Transco Resources Corp.
TSX VENTURE : TRN

CEP International Petroleum Ltd.

October 11, 2005 13:00 ET

Transco and CEP International Petroleum Ltd. Agree to Combine

CALGARY, ALBERTA--(CCNMatthews - Oct. 11, 2005) -

Transco Resources Corp. and CEP International Petroleum Ltd. Announce Proposed Combination

Transco Resources Corp. ("Transco") (TSX VENTURE:TRN) and CEP International Petroleum Ltd. ("CEP") are pleased to announce that they have entered into a binding agreement dated September 30, 2005 ("Agreement") to combine the businesses of Transco and CEP by means of an amalgamation (the "Proposed Transaction") to form a new company to be known as CEP International Petroleum Ltd. ("Amalco") (the proposed combination of Transco and CEP is referred to as the "Proposed Combination"). The Proposed Combination is at arm's length.

Description of CEP and Transco Businesses

CEP is a private company incorporated under the laws of the Yukon on November 23, 1998. CEP's principal assets are located in the Eastern Russia on the Kamchatka peninsula. The Kamchatka peninsula sits between the Sea of Okhotsk and the Bering Sea in the North Pacific Ocean. It is located approximately 1000 miles North of Japan.

Transco is engaged in the exploration for, and the development, production and acquisition of, natural gas and petroleum interests. Transco's strategy for growth includes an active acquisition, exploration, exploitation and development program.

Upon completion of the Proposed Combination, Amalco will continue as an oil and gas exploration and development company, with focus in Eastern Russia on the Kamchatka peninsula.

CEP holds, through its Russian subsidiaries, an 85% interest in two exploration licenses located onshore in the Koriakia Region of the Kamchatka peninsula. In aggregate, these exploration licenses cover 6,424 square kilometers.

CEP initiated an exploration program on the properties in 1998 by acquiring geological and geophysical information relating to oil and natural gas from VINIGRI Geological Institute in St. Petersburg, Russia. VINIGRI is a prominent Russian scientific institution which has been involved in oil and natural gas exploration in the far east of Russia since the 1930s. In 1999 CEP initiated discussions with representatives of the Kamchatka and Koriakia regional administrations with respect to the acquisition of exploration and production licenses. In November of 2000, CEP was granted, through its Russian subsidiary CJSC Unetmelgin, the Tigil onshore exploration license in Koriakia (the "Tigil License Area"). In May of 2003 the Icha exploration license in Koriakia was granted to another subsidiary of the Corporation, CJSC Icha Exploration (the "Icha License Area).

CEP has reprocessed, and interpreted an extensive seismic and well database on these properties. CEP has obtained an extensive database of seismic, well and gravity information on and adjacent to its license areas. This includes approximately 15,000 kilometers of seismic data in the Tigil License Area shot between 1978 and 1988, and 1,000 kilometers of seismic data in the Icha License Area shot between 1977 and 1994. In 2002, CEP re-processed 700 kilometers of seismic data in the Tigil License Area. CEP has also acquired, reprocessed and re-interpreted high-resolution gravity surveys in the Tigil and Icha License Areas. These interpretations have resulted in the identification of 10 oil prospects on the Tigil and Icha License Areas. CEP management believes that new seismic data is required to confirm these prospects.

CEP has determined from its examination of geological, seismic and well data on the license areas and the nearby discovered fields in the Kolpakovsy License, which are held by the Russian Government, that both the Tigil License and Icha License have good potential for discovery of commercial quantities of oil and natural gas.

The primary reservoir target is the Paleocene fluvial sandstone which, in the Nizhne-Kvakchikskoye field, is over 100 meters thick and has a porosity exceeding 20%. Numerous wells have tested light crude oil from Tertiary siltstones confirming the presence of an active oil-generating petroleum system. In 1986, a well on the Tigil License Area blew out gas and oil from a depth of 1,200 meters.

The Icha License

The Icha License, 3,020 square kilometers in size, is located due north of the Kolpakovsky Production License, and covers numerous untested large structures. Offshore regional seismic data shows that the very good reservoir encountered in the Nihzne-Kvakchikskoye field is likely to be present in the Icha area, and basin modeling indicates the license area is oil prone. Old wells drilled immediately south of the license tested both oil and gas. CEP has obtained samples of the crude oil and completed modern geochemical analyses of them to determine their source and exact type. Recent good quality seismic was acquired over the southern part of the license by the Russian government in 1995 and 1996. To date, CEP has assembled and reprocessed all of the existing seismic, potential field, well and geological data and conducted two seasons of surface geological work in the area. This data, in combination with extensive potential field data, has outlined three large structures that are the focus of CEP's exploration effort.

