ProspEx Initiates Review of Strategic Alternatives and Announces Entry into Northeastern BC Montney Play

CALGARY, Jan. 24 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the "Company") is pleased to announce a decision by its board of directors (the "Board") to enter into a review of strategic alternatives, and to announce its entry into the Montney play in northeastern British Columbia.


After a thorough review of the Company's current share price, reserves, production, and operations, the Board has concluded that ProspEx trades at a substantial discount to the net asset value of its underlying assets. Accordingly, the Board has decided to initiate a process to identify, examine and consider a range of strategic alternatives available to the Company with a view to enhancing shareholder value. Such strategic alternatives may include, among other alternatives: a sale of a material portion of the assets of the Company; a sale of the Company, either in one transaction or in a combination of transactions; a merger or other business combination; or a farm-in, farm-out or acquisition. Notwithstanding that due consideration will be given to all alternatives, the Board believes that a sale of one or a combination of assets is most likely to best enhance shareholder value. There can be no assurance that the process will result in a transaction of any form.

The process of reviewing strategic alternatives will be overseen by a special committee comprised of the independent directors of the Board. This special committee has a mandate to solicit, review and consider strategic alternatives and to consider and recommend to the Board whether any proposed transactions are in the best interests of the Company and its shareholders.

In connection with this mandate, the Company has retained Cormark Securities Inc. as its financial advisor to assist the independent committee.

The Company has not set a definitive schedule to complete its evaluation and, notwithstanding the above, no decision on any particular alternative has been reached at this time. ProspEx does not intend to make any further announcements regarding the process unless and until the Board has approved a specific transaction or other course of action or otherwise deems disclosure of developments is appropriate.


ProspEx has assembled a largely contiguous, 25,000 acre (36 section), 100% working interest land position in the Montney play in the Birch area of northeastern British Columbia. This Montney position has been accumulated through a combination of Crown land sales, and a farm-in arrangement with a large E&P company.

The Birch lands are located east of the successful Montney development in the Town area, in an area interpreted to have a localized thickening of the Upper Montney, resulting in Upper Montney net pays close to those interpreted at Town. ProspEx has conducted a preliminary evaluation of the lands by recompleting and testing an existing vertical wellbore and has determined that the Upper Montney is overpressured in the area. Analysis of the gas produced from the recompleted well indicates a relatively high liquids content estimated at 30 barrels per million cubic feet ("mmcf").

A horizontal well was recently drilled and completed in a stratigraphically thinner Upper Montney section northeast of ProspEx's lands by an industry competitor. Data submitted to the provincial regulatory authority by the operator indicate that this well was completed with 7 fracture stimulations of 100 tonnes each, using a foam based fracturing fluid. Following the fracture stimulation, the well was tested for 66 hours with a final rate of 5.1 mmcf per day at a flowing pressure of 450 pounds per square inch. Reservoir pressure surveys indicate that the ProspEx lands have a reservoir pressure substantially greater than encountered on the competitor's lands. This information may be relevant as a potential indicator of the productivity of the ProspEx lands.

ProspEx is planning to drill a horizontal well in the Upper Montney in the first quarter of 2011. Given that the well offsetting the ProspEx lands has a reservoir pressure substantially lower than observed on the Company's lands, and is interpreted to have a thinner Upper Montney section, and allowing for ongoing advancements in fracturing techniques, ProspEx believes that a higher test rate may be achievable (relative to the offsetting horizontal well) on its acreage.

The Company has further increased the depth of its prospect inventory with the entry into the Montney play. The Montney lands, although early in their evolution, offer exposure to a resource play opportunity and the potential for a significant drilling inventory of up to 200 locations, based on the Company's current view of the optimal development of the Upper Montney in the area.


ProspEx is a Calgary based junior oil and gas company focused on exploration for natural gas in the Western Canadian Sedimentary Basin.

Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: the Company's plan to review strategic alternatives, anticipated capital programs and expenditures, expected drilling and anticipated results from such drilling.

Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the availability and viability of strategic alternatives, the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Description of the Business - Risk Factors Relating to Our Business" and "Industry Conditions" in the Company's most recent Annual Information Form, under the heading "Operational and Other Business Risks" in the Company's Management's Discussion and Analysis for the year ended December 31, 2009, and in the Company's most recent consolidated financial statements, management information circular, quarterly reports, material change reports and news releases available under the Company's profile on SEDAR ( Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Information" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions.

The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document and the Company 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 required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.

SOURCE ProspEx Resources Ltd.

For further information: John Rossall, President and CEO or George Yee, Vice President, Finance and Chief Financial Officer at or (403) 268-3940

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