Arete Industries (ARET)

[Oilbull]

Read people Read Geez



Company News



Arete Industries, Inc. Announces Completion of $10 Million Acquisition of Oil and Gas Assets

WESTMINSTER, Colo., May 31, 2011 (GLOBE NEWSWIRE) -- Arête Industries, Inc. (OTCQB:ARET) announced that it has closed a $10 million acquisition to purchase certain oil and gas operating properties in Colorado, Kansas, Wyoming, and Montana. The agreement includes an operating agreement for the continued operations of the properties by the current operator, a company owned by Charles B. Davis, a director of the Company. The properties were purchased from a company owned by Charles B. Davis and its affiliates. The acquisition was effected through payment of $500,000 and a $9.5 million seller-financed promissory note due July 1, 2011. The note is secured by all of the acquired properties.The Company is seeking financing to pay the note.

In connection with of the purchase of the properties the Company had two third independent party engineering reports prepared: a Ryder Scott report on estimated proved reserves on the newly acquired assets and a Sure Engineering report on the value of the proved, probable and possible reserves. The Ryder Scott analysis estimates that the proved wells have a discounted future revenue (at 10% per year) of $12.3 million. The Sure Engineering report estimates that the net present value of the revenues from estimated production of the resources (proved developed producing, proved developed non-producing, proved undeveloped, probable and possible reserves) are $63.9 million (discounted at 10% per year), based on future net revenues of $117.4 million. The independent petroleum engineering reports prepared for the Company were not prepared in accordance with SEC regulations and accordingly no inference should be made that the resource numbers in this press release would equate to those that would be expected if the petroleum engineers had used the SEC guidelines. Primarily, the Ryder Scott report used pricing parameters established by the Company of a range of $55 to $80 per barrel for oil, with escalated prices of 2.0% per year through 2023 for 11 years; natural gas prices were escalated to 2.0% per year beginning in 2015 for 11 years and operating costs were escalated at 2.0% per year. The estimates of the Sure Engineering included proved, probable and possible resources using a constant price of $80 per barrel of oil and natural gas prices from $2.50 to $8.50 per mcf.

Arete Industries, Inc. Releases Operational Update and Drilling Plan for 2011 and 2012
Existing Properties Include 91 Operating Wells That Currently Produce 175 BOE Per Day and Expects to Close the Year Ending December 31, 2011 at 550 BOE Per Day

WESTMINSTER, Colo., June 1, 2011 (GLOBE NEWSWIRE) -- Arête Industries, Inc. (OTCQB:ARET) announced today that the recently acquired properties include current production of approximately 175 Barrel Oil Equivalents per Day (BOEPD) or 63,875 BOE on an annualized basis.

Moving Forward

In addition to the current production and cash flow, the properties offer a large opportunity for future development and we are in the process of evaluating its potential. We have a short-term (two year) drilling plan that will begin July 1, 2011 and continue through December 31, 2012.

The Company intends to drill, refract, and recomplete approximately 12 additional wells during 2011 with a cost of $1.9 million with expected daily production of 550 BOE or annualized production of 200,750 BOE exiting 2011.

Expected 2011 Drilling Plans:

Drill five wells in the Big Bow Field;
Drill two wells in Smokey Creek;
Refrac three wells in the Walsh Field, and
Recomplete two wells in School Creek.

Expected 2012 Drilling Plans

The Company expects to refrac and recomplete eight School Creek wells and drill three School Creek wells on a joint venture basis for an estimated cost of $5.15 million. With the additional expected production, we expect 1,665 BOE daily production or an annualized production of 387,630 BOE exiting 2012.

Future

As part of the purchase, we have approximately thirty-four thousand gross acres that include approximately twenty-one thousand net acres under lease and approximately 250 Proven Undeveloped (PUD) locations. Approximately 200 of the PUDs are in the Coal Bed Methane (CBM) field where we own a pipeline. Our pipeline currently services 16 of our existing wells and is operating at only eight percent usage. If the Company is able to develop these 200 PUDs, we expect to increase the usage of the pipeline to over 70 percent. In addition, there has been several horizontal gas wells drilled in the area that we are exploring to provide transportation through our pipeline.

Donald Prosser, CEO of Arête Industries, said, "We are excited to begin executing on our drilling program to increase revenues and shareholder value. To maximize this opportunity, we have a lot of information to evaluate and decisions to be made. We expect to have a medium term plan by mid-summer and we our also exploring horizontal oil and gas joint ventures."




Oilbull