Canadian Oil

[kraftdinner]

Real Resources looks into merger or sale


2007-03-29 22:58 MT - News Release

Mr. Lowell Jackson reports

REAL RESOURCES PROVIDES 2007 GUIDANCE AND ANNOUNCES PLAN TO EXPLORE STRATEGIC ALTERNATIVES

Real Resources Inc. today provided 2007 guidance for production, cash flow and capital spending, and announced that the board of directors has initiated a formal process to explore alternatives in an effort to enhance shareholder value.

Real Resources anticipates oil and gas production for 2007 to be in the range of 11,500 to 12,000 barrels of oil equivalent per day, compared with 11,100 barrels of oil equivalent per day in 2006. In January, 2007, the company's production was approximately 11,400 barrels of oil equivalent per day. Natural gas volumes have been converted to barrels of oil at 6,000 cubic feet per barrel.

Cash flow for 2007 is expected to be in the range of $110-million (based on $55 (U.S.) West Texas Intermediate and $7.40 (Canadian) AECO) to $140-million (based on current strip prices), compared with $113.1-million in 2006. Capital spending for 2007 is estimated to be approximately $100-million, down 57 per cent, from $231.7-million in 2006.

"We are committed to enhancing value for Real Resources shareholders," said Lowell Jackson, president and chief executive officer. "Despite a difficult year in 2006, we continue to believe that Real Resources has valuable assets with significant long-term growth potential. We are working hard to execute our 2007 plan, while at the same time, exploring other alternatives for delivering value to our shareholders."

The company has engaged CIBC World Markets as its exclusive financial adviser to assist the company to identify and consider strategic alternatives and their potential to enhance shareholder value, including a possible merger, amalgamation, reorganization, or sale of some or all of the assets or any other alternative which may be in the best interest of Real Resources shareholders. There can be no assurance that a transaction of any kind will result.

As previously stated in the March 15, 2007, news in Stockwatch, Real Resources announced three new pool discoveries drilled in the first quarter, all of which have follow-up development drilling opportunities. Total capital expended in the first quarter is projected to be $31-million, which will approximate cash flow. For the remainder of the year, the company plans to drill 61 wells. Real Resources' current defined prospect inventory is in excess of 1,000 wells.

As of the end of 2006, Real Resources' net debt totalled $157.2-million. This included a working capital deficiency of $24.8-million and $132.4-million drawn down from a $185-million extendible revolving term credit facility with Real Resources' banking syndicate, which is made up of three Canadian chartered banks.

Real Resources expects to use cash flow from production to finance the 2007 capital program. Compared with 2006, Real Resources will reduce its capital expenditures on the acquisition of land and seismic and will focus its efforts on developing the numerous opportunities in its existing portfolio. Real Resources' 2007 capital spending objectives include increasing production from current levels while at the same time increasing reserves, thereby enhancing asset value.

Real Resources estimates that its Dec. 31, 2006, net asset value, as disclosed in its March 15, 2007, news in Stockwatch, is $622.8-million, equivalent to $16.05 per basic share outstanding and $15.98 per fully diluted share outstanding. The net asset value assumes $622.8-million as the before-tax net present value of proved-plus-probable reserves discounted at 10 per cent, plus $84.2-million for undeveloped lands and $73-million for seismic data, less $157.2-million of net debt. Sproule Associates Ltd. provided the economic reserves evaluation, Seaton-Jordan & Associates Ltd. provided the undeveloped lands estimate and Boyd Exploration Consultants Ltd. provided the seismic data estimate, each as of Dec. 31, 2006.

We seek Safe Harbor.