SOURCE: PrimeGen Energy Corporation

January 08, 2007 16:05 ET

PrimeGen Reaches Agreement With MB Gas Inc.

DALLAS, TX -- (MARKET WIRE) -- January 8, 2007 -- PrimeGen Energy Corporation (OTCBB: PGNE) ("PrimeGen" or the "Company") is pleased to announce that a new agreement in principal has been reached with MB Gas Inc. ("MB"), a private Alberta oil and gas exploration company. PrimeGen previously announced an intention to acquire an equity interest in MB, but it has since determined that an alternate form of business association better fits the Company's present goals.

The parties have now reached an agreement (the "MB Agreement") in principal whereby PrimeGen will initially loan $3 million (the "Loan") to MB in return for the assignment to PrimeGen of a portion of MB's net revenues from its oil and gas operations. The Loan will be repaid from MB's net revenues on the basis of 75% to the Company and 25% to MB until payout, after which will revert to 30% to the Company and 70% to MB. The Company will have an option to make an additional loan of $3 million (the "Option Loan") with similar payout terms and, in such case, the residual net revenue split will be 40% to PrimeGen and 60% to MB (after payout of the Loan and Option Loan). The proceeds from the Loan and Option Loan (if the Option Loan is advanced) will be used to complete the tie-ins of certain wells, as well as fund seismic surveys and perform related study and exploration analysis on other targeted lands.

An independent investor has agreed to advance to PrimeGen loans (the "Third Party Loans"), as might be required to complete the MB Agreement. The Third Party Loans will be secured by two-year promissory notes which will bear interest at 8 percent per annum. The MB Agreement, and the advance of the Loan and Optional Loan, will be conditional upon the advance of the Third Party Loans, as well as other terms and conditions.

MB owns a natural gas pipeline and transmission system in the Manyberries area of Alberta, Canada, and is presently connecting 3 Sawtooth formation gas wells (the "Wells"), located in the area. Those lands are operated by Provident Energy and have been estimated to contain up to 5.0 billion cubic feet of natural gas. MB also controls certain prospective lands in the area, targeting both shallow and deeper gas-bearing formations. These are in relatively close proximity to the pipe-line system, and it is expected that the gas resulting from any new discoveries made by MB on those lands, together with gas from a number of previously plugged gas wells in the area, will be carried in MB's pipeline.

Mr. William Marshall, the Company's Chairman, stated, "Although we felt that we couldn't reach an agreement with MB based entirely on the historical financial numbers presented to us by MB, we have always known that there is significant gas in the area that is simply awaiting a suitable pipeline infrastructure, exactly like that presently being developed by MB. As a result, we plan to focus on a more strategic alliance that will immediately get the proven gas into the pipeline and allow us a good opportunity to fully explore MB's additional lands in the area. We will also try to connect to our pipeline a significant number of previously drilled and capped gas wells in the area. These wells are proven but were not connected due to the previous lack of area infrastructure, largely a result of the economics relating to historically lower gas prices. We should be able to maintain a decent pipeline volume in the event that some of our other exploration results in the area don't meet our initial expectations. This transaction now fits our present strategy of sourcing cash flow without necessarily having to directly manage the assets daily from our own resources."

Notice Regarding Forward-Looking Statements

This news release contains "forward-looking statements," as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements in this press release, which are not purely historical, are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include the completion of the MB Agreement, Loan and Option Loan, as referenced above, together with any statements concerning resulting revenues or gas reserves, if any.

Actual results could differ from those projected in any forward-looking statements due to numerous factors. These forward-looking statements are made as of the date of this news release, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Although we believe that the beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance those beliefs, plans, expectations or intentions will prove to be accurate. Investors should consult all of the information set forth herein and should also refer to the risk factors disclosure outlined in our annual report on Form 10-KSB, our quarterly reports on Forms 10-QSB, and other periodic reports and supporting documents filed from time-to-time with the Securities and Exchange Commission.


PrimeGen Energy Corporation

William S. Marshall, Chairman

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