NEWS RELEASE
August 2, 2007
PEARL TO ACQUIRE WATCH
RESOURCES LTD.
CALGARY, ALBERTA - Pearl Exploration
and Production Ltd.
("Pearl" ) (TSX Venture: PXX and First North: PXXS) and Watch
Resources Ltd. (“Watch”) (TSX Venture: WRL) are pleased to announce
that they have signed an agreement (the “Arrangement Agreement”)
whereby Pearl will acquire all of the issued and outstanding shares of Watch.
The key producing asset of Watch is
its Fishing Lake
conventional heavy oil field in north-central Alberta. This field is located near Pearl’s Onion
Lake field and the acquisition of this
field is anticipated to provide synergies with Pearl’s
Onion Lake
operations while contributing to Pearl’s
goal of building a solid base of recoverable resources to provide low risk
production and cash flow. Watch has no debt and a current cash position
of approximately Cdn $7 million.
The Fishing
Lake property will represent a
significant heavy oil resource for Pearl
and offers additional potential with the use of enhanced oil recovery
techniques. The field comprises compact geology with stacked reservoir
sands over a contiguous 7 � section land base. An independent NI 51-101
reserves report on the Fishing Lake assets has been commissioned by Pearl and is expected to
be completed in August 2007.
The Fishing Lake
field is early in its development with current net production of approximately
400 boepd, and Watch has internally estimated a 2007 exit rate for the field of
700 to 750 boepd with the continuation of its ongoing capital program.
Further development drilling in 2008 and beyond provides the potential for
production upside.
“The Offer will provide Watch
shareholders the opportunity to directly participate in a diverse and growing
resource company”, Keith Hill,
President and CEO of Pearl, commented. “We are quickly building an
excellent portfolio of low risk, producing assets in western Canada. Watch’s Fishing Lake
property provides Pearl
with significant production and resource upside and we are looking forward to
fully exploiting that property. Its proximity to our existing producing
assets makes it an ideal investment for Pearl
and will contribute immediately to our production and cash flow goals.”
Randy Buchanan, President of Watch,
commented, "We have been striving for the last year or two at Watch to
delineate a marketable heavy oil play which we have now done. We have
always had the intention of turning these assets over to a larger company to
exploit when the timing was appropriate and we feel strongly that Pearl, with their focus on
heavy oil as well as their strong technical abilities coupled with proven fund
raising abilities, is a strategic choice to enhance Watch's shareholder
value."
Subject to necessary approvals, Pearl will acquire Watch in an all share transaction at an
exchange ratio of 0.23 common shares of Pearl for each common share of Watch pursuant
to a plan of arrangement (the “Arrangement”). At the closing
price of Pearl shares of $4.71 on August 1,
2007, the total transaction is valued at approximately Cdn $55 million. Watch has approximately 50.7 million
shares outstanding (on a fully diluted basis).
Full details of the Arrangement will be
included in an information circular that is expected to be mailed to Watch
shareholders in early September, 2007. Completion of the Arrangement will be
subject to, among other things, the approval of not less than two-thirds of the
votes cast at a meeting of Watch shareholders called to approve the
Arrangement, presently anticipated to be held in October, 2007, and the
approval of the Court of Queen’s Bench of Alberta. Other conditions will include
those typical for a transaction of this nature and receipt of regulatory, stock
exchange and third party approvals satisfactory to Pearl. Subject to the satisfaction of
these conditions, it is anticipated that the closing of the transaction will
occur shortly after the meeting.
J.F. Mackie & Company Ltd. is acting as
financial advisor to Watch with respect to the Arrangement and has advised the
board of directors of Watch, and its special committee, that the consideration
to be received by Watch shareholders as a result of completion of the
Arrangement is fair from a financial point of view.
The board of directors of Watch, and its
special committee, has unanimously approved the entering into of the
Arrangement Agreement and has determined the Arrangement and the Arrangement
Agreement to be in the best interests of the shareholders of Watch.
Management of Watch believes the transaction
will enhance value for its shareholders by providing the following benefits:
-
strong
financial and technical resources to fully exploit the Fishing Lake
opportunity;
-
complementary
and geographically close assets will allow for economies of scale with
technical skills and equipment utilization;
-
increased
liquidity in a larger and higher profile company listed on two exchanges;
-
diversification
of projects will mitigate risk and enhance highgrading opportunities; and
-
strong
combined balance sheet to increase access to lower cost of capital to minimize
dilution to shareholders while accelerating the exploitation of the resources;
-
alignment
with a company with a strong and aggressive focus on the creation of long term
shareholder value.
Pearl is a public company focused on
delivering disciplined growth by establishing a North American portfolio of oil
and gas projects with an emphasis on large resource opportunities.
Additional information on Pearl
is available on its website at www.pearleandp.com.
Watch is an energy resource development company
engaged in the exploration and production of petroleum and natural gas. Watch
is a Canadian public company, listed for trading on the TSX Venture Exchange
(TSXV) with the symbol WRL. Additional information on Watch is available on its
website at www.watchresources.com
Pearl’s Certified Advisor on First
North is E. �hman J:or Fondkommission
AB.
All references in this release to boe's are based on a 6 to 1 conversion
ratio. Boe's may be misleading, particularly if used in isolation. A boe
conversion of 6 Mcf:1 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.
For further information, please
contact:
Keith Hill – President, Pearl
Tel.: (604)
689-7842
Fax:
(604) 689-4250
E-mail: khill@namdo.com
|
Arlene Weatherdon - CFO, Pearl
Tel.: (403)
716-4054
Fax:
(403) 265-8324
E-mail:
arlene.weatherdon@pxx.ca
|
Sophia Shane – Corporate Development, Pearl
Tel.: (604) 689-7842
Fax: (604) 689-4250
E-mail: sophias@namdo.com
|
Randy Buchanan – President, Watch
Tel.: Ph
(403) 265-1951
Fax (403) 265-1930
E-mail: randy@Energy51.ca
|
Forward-looking Statements: This document contains
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 Pearl’s and Watch’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 Reform Act of 1995.
Cautionary Statements: Completion of the Arrangement
is subject to a number of conditions, including but not limited to, court and
shareholder approval. There can be no assurance that the Arrangement will
be completed as proposed or at all.
Investors are cautioned that, except as
disclosed in the information circular to be prepared in connection with the
transaction, any information released or received with respect to the
Arrangement may not be accurate or complete and should not be relied
upon. Trading in the securities of Watch should be considered highly
speculative.
The TSX Venture Exchange has
not reviewed and does not accept responsibility for the adequacy or accuracy of
this release.