P3 Energy Ltd.

July 19, 2005 08:00 ET

Southpoint Resources Ltd. and P3 Energy Ltd. Announce Business Combination

CALGARY, ALBERTA--(CCNMatthews - July 19, 2005) - Southpoint Resources Ltd. ("Southpoint") and P3 Energy Ltd. ("P3") are pleased to announce that they have entered into a business combination agreement (the "Agreement") whereby P3 will amalgamate with 1175251 Alberta Ltd. ("Subco"), a wholly-owned subsidiary of Southpoint (the "Amalgamation"). Through the Agreement, shareholders of P3 will receive one (1) common share of Southpoint for each common share of P3 formerly held by them, for an issuance of up to 10,779,500 shares of Southpoint. One of the directors of Southpoint is also a director of P3 and holds under 3% of the outstanding shares of P3.

P3 will operate as a wholly-owned subsidiary of Southpoint until they are merged later in the year for operational efficiencies. At the Southpoint shareholder meeting to be held on August 23, 2005, Southpoint will seek shareholder approval to change its name to E4 Energy Inc.

The new management team will consist of Paul Starnino, President & Chief Executive Officer, Glenn Downey, Senior Vice President, Graham Cormack, Vice President, Engineering & Operations, Franco Civitarese, Vice President Finance & Chief Financial Officer and Randy Bergmann, Vice President, Land. This team consists of the original founding management team of E3 Energy Inc., which was a TSX listed company that sold to StarPoint Energy in January 2005 and was the significant transaction by which StarPoint converted to an energy trust. From December 2002 to December 2004, E3 raised $15.25 million with three separate financings and sold in January 2005 for more than $80 million. This team created sustainable growth in reserves, production, cash flow and net earnings per share through the execution of an integrated growth strategy of focused acquisitions, exploration, exploitation and enhancement of high quality, long life, crude oil and natural gas within core geographic areas. Over that period of time E3 sustained continued growth every quarter on a per share basis and at closing, E3 had reserves of over 6.3mmboe and production of over 1,600 boe/d. E3 was a top decile performer in finding and development costs with a proved producing reserves cost of $7.04/boe and a total proved plus probable finding and development cost of less than $6.00/boe over the life of the company.

A condition of the Amalgamation is that the board of directors of Southpoint be reconstituted to be comprised of 7 members. The members shall include two nominees from the existing board of directors of Southpoint, namely Mr. Scott Ratushny, currently Chairman & Chief Executive Officer and a director of Southpoint and Mr. John Brussa, currently a director of Southpoint and five nominees from P3.

The five new nominees to the board from P3, who will be nominated for election at the annual and special meeting of shareholders of Southpoint to be held on August 23, 2005 (the "Southpoint Meeting") are Mr. Paul Starnino, currently the President & Chief Executive Officer of P3, Mr. Glenn Downey, Senior Vice President of P3, Mr. Jim Brown, Vice President Finance & Chief Financial Officer of HighPoint Resources, Mr. Jim Pasieka, Partner at Heenan Blaikie LLP and Mr. Scott Saxberg, President & Chief Executive Officer of Crescent Point Energy Trust.

As a result of the Amalgamation, Southpoint shall acquire all of P3's existing producing assets. After the Amalgamation, Southpoint will have production in excess of 800 barrels of oil equivalent (boe) per day, split evenly between natural gas and light oil. The company will have cash flow for 2005 in excess of $9 million and will have net debt including working capital deficiency of approximately $7.5 million. Southpoint's oil and natural gas reserves will consist of proven plus probable reserves in excess of 2.1 million boe, as evaluated by Paddock Lindstrom.

Pro forma, the combined entity will have a full portfolio of exploration and development opportunities with more than 12 drilling locations and more than 10 re-completion opportunities on the combined B.C. and Alberta asset base. After completion of the Amalgamation, Southpoint will have a total of 33,356,904 common shares issued and outstanding, with former shareholders of P3 owning approximately 32% of the issued and outstanding common shares of Southpoint.

The boards of directors of each of the management of Southpoint and P3 have unanimously endorsed the Amalgamation and the board of directors of P3 will recommend that shareholders of P3 vote in favour of the Amalgamation. On a fully diluted basis, 55 percent of the current shareholders and stock-option holders of P3 have agreed to vote in favour of the transaction. Sprott Securities Inc. is acting as financial advisor to Southpoint.

The completion of the Amalgamation is subject to the satisfaction of a number of conditions, including, but not limited to, TSX Venture Exchange acceptance and shareholder approval of P3. The transaction cannot close until the required approvals are obtained. There can be no assurance that the Amalgamation will be completed as proposed or at all.

Southpoint is a Canadian junior energy company engaged in the exploration, development and production of crude oil and natural gas in British Columbia and Alberta.

Certain information regarding the Company contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other similar statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Southpoint Resources Ltd.
    Scott Ratushny
    Chairman & C.E.O.
    (403) 514-8115 ext. 223
    P3 Energy Ltd.
    Paul Starnino
    President & C.E.O.
    (403) 266-6747, ext. 27