2009-08-06-2008-09-01

To buy co., gaining 800 BOE/d, 1.3 MMBOE 2P.

Privately held Monterey Exploration Ltd. plans to acquire Upper Lake Oil and Gas Ltd., Calgary, (Toronto: UP) for approximately C$26 million in stock and C$6 million debt assumption for a total deal value of approximately C$32 million. Monterey will pay 0.28 share per Upper Lake share. Current Upper Lake production is approximately 800 barrels of oil equivalent per day. It holds some 20,875 net acres of undeveloped land. Proved plus probable reserves were 1.3 million barrels equivalent as of Dec. 31 as prepared by a third party. Monterey currently produces 1,600 barrels equivalent per day, primarily in northeastern British Columbia. Pro forma, the combined company will have proved plus probable reserves of 8.3 million barrels of oil equivalent with a proved plus probable reserve life index of 9.5 years. Production will be some 2,400 barrels of oil per day (85% gas). It will hold 90,000 net undeveloped acres. The combined assets will be focused in northeastern British Columbia including interests in the Montney resource play. It will be led by the existing Monterey management team. Upper Lake executive chairman Don Copeland is expected to join the board. Upper Lake' president and chief executive Kelly Ogle says, "Upper Lake has successfully grown production from an initial starter kit; however, we realized we needed to be part of a much bigger entity to garner market recognition. Monterey has demonstrated per share growth in production, cash flow and reserves both through acquisition and drilling. Monterey's low decline, long life asset base was very attractive to Upper Lake and our cash flow base can be re-deployed into Monterey's resource style plays in northeastern British Columbia." Cormark Securities Inc. is advisor to Monterey. Acumen Capital Partners has provided the Upper Lake board with a fairness opinion.