Reef Resources Ltd.
TSX VENTURE : REE

Reef Resources Ltd.

May 24, 2011 09:25 ET

Reef Resources Ltd. Announces Heads of Agreement With Solo Oil Plc to Acquire 38.1% Working Interest in Ontario Properties

CALGARY, ALBERTA--(Marketwire - May 24, 2011) -

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

Reef Resources Ltd. (TSX VENTURE:REE) ("Reef" or the "Company") reports that Solo Oil Plc ("Solo") and Reef have entered into a Heads of Agreement (HoA) whereby Solo will acquire a 38.1% Working Interest (WI) in Reef's Ontario properties for a consideration of $4,000,000. Under the terms of the agreement, Solo will convert its existing loan of $1.65 M and provide further funding of $2.35M to acquire a Working Interest position of 38.1% in the Ontario properties and associated intangible assets. The Ontario properties include the Ausable, Airport North and Airport South reefs as well as surface equipment, 23,000 acre 3D seismic and other associated rights (gas storage).

Reef will receive an initial payment of $200,000 upon signing of the HoA and a further payment of $650,000 upon execution of a General Rights Conveyance Agreement (GRCA) and Joint Operators Agreement for a Working Interest of 23.8%. The latter tranche is expected within 30 days of signing the HoA.

An additional 14.3% WI will be acquired by Solo for $1.5 M conditional upon Reef providing a matching $1.5 M. Execution of a second GRCA for the additional 14.3% will occur within 30 days of successful closing of the matching funds.

Reef has outlined a capital budget to complete Ausable # 5, remove frac tools from Ausable #2, drill and complete two wells, purchase a de-ethanizer and purchase of cushion gas for the Enhanced Oil Recovery (EOR) and Natural Gas Liquids (NGL) program. The total budget for this phase of development is approximately $5.5 M. Reef will use the proceeds from the sale of the working interest and new equity capital ($1.5 million) to fund their share of the capital budget.

Reef recently completed the log analysis on its Ausable # 5 well. Log analysis indicates 72 metres net pay of oil and NGL's in the Guelph and A2 formations.

Arnie Hansen, President & CEO, stated "We are very pleased to have Solo on board as a Working Interest partner. This provides us with a solid financial partner that shares our objectives in the future development of the Ontario assets".

Reef will be announcing test results after completion of Ausable #5 and the details of the next development steps in the EOR, NGL program in due course. The Ausable reef is currently on production and is generating revenue from the initial program which commenced in 4th quarter 2010.

Footnote: The Company's Ontario asset has gas storage rights, gas re-injection permit for gas recycle, NGL recovery, enhanced oil recovery and arbitrage. A key component of Reef's Ontario strategy is to identify and exploit undervalued prospects in the Ontario basin by utilizing the company's 23,500 acres of proprietary 3D seismic. In addition to its Ontario Properties, Reef has identified multiple oil and gas acquisition and development opportunities throughout Canada.

Forward Looking Statements — This news release contains certain forward-looking statements, which include assumptions with respect to the valuation of Reef's reserves, funds raised from a financing and future capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company 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 may be required by applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Reef Resources Ltd.
    Arnie Hansen
    President & CEO
    (403) 251-9447

    Reef Resources Ltd.
    Larry Olson
    Vice President, Finance
    (250) 490-3378

    Reef Resources Ltd.
    2020 - 801 6 Ave SW
    Calgary, AB T2P 3W2