Yangarra Resources Ltd.
TSX VENTURE : YAN

Yangarra Resources Ltd.
TriOil Ltd.
TSX VENTURE : TRY

TriOil Ltd.

August 31, 2005 09:30 ET

Yangarra Resources Inc. and TriOil Ltd. Announce Proposed Amalgamation

CALGARY, ALBERTA--(CCNMatthews - Aug. 31, 2005) - Yangarra Resources Inc. ("Yangarra") (TSX VENTURE:AYX) and TriOil Ltd. ("TriOil") (TSX VENTURE:TRY) are pleased to announce that they have entered into an amalgamation agreement dated August 30, 2005 (the "Amalgamation Agreement") pursuant to which they have agreed to amalgamate (the "Amalgamation") and form a new oil and natural gas exploration and development company under the name "Yangarra Resources Ltd.("Amalco").

The Amalgamation

Pursuant to the terms of the Amalgamation, TriOil shareholders will receive 1.0 common share of Amalco for each 1.0 common share of TriOil after completion of the amalgamation and shareholders of Yangarra will receive 0.95 common shares of Amalco for each common share of Yangarra owned. After the completion of the Amalgamation, Amalco will have approximately 53,972,000 common shares outstanding on a basic basis.

Completion of the Amalgamation is subject to a number of conditions, including but not limited to, TSX Venture Exchange Inc. acceptance, approval of the shareholders of each of Yangarra and TriOil by special resolution (66 2/3%), and other customary conditions and regulatory approvals. Each of Yangarra and TriOil intends to hold a special meeting of shareholders in early November 2005 to consider the Amalgamation. Subject to receipt of all approvals, closing is anticipated to occur on or before November 15, 2005.

About Amalco

Amalco will have 750 boe/d of net production with an additional 100 boe/d of net production behind pipe, which is scheduled to be on stream by completion of the Amalgamation.

Amalco will have a combined 1,574 Mboe of proven reserves and 1,271 Mboe of probable reserves, for a total net present value (NAV) of $45,522,000 discounted at 10%, based on reserve reports for Yangarra and TriOil prepared by Sproule Associates Limited ("Sproule") effective July 31, 2005. The combined undeveloped land value based on independent land evaluations prepared by Seaton-Jordan & Associates Ltd. ("Seaton-Jordan") effective July 27, 2005 is $5,470,074. Accordingly, based on the reports of Sproule and Seaton-Jordan, and June 30, 2005 financial statements Amalco will have a net asset value of $0.80 per share (basic) on a proforma basis. Based on June 30, 2005 financial statements for TriOil and Yangarra, Amalco would have a working capital deficiency, including bank debt, of $7,700,000, after taking into account $712, 500 in warrant exercise proceeds received by Yangarra subsequent to June 30, 2005. Amalco, based on June 30, 2005 production exit rates, and utilizing second quarter production net backs, will have a debt to cashflow ratio of less than 1.0 to 1.0.

The board of directors of Yangarra and TriOil are of the view that the Amalgamation will provide Amalco with a stronger management team, an expanded and more focused technical team, significant general and administrative savings, and greater financial flexibility.

The board of directors of Amalco will consist of five members, including James G. Evaskevich, Robert D. Weir, Gordon A. Bowerman, Joseph M. Dutton, and Douglas Stuve.

The Management team of Amalco will include James G. Evaskevich as President and CEO, John Aihoshi as Chief Financial Officer, Robert D. Weir as Vice-President, Engineering, and Don Poruchny as Vice-President, Exploration.

Management and Board Recommendations

The Amalgamation has the unanimous support of the board of directors of both Yangarra and TriOil.

Both Yangarra and TriOil established special committees consisting of independent directors to review and make recommendations with respect to the Amalgamation, as Messrs. Evaskevich and Weir, directors, officers and shareholders of Yangarra, are also directors and shareholders of TriOil. Yangarra's special committee was Gordon Bowerman and TriOil's special committee was Robert Libin.

Each of Yangarra and TriOil engaged Sproule and Seaton-Jordan to evaluate their oil and gas reserves and undeveloped land, respectively. The Yangarra special committee engaged Raymond James Ltd. ("Raymond James") as financial advisor and the TriOil special committee engaged Woodstone Capital Inc. ("Woodstone") as financial advisor. Raymond James has provided the Yangarra board of directors with its verbal opinion, subject to its review of the final form of the documents effecting the Amalgamation, that the consideration to be received by Yangarra shareholders pursuant to the Amalgamation is fair, from a financial point of view. Woodstone has provided the TriOil board of directors with its verbal opinion, subject to its review of the final form of the documents effecting the Amalgamation, that the consideration to be received by TriOil shareholders pursuant to the Amalgamation is fair, from a financial point of view.

