Pearl Exploration and Production Ltd.



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  Oct 23, 2006 - 09:12 ET
Pearl Exploration and Production Ltd. and Atlas Energy Ltd. to Merge and Pearl Announces $100 Million Financing

  CALGARY, ALBERTA--(CCNMatthews - Oct. 23, 2006) -

NOT FOR DISTRIBUTION TO A US NEWSWIRE SERVICE OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF US SECURITIES LAW.

Pearl Exploration and Production Ltd. ("Pearl") (TSX VENTURE:PXX) and Atlas Energy Ltd. ("Atlas") (TSX:AED) are pleased to announce that they have entered into a definitive agreement to merge the two companies. Under the terms of the definitive agreement, the proposed merger will be undertaken by a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement") pursuant to which Pearl will acquire all of the issued and outstanding shares of Atlas and Atlas shareholders will receive 0.82 of a share of Pearl for each share of Atlas held.

Atlas is a publicly traded junior oil and gas company with producing and development assets in western Canada. Total enterprise value of the proposed transaction (which includes the assumption of total net debt of approximately Cdn. $77 million) is approximately Cdn. $340 million as of October 20, 2006. Upon completion of the Arrangement, Pearl estimates that the combined company will have approximately 106,834,000 million shares outstanding, not including shares issued in the $100 million financing or issued upon the exercise of outstanding options and warrants. The board of directors of the combined company will be comprised of eight directors, including the six current directors of Pearl and with the addition of Lukas Lundin, the largest shareholder of Pearl, and Lloyd Arnason, currently the Chairman of the Atlas board of directors.

The proposed Arrangement is subject to the approvals of at least 66 2/3% of the votes of Atlas shareholders and optionholders represented in person or by proxy at a special meeting of Atlas shareholders and optionholders, the Court of Queen's Bench of Alberta and appropriate regulatory and other authorities and certain other conditions customary for transactions of this nature. The proposed Arrangement has the unanimous support of the boards of directors of both Pearl and Atlas. The respective boards of directors have concluded that the Arrangement is in the best interests of the Pearl and Atlas shareholders and the board of directors of Atlas has resolved to recommend that the Atlas shareholders vote in favour of the Arrangement at the special meeting of Atlas shareholders and optionholders. An information circular is expected to be mailed to Atlas shareholders and optionholders in late November 2006 and the proposed Arrangement is expected to close in December 2006.

The definitive agreement prohibits both Atlas and Pearl from soliciting or initiating any discussion regarding any other business combination or sale of material assets, contains provisions to match competing unsolicited proposals and provides for a $7.5 million reciprocal break fee which is payable under certain circumstances if the Arrangement is not completed. All of the directors and officers of Atlas, representing in aggregate approximately 6.5% of the outstanding Atlas shares (on a fully diluted basis) have entered into lockup agreements with Pearl pursuant to which they have agreed to vote their Atlas shares in favour of the Arrangement. GMP Securities L.P. ("GMP") is acting as financial advisor to the board of directors of Pearl and has advised the board of directors of Pearl that it is of the opinion, as of the date hereof, that the consideration under the arrangement is fair, from a financial point of view, to Pearl. Peters & Co. Limited is acting as financial advisor to the board of directors of Atlas and has provided an opinion to the board of directors of Altas that the consideration to be received by the Atlas shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Atlas shareholders.

The combined resource opportunities of both companies are expected to provide shareholders with access to significant upside growth potential in North America. Atlas is a heavy oil and natural gas exploration and development company with current (net to Atlas) production of approximately 5,800 barrels of oil equivalent per day ("boepd"). Key, high working interest projects of the combined company include: Mooney (heavy oil, 74% WI), Druid (heavy oil, 100% WI), Unity (shallow gas, 100% WI), Salt Lake (heavy oil and gas, 100% WI), Ear Lake (heavy oil and gas, 100% WI), Pikes Peak (heavy oil, 100% WI), Onion Lake (heavy oil, 87.5% WI) and Southern Alberta (shallow and medium gas, 88% WI). Atlas has over 260,000 net undeveloped acres (average 83.6% working interest). Other key projects include San Miguel, Texas (heavy oil), Palo Duro, Texas (shale gas) and Gulf Coast shallow water offshore (natural gas).

