CALGARY, Alberta, Feb. 26 /PRNewswire-FirstCall/ -- The following was
released on behalf of the Board of Directors of Tracer Petroleum Corporation,
by Larry Youell, President and CEO:
TRACER PETROLEUM CORPORATION ("Tracer" or the "Company") reports that it
has entered into an agreement dated February 25, 2003 (the "Agreement") to
acquire a 66% interest in Forum Exploration Inc. of the Philippines ("Forum"),
in exchange for 100 million Tracer shares at a deemed value of US$0.10 per
share for total consideration of US$10 million (based upon the price of
Tracer's common shares as reported on the NASD OTCBB on the date of the
Agreement); the remaining 34% of Forum will be retained by Forum Pacific Inc.
of the Philippines. Consummation of the Agreement, which will result in a
change of control, is subject to a number of factors including, but not
limited to, applicable shareholder and regulatory approval., as more fully
discussed below. A finder's fee of up to 5 million warrants, exercisable at
US$0.10 per share, is payable in connection with the consummation of the
Agreement.
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The following information regarding Forum and its properties has been
derived from materials provided by Forum:
Forum has 100% interests in two contract areas in the Philippines, and
these are shown plotted on a map of the Philippine archipelago in Figure 1
below. The first contract area is a GSEC (Geophysical Survey and Exploration
Contract), which covers Manila Bay and a portion of the contiguous landward
area of Luzon Island, including most of the area of Metro Manila. This GSEC,
known as GSEC 92, expired on May 12th 2000, however Forum has recently applied
for another GSEC area which includes the Manila Bay area previously covered by
GSEC 92, plus an additional area on land in a strip extending northwards from
the bay and beyond Lincayen Gulf.
The second contract area is a service contract (SC) area known as SC 40,
which covers the northern half of Cebu Island plus part of the Visayan sea
offshore to the west of the island. Several exploration prospects and leads
have been identified by Forum within the service contract area, both onshore
Cebu, and offshore in the Visayan Sea. A small gas field has been discovered
and appraised onshore Cebu.
PGS Reservoir Consultants (UK) Limited ("PGS"), an independent
consultancy specialising in petroleum reservoir evaluation and economic
analysis, has completed an independent evaluation of Forum's interests in the
Philippines. Based upon this evaluation, PGS has calculated an Expected Value
of Net Cash Flows (NPV10) of US$51.23 million for the interests and an
Optimistic Value of Net Cash Flows (NPV10) of US$485 million. These
calculations are based upon potential recoverable natural gas reserves of 675
billion cubic feet for the Manila Bay GSEC and 3,167 billion cubic feet for SC
40, and potential recoverable oil reserves of 907 million barrels for SC 40,
on an unrisked basis.
Manila Bay
The Manila Bay prospect was identified in the early 1990s as a potential
Miocene/Pliocene gas target, and the first well was drilled on the structure
by Cophil Exploration and its partners during 1995. Technical and operational
problems forced the abandonment of the initial hole, and a sidetrack well also
had to be abandoned after it encountered an overpressured late Miocene
limestone horizon at around 7,430 feet. Gas was detected in the drilling mud
during the penetration of the limestone section, but the lack of wireline logs
or drill stem tests meant that no further evaluation of the limestone zone was
possible at that stage.
In 1996 a further well was drilled on the structure very close to the
original well location. This well successfully drilled down to a TD of
11,684 feet. Gas shows from the drilling mud were identified in several
zones, and this information, together with wireline log data, was used to
select three zones for drill stem testing. However, all of the three tested
zones flowed water, with only minor amounts of gas. It was suspected that the
final test of the shallow Malo Pungatan limestone horizon, which had been
responsible for the over-pressure problems encountered in the original well,
was compromised by a probable casing leak, adding further uncertainty to the
interpretation of the well results.
The available seismic and well data from Manila Bay were the subject of a
detailed review and evaluation by PGS. The conclusions from this work were
that some additional prospects may be present near the original Manila Bay
wells, and that new seismic work, involving re-processing and attribute
analysis may identify potential new drilling targets.
SC 40 - Cebu
Exploration in the Visayan basin began over 100 years ago and since then
approximately 130 wells have been drilled. The majority of the wells were very
shallow tests, drilled outside of structural closure. Oil and gas shows have
been encountered in a number of wells with oil and gas discoveries made
onshore Cebu Island. Since 1994 twelve wells have been drilled in the offshore
Visayan basin, ten of which lie within the SC 40 Licence. Of these ten wells,
nine targeted Miocene reef plays defined on 2D seismic data and good reservoir
quality was established by 7 wells. Hydrocarbon seeps are also common in the
area indicating an active and mature petroleum system.
The outstanding work commitments for SC 40 amount to 3 wells, which are
all to be drilled in 2003. These wells will be drilled on onshore prospects,
commencing with a re-entry or twin well on the Maya prospect in SC 40. Target
depths for onshore prospects tend to be modest, and drilling costs are
therefore not high. Forum has its own drilling rig and ancillary equipment,
and this will be used to drill the onshore prospects. Forum has budgeted
US$450,000 for these 3 shallow onshore wells, with the first well due to
commence during the next 30 days. This well, FORUM-1X, will be located close
to MST-11, an oil discovery well drilled in 1961 that flowed 540 barrels of 44
degree API oil during a drill-stem test.
