Enterra Energy to Acquire Producing Assets in Oklahoma

Enterra Energy Trust reports that it is pursuing the acquisition of oil and gas assets producing approximately 5,500 boepd in Oklahoma. The production is approximately 80% natural gas and 20% light oil. Enterra has entered into agreements with a group of private sellers to acquire the assets including producing wells, undeveloped land and an operating company with its employees, equipment and infrastructure for total consideration of approximately US$246 million. The agreements are subject to a number of conditions, including satisfactory completion of due diligence, title and environmental reviews and receipt of all required board and regulatory approvals. There is the possibility that the sellers may be able to acquire small additional interests in the producing wells from their current working interest partners, which in turn would be purchased by Enterra. At closing of the transactions, the purchase price will be adjusted based on the additional interests and production rates. The purchase price will be paid through a combination of cash, the issuance of trust units of Enterra and the assumption of debt. Subject to the satisfaction of all conditions to completion of the transactions, closing is expected to be January 6, 2006 with respect to one seller and February 28, 2006 with the remaining sellers.

Management of Enterra believes this transaction will be accretive immediately to cash flow on a per unit basis, net asset value on a per unit basis, production on a per unit basis and reserves on a per unit basis. Anticipated benefits to unitholders from this transaction include the following:

  • An increase of approximately 5,500 boepd bringing Enterra's overall production to over 15,000 boepd with the potential for additional production adds from the acquisition of some of the working interest partners.
  • More than 65,000 net acres of land of which over 40,000 net acres are undeveloped that currently have 18 drill ready locations, 40 well defined drilling locations and up to 50 possible additional drilling locations.
  • Focused operations in Oklahoma.

As per Enterra's business plan, these properties will be developed by way of joint venture. JED Oil Inc. has done most of the development drilling for Enterra, however with the aggressive drilling program JED has scheduled over the next 18 months, JED will not be able to provide the necessary resources as its capital, and more importantly, people are dedicated to its existing 18 month drilling program. As a result, Enterra plans to enter into a joint venture arrangement with Petroflow Energy Inc. to develop these properties to achieve their production potential. Petroflow presented this acquisition opportunity to Enterra as a result of its relationship with Macon Resources Ltd. Macon has been engaged by Enterra to provide management services to the Trust as well as to bring the Trust potential acquisitions. Macon holds approximately a 10% interest in Petroflow Energy.

"This acquisition is consistent with and extends Enterra's business plan, providing both existing production and substantial development opportunities," said Keith Conrad, President and CEO of Enterra. "We also hope to supplement our current staff by retaining the existing staff in Oklahoma once the acquisition closes."

Kingsbridge Facility

In connection with the financing agreement Enterra entered into and announced in April 2005 with Kingsbridge Capital Limited ("Kingsbridge"), Enterra reported that it has drawn (U.S.) $13,333,332 for which it issued 689,079 trust units over the period from Nov. 15 to Dec. 8. The term of this commitment is 24 months or until the total commitment of $100 million is drawn. Enterra has registered the trust units as per the agreement. Enterra's prospectus is available on the systems for electronic document analysis and retrieval (SEDAR) and the EDGAR website of the US Securities and Exchange Commission.