RedStar Oil & Gas Inc.

RedStar Oil & Gas Inc.

August 10, 2005 09:19 ET

Redstar Oil & Gas Inc. Announces Amalgamation with Pelorus Energy Corp.

CALGARY, ALBERTA--(CCNMatthews - Aug. 10, 2005) -

Not for distribution to U.S. newswire services or for dissemination in the United States of America.

RedStar Oil & Gas Inc. (TSX VENTURE:RED) ("RedStar" or the "Company") is pleased to announce the successful completion of the previously announced business combination of RedStar and Pelorus Energy Corp. The two companies have now amalgamated to form a single entity ("Amalco") and will continue to carry on business under the name "RedStar Oil & Gas Inc.".

In the past 8 months RedStar has taken several significant steps toward developing a solid platform of production, reserves and cashflow from which the Company will be able to produce above average, sustainable growth for our shareholders.

Since the commencement of operations in December 2004, the Company has built and operates a production base of long life natural gas reserves, located primarily in north eastern British Columbia and has identified multiple growth opportunities that will be exploited in the upcoming winter drilling season.

Highlights to date include:

- RedStar closed three private placement financings for gross proceeds of over $31 million.

- The Company shot a 400 square mile 3D seismic program at Halfmoon Creek and Windsor Creek on the Cutbank Ridge and a 50 square mile 3D seismic program at Ekwan both in north eastern British Columbia.

- The Company has negotiated two farm-in agreements under a portion of the seismic lands and developed a multi-well drilling program for the upcoming winter.

- RedStar participated in two additional farm-in agreements and drilled 5 gross gas wells with a 100% success ratio.

- In the first 8 months of operations, RedStar also acquired one private company and completed three asset acquisitions consisting of high quality, long life natural gas reserves and production.

- RedStar continues to maintain a strong balance sheet with a working capital surplus of approximately $4 million and unutilized credit facilities that are currently being reviewed.

- The Company currently has a production base of approximately 600 boe/d and a large inventory of drillable locations in British Columbia and Alberta.

Details of the Amalgamation

Through the completion of the amalgamation, each twenty-five (25) common shares of Pelorus were exchanged for one (1) common share of Amalco and each twenty-five (25) common shares of RedStar Oil & Gas Inc. were exchanged for 0.75 of a common share of Amalco and 0.25 of a non-voting common share of Amalco. Accordingly, Amalco now has outstanding approximately 17,318,605 common shares and 2,731,404 non-voting common shares.

Name Change and Trading of Amalco Shares on the TSX Venture Exchange

The name of the Company has been changed to "RedStar Oil & Gas Inc.". The shares of the Company will commence trading on the TSX Venture Exchange on a post-amalgamated basis, reflecting the 25 for 1 exchange ratio, on Wednesday, August 10, 2005 under the trading symbol "RED".

Completion of Acquisition

In conjunction with the completion of the amalgamation the Company has acquired all of the outstanding shares of Bowfort Oil & Gas Ltd. ("Bowfort"), a private oil and gas company, in exchange for 1,142,858 Amalco common shares at a deemed price of $1.75 per share. The shares issued pursuant to the Bowfort acquisition will commence trading on the TSX Venture Exchange on or about August 12, 2005, at which time there will be 18,461,463 Amalco common shares issued and outstanding.

RedStar Oil & Gas Inc. is a junior oil and gas company engaged in the exploration, development and production of oil and natural gas in the Western Canadian Sedimentary Basin.

Cautionary Statements

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Certain information set forth in this document, including management's assessment of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond this party's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Actual results, performance or achievement could differ from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will be derived there from. Pelorus disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Pelorus
    Chester J.R. Krala
    (403) 262-3130
    (403) 239-0621 (FAX)
    Avenir Capital Corporation
    William Gallacher
    (403) 237-9949