Fairwest Energy Corporation and Strike Petroleum Ltd. announce plan of arrangement

    TSX: FEC


    CALGARY, March 12 /CNW/ - FairWest Energy Corporation ("FairWest") and
Strike Petroleum Ltd. ("Strike") are pleased to announce that they have
entered into an arrangement agreement whereby FairWest will acquire all of the
issued and outstanding shares and options of Strike. The ratio of Strike
shares to be exchanged for FairWest shares has been estimated by Strike and
FairWest at 0.84724 FairWest shares for every Strike share, using an agreed
upon methodology, largely based upon the respective net asset values of each
company. This represents an aggregate purchase price of approximately
$26.45 million, and includes the assumption by FairWest of Strike's
outstanding bank debt and working capital deficiency of $15.9 million. In
arriving at the estimated exchange ratio, Strike's independent engineering
evaluation effective September 30, 2006 (subject to certain adjustments) and
FairWest's management estimate of reserve value effective January 1, 2007,
were used. Under the terms of the Arrangement Agreement, the calculation of
the exchange ratio is subject to a final adjustment based upon a number of
conditions, including due diligence, a final calculation of Strike's total
indebtedness and receipt of the independent evaluations of the Strike and
FairWest reserves, each effective as at January 1, 2007. These reserve reports
are expected to be delivered in mid-February and an announcement confirming
the final exchange ratio will be made at that time. Management of FairWest and
Strike do not expect a material adjustment to the estimated exchange ratio set
out above.
    The arrangement is subject to certain arrangements being made with
Strike's creditors, as set forth in information circular which will be mailed
to Strike shareholders and creditors.
    "The acquisition of Strike by FairWest results in a more than doubling of
most of FairWest's key indicators, including daily production, cash flow,
undeveloped land and available growth opportunities", said Jim Gettis,
President of FairWest. "As a result of the transaction, FairWest will add
approximately 650 barrels of oil equivalent per day ("boe/d") of high working
interest, operated production, with an attractive portfolio of drilling
opportunities at Kirkpatrick Lake, Youngstown and Sedalia. Strike's lands are
adjacent to FairWest's current core areas located at Antelope, Berry Creek,
and Provost, in eastern Alberta. In addition, most of Strike's administrative
and technical team will be invited to join us at FairWest, and we are excited
about the opportunities we can create with great people from both companies."
    Richard Clark, Executive Chairman of Strike, added "This transaction
represents an excellent way for Strike shareholders to realize and enhance the
value of their investment, following Strike's disappointing performance over
the summer and fall of 2006. The transaction with FairWest will allow Strike
shareholders to participate in a well managed, high growth,
exploration-focused company. Strike's Board of Directors conducted an
extensive process prior to entering into this transaction and we are pleased
with the opportunity to combine Strike and FairWest."

    Impact of the Transaction on FairWest

    The transaction is expected to be accretive to FairWest's cash flow,
production, reserves and net asset value on a per share basis. The transaction
will result in approximately 1,250 boe/d of production to FairWest,
maintaining FairWest's overall natural gas weighting at 95%. Proved plus
probable reserves to be acquired by FairWest based on Strike's September 30,
2006 reserve report are estimated at 1.421 million barrels of oil equivalent
(90% natural gas). Approximately 63% of the acquired reserves are proved and
72% of the proved reserves are developed and producing. The transaction will
increase FairWest's enterprise value to approximately $67.0 million, while
maintaining a strong balance sheet with year end debt to cash flow ratio of
less than 1 times.
    Based on a total estimated acquisition cost at May 1, 2007 of
$26.4 million, which includes undeveloped land and seismic valued at $2.25
million and the assumption of $15.9 million debt and working capital
deficiency, the acquisition metrics of the transaction are as follows:

    -   Reserve acquisition metrics of $18.26/boe of proved plus probable
    -   Production acquisition cost of $37,225/boe/d
    -   Incremental 2007 cash flow of approximately $4.25 million (assuming
        forecasted production, C$7.48/MCF AECO natural gas and Cdn$62.50/bbl)

    Currently Strike has six wells remaining from the summer drilling program
that have been completed and tested and are waiting on tie-ins. The expected
increase in net production from these wells would be 50 - 100 boe/d. An
additional 21 drilling locations have been identified for future
consideration. Currently, Strike has approximately 38,968 gross acres (35,668
acres net) of developed and undeveloped land.

