Kereco Energy Ltd. ("Kereco" or the "Corporation") - Completion of Corporate Repositioning, Convertible Debenture Offer and Normal Course Issuer Bid



    (TSX: KCO)

    CALGARY, Jan. 15 /CNW/ - Kereco today announces its final update on the
repositioning of the Corporation that it commenced on July 18, 2007. As of
today, Kereco has completed its previously announced disposition program for
net cash consideration totalling $245 million. This leaves the Corporation
with no bank debt and cash on hand of approximately $80 million. The
previously issued $70 million of convertible debentures also remain
outstanding.
    On a go forward basis, Kereco will be a value driven junior oil and gas
Corporation focussed on rate of return projects. The assets being retained by
the Corporation include the long-life light oil assets at Sturgeon Lake and
our light oil and natural gas assets in the Peace River Arch area of Alberta.
These assets are currently producing approximately 4,200 boe/day (70% light
oil and NGLs) with a current netback in excess of $40.00/boe. We estimate the
reserves on these assets to be 13 mmboe of proved and 18 mmboe of proved plus
probable reserves (76% light oil and NGLs), providing the Corporation with a
reserve life index of 11.7 years. Kereco is budgeting to direct approximately
$35 million of capital towards organic drilling and optimization activities
and maintain capital available for strategic acquisition opportunities that
the Corporation anticipates will become available in 2008. The initial
$35 million capital program is expected to generate approximately 4,200
boe/day of average daily production in 2008 and cash flow of approximately
$60 million ($1.02 per basic share), which is $25 million more than the
currently planned capital expenditure program for 2008. There are not
currently any acquisitions included in the 2008 forecast. In addition to the
cash on hand and surplus cash flow, Kereco also has available an undrawn
$100 million bank facility with our current syndicate of lenders.
    Kereco anticipates making an offer to its current convertible debenture
holders to repurchase the debentures at 95% of their par value, subject to
normal regulatory and Toronto Stock Exchange ("TSX") approvals, as applicable.
Although these 4.75% debentures are an attractive form of financing, we
believe that having excess cash on the balance sheet together with an undrawn
bank line is not an efficient capital structure for Kereco going forward. We
anticipate mailing an offer to the convertible debenture holders prior to the
end of January 2008.
    As well, Kereco announces today that it has filed a Notice of Intention
with the TSX to make a Normal Course Issuer Bid ("NCIB") to purchase its
common shares through the facilities of the TSX. Purchases to be made over the
next twelve months pursuant to the NCIB will not exceed 5,339,424 common
shares (representing approximately 10.0% of the 58,184,217 outstanding common
shares as of today, net of 4,789,977 common shares held by insiders of the
Corporation or held in escrow) and will result in the cancellation of any
shares acquired. The maximum common shares that the Corporation may purchase
for cancellation per trading day is 67,479, which is equal to 25% of the
average daily trading volume for the six months ended December 31, 2007. The
average daily trading volume for the six months ended December 31, 2007 was
269,919. The Bid is expected to commence on January 18, 2008 and will
terminate on January 17, 2009 or such earlier time as the Bid is completed or
terminated at the option of Kereco. Haywood Securities Inc. has agreed to act
on the Corporation's behalf to purchase the shares at the prevailing market
price at the time of the purchase through the facilities of the TSX. The NCIB
is being undertaken to provide an alternative to the Corporation to repurchase
its shares with available cash should the market environment continue to
undervalue the predominantly light oil and NGLs assets that now comprise
Kereco. Such purchases will increase the proportionate interest of, and may be
advantageous to, all remaining shareholders. Proceeding with the NCIB is
subject to final acceptance from the TSX of the Notice of Intention.
    We would like to thank our shareholders for their support throughout this
repositioning process and look forward to reporting to you on the newly
positioned company in the future.
    Tristone Capital Inc., BMO Nesbitt Burns and GMP Securities L.P. acted as
Kereco's financial advisors on the repositioning process and associated asset
dispositions.

    Advisory

    Certain information regarding Kereco Energy Ltd. in this news release
including management's assessment of the effect on Kereco of royalty rate
changes in Alberta, future plans and operations, number, type and timing of
wells to be drilled, tested and completed, timing of tie in of wells and
commencement of production from new wells and production therefrom, the plan
and development of certain prospects, and production estimates may constitute
forward-looking statements under applicable securities laws and necessarily
involve risks including, without limitation, risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks, changes
in royalty and tax legislation, competition from other producers, inability to
retain drilling rigs and other services, capital expenditure costs, including
drilling, completion and facilities costs, unexpected decline rates in wells,
surface conditions may delay projects and/or operations, wells not performing
as expected, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information on these
and other factors that could effect Kereco's operations and financial results
are included in reports on file with Canadian securities regulatory
authorities and may be accessed through the SEDAR website (www.sedar.com).
Furthermore, the forward-looking statements contained in this news release are
made as at the date of this news release and Kereco does not undertake any
obligation to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
    In conformity with Canadian Securities Administrators National Instrument
51-101, natural gas volumes have been converted to equivalent barrels of oil
("boe") using a conversion ratio of six thousand cubic feet ("mcf") to one
boe. This ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Readers are cautioned that boes may be misleading, particularly if
used in isolation.

    %SEDAR: 00021661E




For further information:

For further information: Kereco Energy Ltd., Grant B. Fagerheim,
President and Chief Executive Officer, Phone (403) 290-3401 Or Stephen C.
Nikiforuk, C.A., Vice President, Finance and Chief Financial Officer, Phone
(403) 290-3404

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KERECO ENERGY LTD.

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