RedStar Oil & Gas Inc.

RedStar Oil & Gas Inc.

September 21, 2005 13:13 ET

Redstar Oil & Gas Inc. Announces Transaction with Large Independent Producer

CALGARY, ALBERTA--(CCNMatthews - Sept. 21, 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) (TSX VENTURE:RED.nv) ("RedStar" or the "Company") is pleased to announce that RedStar has entered into an option and farm-in arrangement (the "Agreement") with a major independent gas producer (the "Major"). The agreement involves the option to farm-in on all shallow gas and oil prospects (primarily the upper Mississippian) in RedStar's core area of northeast British Columbia. The optioned area includes the lands owned or controlled by the Major in this area, consisting of over 2.77 million acres. Through the Agreement, RedStar will have access and priority to the Major's extensive gas gathering, production, and processing infrastructure. In addition, RedStar has access to the Major's technical database including a comprehensive 2D and 3D seismic data inventory and has committed to shooting a 3-D seismic program for winter 2006.

Details of the agreement:

- The 2.77 million acre option and farm-in will give RedStar immediate access to a large prospect fairway of proven, shallow sweet gas in its northeast B.C. core area. The area contains multi-zone plays and trends which will enable RedStar to expand in this area. Initial exploration work indicates enough drilling opportunities to provide for a multi-year exploration program in the area.

- RedStar will have a right of first refusal to purchase available production from the Major in northeast B.C. The right to purchase, combined with the 2.77 million acre option and farm-in, will give RedStar an expansive, highly prospective area for exploitation and exploration that will provide RedStar with significant growth potential in 2006 and for the remainder of the multi-year Agreement.

- RedStar will have the potential opportunity to purchase crown lands and/or participate with the Major provided it is a co-operative venture and in the interest of the Major.

- RedStar has contracted drilling, completion and pipeline services for the upcoming winter drilling season and has budgeted 22 winter drilling locations in the first phase of this multi-year program. RedStar anticipates expanded drilling programs over the next 3 years.

Currently RedStar is producing approximately 600 BOE per day with significant growth potential in 2006. RedStar is a junior oil and gas company focused on creating shareholder value by growing per share production, reserves and cashflow, through acquisitions and a focused exploration, development and exploitation program.

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. RedStar 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

  • RedStar Oil & Gas Inc.
    Chester J.R. Krala
    President & CEO
    (403) 262-3130
    (403) 239-0621 (FAX)
    Avenir Capital Corporation
    William Gallacher
    (403) 237-9949
    Cell: (403) 613-5204
    RedStar Oil & Gas Inc.
    Lawrence F. Walter
    Vice President, Finance & CFO
    (403) 262-3130
    (403) 239-0621 (FAX)