Hemi Energy Group Inc. (fka HMGP)

[1581]

Recent acquisition in Kansas. Interesting to compare numbers with what we already know with hemi. They are too small to gobble up hemi but there are bigger fish being just as aggressive, if not more so.


Teton Energy Corporation Announces Completion of Purchase of Oil and Gas Properties in the Central Kansas Uplift
ACQUISITION INCREASES RESERVES 91 PERCENT AND PRODUCTION 99 PERCENT

TETON INCREASES GUIDANCE FOR NET ANNUAL PRODUCTION FOR 2008 TO 3.4 BCFE
INCLUDING EXISTING PROJECTS AND NEW KANSAS ACQUISITION

DENVER, April 2, 2008 /PRNewswire-FirstCall/ -- Teton Energy Corporation ("Teton") (Amex: TEC) today announced it has completed the purchase of reserves, production and certain oil and gas properties in the Central Kansas Uplift of Kansas from Shelby Resources, LLC, a private oil and gas company and a group of approximately 14 other working interest owners, collectively ("Sellers") for approximately $53.4 million before closing adjustments. Terms also include warrant coverage of 625,000 shares at a $6.00 strike price with a two-year term. The effective date of the transaction is March 1, 2008.

The purchase price was funded with $40.1 million of cash and borrowing capacity available under Teton's revolving credit facility with JPMorgan and $13.3 million of Teton common stock, or 2,746,128 common shares. Effective April 2, 2008, Teton amended its bank credit facility with JPMorgan, increasing the total facility from $50 million to $150 million. The available borrowing base under Teton's bank credit facility was increased from $10 million to $50 million as a result of the combination of the added reserves from this transaction, ongoing drilling programs, and new hedging positions.

Highlights of the transaction include:
-- The assets purchase include an estimated 12.9 billion cubic feet
equivalent ("Bcfe") or 2.2 million barrels of oil equivalent ("MMBoe")
of proved reserves, an increase of 91 percent over Teton's year-end
proved reserves of 14.1 Bcfe.
-- The Sellers' proved reserves are approximately 94 percent oil and
92 percent of their reserves are developed (PDP or PDNP), located on
approximately 8,719 gross acres, with a 92% working interest to Teton.
-- When combined with Teton's existing reserves, Teton now has net proved
reserves of approximately 27.0 Bcfe (4.5 MMBoe) comprised of 52 percent
natural gas and 48 percent oil. In addition, the ratio of Teton's
developed reserves in the proved category has increased from 61 percent
to 76 percent.
-- The acquisition includes estimated net risked probable reserves of
5.7 Bcfe (0.95 MMBoe). When combined with Teton's existing probable
reserves, Teton now has probable reserves of 37.1 Bcfe.
-- The purchase price includes an estimated 4.26 million cubic feet
equivalent ("MMcfe") per day or 710 barrels of oil equivalent ("Boe")
per day of production as of March 1, 2008, an increase of 99 percent
over Teton's year-end production rate of 4.3 MMcfe per day.
-- After combining estimated net annual production from the Kansas
acquisition for the remaining nine months of 2008 (March production
will be an adjustment to the purchase price, with actual production to
Teton beginning April 2) with previous guidance of 2.0 Bcfe of annual
production for 2008, Teton now expects annual production will be
approximately 3.4 Bcfe in 2008.
-- Production from the Sellers' assets is approximately 92 percent oil and
six percent natural gas. When combined with Teton's existing
production, Teton now has production of approximately 57 percent oil
and 43 percent natural gas.
-- The purchase price includes 50 producing wells, 22 wells with
production behind pipe, five proved undeveloped locations and
29 identified probable locations on the 8,719 acres.
-- The proved and probable assets to be acquired have a 92 percent working
interest and a 76 percent net revenue interest to Teton.
-- In addition, the purchase price includes 52 square miles of 3-D seismic
with additional seismic to be acquired in 2008. It also includes
39,385 gross (23,631 net) undeveloped acres where Teton operates, at
60 percent working interest to Teton and 40 percent working interest to
Sellers. The Company believes the undeveloped acreage could yield
additional upside resource potential to Teton estimated to be
equivalent to the proved reserves.
-- Teton and Sellers have also agreed to a 5,326 square-mile go-forward
30-month area of mutual interest to pursue additional acreage and
resource opportunities where Teton will operate under the same 60/40
working interest split with Sellers as described on the existing
undeveloped acreage.


Teton anticipates that unit operating expenses in 2008 for the new Kansas project will be as follows: lease operating expense (LOE) will approximate $3.50 per Boe, transportation and gathering expenses will approximate $6.00 per Boe, production taxes will be approximately 8 percent and depreciation, depletion and accretion will approximate $18.00 - $20.00 per Boe. Teton expects general and administrative expenses to increase only minimally as a result of the acquisition.

Teton has hedged 80 percent of the oil proved developed producing ("PDP") production and 80 percent of the natural gas PDP production related to this transaction for five years through a series of costless collars in order to lock in base case economics associated with the acquisition. Table A below summarizes all of the Company's hedging positions, including positions previously put in place for a portion of its existing production.

Teton completed the hedging transactions with its senior bank, JPMorgan. These costless collars are intended to provide cash flow stability by locking in a portion of its revenues and cash flow in the event that crude oil or natural gas prices decline, while maintaining exposure to upside in the pricing. The additional cash flow stability will increase operational and financing flexibility.

Karl Arleth, President and Chief Executive Officer of Teton, stated, "The entire Teton team is excited about this company transforming transaction which will provide us with a much larger and more balanced portfolio of natural gas and oil reserves and production. It nearly doubles our reserves and daily production and provides us with significant upside potential in this very active oil and gas play. This is a new project for Teton to operate and we plan to begin a targeted $7 million capital expenditure program in Kansas for 2008 almost immediately."


http://ir.teton-energy.com/phoenix.zhtml?c=137387&p=irol-newsArticle&ID=1125046&highlight=