WellStar Energy Corp.
TSX VENTURE : WSE.H
FRANKFURT : W6V1

WellStar Energy Corp.

September 12, 2012 07:45 ET

Wellstar Enters Into Letter of Intent to Acquire Oil & Gas Assets and Announces Private Placement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 12, 2012) - WellStar Energy Corp. (TSX VENTURE:WSE.H)(FRANKFURT:W6V1) (the "Company" or "WellStar"), announced today that on July 23, 2012 the Company submitted a cash offer of US$51.5 million ("the Offer") to an arm's length vendor of non-operated oil & gas assets located in North Dakota ("the Assets").

On September 7, 2012, after further negotiations with the vendor, the Company signed an acceptance letter (the "Letter of Intent") whereby the vendor agreed to the terms of the Offer and set an effective date for the transaction (the "Transaction") of November 1, 2012. The completion of the Transaction is conditional upon, among other things, completion of due diligence, entering into a mutually acceptable definitive purchase and sale agreement by September 28, 2012, preparation of a National Instrument 51-101 compliant technical report; the Company securing suitable financing within the timeframe agreed to by the parties and obtaining all necessary regulatory approvals to the Transaction, including the TSX Venture Exchange (the "TSX-V").

The Assets consist of significant non-operated working interests in approximately 18,271 gross (7,159 net) acres in North Dakota. The Assets are operated by an established Bakken exploration and production company with multiple operated drilling rigs and dedicated hydraulic fracturing crews. Based on data provided by the operator, including the current drill schedule in place and forecast, all acreage is currently expected to be held by production by year end 2013.

The Assets are currently producing approximately 450 net barrels of oil per day from multiple wells. There are another 45 gross (10.57 net) locations identified based on the planned drilling of Bakken and Three Forks wells per 1280 acre drill spacing unit. The operator has currently scheduled seven gross wells to be drilled in the first seven months of 2013 with an additional four wells currently anticipated to be drilled during the remainder of the year. 2013 capital expenditures on the Assets are currently expected to total approximately US$37 million.

The Company also announces a non-brokered private placement (the "Offering") of up to 1,333,333 shares (the "Shares") at a price of $0.15 per Share for total aggregate consideration of approximately $200,000. All securities issued in connection with the Offering will be subject to a statutory hold period of four months plus a day from the date of issuance in accordance with applicable securities legislation. The net proceeds from the Offering will be used by the Company for costs relating to the Transaction and for general working capital. The Company may pay a finder's fee on the Offering and on the Transaction within the amount permitted by the policies of the TSX-V. Closing of the Offering is subject to a number of conditions, including receipt of all necessary corporate and regulatory approvals, including the TSX-V.

The Company's president and CEO, Andrew H. Rees commented, "I am excited with the opportunity to enter the prolific North Dakota Bakken oil play. Management believes the key to success for a small company such as WellStar in the Bakken is to be aligned as a non-operator with a high quality multi-billion dollar operating partner. This allows a company to enjoy risk diversification, technology transfer and maintain low overhead which is extremely important when drilling $10 million wells. As a non-operator, low overhead is achieved because WellStar isn't responsible for R&D engineering, seismic and legal or accounting with respect to production. To advance the Company further, management will continue developing its existing assets, while utilizing relationships in the sector in pursue additional acquisitions under $100 million that may be deemed too small for major players."

ON BEHALF OF THE BOARD

Andrew H. Rees, President and Chief Executive Officer

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially. Except as required pursuant to applicable securities laws, the Company will not update these forward-looking statements to reflect events or circumstances after the date hereof. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by the Company.

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

  • WellStar Energy Corp.
    Andrew H. Rees
    President and Chief Executive Officer
    (604) 505-3739
    (604) 669-3041 (FAX)
    www.wellstarenergy.com