Related Matters
In conjunction with the Forum acquisition, Tracer expects that it will
need to raise up to US$2 million through a contemplated equity financing of up
to 20 million shares at US$0.10 per share. Although Tracer is in discussions
to complete a portion of this as a private placement on a best efforts basis
for up to US$500,000, it has not entered any definitive agreements with
respect to either this portion of the proposed financing or the balance of
US$1.5 million and no assurances can be given that all or any such portion of
additional equity financing will be completed. The proceeds of such
financing, if successful, will be used in large part for the development of
Forum's contract areas in the Philippines.
Tracer currently owes approximately US$400,000 in principle and accrued
interest to various creditors, including Roc Oil Corporation, AMS Limited of
Bermuda, and the Company's Chairman, David R. Robinson. These creditors have
agreed in principle to exchange their debt for 10% convertible debentures,
with registration rights, which can be converted into Tracer common shares at
US$0.10 per share. Tracer intends to file a registration statement with
respect to the shares issuable upon the conversion of such debenture, as well
as restricted shares held by certain other shareholders.
Since the issuance of the 100 million shares for the Forum acquisition and
the registration of the shares to be issued upon exercise of the to-be-issued
convertible debentures will have a substantial dilutive effect on Tracer's
existing shareholders, the completion of the Forum acquisition is subject to
shareholder and regulatory approval. Tracer intends to hold an Extraordinary
Meeting of its shareholders as soon as possible to consider and act upon these
matters. However, no specific timetable has been established.
President's Comment
Mr. Larry Youell, Tracer's President and Chief Executive Officer,
commented, "With the huge US$4.5 billion Malampaya Deepwater Gas-to-Power
project involving such major companies as Shell, ChevronTexaco, and British
Gas, the Philippines is proving itself to be an attractive area for upstream
oil and gas development. The location of Forum's potential Manila Bay
prospect, in particular the close proximity to a developed gas market, means
that a discovery of gas in commercial quantities could be readily developed.
The water depth in Manila Bay is shallow, and the technology to exploit gas
reserves in such locations is well developed. The current local market price
for natural gas is about US$4.80 per thousand cubic feet which is a reasonably
high price by world standards. Forum's Cebu contract also holds very
significant potential for both oil and gas, and so the acquisition of a
majority interest in Forum Exploration should prove to be a very worthwhile
acquisition for Tracer and its shareholders."
Other
Following the consummation of the Agreement, in addition to aggressively
developing the Forum interests in the Philippines, Tracer plans to continue to
pursue the acquisition of its potential project interests in Turkmenistan and
Nigeria, as well as production and development opportunities in the US that
have been initiated by Forum. Furthermore, following the consummation of the
Agreement, Tracer plans to pursue the possibility of listing its common shares
for trading on other exchanges and venues in addition to the NASD OTCBB, such
as the Toronto Stock Exchange and/or the Alternative Investment Market of the
London Stock Exchange.
The Company is also pleased to report that Mr. David M. Thompson, aged 50,
of Hamilton, Bermuda, has agreed to join the Board of Directors and to also
become Chief Financial Officer of Tracer. As Managing Director and a major
shareholder in AMS Limited, an international management company in Bermuda
with funds and assets under management exceeding $200 million, Mr. Thompson
was responsible for incorporating a management company and developing it into
an international organization offering a variety of services including trading
companies, foreign sales corporations, personal trusts, asset management and
financial money management. Previously, Mr. Thompson spent nine years as
Senior Vice President and Executive Director of the Larmag Group of Companies
in the Netherlands, which is now operated through AMS. His more than 25 years
of financial experience includes raising over US$75 million from the private
debt and equity markets for investment in an upstream oil and gas business
located in Turkmenistan. He later negotiated the terms of the sale of these
holdings to Dragon Oil PLC. Mr. Thompson received an Institute of Bankers
Diploma from the University of London and later received his CMA from York
University in Toronto. Tracer also reports that Mr. Sameer Hirji has resigned
from the Board of Directors.
This release contains "forward-looking statements" as per Section 21E of
the US Securities and Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Management is currently reviewing many options and there
is no assurance that they will not make decisions other than those now
contemplated. The Company is subject to political risks and operational risks
identified in documents filed with the Securities and Exchange Commission,
including changing and depressed oil prices, unsuccessful drilling results,
change of government and political unrest in its main area of operations.
For investor information please contact Larry Youell, CEO, at
+1-250-491-7783, or the Company headquarters: TRACER PETROLEUM CORPORATION,
Suite #910, 441 - 5th Ave. S.W., Calgary, AB, T2P 2V1 Canada. Phone:
+1-403-290-1676 or Fax: +1-403-264-5285, or "e-mail"
tracerinfo@tracerpetroleum.com or web site, http://www.tracerpetroleum.com.
SOURCE Tracer Petroleum Corporation
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http://www.tracerpetroleum.com
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CONTACT:
Larry Youell, CEO, of Tracer Petroleum
Corporation, +1-250-491-7783
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