Petro-Reef Resources
Ltd.
TSX: PER
February 8,
2008
Petro-Reef Resources Ltd. Announces
Strategic Acquisition
CALGARY, ALBERTA - Petro-Reef
Resources Ltd. ("Petro-Reef") is pleased to announce that it has closed an
acquisition of approximately 400 boe/d, including approximately 70 barrels per
day of crude oil, a 10% working interest in the Petro-Reef operated Alexander
Gas Plant and interests in several key sections of undeveloped land in
Petro-Reef's core area of Alexander in Alberta from one of its joint venture
partners. Petro-Reef has acquired the assets for $10,400,000, subject to final
adjustments. The acquisition is effective January 1, 2008.
Joe Werner, President and CEO of
Petro-Reef was quoted as saying:
"This acquisition is strategic for
the future growth of Petro-Reef. Not only did we acquire 400 boe/d of long life,
low cost natural gas and crude oil production, we have increased our average
working interest to over 75% for existing producing wells and 94% on several key
development and exploration drilling locations. This acquisition solidifies
Alexander as the key to Petro-Reef's ongoing success."
Concurrent with the acquisition,
Petro-Reef amended its credit facilities with National Bank of Canada whereby the Bank increased the
existing Revolving Operating Demand Loan from $7,750,000 to $13,500,000, and
Non-Revolving Acquisition/Demand Loan from $2,250,000 to $4,000,000. Part of the
amount of the purchase price for the acquisition was drawn on the Revolving
Operating Demand Loan. No amounts were drawn on the Non-Revolving
Acquisition/Demand Loan and there are no immediate plans to access that
facility.
Financial
Impact
As a result of the acquisition,
current production is now approximately 1,250 - 1,300 boe/d, including over 150
barrels per day of crude oil production. As a result of recent drilling success
and the acquisition, Q1 - 2008 production volumes are expected to exceed Q3 -
2007's average production by over 100%.
Petro-Reef is pleased to announce it
is increasing its average 2008 production forecast to 1,600 boe/d. Based on the
increased production and utilizing a $6.00 / mcf natural gas price forecast,
Petro-Reef's estimates cash flow from operations in 2008 of approximately
$10,000,000. Petro-Reef maintains a strong balance sheet as forecast debt to
forward cash flow is not expected to exceed 1:1 at
closing.
The acquisition is accretive for
existing shareholders on a cash flow and production per share basis. Petro-Reef
estimates cash flow per share accretion of 25% and production per share
accretion of 33% as a result of the acquisition.
Forward-Looking Statements: All
statements, other than statements of historical fact, set forth in this news
release, including without limitation, assumptions and statements regarding
reservoirs, resources and reserves, future production rates, exploration and
development results, financial results, and future plans, operations and
objectives of the Corporation are forward-looking statements that involve
substantial known and unknown risks and uncertainties. Some of these risks and
uncertainties are beyond management's control, including but not limited to, the
impact of general economic conditions, industry conditions, fluctuation of
commodity prices, fluctuation of foreign exchange rates, environmental risks,
industry competition, availability of qualified personnel and management,
availability of materials, equipment and third party services, stock market
volatility, timely and cost effective access to sufficient capital from internal
and external sources. The reader is cautioned that assumptions used in the
preparation of such information, although considered reasonable by the
Corporation at the time of preparation, may prove to be incorrect. There can be
no assurance that such statements will prove to be accurate and actual results
and future events could differ materially from those anticipated in such
statements.
Reference is made to barrels of oil
equivalent (boe). Barrels of oil equivalent may be misleading, particularly if
used in isolation. In accordance with National Instrument 51-101, a boe
conversion ratio for natural gas of 6 Mcf: 1 bbl has been used, which is based
on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the
wellhead.
The TSX Venture Exchange does not
accept responsibility for the adequacy or accuracy of this news release.
CONTACT
INFORMATION:
Petro-Reef Resources
Ltd.
Joseph Werner
President and
CEO
(403) 265-6444
Fax: (403)
264-1348
or
Petro-Reef Resources
Ltd.
John
Pantazopoulos
Vice-President Finance and
CFO
(403) 265-6444
Fax: (403)
264-1348
or
Petro-Reef Resources
Ltd.
970, 10655 Southport Road
S.W.
Calgary, Alberta T2W
4Y1
Email:
info@petro-reef.ca
Website:
www.petro-reef.ca
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