Progress Energy Announces Strategic Partnership with PETRONAS to Develop Montney Shale Assets

Jun 2, 2011

Pursuing West Coast LNG project to unlock Progress’ large Montney
position

CALGARY, June 2, 2011 /CNW/ – Progress Energy Resources Corp.
(“Progress” or the “Company”) (TSX: PRQ) announced today it has
executed a binding framework agreement to create a strategic
partnership with the Malaysian national oil company, PETRONAS, to
develop a portion of Progress’ Montney shale assets in the Foothills of
northeast British Columbia (the “Transaction”).  Progress will sell 50
percent of its working interest in its Altares, Lily and Kahta
properties (the “North Montney Joint Venture”) to PETRONAS for CDN$1.07
billion.  The agreement also reflects the desire by both parties to
explore additional opportunities to develop liquefied natural gas (LNG)
export capacity in British Columbia.

“This is a breakthrough transaction for Progress: the partnership we are
launching will enable us to accelerate our growth strategy,” said
Michael Culbert, President and Chief Executive Officer of Progress. 
“We are very pleased to form this long-term partnership with PETRONAS.
They share our belief that our North Montney shale assets are a
world-class resource that deserves significant investment.  We look
forward to benefitting from PETRONAS’ significant global expertise
including their leadership in developing infrastructure and accessing
LNG markets. As well as enhancing Progress shareholder value, this
partnership will also generate substantial economic benefits for local
communities and the province of British Columbia, while leveraging the
environmental benefits of Canada’s abundant and clean-burning natural
gas resources globally.”

Under the terms of the framework agreement, PETRONAS will pay 25 percent
of the total consideration (CDN$267.5 million) in cash at closing and 75 percent of the total consideration in
the form of a capital carry whereby PETRONAS will pay 75 percent of
Progress’ share of future capital expenditures in the North Montney
Joint Venture over the next five years to a total of CDN$802.5 million. The Transaction provides Progress with the capital required to
accelerate the development of its unconventional assets and unlock the
value underlying the Company’s vast Montney land holdings.

In addition to the above Transaction, PETRONAS and Progress will
establish an LNG export joint venture (the “LNG Export Joint Venture”)
to be 80 percent and 20 percent owned, respectively. The LNG Export
Joint Venture will launch a feasibility study to evaluate building and
operating a new LNG export facility on the West Coast of British
Columbia. PETRONAS would be the operator of this facility, and PETRONAS
and Progress would jointly market the LNG utilizing PETRONAS’
well-established and extensive network of customers in the largest LNG
markets globally.

“Canada is poised to take a larger role on the world’s energy stage.
Developing new export options for Canadian natural gas producers is a
logical step in connecting our vast resources with growing Asian demand
for environmentally responsible energy sources like natural gas,” said
Mr. Culbert.  “We look forward to working with West Coast British
Columbia communities as we pursue this opportunity to build a new
facility that will add value to British Columbia’s natural resources
while creating considerable long-term local economic benefits.”

In connection with the LNG Export Joint Venture, PETRONAS will provide a
standby equity financing commitment of up to $600 million, for
Progress’ capital requirements arising from the North Montney and LNG
Export joint ventures from which Progress can draw down at the time of
a successful LNG final investment decision.

The North Montney Joint Venture comprises 149,910 working interest acres
in which PETRONAS will acquire a 50 percent interest and Progress will
be the operator. The North Montney Joint Venture lands represent
approximately 20 percent of Progress’ rights in its northeast British
Columbia Foothills land holdings, which total approximately 700,000 net
acres.  Progress holds approximately 900,000 net acres of Montney
rights over its entire British Columbia and Alberta land base, making
it one of the largest Montney land rights holders.  The joint venture
properties include five wells with minimal production at this time.

The closing of the transaction is subject to the execution of definitive
agreements and receipt of regulatory approval.

BMO Capital Markets acted as exclusive financial advisor to Progress on
this transaction.

