Profound Energy Inc. announces strategic combination with Defiant Resources Corporation



    CALGARY, Jan. 21 /CNW/ - Profound Energy Inc. ("Profound" or the
"Company") (PFX-TSX) and Defiant Resources Corporation ("Defiant") are pleased
to announce that they have entered into an arrangement agreement whereby
Profound will acquire by plan of arrangement, subject to certain conditions,
all of the issued and outstanding shares of Defiant, for total consideration
of approximately $58.1 million, including the assumption of approximately
$20.0 million of net debt (the "Arrangement"). Under the terms of the
Arrangement, Profound will issue approximately 12.4 million common shares to
the shareholders of Defiant based on an exchange ratio of 0.55 of a Profound
common share for each share of Defiant or $1.69 per share based on a 10 day
weighted average price of $3.07 for Profound. Based on the 10 day weighted
average price of Defiant on the TSX, the transaction represents a premium of
21.8%.

    Arrangement Overview:

    Profound will acquire approximately 1,300 BOE/d (70% natural gas, 30% oil
& liquids), 4.03 MMBOE of proven plus probable reserves (based on Profound's
internal estimates) and 85,000 net acres of undeveloped land. Based on the
purchase price of $58.1 million and after excluding the seismic database and
undeveloped land value of approximately $12.4 million, the Arrangement metrics
are:

    
    -   Production - $35,207 per BOE/d based on estimated current production
        of 1,300 BOE/d.
    -   Reserves - $11.36 per proven plus probable barrel of oil equivalent.
    

    The Arrangement will provide Profound and Defiant shareholders, ownership
in a larger, financially stronger company that intends to focus on the
exploitation of the combined companies' large prospect inventory.
    The Boards of Directors of both Profound and Defiant have unanimously
approved the Arrangement. The Defiant Board has unanimously concluded that the
Arrangement is in the best interests of its shareholders, and has unanimously
resolved to recommend that Defiant shareholders vote their shares in favour of
the Arrangement. FirstEnergy Capital Corp. acted as exclusive financial
advisor to the Defiant Board of Directors and have provided an opinion that
the consideration to be received by the Defiant Shareholders under the
Arrangement is fair, from a financial point of view. Additionally, all of the
directors and senior officers of Defiant, representing approximately
24 percent of the outstanding Defiant Shares have entered into support
agreements to vote their shares in favour of the Arrangement.
    The Arrangement contains a reciprocal non-completion fee in the amount of
$1.5 million which is payable by Defiant or Profound to the other, as the case
may be, in certain circumstances if the Arrangement is not completed. The
Arrangement requires the requisite approval of Defiant shareholders along with
customary regulatory, court and other approvals. An information circular
outlining the Arrangement will be mailed to Defiant Shareholders in connection
with the Arrangement and the closing of the Arrangement and shareholder's
meeting are proposed to be held prior to March 31, 2008.

    Strategic Rationale:

    The Arrangement complements Profound's acquire, exploit and explore
growth strategy and provides additional critical mass with regards to
production, land and cash flow further establishing Profound as a
growth-oriented junior. In addition to a solid production base consisting of
30 percent oil, the acquisition brings approximately 85,000 net undeveloped
acres of land, and a new core area in the Peace River Arch, Alberta.
    Both Defiant and Profound maintain significant oil and gas properties in
the Pembina area, allowing efficiency in drilling and production operations.
Identified well optimization and facility construction is underway which
should provide short term production growth and additional drilling
opportunities. In addition to a significant land base with excellent seismic
coverage, Defiant provides an inventory of over 25 seismically and mapping
defined drilling opportunities.

