Progress Energy Announces the Closing of its Strategic Partnership with PETRONAS

Aug 2, 2011

Upstream and LNG joint ventures focus on growing Asian markets

CALGARY, Aug. 2, 2011 /CNW/ - Progress Energy Resources Corp. ("Progress" or the "Company") (TSX:PRQ) announced today that it has closed the previously  announced transaction to create a strategic partnership with the Malaysian national oil and gas company, PETRONAS, to develop a portion of Progress' Montney shale assets in the Foothills of northeast British Columbia (the "Transaction").  Under the Transaction, PETRONAS acquired 50 percent of Progress' working interest in the Altares, Lily and Kahta properties (the "North Montney Joint Venture").

"Both parties have worked diligently and cooperatively towards the completion of the agreements that form the basis of our strategic partnership," said Michael Culbert, President and Chief Executive Officer of Progress.  "We will now move forward on building a strong gas production growth profile from the North Montney Joint Venture assets as well as initiating the feasibility study for the development of an LNG export facility on the west coast of British Columbia."

PETRONAS is paying a total consideration of CDN$1.07 billion of which 25 percent of the total consideration (CDN$267.5 million) has been paid in cash upon closing and 75 percent of the total consideration will be paid in the form of a capital funding commitment whereby PETRONAS will pay 75 percent of Progress' share of future capital expenditures in the North Montney Joint Venture to a total of CDN$802.5 million.

PETRONAS and Progress have also established an LNG export joint venture (the "LNG Export Joint Venture") which is 80 percent and 20 percent owned, respectively. The LNG Export Joint Venture will launch a feasibility study immediately to evaluate the potential of the LNG export facility on the west coast of British Columbia. PETRONAS will be leading the development of the LNG export facility, and PETRONAS and Progress will jointly market the LNG utilizing PETRONAS' well-established and extensive network of customers in LNG markets globally.

In connection with the LNG Export Joint Venture, at the time of a successful LNG Export investment decision, PETRONAS will provide a standby equity financing commitment of up to $600 million, for Progress' capital requirements of the North Montney Joint Venture to supply gas for the LNG Export Joint Venture, subject to receipt of all regulatory approvals.

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 natural gas production, 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.

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", "should", "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 terms of the North Montney Joint Venture, including terms of the payment of the remaining 75 percent of the total consideration;
  • the effect of the North Montney Joint Venture on the Company's growth strategy;
  • the effect of the Transactions on Progress' development of its unconventional assets and Montney land holdings;
  • the terms of LNG Export Joint Venture; 
  • the terms of standby equity financing commitment; and
  • Progress' business strategy, priorities and plans.

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 LNG Export Joint Venture is 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.