The Tigil License

The Tigil License, 3,638 square kilometers in size, was one of the first areas of Kamchatka to be explored for oil. In 1932 the first well was drilled, Tockinsky 1 located on a surface anticline. It encountered significant oil shows at a depth of 800 meters, and as a result, extensive follow-up exploration was conducted over the ensuing 30 years, involving the acquisition of approximately 15,000 kilometers of seismic and the drilling of 6 exploration prospects. Although these old wells were located on the basis of surface geology or poor quality seismic, several of them had significant oil shows including a well at Rosschinskaya which blew out oil and gas and a well at Gavinskaya which recovered cores bleeding oil and condensate. CEP has acquired all of this old exploration information and re-interpreted the data using the latest computer and geologic modeling systems. Computer workstation mapping of the newly re-processed 1986 seismic data has confirmed and highlighted three large oil prospects located in the western part of the license area. These structures are very similar in nature to the oil fields located on nearby Sakhalin Island.

CEP's exploration work has identified numerous oil prospects on the Tigil License that are well defined structures in close proximity to proven oil source rocks, and there is good reservoir in offset wells. The combination of these factors makes CEP optimistic that there is a probability of an oil discovery on the Tigil License.

CEP has completed an extensive geological report describing in detail the petroleum geology of West Kamchatka. This report has been reviewed by Scott Pickford PLC, an independent United Kingdom based consulting firm that specializes in the preparation of geological reports and reserve estimations. The stratigraphy of western Kamchatka is similar to that of Sakhalin Island. According to data published by Russian government agencies, in the Sakhalin area a total of 63 onshore and 11 offshore fields have demonstrated proven reserves of more than 6 billion barrels of recoverable oil, establishing Sakhalin Island as an important oil producing region in Eastern Russia. These recoverable reserve estimates are not in accordance to COGE Handbook standards and should not be relied upon.

Terms of Proposed Combination

Pursuant to the Agreement, holders of common shares of CEP ("CEP Shares") will receive shares of Amalco ("Amalco Shares") such that all of the securities of CEP will be acquired for up to a maximum of 17,569,859 Amalco Shares or 1.00 Amalco Share for each CEP Share. Securities convertible into CEP Shares will be exchanged for Amalco securities of a similar character based on the CEP exchange ratio of 1 to 1.

Pursuant to the Agreement, holders of common shares of Transco ("Transco Shares") will receive Amalco Shares such that all of the securities of Transco will be acquired for up to a maximum of 22,476,682 Amalco Shares or 1.00 Amalco Share each Transco Share. Securities convertible into Transco Shares will be exchanged for Amalco securities of a similar character based on the Transco exchange ratio of 1 to 1. The deemed price for the Proposed Combination is $1.00 per Amalco Share or in aggregate $17,569,859 for all the CEP Shares.

The Proposed Combination is subject to a due diligence period which terminates on October 7, 2005, as well as standard conditions, including the condition that both the Transco and CEP shareholders holding 66 2/3% of the Transco Shares and CEP Shares vote their respective shares in favour of the Proposed Combination. In addition, there is a mutual termination payment in the amount of $500,000 in the event the Proposed Combination does not proceed for certain reasons.

At the time of closing of the Proposed Combination there are expected to be 22,476,682 Transco Shares issued and outstanding and 17,569,859 CEP Shares outstanding, resulting in a total of 40,046,541 Amalco Shares. Certain of the Amalco Shares issued pursuant to the Proposed Combination in exchange for CEP Shares may be required to be deposited into escrow and released on terms to be determined in accordance with the requirements of the TSX Venture Exchange Inc. (the "Exchange").



A financial summary of CEP for the periods indicated is as follows:

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August 31, May 31, May 31, May 31,
2005 2005 2004 2003
(Unaudited) (Unaudited) (Audited) (Audited)
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Current Assets 4,077,000 214,875 980,527 1,034,656
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Petroleum and Natural
Gas Properties 1,936,000 2,092,881 3,489,273 2,936,859
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Current Liabilities 908,000 964,386 2,321,873 340,298
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Operating Revenues nil 14,177 22,273 20,456
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Operating Expenses 392,000 797,178 944,862 1,276,644
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Cash Flow (390,000) (768,705) (978,698)(1,143,675)
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Shareholders Equity 5,105,000 1,340,370 2,125,948 3,628,030
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Private Placement

Transco has announced on September 21, 2005 an agreement with Research Capital Corporation to raise up to $8,000,000 through the issuance of up to 8,000,000 common shares of Transco. The proceeds of this private placement are expected to be used primarily for the seismic program on the Tigil Licence.

Stock Options

Amalco also intends to grant incentive stock options for 1,800,000 common shares in Amalco at a price of 1.28 or higher per common share, in conjunction with closing of the Proposed Combination, to certain directors, officers and employees and consultants of Amalco.

New Management Upon Completion of the Proposed Combination

Upon completion of the Proposed Combination the directors of Amalco will be Robert Maxwell, Brian Hearst, David Antony, Charles Selby, Khusro Mirza, Robert Rooney and Peter Hubacheck. The officers of Amalco will be Robert Maxwell (President & CEO), Brian Hearst (V.P. Finance & CFO), and Frederic Monnier (V.P. Exploration).

