Purcell Energy Ltd.
TSX : PEL

Purcell Energy Ltd.

October 06, 2005 21:16 ET

Purcell Energy Mails Information Circular Regarding Asset Sales and Proposed Plan of Arrangement to Create Tenergy Ltd. and Point North Energy Ltd.

CALGARY, ALBERTA--(CCNMatthews - Oct. 6, 2005) - Purcell Energy Ltd. (TSX:PEL) ("Purcell") has mailed its information circular to its shareholders respecting its previously announced proposed asset sales and plan of arrangement (the "Arrangement"). Subject to shareholder and regulatory approvals, Purcell will sell its Alberta and Saskatchewan producing assets and create Tenergy Ltd. ("Tenergy"), a British Columbia focused, deep gas, exploration company. Purcell will continue as Point North Energy Ltd. ("Point North"), a gas exploration and production company whose principal asset will be the Fort Liard, Northwest Territories gas property.

Pursuant to an interim order of the Court of Queen's Bench of Alberta, the special meeting of Purcell shareholders will be held at the Bow Valley Square Conference Centre, Angus/Northcote Room, 205 - 5th Avenue S.W., Calgary, Alberta at 9:00 a.m. (Calgary time) on Thursday, October 27, 2005 to consider, among other things, the asset sales and the Arrangement. A copy of the information circular and form of proxy for the meeting are available on the company's website www.purcellenergy.com or at www.sedar.com. The Arrangement will also require the final approval of the Court of Queen's Bench of Alberta and certain regulatory approvals. If all conditions of the asset sales and Arrangement have been satisfied or waived, Purcell expects the effective date of the Arrangement to be on or about October 28, 2005.

As a result of the Arrangement, Purcell shareholders will retain their Purcell common shares, which will be consolidated on a one-for-five basis, and the name of the company will be changed to Point North Energy Ltd. For each pre-consolidated Purcell common share held, shareholders will also receive 0.20 of a share in Tenergy, a new exploration-focused, natural gas company holding Purcell's Tenaka assets and undeveloped British Columbia acreage. At the same time, as a result of the asset sales, shareholders will receive a cash payment currently estimated at $0.40 per Purcell common share and 0.0556 of a common share of Prairie Schooner Petroleum Ltd. ("Prairie Schooner" - TSX-PSL), equivalent to one Prairie Schooner share for 18 Purcell common shares.

The asset sales and the Arrangement will accomplish the following:

- Shareholders will continue to be exposed to the upside potential of Purcell's Alberta assets through ownership of Prairie Schooner shares;

- Shareholders will continue to be exposed to the upside potential of the Tenaka natural gas play through ownership of Tenergy, a debt-free, British Columbia focused exploration company;

- Shareholders will remain owners of Point North, a debt-free company with new management that will focus on maximizing the value of Purcell's Fort Liard property; and

- The asset sale will enable payment of all debt and costs of the reorganization, as well as provide for payment of cash to shareholders.

Tenergy

Tenergy will be a natural gas-focused junior that will expose its shareholders to significant upside potential as it develops the Tenaka Slave Point project and pursues its other high-impact deep gas prospects in northeast British Columbia. Purcell's existing management team will continue in Tenergy with Jan Alston as Chief Executive Officer, Bruce Murray as President, Rick Fedoruk as Vice President, Exploration, and Daniel Tiberio as Manager, Engineering and Operations. Tenergy expects to announce a Chief Financial Officer prior to the shareholders meeting. Tenergy's board of directors will include Murray Todd as Chairman, Jan Alston, Bruce Murray, James Smith, and Harry Wheeler.

Initial equity financing of Tenergy of up to $5 million will be provided by a private placement primarily to Tenergy's management and directors. The private placement will be subject to a two-year hold period. After the private placement, Tenergy will have no debt.

Pursuant to the Arrangement, Purcell will transfer the Tenaka natural gas property and all of its undeveloped British Columbia acreage to Tenergy. At Tenaka, the company's acreage encompasses approximately 88,000 gross (38,000 net) acres of contiguous lands covering 129 gas spacing units at an average working interest of 42.6 percent. Three wells drilled last winter were placed on production in April 2005 and continue to produce on average greater than 5 mmcf/d each. Purcell's current Tenaka production exceeds 650 boe/d. Tenergy has identified up to 12 drilling locations on 3D seismic, including follow-up locations to this past winter's drilling and other separate prospects. Additional contingent drilling locations are being developed. Tenergy plans to drill four wells in winter 2006. A further 90,000 net acres of undeveloped land will also be transferred to Tenergy.

Point North

John Emery, Purcell's current Manager, Engineering will lead Point North's management team as President and Chief Executive Officer. Terry Lindquist, Purcell's current Chief Financial Officer, will be Point North's interim Chief Financial Officer during the transition period. Point North expects to announce other new members of the management team in the next two weeks. Point North's board of directors will include John Emery, Jan Alston, John Niedermaier, and Hugh Gillard.

Following the Arrangement, Point North's significant asset will be the Fort Liard natural gas property located in the southwest region of the Northwest Territories. This property recently produced about 500 boe per day net to Purcell from three wells. Currently, two wells are off-line pending completion of repairs to the wellsite facilities. The company expects the two wells to be back on production by the end of October. The K-29A development well is being drilled at Fort Liard and has the potential to more than double production. K-29A results are expected before the end of October 2005 and, if the well is successful, Point North anticipates that two more wells will be drilled in 2006. The Fort Liard gas pool contains approximately 700 bcf of original raw gas in place, with about 140 bcf of raw gas produced since start-up in 2000. Point North will retain several minor producing and undeveloped properties in Alberta and British Columbia. Current production from the minor properties is 50 boe per day, with as much as 200 boe per day behind pipe pending recompletions and tie-ins. Point North will also retain approximately 22,000 net acres of undeveloped lands. Following the Arrangement, Point North will be a debt-free company with cash flow from the Fort Liard property.

GMP Securities Ltd. has provided the Board of Directors of Purcell with a written opinion that the consideration to be received by holders of Purcell common shares under the Arrangement is fair from a financial point of view. The Management and Directors of Purcell expect that the asset sales and Arrangement should restructure the corporate affairs of Purcell to the maximum benefit of the Company's shareholders by unlocking the value of Purcell's assets, while ensuring that shareholders continue to have the opportunity to profit from the long term potential of two of Purcell's key assets.

This news release contains forward-looking operational information with respect to Purcell, including production. These projections are based on the Company's expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from forecasts. These risks and uncertainties include general economic, market and business conditions, commodity prices, well production rates, drilling success, timing, the imprecise nature of reserves estimates, service industry conditions, and the successful implementation of the company's business strategy. There is no representation by Purcell that actual results achieved during the forecast period will be the same, in whole or in part, as those forecast.

Note

In this news release the term barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of one boe for 6,000 cubic feet of natural gas is based on an energy-equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.

Contact Information

  • Purcell Energy Ltd.
    Jan Alston
    (403) 269-5803
    or
    Purcell Energy Ltd.
    Bruce Murray
    (403) 269-5803
    or
    Purcell Energy Ltd.
    John Emery
    (403) 269-5803
    www.purcellenergy.com
    or
    Iradesso Communications Corp.
    Peter D. Knapp
    (403) 503-0144 ext. 202