2009-09-21-2009-08-05-2009-08-05

To buy company, gaining 350 BOE/d, 1,400 gross undeveloped sections in AB.

Calgary-based NAL Oil & Gas Trust (Toronto: NAE.UN) plans to acquire Spearpoint Energy Corp. for C$16.2 million. Spearpoint assets include production of approximately 350 barrels of oil per day and a farm-in agreement with an unnamed industry partner. At closing, NAL plans to sell 40% of the acquired assets to its strategic partner The Manufacturers Life Insurance Co. for approximately C$6.5 million. The farm-in agreement gives NAL exclusive access to some 1,400 gross sections of undeveloped oil and gas properties in Alberta with an initial two-year term and a capital commitment by NAL of C$50 million in the first year, C$57 million in the second year and an option to extend the arrangement for a third year with a commitment of another C$50 million. The properties lie adjacent to NAL's Garrington and Pine Creek properties where the company is working a horizontal drilling program in the Cardium formation. The 896,000 gross undeveloped acres of farm-in properties include multi-zone gas and shallow-gas potential, and NAL plans to drill five gross (three net) Cardium oil locations on the properties in the fourth quarter of 2009. The properties include 100,000 acres with Cardium formation rights in NAL's Sylvan Lake and Pine Creek areas in Alberta, and they add 70 Cardium oil locations to the company inventory. The arrangement also gives NAL preferred access to the farm-in partner's processing facilities. Currently, NAL's horizontal Cardium wells give it an initial production rate between 300- and 500 barrels of oil per day after load fluid recoveries with a 10% to 15% decline rate leaving production of 75 to 125 barrels per day of oil light sweet crude per well after six months. "The acquisition of Spearpoint and the new farm-in agreement builds on NAL's focused strategy of creating an E&P company through the addition of quality assets to support organic growth as we approach the end of 2010. The participation of our partner Manulife in the acquisition of Alberta Clipper, the joint venture in the Cardium and this Spearpoint agreement allows the trust to execute larger transactions with future commitments and maintains the trust's ongoing financial capability to pursue opportunities in the marketplace," says Andrew Wiswell, NAL president and chief executive.