Biographies for the proposed new officers and directors of Amalco are as follows:

Robert J. Maxwell - Proposed President, CEO and Director

Mr. Maxwell holds a Bachelor of Science in Geology and a Master of Science in Geochemistry, is a designated Professional Geologist by the Association of Professional Engineers, Geologists and Geophysicists of Alberta (APEGGA). Mr. Maxwell has over 23 years of experience in project management of petroleum exploration and development, most of which has been in international operations.

Mr. Maxwell has been the president of CEP since 1998. Prior there to, Mr. Maxwell was a project manager for PanCanadian Petroleum's international group, and a petroleum geologist for Conoco in Egypt, for Asamera in Indonesia, and for Shell Canada.

Brian Hearst - Proposed CFO and Director

Mr. Hearst holds a Bachelor of Economics and is a Chartered Accountant with over 24 years of experience, including eight years of experience in a senior management role with an international oil and gas company. Mr. Hearst was appointed Chief Financial Officer and Director of CEP in March, 2005.

Prior to March, 2005, he was Chief Financial Officer and Corporate Secretary of Canoro Resources Ltd. (CNS-TSX-V), a junior international oil and gas company, from 1996 to 2004, (a director from 1997 to 2002) and an independent financial consultant from 2004 to 2005.

David Antony - Proposed Director

Mr. Antony is a Chartered Accountant, with over 15 years experience with both private and public companies. He is currently Chief Executive Officer of Transco. As well Mr. Antony is President and a director of March Resources Corp. (MCF-TSX-V). From 1991 to 2001, Mr Antony was a partner at Halpin Antony Owen Mayer, Chartered Accountants.

Charles Selby - Proposed Director

Mr. Selby is both a Lawyer and a Petroleum Engineer. Mr Selby is currently Vice President and Corporate Secretary for Pengrowth Corporation Fund (PGF-TSX). As well Mr. Selby is Chairman and CFO of AltaCanada Energy Corp. (ANG-TSX-V), Director of Qwest Energy Corporation, a Director of Interex Oilfield Services Ltd. and a Trustee for EOG Saskatchewan Trust.

Mr. Khusro Mirza - Proposed Director

Mr. Mirza holds a Master of Science in Earth Sciences from Waterloo University. Mr. Mirza has over 30 years experience in oil and natural gas exploration and development operations in Canada and internationally. Mr. Mirza was Vice President CEP from November, 1998 to April, 2005. Prior to November, 1998, Mr. Mirza accumulated 25 years experience in oil and natural gas exploration and development with major oil companies in Canada and abroad.

Robert Rooney - Proposed Director

Mr. Rooney holds a Bachelor of Laws. Mr. Rooney has been a Partner of Bennett Jones LLP since 1992. Mr. Rooney has been a director of Zenas Energy Corp. (ZNS-TSX-V) since July 2005, a director of Blizzard Energy (BZZ-TSX) from December, 2002 to July 2005, a director of Resolute Energy (TSX-V) since March 1999, a director of Tidal Resources (TSX-V) from 1996 to 2003, and a director of M.L. Cass Petroleum (TSX-V) from 1998 to 2001.

Peter Hubacheck - Proposed Director

Mr. Hubacheck holds a Bachelor of Science in geology, and has been designated a Professional Geologist by APEGGA. He has over 30 years of experience in the oil and gas and mining industries. Mr. Hubacheck has been a director of CEP since April, 2004. He has been a director of Contact Diamond Corp. (CO-TSX-V) since April, 2005, and a director of Agnico Eagle Mines Ltd. from May, 1996 to August, 1998. Since January, 1995, Mr. Hubacheck has been a principal of WA Hubacheck Consultants Ltd. providing geological exploration services to oil and gas and mining companies.

Frederic Monnier - Proposed VP Exploration

Dr. Monnier holds a Ph.D. in geochemistry, and has over 25 years experience in international oil and gas exploration. Dr. Monnier was appointed as Vice President and a Director of CEP in March, 2005. He has spent 25 years principally with Elf Aquitaine, Total, and Chevron. Dr. Monnier specializes in oil geochemistry and basin modeling.

Approvals and Conditions

The Proposed Combination is subject to both shareholder approval and regulatory acceptance under the policies of the Exchange.

Research Capital Corporation, subject to satisfactory due diligence, will act as a sponsor to Transco in connection with the transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

In connection with the amalgamation, Transco will pay an arms length finder's fee of 500,000 common shares of Transco at a deemed value at the transaction price. The finder's fee is payable upon the closing of the above noted transaction. The finder's fee is subject to TSX-Venture Exchange acceptance.

Cautionary Statements

Completion of the Proposed Combination is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance. The Proposed Combination cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Combination will be completed as proposed, or at all.

Investors are cautioned that, except as disclosed in the Joint Management Information Circular of Transco and CEP to be prepared in connection with the Proposed Combination, any information released or received with respect to the Proposed Combination may not be accurate or complete and should not be relied upon. Trading in the securities of Transco should be considered highly speculative. The Transco common shares will remain halted on the TSX Venture Exchange pending receipt of certain documentation by the TSX Venture Exchange.

The Exchange has in no way passed upon the merits of the Proposed Combination and has neither approved nor disapproved the contents of this press release.

The Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of this information.

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