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CANADA ENERGY INCREASES ACREAGE BY 35% THROUGH ACQUISITION OF OIL AND GAS ASSETS. ENTERS INTO FARM-IN AGREEMENT WITH A MAJOR. APPOINTS BEN JONES AS CEO.

September 18, 2007

 

 

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 18, 2007) - Canada Energy Partners Inc. ("Canada Energy" or the "Company") (TSX VENTURE:CE) is pleased to announce two concurrent transactions. The first transaction consists of the acquisition of the oil and gas assets of Triumph Pacific Oil & Gas Corporation ("Triumph"), a private Canadian exploration company. The second transaction consists of a farm-in agreement (the "Farm-in Agreement") with a major Canadian oil and gas producer (the "Major"). The acquisition of the oil and gas assets from Triumph will result in a 35% increase in the net acres held by the Company, excluding the acreage under the Farm-in Agreement from the Major. Canada Energy will be the operator of the acreage acquired from Triumph and lands earned pursuant to the Farm-in Agreement.

Canada Energy has entered into an agreement with Triumph to acquire all of Triumph's oil and gas assets (the "Assets") in the Peace River area near Hudson's Hope in northeast British Columbia (the "Acquisition"). The Assets include 77% working interest in one wellbore and 3,042 net acres of the deep rights on the lands of the Company's Peace River Coalbed Methane (CBM) Project, farm-in rights to 30,372 net acres (variable depth rights), drilling licences encompassing 8,796 net acres which include deep and shallow rights (Monias and Moberly prospects), $200,000 cash, and certain geological data and intellectual property of Triumph. The Assets are subject to a 12.5% back-in after project payout, proportionately reduced to Triumph's net interest. Under the terms of the Acquisition, the Company has agreed to issue to Triumph 3,506,666 common shares (the "Shares") in the capital of the Company. The Shares are subject to a 4 month hold period required by the TSX Venture Exchange. The Acquisition is subject to regulatory approval. Certain shareholders and directors of Triumph are also directors of Canada Energy and the Company has obtained a favourable independent fairness opinion in relation to this transaction. In addition, the transaction was negotiated by independent directors. Directors that have interest in Triumph abstained from voting. The closing of the Acquisition is scheduled for October 2, 2007, or such other date as may be mutually agreed by the parties.

The Farm-in Agreement with the Major will allow the Company to earn a 70% working interest in the shallow and certain deep rights (to the base of Nikanassin) on 8 sections comprising gross 5,216 acres also located in the Peace River area in northeast British Columbia, by paying 100% of the costs of the initial exploratory wells. Each exploratory well drilled will earn the Company 2 sections. All 8 sections are located in close proximity to the Major's existing gas infrastructure and the Company has a gas transportation agreement with the Major. Canada Energy will have a 70% working interest in all subsequent development wells on the earned acreage. The Company has until March 27, 2008, to spud the first exploratory well and has the option to drill subsequent exploratory wells every 6 months thereafter from the date of completion of the previous well. Three of the eight sections are subject to a 15% royalty on gas, a 5% - 15% royalty on oil production to unrelated third parties and a 6.25% after-payout working interest by Triumph. The Company will require additional financing for the planned drilling of the wells.

Mr. Ben Jones, a Director of the Company, who was VP of Exploration for Triumph, will join the management team of Canada Energy as Chief Executive Officer. As a result of this appointment, the Company has granted 500,000 stock options to Mr. Jones. The stock options are exercisable at a price of $1.10 per share for a period of 5 years. The grant of the stock options is subject to regulatory approval.

Canada Energy believes that the two transactions diversify the holdings in the Company's focus area of the Peace River region of northeast British Columbia. A portion of the acquisition involves acreage underlying the Company's Peace River Project and the remainder is in close geographic proximity. The assets include numerous conventional, shale gas, and coalbed methane opportunities. The Company's summary of oil and gas interests before and after the two transactions is as follows:

 

--------------------------------------------------------------------------------------------
Description of
Prospect
The Company's
interest before two
transactions
The Company's
interest
after two
transactions
Status of
Prospect
--------------------------------------------------------------------------------------------
Peace River CBM
Project, 50,188
gross acres,
shallow rights.
50% working
interest or
25,094 net acres.
50% working
interest or
25,094 net acres.
Commercial
development
stage.
Operator:
Hudson's Hope
Gas Ltd.
--------------------------------------------------------------------------------------------
Deep rights on
the lands covered
by Peace River
CBM Project,
50,188 gross
acres.
22% working
interest in
one well, 15.75%
- 21% working
interest in
the deep rights
on acreage or
13,409 net acres
in the deep rights.
99% working
interest in one
well, 74% - 99%
working interest
in the deep
rights on the
acreage or 46,823
net acres in
the deep rights.
One deep well
drilled to date,
exploration
stage.
--------------------------------------------------------------------------------------------
Monias Prospect,
shallow and deep
rights, 6,518
gross acres.
2% working
interest or
140 net acres.
100% working
interest or
6,518 net acres.
Exploration
stage.
Operator:
Canada Energy.
--------------------------------------------------------------------------------------------
Moberly Prospect,
shallow and deep
rights, 2,600
gross acres.
7% working
interest or
182 net acres.
100% working
interest or
2,600 net acres.
Exploration
stage.
Operator:
Canada Energy.
--------------------------------------------------------------------------------------------
Farm-in from
Major, shallow
and certain
deep rights
(to the base of Nikanassin),
5,216 gross acres.
Option to earn
35% working
interest or
1,826 net acres.
Option to earn
70% working
interest or
3,651 net acres.
Exploration
stage.
Operator:
Canada Energy.
--------------------------------------------------------------------------------------------
Total interest,
64,522 gross
acres.(1)
25,416 net
acres.(1)(2)
34,212 net
acres.(1)(2)(3)
35% increase
in net acres.
--------------------------------------------------------------------------------------------
  1. does not include net acres from the deep rights on the lands covered by the Peace River CBM Project.
  2. does not include acreage under option from Farm-in agreement with the Major. This acreage has not been earned.
  3. after the Acquisition, the Company will own 55,941 net acres of intermediate and deep rights in the Peace River area.

The Company also reports that after the full evaluation of the previously announced deep rights Triassic test well (see the Company's February 20, 2007 news release), Triumph, who is the deep rights operator, decided not to attempt a completion at this time. Gas shows were encountered in the Triassic section, but it was determined that under current market conditions a completion attempt was not merited. The Company had a 22% working interest in the well and acquired an additional 77% working interest in the wellbore as part of the Acquisition. Canada Energy expects that this well will be utilized in the coalbed methane development program.

Canada Energy will continue working with Hudson's Hope Gas Ltd., a subsidiary of GeoMet Inc. (NASDAQ:GMET), the operator of the Peace River CBM Project, on the planned commercial production. Further, Canada Energy Partners will continue exploring for conventional and unconventional natural gas in the Peace River area of British Columbia.

On behalf of the Board of Directors
of Canada Energy Partners Inc.

John Proust
Director

Canada Energy Partners Inc.
1500 – 885 West Georgia Street,
Vancouver, BC V6C 3E8 Canada
Telephone: 604-909-1154
Fax: 604-488-0319
Website: www.canadaenergypartners.com

Forward-looking statements: This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Act of 1995.


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

 


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