Radius Resources Corp.
TSX VENTURE : RAX

October 09, 2008 09:30 ET

Radius Resources Announces Joint Venture Agreement and Flow Through-Eligible Capital Expenditures

CALGARY, ALBERTA--(Marketwire - Oct. 9, 2008) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Radius Resources Corp., (TSX VENTURE:RAX) ("Radius"), announced that Radius, Midway Gas Corp ("Midway"), a privately held company that acquires and operates oil and gas exploration and production properties, and Kristina Capital Corp. ("Kristina"), a capital pool company listed on the TSX Venture Exchange have entered into a joint venture arrangement dated effective July 1, 2008 whereby the parties will agree to jointly develop certain oil and gas prospects in the Porcupine Forest of Central East Saskatchewan (the "Assets"). The Assets consist of three exploratory permits which expire in 2009 and 2011, covering an area of 1,187 sections of land in Saskatchewan known as the Porcupine Forest lands.

Terms of the JV Agreement

Pursuant to the JV Agreement, the initial prospect is the assets which Kristina is acquiring a 75% interest in per its Qualifying Transaction with Midway, as more fully described below. In order to organize this joint development of the Assets, Radius, Midway and Kristina have entered into a farmout agreement dated effective July 1, 2008 (the "Farmout Agreement") whereby Midway agrees to grant Radius the right to earn a 37.5% interest in the Assets by paying 100% of the costs of the initial exploration phase of up to $2,500,000 or the first ten exploration wells being drilled, whichever occurs first.

Additionally, Midway has agreed to act as the operator with respect to the development of the Assets in exchange for maintaining its 25% interest. Further, pursuant to the Farmout Agreement, Kristina acknowledged this arrangement and agreed that upon Kristina obtaining the 75% interest in the Assets pursuant to the Qualifying Transaction, it will honour the Farmout Agreement and grant to Radius the right to earn half of Kristina's 75% interest by paying 100% of the costs associated with initially developing the Assets (up to $2,500,000 or the drilling of the first ten exploration wells, whichever occurs first). As a result of the JV Agreement and Farmout Agreement, upon Radius paying 100% of the initial costs, the interests held in of the Assets will be Kristina 37.5%, Radius 37.5% and Midway 25% on closing of the Qualifying Transaction.

It is expected that the exploration activities will be completed by mid October 2008 and will reduce Radius' outstanding Flow-Through obligations by $2,500,000.00.

Radius to Participate in Kristina Private Placement

Radius further intends to participate in a non-brokered private placement being offered by Kristina concurrently with the completion of its Qualifying Transaction, to be conducted as a unit offering with each unit ("Unit") being comprised of one common share of Kristina ("Common Share") and one Common Share purchase warrant with an exercise price of $0.65 per warrant and an expiry date of two years from the date of issuance. The price per Unit will be $0.50 and Radius anticipates subscribing for up to 3,600,000 Units ($1,800,000). As a result of its participation in the offering, Radius will become a new control person of Kristina and as such its subscription for Units will be subject to approval by the TSX Venture Exchange (the "Exchange") and is also subject to approval by Kristina shareholders. Any of Radius' directors, officers and insiders and associates and affiliates thereof who are also shareholders of Kristina will not be eligible to vote on this matter.

Porcupine Forest - Saskatchewan

The Assets consist of three exploratory permits which expire in 2009 and 2011, covering an area of 1,187 sections of land in Saskatchewan known as the Porcupine Forest lands. Upon the successful completion of the exploratory permits a portion of the land, approximately 25%, then converts to a five year crown lease.

