Sandstorm Metals & Energy Ltd.
TSX VENTURE : SND

Sandstorm Metals & Energy Ltd.

March 21, 2011 06:10 ET

Sandstorm Metals & Energy Agrees to Acquire Oil and Gas Streams

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 21, 2011) - Sandstorm Metals & Energy Ltd. ("Sandstorm" or the "Corporation") (TSX VENTURE:SND) is pleased to announce that it has entered into an oil and gas purchase agreement on currently producing oil and natural gas properties located in the Two Creek and Strathmore areas of Alberta, Canada.

Sandstorm has entered into the oil purchase agreement (the "Agreement") with Terrex Energy Inc. ("Terrex") (TSX VENTURE:TER) whereby the Corporation has agreed to purchase (a) 25% of all oil, natural gas and natural gas liquids produced for the life of the Two Creek Jurassic A pool and for 5 years of the Two Creek Jurassic B pool (the "Two Creek Property"), and (b) 15% of all oil, natural gas and natural gas liquids produced from the Strathmore property. Pursuant to the Agreement, Sandstorm will provide an upfront deposit (the "Upfront Deposit") to Terrex in the amount of $14.7 million plus ongoing per-unit payments of $15.00 per barrel of oil delivered, $1.00 per mcf of gas delivered, and $8.00 per barrel of natural gas liquids delivered. Sandstorm will also pay the direct transportation and royalty costs associated with its share of oil, natural gas and natural gas liquids.

Aside from the Upfront Deposit and ongoing payments, the Corporation is not required to contribute to any capital, exploration or operating expenditures in respect of the assets which are the subject of the Agreement. Terrex has provided the Corporation with a guarantee that Sandstorm will receive minimum before tax cash flows of $0.5 million in 2011, $1.1 million in 2012, $1.8 million in 2013, $2.2 million in 2014, $2.6 million in 2015, $2.4 million in 2016, $2.2 million in 2017 and $1.9 million in 2018 thus providing a 100% guaranteed return of capital. Terrex has also provided minimum development commitments including the drilling of two wells at Two Creek, and the implementation of chemical flood enhanced oil recovery ("EOR") program at both Two Creek and Strathmore. The Corporation has granted Terrex the right to buy back half of the future production under the Agreement, for a period of 24 months, upon Terrex making a payment of $9.6 million to Sandstorm, upon receipt of which, the percentage of production Sandstorm is entitled to purchase shall be decreased to 12.5% at the Two Creek Property and 7.5% at the Strathmore property. The Agreement is conditional on Terrex completing the acquisition of the Two Creek Property, and also on receipt by Terrex of approval of the TSX Venture Exchange.

"We are very excited about the opportunity we see in the oil and gas sector," stated Nolan Watson, President and Chief Executive Officer of Sandstorm, "this transaction is the first step in what we believe will be a significant growth sector for Sandstorm."

About the Two Creek Property and the Strathmore Property

The Two Creek Property includes approximately 16 producing wells in two separate oil pools on 4,320 acres of land. Two additional wells are expected to be drilled on the Two Creek Property within the next 18 months, and a chemical flood is expected to be implemented within the next three years.

The Strathmore property includes approximately 10 producing wells in one main oil pool on 3,131 acres of land. A chemical flood EOR program is scheduled to be implemented in late 2011.

The properties are characterized by relatively large original oil-in-place reservoirs with comparatively low recoveries to date. Sandstorm believes optimization and EOR programs at both the Two Creek Property and the Strathmore property can significantly increase production and recoverable reserves. On January 21, 2011 the Alberta Energy Resources Conservation Board approved Terrex's plans for an "EOR" program at Strathmore and Terrex intends to commence the planning, evaluation and development of such programs at the Two Creek Property immediately following closing of the acquisition.

ABOUT SANDSTORM METALS & ENERGY

Sandstorm Metals & Energy Ltd. is a growth focused resource based company that seeks to complete commodity purchase agreements with companies that have advanced stage development projects or operating projects. A commodity purchase agreement involves Sandstorm making an upfront cash payment to its partners and in exchange, Sandstorm receives the right to purchase a percentage of the commodity produced for the life of the asset, at a fixed price per unit. Sandstorm helps other companies in the resource industry grow their business, while acquiring attractive assets in the process.

Sandstorm is focused on low cost operations with excellent exploration potential and strong management teams. Sandstorm has completed commodity purchase agreements with NovaDX Ventures Corp., Royal Coal Corp. and Terrex Energy Inc. For more information visit: www.sandstormltd.com.

Cautionary Note Regarding Forward-Looking Information

Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information is based on reasonable assumptions that have been made by Sandstorm as at the date of such information and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Sandstorm to be materially different from those expressed or implied by the forward-looking information, including but not limited to: the impact of general business and economic conditions; the absence of control over mining operations from which Sandstorm will purchase coal and risks related to those mining operations, including risks related to international operations, government and environmental regulation, actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined; problems inherent to the marketability of minerals; industry conditions, including fluctuations in the price of metals, fluctuations in foreign exchange rates and fluctuations in interest rates; stock market volatility and competition, as well as those factors discussed in the section entitled "Risk Factors" in Sandstorm's annual information form for the financial period ended December 31, 2010. Although Sandstorm has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Sandstorm does not undertake to update any forward-looking information that is contained or incorporated by reference herein, except in accordance with applicable securities laws. Sandstorm does not provide any representation as to its comparability with other companies in its industry including, but not limited to Franco-Nevada Corporation, BHP Billiton, Rio Tinto and Western Coal.

Neither the 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

  • Sandstorm Metals & Energy Ltd.
    Nolan Watson
    President and Chief Executive Officer
    (604) 689-0234
    or
    Sandstorm Metals & Energy Ltd.
    Denver Harris
    Investor Relations Contact
    (604) 689-0234
    www.sandstormmetalsandenergy.com