Palliser Oil & Gas Corporation Announces Strategic Property Acquisition

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, Sept. 17, 2012 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSXV: PXL) is pleased to announce that it has acquired certain heavy oil properties (the "Acquired Properties") from a number of private companies within its existing greater Lloydminster core area. The Acquired Properties are estimated to currently produce approximately 140 boe/d of net operated production.

Consideration for the Acquired Properties is comprised of $3,240,000 cash and 3,323,000 Palliser common shares for total consideration of approximately $5.3 million based on a five-day weighted average trading price of $0.61 per share. After giving effect to the common share consideration, Palliser currently has 57,453,348 basic common shares outstanding. The cash to close was funded through existing credit facilities.

Acquisition highlights:

  • Approximately 140 boe/d (98% heavy oil) of net operated production within Palliser's greater Lloydminster core area, with the majority being 100 percent working interest;

  • Strategic salt water disposal infrastructure located adjacent to existing Palliser production, including two salt water disposal facilities and four salt water disposal wells, and the potential to increase revenue from third party processing;

  • Production and operating expenses of approximately $15.00/boe;

  • Approximately 1,530 acres of net undeveloped land located within Palliser's existing Manitou core area; and

  • The following table outlines the forecasted Company interest reserves for the Acquired Properties, effective August 31, 2012:

                Oil         10% NPV
        Company Interest Reserves        (Mbbls)         (Millions)
        Total Proved            210           $5.6
        Total Proved plus Probable          371           $8.7

Notes:          
      (1)   Estimated before tax net present values do not represent fair market value.
      (2)   Company interest reserves are working interest reserves prior to the deduction of royalties and include royalty interests.
      (3)   The Acquired Properties were evaluated based on an August 31, 2012 GLJ Petroleum Consultants engineering report in accordance with NI 51-101, using GLJ's price forecast effective July 1, 2012.
      (4)   The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Acquisition benefits to Palliser:

  • Increases current estimated daily production to approximately 2,400 boe/d (98% heavy oil);

  • Generates attractive acquisition metrics of approximately $34,300/boe/d and $12.96 per proven plus probable boe, adjusting for land value of approximately $0.5 million (based on $300/acre for undeveloped lands).

  • Expands Palliser's total undeveloped heavy oil acreage to approximately 29,000 net acres;

  • Has attractive operating and production expenses of approximately $15.00/boe, which is complimentary to Palliser's operating costs, currently estimated to be below $21.50/ boe;

  • Improves control of Palliser-owned salt water disposal infrastructure in the Company's greater Lloydminster core area, which currently consists of eight salt water disposal facilities, 15 salt water disposal wells, and 42 heavy oil wells tied into these facilities and;

  • Expands Palliser's prospect inventory to over 160 locations and is consistent with Palliser's strategy of acquiring assets with large oil in place reserves and historically low recovery factors.

Outlook:

The Acquired Properties complement Palliser's existing prospect inventory and provide further synergies to expand our high volume lift methodology with additional strategic salt water disposal infrastructure, allowing operating costs to continue to trend lower through the remainder of 2012. After taking the purchase of the Acquired Properties into consideration, Palliser has increased its capital budget by approximately $6.0 million. The revised capital program of $36 million for 2012 will be funded from funds flow from operating activities and the Company's credit facility.  The company is forecasting to have approximately $37 million of net debt out of a total $43 million credit facility at the end of the third quarter 2012.

Palliser's guidance for 2012 is targeting to be in the middle to higher end of the exit production range (December 2012 average) of 2,600-2,800 boe/d (98% heavy oil weighting) with average daily production expected to be close to the bottom end of the range of 2,250-2,350 boe/d. Palliser's focus in early 2012 was to expand the Company's salt water disposal infrastructure ahead of adding production resulting in improved netbacks and lower operating costs, now estimated to be below $21.50/boe. The Company's guidance includes continued strengthening of the balance sheet, with third quarter 2012 net debt forecast to be in the range of 1.5-1.7 times third quarter annualized funds flow from operating activities.

Palliser is a Calgary-based emerging junior oil company currently focused on heavy oil production in the greater Lloydminster area of both Alberta and Saskatchewan. For further information about Palliser, visit the Company's website at www.palliserogc.com.

Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: commodity focus; drilling plans and potential locations; expected production levels; development plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures. Forward-looking statements are typically identified by words such as "anticipate", "estimate", "expect", "forecast", "may", "will", "project" and similar words suggesting future events or performance or may be identified by reference to a future date. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward-looking statements herein, Palliser has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; "differentials" between West Texas Intermediate and Western Canadian Select benchmark pricing; future oil and natural gas production levels; the potential to increase revenue from third party processing; future water disposal capacity; future exchange rates and interest rates; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities. Although Palliser believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause Palliser's actual performance and financial results in future periods to differ materially from any estimates or projections. Additional information on these and other factors that could affect Palliser's results are included in reports on file with Canadian securities regulatory authorities, including the Company's Annual Information Form, and may be accessed through the SEDAR website at www.sedar.com.

The forward-looking statements contained herein speak only as of the date hereof. Except as expressly required by applicable securities laws, Palliser does not undertake any obligation to, nor does it intend to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.

Production volumes are commonly expressed on a barrel of equivalent ("BOE") basis whereby natural gas volumes are converted at a ratio of six thousand cubic feet to one barrel of oil. The intention is to convert oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. The term BOE may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalent method and does not represent an economic value equivalency at the wellhead.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

SOURCE: Palliser Oil & Gas Corporation

For further information:

Allan B. Carswell
President and COO
al@palliserogc.com
(403) 209-5709

Kevin Gibson
CEO
kevin@palliserogc.com
(403) 209-5717

Ivan J. Condic
Vice President, Finance and CFO
ivan@palliserogc.com
(403) 209-5718

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Palliser Oil & Gas Corporation

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