SignalEnergy Inc.

May 06, 2005 23:59 ET

SignalEnergy and Goose River announce proposed business combination

CALGARY--(CCNMatthews - May 6) - SignalEnergy Inc. ("SignalEnergy") and
Goose River Resources Ltd. ("Goose River") are pleased to jointly
announce that they have entered into a letter of intent to effect a
business combination by way of plan of arrangement (the "Proposed
Transaction"). The Proposed Transaction, which is subject to the
approval of the boards of directors of both companies, regulatory
authorities and Goose River's shareholders, will result in the
shareholders of Goose River becoming shareholders of two companies: 1)
SignalEnergy; and 2) "Exploreco", a newly created exploration company
which will hold certain properties now held by both Goose River and

Terms of the Proposed Transaction

Under the terms of the Proposed Transaction, all of the outstanding
shares of Goose River shall be exchanged for, at the election of a
Goose River Shareholder: (i) 0.83 SignalEnergy shares per Goose River
Share; (ii) $1.00 in cash per Goose River share; or (iii) a combination
thereof, provided that the maximum aggregate amount of cash available
shall be limited to $10.0 million and the maximum aggregate
SignalEnergy shares issued shall be limited to 21.25 million shares.
Upon conclusion, Goose River shareholders will hold up to approximately
30% of SignalEnergy on a fully diluted basis, with SignalEnergy
shareholders holding the balance.

In addition, the shareholders of Goose River will receive, for each
share of Goose River, 1/20 of a share of Exploreco. SignalEnergy will
hold an equivalent number of non-voting shares in the new exploration

Benefits of the Proposed Transaction

Management of both SignalEnergy and Goose River believe the Proposed
Transaction to be highly beneficial to the shareholders of both
companies. The transaction is substantially accretive on net asset
value per share and cash flow per share for both SignalEnergy and Goose
River. Through SignalEnergy's significant tax pool balances, the
combined company will be able to realize significant value that would
be unavailable to either company on a stand-alone basis. Goose River's
rapid and successful corporate growth since current management
recapitalized the company has led to the value of reserves well
exceeding current tax pool coverage. The result is a large discrepancy
between the pre-tax and after-tax net asset values of Goose River's
current proved and probable reserves. By merging with SignalEnergy,
which has tax pools and capital losses in excess of $80 million, the
combined company will capture significant tax savings. The transaction
results in an increase in net pre-tax asset value per share of
SignalEnergy of approximately 7.2% to approximately $1.57 per share
(based on the issue by SignalEnergy of the maximum number of shares).

A cornerstone of SignalEnergy's growth strategy has been acquisitions
complementary to its grass root exploration and development programs.
Goose River marks the third acquisition, following Predator Exploration
Ltd and a privately held company in early 2005.

In addition to the compelling tax attributes of the Proposed
Transaction, Goose River contributes an attractive suite of lower risk
development opportunities on its highly concentrated land base as well
as a number of prospective exploration opportunities. The Goose River
prospect inventory includes approximately 15 infill drilling locations
at its core property, Redwater, Alberta. The lower risk, conventional
assets provide an excellent complement to SignalEnergy's growing
inventory of higher impact prospects, and low risk resource play
opportunities. The business combination provides a larger, more
diversified asset base which will allow SignalEnergy to aggressively
pursue its 2005 capital program.

Following the Proposed Transaction, management of the resulting company
will be the existing management team of SignalEnergy, led by Cameron
Bailey as President and Chief Executive Officer. It is intended that
the Board will be reconstituted to have representation from both

"We are highly complimentary of the value which the Goose River
management team has created and feel that our unique Company provides
the best platform to realize the full potential of those assets," said
Mr. Bailey. "SignalEnergy has pursued an aggressive growth strategy
which has included both corporate acquisitions and grass roots
exploration and development. Goose River's assets provide development
opportunities as well as allowing us to increase the scope of our
operations and potentially realize material cost savings."

Curtis Hartzler, the President of Goose River, and his management team,
have agreed to assist SignalEnergy to ensure a successful transition of
Goose River's asset base and exploration inventory to the resulting
company. Mr. Hartzler and his management team will assume control of
Exploreco, which will have assets contributed to it from both
companies. The assets will consist of two minor producing interests and
a significant amount of undeveloped acreage. The board of directors of
Exploreco will consist of the same individuals who presently constitute
the board of directors of Goose River.

Mr. Hartzler added, "From the perspective of Goose River shareholders,
we believe that this is a very synergistic marriage of the individual
strengths of both companies. The combination results in a solid
foundation from which to substantially grow the asset base. We are also
excited about the prospects for Exploreco and look forward to the
continuation of our record of value creation for shareholders."

Following the Proposed Transaction, the resulting company will have, on
a combined basis, the following:

- daily average production of over 2,000 boe/d, weighted 70% to natural
gas and 30% to crude oil and natural gas liquids with a forecast 2005
exit rate in excess of 2,500 boe/d

- annualized pro forma cash flow in excess of $24 million ($0.35 per

- 60,000 net acres of undeveloped land

- 68.8 million basic shares (based on the issue by SignalEnergy of the
maximum number of shares)

- tax pools of approximately $80 million

- net debt of approximately $13.5 million

- Combined net asset value of approximately $112 million, based on
year-end engineering reports for both companies, which equates to $1.63
on a per share basis.

Based on Sproule Associates Ltd.'s report dated February 28, 2005, the
exchange ratio translates into a cost per boe of Goose River reserves
that is approximately $9.85/boe and $17.48/boe on a proven plus
probable basis and a proven basis respectively. The Proposed
Transaction has the unanimous support of the boards of directors of
both SignalEnergy and Goose River.

The Proposed Transaction remains subject to completion of due
diligence, completion of a formal arrangement agreement approved by
both boards and receipt by each of the companies of a fairness opinion.
The proposed plan of arrangement will also require the approval of 66-
2/3% of the votes of the Goose River shareholders cast at a meeting
held to consider the arrangement, as well as approval of the Court of
Queen's Bench of Alberta and other regulatory agencies. The information
circular that will detail the plan of arrangement is anticipated to be
mailed to shareholders of Goose River before June 15, 2005, with the
meeting of Goose River's shareholders to be held approximately one
month following the mailing.

In the letter of intent, SignalEnergy and Goose River have agreed to
not solicit or initiate discussions or negotiations with any third
party for any business combination until May 10, 2005. The formal
arrangement agreement will provide that Goose River and SignalEnergy,
under defined circumstances, have agreed to pay a non-completion fee of

First Associates Investments Inc. and Canaccord Capital Corporation
have acted as financial advisors to SignalEnergy. Acumen Capital
Finance Partners Limited has acted as financial advisor to Goose River.

SignalEnergy and Goose River are Calgary, Alberta, Canada based crude
oil and natural gas exploration, development and production companies.

Certain information set forth in this news release, including
management's assessment of SignalEnergy's and Goose River's 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 the parties' 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, 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 materially from those expressed in, or implied by the forward
looking statements in this news release, 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 the parties will derive therefrom. SignalEnergy and Goose
River each disclaim any intention or obligation to update or revise any
forward looking statements, whether as a result of new information,
future events or otherwise.

Contact Information

    J. Cameron Bailey
    President and Chief Executive Officer
    (403) 398-3345
    (403) 398-3366 (FAX)


    Curtis A. Hartzler
    (403) 263-4310
    (403) 263-4368 (FAX)