The transaction is synergistic with Pearl's core assets around Onion Lake in N.E. Alberta and N.W. Saskatchewan and will allow the combined company to focus on optimizing value through low cost development, operating and product marketing. Following completion of the Arrangement, pro forma production of approximately 8,000 boepd is expected from high working interest assets in concentrated operating areas. Pearl estimates that its development portfolio and the equity issue described below will allow the combined company to undertake an aggressive capital expenditure program in 2007.

Gary Guidry, President of Pearl, commented, "the Atlas development portfolio will contribute significant production per share, cash flow per share and NPV per share to Pearl shareholders. The Atlas assets complement our own existing assets and this friendly transaction with Atlas is another step forward in our aggressively paced, growth strategy."

Richard Lewanski, President of Atlas, said, "The combined company will be a well-financed company with a clear focus on testing and developing large resource plays. This transaction will allow Atlas shareholders to benefit from exposure to Pearl's early stage testing of several potentially significant resource plays, as well as benefiting from the ability to accelerate the pace of development of Atlas' key resource plays. We look forward to building a large, resource focused exploration and development company together."

Pearl also announces that it has entered into an agreement with GMP pursuant to which GMP has offered to place with its clients, on an underwritten basis, an aggregate of 14,444,444 subscription receipts for common shares at a price of $4.50 each, and 1,709,401 subscription receipts for flow through shares at a price of $5.85 each, for gross proceeds of $75,000,000. Each subscription receipt will entitle the holder to acquire one common share or flow-through common share, as applicable, of Pearl, without further action or payment on the part of the holder, concurrently with the closing of the Arrangement with Atlas. In addition, GMP has offered to market for Pearl, on a best efforts basis, an issue of 5,555,555 common shares of Pearl at a price of Cdn. $4.50 per share for gross proceeds of Cdn. $25,000,000. The proceeds of the financings will be used to pay down the combined debt and fund ongoing capital programs. The private placement is subject to regulatory approval and the underwritten portion thereof is a condition to the proposed Arrangement.

Upon completion of the Arrangement and the $100 million financing, Pearl will have approximately 128,543,039 shares outstanding of which Pearl shareholders will hold 40.6%, former Atlas shareholders will hold 42.7% and subscribers to the $100 million financing will hold 16.9%.

Reader Advisory:

All references in this release to boe's are based on a 6 to 1 conversion ratio. Boe's may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl 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 does not constitute an offer to sell or the solicitation of an offer to buy any securities of Pearl or Atlas within the United States. The securities of Pearl and Atlas have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws. Accordingly, the shares may not be offered or sold in the United States or to U.S. persons (as such terms are defined in Regulation S under the 1933 Act) unless registered under 1933 Act and applicable state securities laws or an exemption from such registration is available.

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

This press release also contains forward-looking statements concerning the anticipated acquisition of all of the shares of Atlas. Although Pearl and Atlas believe that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them and neither Pearl nor Atlas gives any 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. The forward-looking statements contained in this press release are made as of the date hereof and neither Pearl nor Atlas undertakes any 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.

About Pearl:

Pearl is a public company focused on delivering disciplined growth by establishing a North American portfolio of oil and gas projects with an emphasis on large resource opportunities. Additional information on Pearl is available on the Company's website at www.pearleandp.com.

Neither the Toronto Stock Exchange nor the TSX Venture Exchange has reviewed, nor do they accept responsibility for, the adequacy or accuracy of this release.

FOR FURTHER INFORMATION PLEASE CONTACT:


Pearl Exploration and Production Ltd.
Gary Guidry
President and Chief Executive Officer
(403) 716-4051
(403) 261-1007 (FAX)
Email: gary.guidry@tykoil.com

or

Pearl Exploration and Production Ltd.
Arlene Weatherdon
Chief Financial Officer
(403) 716-4051
(403) 261-1007 (FAX)
Email: arlene.weatherdon@tykoil.com

or

Pearl Exploration and Production Ltd.
Gary Hyde
Chief Operating Officer
(403) 716-4063
(403) 261-1007 (FAX)
Email: gary.hyde@tykoil.com

or

Pearl Exploration and Production Ltd.
Sophia Shane
Corporate Development
(604) 806-3575
Email: sophias@namdo.com

or

Atlas Energy Ltd.
Richard Lewanski
President and CEO
(403) 215-8314

or

Atlas Energy Ltd.
James C. (Pep) Lough
Vice President, Finance and CFO
(403) 538-0065

or

Atlas Energy Ltd.
Investor Information
Email: investorinfo@atlasenergyltd.com
 
 

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