The board of directors of Yangarra has concluded that the Arrangement is in the best interests of its shareholders and will recommend that Yangarra shareholders vote their Yangarra shares in favour of the Arrangement.

The board of directors of TriOil has concluded that the Arrangement is in the best interests of its shareholders and will recommend that TriOil shareholders vote their TriOil shares in favour of the Arrangement.

Yangarra's Reserves

The tables below summarize Yangarra's working interest and net reserves and the present value of future cash flows before the deduction of income taxes and including ARTC from the July31 report prepared by Sproule using the Sproule June 30, 2005 price forecast and cost assumptions in accordance with National Instrument 51-101.



Summary of Reserves at July 31, 2005 (escalated price case)

Oil & NGLs Natural Gas Oil Equivalent
(mbbls) (mmcf) (mboe)
-------------------------------------------------
WI Net WI Net WI Net
-------------------------------------------------

Proved Developed
Producing 147.5 103.8 2,928 2,349 635.5 495.2
Proved Developed
Non-producing 53.5 47.3 224 180 90.9 77.3
Proved Undeveloped 34.2 23.4 2,393 2,076 433.0 369.4
Total Proved 235.1 174.5 5,545 4,605 1,159.3 941.9

Probable 195.9 133.8 4,859 3,990 1,005.7 798.8

Total Proved
Plus Probable 431.0 308.2 10,404 8,595 2,165.0 1,740.7


Summary of Present Value of Cash Flows at July 31, 2005
(escalated price case including ARTC)

Future Cash Flow from Reserves Before
Deduction of Income Tax Discounted At
--------------------------------------------
($000s) 0% 5% 10% 15% 20%
--------------------------------------------

Proved Developed
Producing 16,776 14,680 13,184 12,040 11,127
Proved Developed
Non-producing 2,537 1,931 1,563 1,320 1,147
Proved Undeveloped 5,435 3,769 2,676 1,908 1,344
Total Proved 24,749 20,379 17,422 15,268 13,619

Probable 21,547 15,101 11,468 9,103 7,440

Total Proved
Plus Probable 46,296 35,480 28,890 24,371 21,059


The tables below summarize Yangarra's working interest and net reserves and the present value of future cash flows before the deduction of income taxes and including ARTC from the July 31, 2005 Sproule report using the June 30, 2005 posted prices and cost assumptions in accordance with National Instrument 51-101.



Summary of Reserves at July 31, 2005 (constant price case)

Oil & NGLs Natural Gas Oil Equivalent
(mbbls) (mmcf) (mboe)
-------------------------------------------------
WI Net WI Net WI Net
-------------------------------------------------

Proved Developed
Producing 147.7 103.5 2,932 2,351 636.3 495.2
Proved Developed
Non-producing 53.5 47.0 224 180 90.9 77.1
Proved Undeveloped 34.2 23.4 2,394 2,078 433.3 369.7
Total Proved 235.3 173.8 5,551 4,609 1,160.5 942.0

Probable 196.4 132.7 4,870 4,001 1,008.1 799.4

Total Proved
Plus Probable 431.7 306.5 10,422 8,610 2,168.6 1,741.3


Summary of Present Value of Cash Flows at July 31, 2005
(constant price case including ARTC)

Future Cash Flow from Reserves Before
Deduction of Income Tax Discounted At
--------------------------------------------
($000s) 0% 5% 10% 15% 20%
--------------------------------------------

Proved Developed
Producing 17,533 15,069 13,326 12,010 10,974
Proved Developed
Non-producing 3,213 2,367 1,867 1,542 1,316
Proved Undeveloped 6,352 4,308 2,992 2,083 1,424
Total Proved 27,098 21,745 18,185 15,635 13,714

Probable 24,184 16,957 12,794 10,068 8,153

Total Proved Plus
Probable 51,282 38,702 30,979 25,703 21,867


TriOil's Reserves

The tables below summarize TriOil's working interest and net reserves and the present value of future cash flows before the deduction of income taxes and including ARTC from the July 31 report prepared by Sproule using the Sproule June 30, 2005 price forecast and cost assumptions in accordance with National Instrument 51-101.