    Additional Financing

    In conjunction with the transaction, FairWest intends to complete a
private placement financing, the net proceeds of which will be used by
FairWest to fund the capital programs of the combined companies, pay down
debt, fund the expenses of the transaction and for general working capital

    Director Approvals and Recommendations

    The Boards of Directors of Strike and FairWest have unanimously approved
the Arrangement and Strike's Board has agreed, as part of the Arrangement, to
recommend that the shareholders and creditors of Strike vote in favour of the
Arrangement. The Arrangement is anticipated to close on or about April 30,
2007. Upon closing of the transaction, Richard Clark, Executive Chairman of
Strike, will join the Board of Directors of FairWest. The transactions
contemplated by the Agreement are subject to a number of conditions including
the following:

    -   approval of the Arrangement by securityholders and creditors of the
    -   completion of due diligence by both parties;
    -   receipt by Strike and FairWest of satisfactory fairness opinions and
        reserve reports;
    -   regulatory approval including TSX Venture and TSX approval;
    -   the granting of a final order by the Court of Queen's Bench of
        Alberta, approving the Arrangement; and
    -   no material adverse change shall have occurred in the affairs of
        Strike or FairWest.

    Financial Advisors

    Jennings Capital Inc. is acting as FairWest's financial advisor with
respect to the Arrangement and has provided the FairWest Board of Directors
with its oral opinion, subject to review of the final form of documents
effecting the Arrangement, that the consideration offered pursuant to the
Arrangement is fair, from a financial point of view, to the shareholders of

    About Strike

    Strike (TSXV: SPP.V) is a Calgary-based junior oil and gas corporation
with its principal producing properties located at the Kirkpatrick Lake,
Youngstown, Sedalia, Jumpbush and Majorville areas of Alberta.

    About FairWest

    FairWest (TSX: FEC) is a Calgary, Alberta based junior oil and gas
company engaged in the acquisition, exploration, development and production of
crude oil and natural gas in the provinces of Alberta and Saskatchewan.

    Statements in this release which describe either FairWest's or Strike's
intentions, expectations or predictions, or which relate to matters that are
not historical facts are forward-looking statements. These forward-looking
statements involve known and unknown risks and uncertainties which may cause
the actual results, performances or achievements of Strike to be materially
different from any future results, performances or achievements expressed in
or implied by such forward-looking statements. Either FairWest or Strike may
update or revise any forward-looking statements, whether as a result of new
information, future events or changing market and business conditions.

    BOE Disclosure: Disclosure provided herein in respect of barrels of oil
equivalent (BOE) may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

    This Press Release is not to be disseminated in the United States of
America. This announcement is not an offer of Strike's shares in the United
States. Strike's shares have not been and will not be registered under the
U.S. Securities Act and have not been and will not be offered or sold in the
United States except in transactions exempt from the registration requirements
of that Act.

    The TSX Venture Exchange and the TSX do not accept responsibility for the
    adequacy or accuracy of this release.

    %SEDAR: 00020589E

For further information:

For further information: regarding Strike, please contact: Strike
Petroleum Ltd., D. Stephen Burtt, CA, Telephone: (403) 264-2332, ext 22,
Facsimile: (403) 264-2350, Email: steve.burtt@strikepetroleum.com; For further
information regarding FairWest, please contact: FairWest Energy Corporation,
James G. Gettis, President and Chief Executive Officer, Marion D. Mackie,
Chief Financial Officer, Telephone: (403) 264-4949, Facsimile: (403) 269-1761

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