PrimeWest Closes Acquisition of U.S. Oil and Gas Assets

Calgary-based PrimeWest Energy on Friday announced the closing of its acquisition of producing oil and gas assets located in Montana, North Dakota and Wyoming for total consideration of approximately US$300 million (CDN$330 million, assuming an exchange rate of CDN$1 equals 90 cents US).

The acquisition establishes a new operating area for PrimeWest within the Williston Basin, providing considerable water flood and development drilling potential. The acquisition increases company interest production by approximately 3,200 barrels of oil equivalent (BOE) per day, comprised of 94% crude oil and 6% natural gas. Approximately 80% of the crude oil production is light crude oil, produced from the Mississippian and Devonian formations with an average 38-degree API. The remaining crude oil produced has an average 20-degree API.

The major fields acquired are Flat Lake, Dwyer, and Goose Lake in Montana; Rival, Grenora, Alexander, Wiley, Glenburn, and Sherwood in North Dakota; and Rocky Point in Wyoming. The most prolific field is Flat Lake, which is geologically similar to the producing fields found immediately north of the Canada/U.S. border in the Province of Saskatchewan.

PrimeWest's total inventory of future development opportunities is now approximately CDN$1 billion. In addition to the previously announced 2006 capital development program of CDN$275 million, PrimeWest plans to invest approximately CDN$23 million on the U.S. properties, which will provide for the drilling of three wells, well reactivations, injection conversions, and high-volume lift, bringing the total 2006 capital development program to approximately CDN$300 million. Previously disclosed development activities will continue on the Conventional, Tight Gas, Shallow Gas, and Coalbed Methane (CBM) plays in Canada. In conjunction with GLJ estimates, PrimeWest has identified approximately 160 drilling locations on the U.S. properties to drill over the next several years. The majority of the additional drilling locations consist of infill horizontal wells. Capital investment in the U.S. properties is forecast at approximately CDN$50 million for each of the next 3 years. Additional opportunities include higher-density infill drilling, water flood optimization, and potential enhanced recovery oil projects.

As previously announced, the transaction was financed through PrimeWest's existing credit lines plus a supplementary credit line of CDN$250 million.

PrimeWest is a Canadian-based conventional oil and gas royalty trust, headquartered in Calgary, Alberta. The Trust actively acquires, develops, produces, and sells natural gas, crude oil, and natural gas liquids for the generation of monthly cash distributions to unitholders.


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