Summary of Reserves at July 31, 2005 (escalated price case)



Oil & NGLs Natural Gas Oil Equivalent
(mbbls) (mmcf) (mboe)
-------------------------------------------------
WI Net WI Net WI Net
-------------------------------------------------

Proved Developed
Producing 4.7 3.4 1,840 1,574 311.4 265.7
Proved Developed
Non-producing 8.3 5.8 426 362 79.3 66.1
Proved Undeveloped 0.0 0.0 2,080 1,802 346.7 300.4
Total Proved 13.0 9.2 4,347 3,739 737.5 632.3

Probable 2.4 1.7 3,280 2,828 549.1 473.0

Total Proved
Plus Probable 15.4 10.9 7,627 6,567 1,286.6 1,105.4


Summary of Present Value of Cash Flows at July 31, 2005
(escalated price case including ARTC)

Future Cash Flow from Reserves Before
Deduction of Income Tax Discounted At
--------------------------------------------
($000s) 0% 5% 10% 15% 20%
--------------------------------------------

Proved Developed
Producing 8,000 7,307 6,742 6,272 5,876
Proved Developed
Non-producing 2,107 1,557 1,225 1,009 860
Proved Undeveloped 4,562 3,720 3,052 2,516 2,084
Total Proved 14,668 12,584 11,019 9,798 8,820

Probable 9,614 7,243 5,614 4,444 3,576

Total Proved Plus
Probable 24,282 19,828 16,632 14,242 12,395


The tables below summarize TriOil's working interest and net reserves and the present value of future cash flows before the deduction of income taxes and including ARTC from the July 31, 2005 Sproule report using the June 30, 2005 posted prices and cost assumptions in accordance with National Instrument 51-101.



Summary of Reserves at July 31, 2005 (constant price case)

Oil & NGLs Natural Gas Oil Equivalent
(mbbls) (mmcf) (mboe)
-------------------------------------------------
WI Net WI Net WI Net
-------------------------------------------------

Proved Developed
Producing 4.8 3.4 1,841 1,575 311.6 265.9
Proved Developed
Non-producing 8.3 5.8 427 363 79.4 66.2
Proved Undeveloped 0.0 0.0 2,084 1,805 347.3 300.8
Total Proved 13.0 9.1 4,351 3,742 738.2 632.9

Probable 2.4 1.7 3,282 2,829 549.4 473.3

Total Proved Plus
Probable 15.4 10.9 7,633 6,572 1,287.7 1,106.2


Summary of Present Value of Cash Flows at July 31, 2005
(constant pricej case including ARTC)

Future Cash Flow from Reserves Before
Deduction of Income Tax Discounted At
--------------------------------------------
($000s) 0% 5% 10% 15% 20%
--------------------------------------------

Proved Developed
Producing 7,739 6,941 6,306 5,790 5,364
Proved Developed
Non-producing 2,191 1,595 1,236 1,003 842
Proved Undeveloped 4,912 3,846 3,037 2,413 1,922
Total Proved 14,842 12,382 10,579 9,206 8,128

Probable 10,577 7,806 5,933 4,608 3,637

Total Proved Plus
Probable 25,419 20,188 16,512 13,812 11,765


READER ADVISORY

Boes may be misleading, particularly if used in isolation. A boe conversion ratio of six mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Statements in this press release may contain forward-looking information including expectations of future production and components of cash flow and earnings. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the companies. These risks include, but are not limited to; the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks include, but are not limited to; operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of reserves, production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.

The reader is further cautioned that estimating oil and gas reserves requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect as further information becomes available, and as the economic environment changes.

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

Investors are cautioned that, except as disclosed in the Information Circular to be prepared in connection with the Amalgamation, any information released or received with respect to the Amalgamation may not be accurate or complete and should not be relied upon. Trading in the securities of Yangarra and TriOil should be considered highly speculative.

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

Contact Information

  • Yangarra Resources Inc.
    James G. Evaskevich
    (403) 262-9558 ext. 224
    Email: info@yangarra.ca
    or
    Yangarra Resources Inc.
    Suite 1530, 715 - 5 Avenue S.W.
    Calgary, AB T2P 2X6
    Website: www.yangarra.ca
    or
    TriOil Ltd.
    Joseph Dutton
    (403) 265-5663
    Email: info@trioil.ca
    or
    TriOil Ltd.
    Suite 2920, 205 - 5 Avenue S.W.
    Calgary, AB T2P 2V7
    Website: www.trioil.ca