SignalEnergy Inc.

February 01, 2006 23:59 ET

SignalEnergy Enters into a Significant Asset Sale

CALGARY--(CCNMatthews - Feb. 1) - SignalEnergy Inc. (TSX:SGI) ("Signal" or the "Company") is pleased to announce that it has entered into a transaction to sell a significant portion of its assets to distribute the net proceeds to its shareholders and continue to operate as a going concern.

The transaction contemplates selling 4.84 million boe of proven and probable reserves, 70,952 acres (40,910 net acres) of undeveloped land and related facilities in the Kaybob, Carrot Creek and Redwater areas for $100 million cash (subject to certain adjustments). Signal has approximately $110 million of tax pools and tax credits which it intends to apply against the receipt of the proceeds from the asset sale for the purpose of minimizing tax liability (to the extent permitted under prevailing legislation). The effective date of the transaction is February 1, 2006 and is scheduled to close on February 24, 2006.

The Company believes that the consideration being received for the assets represents full value. While this disposition is outside the normal course of business, it will provide an opportunity of significant and immediate cash realization for the shareholders.

The distribution of proceeds to shareholders will take place as soon as possible and is subject to regulatory authority approval. It is the intention of the Company to payout all of the net proceeds in a tax efficient manner which may include a return of some or all of the Company's stated capital. Prior to the sale the Company's total indebtedness is approximately $26.5 million of which all or a portion of the debt will be reduced by the net proceeds from the sale.

Signal will retain its assets in the Buick Creek area located in North East British Columbia, and Chigwell/Bashaw area located in Central Alberta. After completion of the proposed cash distribution, Signal will consist of the following attributes:

- Current production of 400 boe/d with 100% weighting to natural gas and natural gas liquids.

- Total proven reserves of 1.27 MMboe and total proven plus probable reserves of 1.96 MMboe as at September 30, 2005.

- Reserves net present value discounted at 10% of $27.3 MM total proven ($0.39 per share) and $38.8 MM$ total proven plus probable ($0.55 per share).

- Reserve life index of 8.7 years on a total proven basis and 13.7 years on a total proven plus probable basis.

- 13,633 acres (7,887 net acres) of undeveloped land independently evaluated at $1.6 MM in value.

- Prospect inventory of 12-18 gross CBM locations and 4-6 gross conventional drilling prospects within its core areas.

- High net-back properties with operating costs estimated at $5.00/boe.

- No production hedges or long-term marketing contracts.

The decision to pursue this sale will also allow the Company to be more competitive with the number of exploration focused companies created from recent trust conversions. The Company will continue to aggressively pursue full-cycle exploration and development activities supplemented with a buy and exploit strategy.

Based on The Reserve Report dated October 1, 2005 Signal's success can be measured by:

- since recapitalization, Signal has added 6.8MMboe

- achieved proven and probable finding and development costs of $12.10 per boe ($13.77 per boe including an estimate for future capital) while maintaining a recycle ratio of 2.9 times over the past 18 months

- maintained a recycle ratio of 2.9 times over the past 18 months

The reserve and present worth value referenced herein are based on an independent reserve evaluation prepared by Gilbert Laustsen Jung Associates Ltd. and Sproule Associates Limited as at October 1, 2005 ("The Reserve Report"). FirstEnergy Capital Corp. was retained to provide financial advisory services to the Company related to the transaction and has provided an opinion to the board that the transaction is "fair from a financial point of view".

Caution to Reader

This news release contains forward-looking statements and the reader is cautioned not to place undue reliance on these statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predications, forecasts, projections and other forward-looking statements will not occur.

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