Any production from the property will be subject to Crown royalties and some areas will be subject to an additional gross overriding royalty. The prospective resources with respect to the Assets have been evaluated by Chapman Petroleum Engineering ("Chapman") and a report thereon, effective as of June 1, 2008, prepared in accordance with National Instrument 51-101 and Canadian Standards set out in the Canadian Oil and Gas Evaluation Handbook (COGEH) entitled, "Evaluation of Prospective Resources - Porcupine Forest Area, Saskatchewan Prepared for Kristina Capital Corporation dated June 2, 2008" (the "Chapman Report"). "Undiscovered Resources" are those quantities of oil and gas estimated on a given date to be contained in accumulations yet to be discovered; the estimated potentially recoverable portion of undiscovered resources is classified as "Prospective Resources." "Prospective Resources" are those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. There is no certainty that any portion of the resources will be discovered and that, if discovered, it may not be economically viable or technically feasible to produce any portion of the resources.

The Chapman Report assessed the prospective resources for the Favel interval in the Porcupine Forest area of eastern Saskatchewan based on an analogy to the shallow Milk River zone in the Abbey area of western Saskatchewan, which has been adjusted for the shallower depth and lower pressures in the Porcupine Forest area. The analogies relied upon in the Chapman Report indicated that the expected per well values for the Porcupine Forest area would be for ultimate recovery of 120 MMscf per well with an initial rate of 80 Mscf/d per well. Chapman prepared best, low and high estimates for the area. For the best estimate Chapman assumed 10 percent of the area (119 sections) would be developed by a total of 476 wells for a forecast of ultimate raw resources of 57,120 MMscf. In the low estimate, Chapman assumed 5 percent of the area (59 sections) would be developed by 238 wells for a forecast of ultimate raw resources of 28,560 MMscf. In the high estimate, Chapman assumed 15 percent of the area (178 sections) would be developed by 712 wells for a forecast of ultimate raw resources of 85,440 MMscf. Initial gas rates are estimated to average 80 Mscf/d per well for a total initial rate of 38,080 Mscf/d pursuant to the best estimate. Total gross development capital expenditures for the best estimate have been estimated at $121,576,000.



Summary of Prospective Resources and Economics
Before Income Tax
As of June 1, 2008
Net to Appraised Interest

Cumulative Cash Flow
Description Resources (BIT) M$ Discounted at:
-------------------- -------------------------- ------------------------

Sales Gas
(MMscf) Undisc. 15%/year
-------------------------- ---------- ----------
Gross Net
BEFORE RISK
Best Estimate
Shallow Gas Prospect 40,698 38,194 185,636 60,293
Low Estimate
Shallow Gas Prospect 20,349 19,097 91,540 28,919
High Estimate
Shallow Gas Prospect 60,876 57,130 278,937 91,402
Arithmetic Average
Shallow Gas Prospect 40,641 38,140 185,371 60,205
AFTER RISK
Arithmetic Average
Shallow Gas Prospect 5,283 4,958 21,874 5,602


HISTORICAL, CONSTANT, CURRENT AND FUTURE PRICES
June 1, 2008


AECO
Spot Sask. D.C. Pentanes NGL
Gas Propane Butane Plus Mix
GRP III (NIT) Gas (1) Gas (3) (4) (4) (4) (5)
Date /MMBTU $IGJ $/MMBTU $IMMBTU $/MMBTU $IBBL $/BBL $/BBL $IBBL
---- ------- ---- ------- ------- ------- ------- ------ ----- ------

HISTORICAL
PRICES GRP AECO
1994 1.82 1.73 1.78 1.88 1.81 12.72 13.44 21.67 15.62
1995 1.31 1.24 1.08 1.35 1.29 14.38 13.97 24.11 17.18
1996 1.63 1.55 1.33 1.52 1.50 22.95 17.19 30.05 23.35
1997 1.97 1.87 1.67 1.84 1.80 17.73 19.07 30.90 22.08
1998 1.94 1.84 1.94 2.05 1.94 11.13 12.06 21.86 14.63
1999 2.48 2.35 2.82 2.83 2.51 15.93 18.01 27.73 20.09
2000 4.50 4.27 5.56 4.85 4.00 31.38 35.01 46.35 36.96
2001 5.78 5.48 5.44 5.48 6.12 31.27 30.27 44.98 35.08
2002 3.86 3.66 4.13 4.17 3.85 19.14 25.11 40.72 27.41
2003 6.45 6.11 7.03 6.47 6.45 28.85 32.15 44.23 34.46
2004 6.25 5.92 6.60 6.50 6.25 31.95 38.40 54.06 40.52
2005 8.30 7.87 8.82 8.55 8.30 38.03 46.31 69.32 49.90
2006 6.57 6.23 6.55 6.82 6.57 38.97 50.42 76.08 53.54
2007 6.21 5.88 6.47 6.46 6.21 40.47 49.76 75.96 53.90
2008 est.
(5 month) 7.70 7.30 8.72 7.95 7.70 49.41 65.64 107.40 71.67