    2008 Outlook:

    Upon closing of the Arrangement, Profound will have the following
corporate pro forma characteristics:

    
    -   Production levels of more than 3,975 BOE/d, comprising more than
        25 percent light oil.
    -   Approximately 12.5 MMBOE of P+P reserves; RLI of approximately
        9 years.
    -   Undeveloped land base of approximately 127,000 net acres.
    -   The Company will operate approximately 85 percent of its production.
    -   Excellent balance sheet with debt to forward cash flow of
        approximately 1.6 times.
    -   Tax pools of approximately $200 million, resulting in a significant
        long term tax advantage.
    -   Large drilling inventory of over 50 low risk development and higher
        reward exploration locations representing two years of activity
    -   Approximately 37.3 million shares outstanding.
    

    Profound shall provide additional 2008 guidance upon successful
completion of the Arrangement.
    Profound's focus continues to be on increasing shareholder value through
a combination of grassroots exploration, strategic acquisitions and subsequent
exploitation.

    Reader Advisory

    Barrels of oil equivalent ("BOE") may be misleading, particularly if used
in isolation. A BOE conversion ratio has been calculated using a conversion
rate of six thousand cubic feet of natural gas to one barrel and is based on
an energy equivalency conversion method application at the burner tip and does
not represent an economic value equivalency at the wellhead.
    Certain information regarding Profound and Defiant (the "Companies") set
forth in this joint news release including management's assessment of the
Companies' future plans and operations, the effect of the Transaction on the
Companies and on shareholders of Profound and Defiant, timing of matters
relating to the approval of the Transaction and implementation thereof,
production increases and future production levels contain forward-looking
statements that involve substantial known and unknown risks and uncertainties.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond the Companies' control including,
without limitation, the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, imprecision
of reserve estimates, environmental risks, competition from other producers,
lack of availability of qualified personnel, stock market volatility, ability
to access sufficient capital from internal and external sources, uncertainty
related to completion of the Transaction and the effect thereof and failure to
receive required shareholder and regulatory and other approvals. The
Companies' actual results, performance or achievements may differ materially
from those expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any events anticipated by the
forward-looking statements will transpire or occur, or if any of them do so,
what benefits that the Companies will derive therefrom. Additional information
on these and other factors that could affect the Companies' 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 joint news release are made
as at the date of this joint news release and none of the Companies undertake
any obligation to update publicly or to revise any of the forward-looking
statements, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
    The term "cash flow" is not a recognized measure under Canadian generally
accepted accounting principles ("GAAP"). Management of Profound believes that
in addition to net earnings, cash flow is a useful supplemental measure as it
provides an indication of the results generated by Profound's principal
business activities before the consideration of how these activities are
financed or how the results are taxed. Investors are cautioned, however, that
this measure should not be construed as an alternative to net earnings
determined in accordance with GAAP as an indication of Profound's performance.
Profound's method of calculating cash flow may differ from other companies,
especially those in other industries and accordingly may not be comparable to
measures used by other companies. Profound calculates cash from operations as
cash from operating activities before the change in non-cash working capital
related to operating activities.
    Readers are also cautioned that this joint news release contains the term
RLI or reserve life index, which is not a recognized measure under GAAP.
Management of Profound believes that this measure is a useful supplemental
measure of the length of time the reserves would be produced over at the rate
used in the calculation. Readers are cautioned, however, that this measure
should not be construed as an alternative to other terms such as net income
determined in accordance with GAAP as a measure of performance. Profound's
method of calculating this measure may differ from other companies, and
accordingly, it may not be comparable to measures used by other companies.

    The TSX has not reviewed and does not accept responsibility for the
    adequacy or accuracy of this release.





For further information:

For further information: Profound Energy Inc., 380, 435 - 4th Avenue
S.W., Calgary, Alberta, T2P 3A8; Nick Wemyss, Exec. V.P. and Chief Operating
Officer, Tel (403) 513-1378; Evelyn Burnett, Vice President, Finance and Chief
Financial Officer, Tel: (403) 513-1388; Defiant Resources Corporation, 1800,
800 - 6th Avenue SW, Calgary, Alberta, T2P 3G3; Rick J. Ironside, President &
Chief Executive Officer, Tel: (403) 266-5587

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PROFOUND ENERGY INC.

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