About PETRONAS
PETRONAS is the national oil and gas company of Malaysia. Incorporated
in 1974 the company, ranked among the most profitable among the Fortune
Global 500 entities, is engaged in the oil, gas and petrochemicals
industries with strategic business assets and interests in more than 30
countries. It is one of the world’s leading LNG companies and is fully
involved in every value chain of the LNG business, from liquefaction
and shipping to re-gasification and trading. Apart from its Malaysian
production facility, currently one of the world’s largest, PETRONAS
also owns interests in LNG assets in Australia, Egypt and the United
Kingdom.

About Progress Energy
Progress is a Calgary, Canada-based energy company focused on
exploration, development and production of large, unconventional
natural gas resources in northeast British Columbia and northwest
Alberta. Throughout its history, Progress has a solid track record of
growing reserves, production and the underlying value of the Company
for its shareholders.  Common shares of Progress are listed on the
Toronto Stock Exchange under the symbol PRQ.

Investor Conference call information:
Progress will host an investor conference call on Thursday, June 2, 2011
at 9:00 a.m., Calgary time (11:00 a.m. eastern time).   Investors may
participate by calling 1-888-231-8191 and referencing conference ID
72183912. Alternatively, investors may access the call through the
following URL:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3559380

Advisory on Future Oriented Information
This press release (the “press release”) contains forward-looking
statements and forward-looking information within the meaning of
applicable securities laws. The use of any of the words “expect”,
“anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”,
“will”, “project”, “shou
ld”, “believe”, “plans”, “intends” and similar expressions are intended
to identify forward-looking information or statements. In particular,
forward looking statements in this press release include, but are not
limited to:

  • the effect of the North Montney Joint Venture on the Company’s growth
    strategy;
  • the economic and environmental benefits of the North Montney Joint
    Venture;
  • the terms of the North Montney Joint Venture framework agreement;
  • the effect of transactions on Progress’ development of its
    unconventional assets and Montney land holdings;
  • the terms of LNG Export Joint Venture;
  • the results of the feasibility study to evaluate the building and
    operation of an LNG export facility;
  • the effect of LNG Export Joint Venture on British Columbia natural
    resources and long term local benefits;
  • the terms of standby equity financing commitment;
  • Progress’ business strategy, priorities and plans;
  • the focus of capital expenditures, the timing of capital spending and
    the results therefrom;
  • the focus of the Company’s exploration and development efforts;
  • potential capital investment opportunities;
  • expected sources of capital funding; and
  • future demand for natural gas.

The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable credits, royalty rates and tax laws; the performance
of existing wells; the success obtained in drilling new wells; the
sufficiency of budgeted capital expenditures in carrying out planned
activities; completion of definitive documentation;  receipt of all
required regulatory approvals; and the availability and cost of labour
and services and future operating costs. Although Progress believes
that the expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward looking statements and information
because Progress can give no assurance that they will prove to be
correct.

Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and
gas industry in general such as operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
uncertainty of reserve and resource estimates; the uncertainty of
estimates and projections relating to test rates, reserves, resources,
production, costs and expenses; health, safety and environmental risks;
commodity price and exchange rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to realize
the anticipated benefits of acquisitions; ability to access sufficient
capital from internal and external sources; the risk that the North
Montney Joint Venture or the LNG Export Joint Venture are not completed
on the terms described or at all; failure to receive all required
regulatory approvals; failure to realize the anticipated benefits of
the Transaction or the LNG Joint Venture; and changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations.

Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide security holders with a more complete perspective
on the Company’s future operations in respect of the North Montney
Joint Venture and the LNG Export Joint Venture and such information may
not be appropriate for other purposes. The Company’s actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them
do so, what benefits that the Company will derive there from. Readers
are cautioned that the foregoing lists of factors are not exhaustive.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that
could affect the operations or financial results of Progress are
included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website (
www.sedar.com). The forward-looking statements and information contained in this
press release are made as of the date hereof and Progress undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.