Questerre Energy Corporation has reached an agreement to increase its working interest in the St. Lawrence Lowlands by acquiring Terrenex Ltd. in an all share transaction.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "We are very pleased to increase our interest in the Lowlands plus gain ownership of one of the most comprehensive seismic databases in Quebec. The transaction also eliminates a non-arms length relationship going forward."
Terrenex is a significant shareholder of Questerre with common directors. Terrenex's assets are 10,698,785 Questerre shares and a working interest in sixteen exploration licenses covering 711,000 acres in the Lowlands. The licenses are held jointly with Questerre and are subject to a farm-in and participation agreement with a major Canadian independent. In the four licenses earned by the Canadian Independent for drilling Gentilly #1, Terrenex holds a 3.75% working interest. In the remaining 12 licenses, Terrenex currently holds a 15% working interest. Should the Canadian Independent complete its earning obligations on these 12 licenses and Terrenex participate for its proportionate share, Terrenex would have a 3.75% working interest. Terrenex also owns a seismic database of over 5,300 km of 2-D data in the Lowlands.
Terrenex's Quebec assets were valued at $3.474 million by an independent engineering firm retained by the independent directors of Questerre. The total consideration for Terrenex's assets, including 10.7 million Questerre shares, will be 15,892,785 Questerre shares and the assumption of $0.5 million in net debt. The net debt component will be paid through a non-refundable deposit on the transaction.
All the independent directors of Questerre have approved the acquisition. The independent director of Terrenex has approved the terms of the agreement and the transaction must be approved by the shareholders of Terrenex. In addition to Terrenex shareholder approval, closing of the transaction is subject to receipt of all regulatory approvals and is scheduled for no later than April 30, 2008. Upon completion of the transaction after the cancellation of the 10.7 million Questerre shares held by Terrenex, there will be 174,124,470 Questerre shares issued and outstanding.
Questerre also reported on recent developments concerning the Yamaska licenses in the Lowlands. The operator, Gastem Inc., has announced that its partner, a major US independent, has elected to exercise its financial commitment option on the Yamaska licenses. Questerre holds a 7.5% gross overriding royalty convertible into a 20% working interest on these licenses after earning by the US independent.
Questerre updated activities in the Greater Sierra region of British Columbia. Drilling operations on the second well under its farm-in agreement with a senior independent were successfully completed at the end of January. The well was drilled to a vertical depth of approximately 1500 m with a 1000 m horizontal leg in the target Devonian Jean Marie formation. Based on the final test rate of 2.0 mmcf/d (332 boe/d) while drilling, the partner has commenced work to tie-in both wells into the gathering system.
The Company also confirmed its exit production for December 2007 was 1,200 boe/d with average production for 2007 of approximately 1,400 boe/d.
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