Welton Energy Corporation
TSX : WLT
TSX : WLT.WT

Welton Energy Corporation

January 18, 2006 17:07 ET

Welton Energy Corporation Achieves 2005 Exit Production Rate Over 1,000 boe per day and Files Final Prospectus for $10.5 Million Convertible Debenture Rights Offering

CALGARY, ALBERTA--(CCNMatthews - Jan. 18, 2006) -

Not for distribution to United States newswire services or for dissemination in the United States.

Welton Energy Corporation ("Welton" or the "Corporation")(TSX:WLT)(TSX:WLT.WT) is pleased to announce its 2005 exit production rate and the filing of its Final Prospectus for the Corporation's $10.5 million Convertible Debenture Rights Offering.

WELTON ACHIEVES 2005 EXIT PRODUCTION RATE OVER 1,000 BOE PER DAY

Welton achieved an estimated 2005 exit production rate of 1,010 boe per day, comprising approximately 45% natural gas and natural gas liquids and 55% crude oil (mainly heavy oil). In addition, approximately 50 boe per day of production was shut in at year end due to temporary facility/start-up constraints.

WELTON FILES FINAL PROSPECTUS FOR $10.5 MILLION CONVERTIBLE DEBENTURE RIGHTS OFFERING

Welton has filed the Final Prospectus for its $10.5 million Convertible Debenture Rights Offering. The Corporation intends to use the proceeds from the offering principally to repay the note payable owing to Brompton Financial Limited ("BFL") and certain of its directors, which was previously advanced to acquire Era Oil & Gas Corp. in September 2005.

As described more fully in the Final Prospectus, Welton is issuing to the holders of its outstanding common shares on January 30, 2006 transferable Rights to subscribe for and purchase a total of $10.5 million of 8% Secured Convertible Debentures in $1,000 increments. The Convertible Debentures will have a maturity date of January 15, 2009.

Shareholders will receive one Right for each common share held, and 3,667 Rights will entitle the holder thereof to purchase a Convertible Debenture at a price of $1,000 on or before February 24, 2006. Rightsholders will, under certain conditions, be entitled to subscribe for additional Convertible Debentures. The Corporation currently has 38,502,974 common shares issued and outstanding.

The Rights, the Convertible Debentures and the Common Shares will trade on the Toronto Stock Exchange.

Convertible Debentures will be convertible at the option of the holder into common shares of the Corporation at a conversion price of $1.55 per share at any time prior to the earlier of the last business day prior to a redemption date or maturity date.

After July 15, 2007, the Corporation may under certain conditions redeem the Convertible Debentures where the weighted average trading price of its common shares exceeds $2.06 for a period of 20 days.

The Convertible Debentures will be direct secured obligations of the Corporation, but will be subject to security for present and future Senior Bank Indebtedness of the Corporation and to security associated with any hedging transactions.

BFL, which owns approximately 14.2% of Welton's outstanding common shares, and all directors of the Corporation, who own directly or indirectly in aggregate approximately 15.06% of Welton's outstanding common shares, anticipate participating in the offering to the full extent of the common shares they hold. BFL also has provided a standby commitment to subscribe for any Convertible Debentures not taken up by other shareholders.

The foregoing is only a summary of certain terms and conditions of the offering. The full text of the Final Prospectus can be accessed on SEDAR at www.sedar.com.

OUTLOOK

Welton is an opportunity-rich junior oil and gas company with a diversified suite of prospects ranging across the Western Canadian Sedimentary Basin, including resource-type development projects such as Mantario East, Brazeau River, Ricinus, and Medicine Lodge, exploitation/lower-risk exploration plays with significant upside potential such as Majeau and Woking, and higher-risk, high-potential exploration opportunities in the Karr, Peace River Arch, and Chime areas. These projects frequently have multi-zone potential and provide a balanced portfolio of crude oil and natural gas opportunities for both short and long-term growth.

With approximately 80 drilling locations on the books and upwards of $26 million of projects identified, 2006 is expected to be significant for the Corporation. The Corporation also continues to look at new acquisition opportunities to complement its drilling activities.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy the common shares in any jurisdiction. Such securities have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States, or to a U.S. person, absent registration or an applicable exemption from the registration requirement.

Cautionary Statements

Certain information set forth in this document contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's 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, the 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 the preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Welton's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements 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 Welton will derive therefrom. Welton disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A barrel of oil equivalent (boe) is derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent. A boe conversion may be misleading, particularly if used in isolation, as it is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

Contact Information

  • Welton Energy Corporation
    Donald A. Engle
    President
    (403) 215-4747
    or
    Welton Energy Corporation
    David C. Whiteley
    Chief Financial Officer
    (403) 215-4757
    www.weltonenergy.com