess of $80 million of annualized cash flow in the fourth quarter. Current net debt is approximately $60 million which relates to under 0.8 years current cash flow. Operationally, Prairie Schooner currently has 5 drilling rigs operating in its core areas and anticipates executing a $40 million capital program before breakup 2006. Drilling activities are currently focused at Killam in east central Alberta and at Pembina and Ferrier in our west central core exploration fairway.

The Company's strategy of assembling core operating areas complimented by a significant drilling program (40 net wells year to date) has proven very successful. This success is anticipated to continue as the new assets are incorporated over the coming months. Prairie Schooner's third quarter interim operating and financial results will be press released on November 14.

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.

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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 boes 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
    Prairie Schooner Petroleum Ltd.
    Mr. Jerry Sapieha, CA
    Vice President, Finance and CFO
    (403) 303-3762
    (403) 266-8681 (FAX)