Pegasus Oil & Gas Inc. Announces Take-Over Bid by Harvest Energy Trust



    (Stock Symbol "POG.A & POG.B" - TSX Venture Exchange)

    CALGARY, June 15 /CNW/ - Pegasus Oil & Gas Inc. ("Pegasus" or "the
Corporation") announces that it has entered into a pre-acquisition agreement
(the "Agreement") with Harvest Energy Trust ("Harvest") pursuant to which a
wholly owned subsidiary of Harvest has agreed to make an offer to acquire all
of the Class A and Class B shares of Pegasus for consideration consisting of
0.015 Harvest trust units for each Pegasus Class A share and 0.15 Harvest
trust units for every Pegasus Class B share (the "Proposed Transaction"). The
total transaction value is $18.7 million, of which approximately $14 million
is the assumption of Pegasus net debt.
    Commencing in December 2008, in light of low commodity prices and
increasing debt levels, the board of directors of Pegasus, together with its
financial advisor, conducted a comprehensive review of the strategic
alternatives available to Pegasus. In connection with this strategic review, a
number of parties were contacted with respect to a proposed transaction with
Pegasus. As a result of the strategic review, the board of directors concluded
that the acquisition of Pegasus by Harvest presents the best alternative for
the Pegasus shareholders. In reaching this conclusion, the board considered a
number of factors, including the value and form of consideration offered under
the transaction, deal liquidity, as well as the Corporation's limited access
to capital, debt levels and future capital spending constraints.
    The board of directors of Pegasus has unanimously approved the Proposed
Transaction and has concluded that the transaction is in the best interests of
Pegasus and its shareholders and will recommend that its shareholders accept
the offer. FirstEnergy Capital Corp. is acting as exclusive financial advisor
to Pegasus' board of directors and has provided the board of directors with a
fairness opinion that, subject to review of final documentation, the
consideration to be received by Pegasus' shareholders under the offer is fair,
from a financial point of view. Officers and directors holding approximately
17% of the outstanding Class A and Class B shares have entered into lock-up
agreements with Harvest pursuant to which they have agreed to tender their
Pegasus shares to the offer.
    The Proposed Transaction will be subject to certain conditions, including
the deposit of at least 90% of Pegasus' outstanding Class A (on a diluted
basis) and Class B shares to the offer and the receipt of all required
regulatory approvals and other customary conditions. The Agreement provides
for a non-completion fee of $0.7 million which is payable to Harvest under
certain circumstances if the transaction is not completed. The Agreement also
requires that Pegasus cease all solicitation discussions and negotiations with
any other parties with respect to any take-over proposals and provides Harvest
with the right to match should a superior take-over proposal be received by
Pegasus. Harvest anticipates mailing the offer and takeover bid circular to
Pegasus' shareholders on or about June 19, 2009, and in any event not later
than June 26, 2009, and the offer will expire approximately 35 days
thereafter.
    Pegasus shareholders who accept the offer and acquire Harvest trust units
will be eligible to receive distributions on such Harvest trust units,
provided they hold such trust units on the applicable record date for the
monthly distribution.
    Pegasus' assets include a large presence in Central Alberta, being the
Crossfield and Strathmore areas which are mutual and adjacent to existing
Harvest operations with complementary drilling opportunities. Based on
internal field estimates for the month of May 2009, Pegasus' production
averaged approximately 600 boe/d comprised of 2,975 thousand cubic feet (mcf)
of natural gas and 105 barrels (bbl) of oil and natural gas liquids. Total
consideration for the transaction represents approximately $31,100 per flowing
boe based on these production estimates.

    About Harvest

    Harvest is one of Canada's largest energy royalty trusts offering
unitholders exposure to an integrated structure with upstream and downstream
operations. Harvest trust units are traded on the Toronto Stock Exchange
("TSE") under the symbol "HTE.UN" and on the New York Stock Exchange ("NYSE")
under the symbol "HTE".

    About Pegasus

    Pegasus is a Calgary-based junior oil and natural gas producer with a
focused production based in central Alberta, northwest Alberta and northeast
British Columbia.

    Forward-looking statements - This document contains forward-looking
statements. More particularly, this document contains statements concerning
the proposed transaction, including transaction values, and the completion of
the proposed transaction.
    The forward-looking statements are based on certain key expectations and
assumptions made by Pegasus, including expectations and assumptions concerning
timing of preparation and mailing of offer documents, receipt of required
regulatory approvals and third party consents and the satisfaction of other
conditions to the mailing of offer documents and completion of the
transaction.
    Although Pegasus believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because Pegasus can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks. These
include, but are not limited to, risks that regulatory and third party
approvals and consents are not obtained on terms satisfactory to the parties
and risks that other conditions to the mailing and completion of the offer are
not satisfied on the timelines set forth herein or at all.
    The forward-looking statements contained in this press release are made
as of the date hereof and Pegasus undertakes no obligation to update publicly
or revise any forward-looking statements or information, whether as a result
of new information, future events or otherwise, unless so required by
applicable securities laws.

    Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. Boe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas
is based on an energy equivalency conversion method primarily applicable at
the burner.

    
    Neither 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 release.
    

    %SEDAR: 00005637E




For further information:

For further information: Pegasus Oil & Gas Inc., Patrick Mills,
President & CEO, (403) 521-6307 or Pegasus Oil & Gas Inc., 101 10th St. N.W.,
Calgary, AB, Canada, T2N 1V4, (403) 521-5282, (403) 521-5284 (FAX), Website:
www.pegasusoilgas.com

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Pegasus Oil & Gas Inc.

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