CONSTANT est.
PRICES 8.90 8.44 9.89 9.15 8.90 54.15 67.30 123.85 79.00
May 30,
2008 (6)

CURRENT
YEAR
FORECAST
2008 8.60 8.15 9.05 8.85 8.60 52.65 67.28 100.43 71.37
(7 months)
FUTURE
FORECAST
2009 8.30 7.87 8.74 8.55 8.30 51.51 65.82 98.26 69.83
2010 8.10 7.68 8.53 8.35 8.10 51.48 65.78 98.19 69.78
2011 8.00 7.58 8.42 8.25 8.00 49.65 63.44 94.70 67.30
2012 8.10 7.68 8.53 8.35 8.10 49.65 63.44 94.70 67.30
2013 8.25 7.82 8.68 8.50 8.25 49.65 63.44 94.70 67.30
2014 8.40 7.96 8.84 8.65 8.40 49.65 63.44 94.70 67.30
2015 8.57 8.12 9.02 8.82 8.57 50.67 64.75 96.65 68.69
2016 8.74 8.28 9.20 8.99 8.74 51.71 66.07 98.63 70.10
2017 8.91 8.45 9.38 9.16 8.91 52.77 67.43 100.66 71.53
2018 9.09 8.62 9.57 9.34 9.09 53.85 68.81 102.72 73.00
2019 9.27 8.79 9.76 9.52 9.27 54.96 70.22 104.83 74.50
2020 9.46 8.97 9.96 9.71 9.46 56.08 71.66 106.98 76.03
2021 9.65 9.15 10.16 9.90 9.65 57.23 73.13 109.17 77.58
2022 9.84 9.33 10.36 10.09 9.84 58.40 74.63 111.40 79.17
2023 10.04 9.52 10.57 10.29 10.04 59.60 76.16 113.68 80.79

Notes:
(1) Gas Reference Price (GRP) represents the average of all system and
direct (spot and firm) sales.
(2) Price paid at field delivery point.
(3) Price paid by CanWest net of raw gas gathering and processing charges
but before deduction of field gathering and compression charges.
(4) Reference point is FOB Edmonton for fractionated product.
(5) Natural Gas Liquids blended mix price assuming typical liquid
composition of 40% propane, 30% butane and 30% pentanes plus.
(6) May 30, 2008 is the last trading day of May 2008.
(7) Capital expenditures and operating costs are escalated at 2.0% per year
until 2023.


Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange approval. There can be no assurances that the transaction will be completed as proposed or at all. Investors are cautioned that, except as herein disclosed, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Radius should be considered highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

ADVISORY: Certain information in this press release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to the closing or completion of the Qualifying Transaction. Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with oil and gas production, marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; imprecision of reserve estimates; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; inability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward looking statements contained in this press release are expressly qualified by this cautionary statement.

The forward-looking statements contained in this news release are made as of the date of this news release, and Radius does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

Radius Resources Corp. is a junior oil and gas company engaged in the exploration for, and development and production of, crude oil and natural gas focusing in the Peace River Arch region of central Alberta. The Company's shares trade on the TSX Venture Exchange under the symbol "RAX".

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this statement.

Contact Information

  • Radius Resources Corp.
    Mr. David R.P. Mears
    Chairman & CEO
    (403) 265-9393
    (403) 265-9224 (FAX)
    or
    Radius Resources Corp.
    Suite 650, 816 - 7th Avenue SW
    Calgary, Alberta T2P 1A1