Sentry acquires gas and oil reserves and land rights offshore Canada

Jul 14, 2000 02:00 AM

Sentry Resources Corporation (SOX) has now completed the acquisition of Georgian Bancorp's interest to acquire gas and oil reserves and land rights in the Mackenzie Delta and Beaufort Sea areas of Canada.
These interests were originally acquired by The Georgian Group (Sentry's main shareholder) following participation between 1981 to 1986 in a $ 900 mm exploration program under a farm-out agreement with Esso Resources Canada.
The Georgian Companies (including Sentry which already had a 1/6th interest in the properties) expended over $ 43 mm at the time of the drilling. The Esso program involved over 3 mm acres of petroleum and natural gas rights including almost 400,000 acres of Inuvialuit Lands. Including the current transaction, Sentry will have approximately 2.6 % interest in these properties.
The transaction with Georgian involved Sentry issuing a promissory note to Georgian for $ 5,515,534.69 with interest at 6 %. The note matures on June 26, 2003. It is open and prior to maturity and upon receipt of all necessary regulatory approvals and stock exchange consents, Georgian has the right, at any time, to convert the principal and interest owing under the Promissory Note into treasury common shares of Sentry valued at $ 0.15 per share; also Sentry has the right upon receipt of all necessary regulatory approvals and stock exchange consents to put treasury common shares of Sentry to Georgian valued at $ 0.15 per share into a number of treasury common shares of Sentry equivalent to the principal and accrued interest.

First Energy Capital of Calgary on March 24, 2000 in a 16 page analysis with respect to the Mackenzie Delta potential for Northern Frontier Gas stated: "We believe production from the north is inevitable. Given the following: - [The National Energy Board of Canada has] estimated discovered gas reserves in the Mackenzie Delta/Beaufort Sea of 9 Tcf with an estimated 55 Tcf yet to be discovered.
- Current productive capability from the Mackenzie Delta onshore reserves estimated at 1.0 Bn cfpd.
- Agreement among First Nation leaders to work together to help development in the NWT proceed.
- Demand for gas in North America increasing at a higher rate than supply from the conventional basins on the continent.
- Higher natural gas prices.
We believe that gas production from the MacKenzie Delta ... is inevitable and that the gas will be delivered to markets in the south in six to eight years." And again in the current issue of Canadian Business dealing with natural gas, it is stated: "The growing strategic importance of natural gas hasn't escaped the attention of the multinationals. Three of Canada's biggest producers -- Shell Canada, PetroCanada and BP Amoco --started dumping their oil assets in 1999 to concentrate on oil sands production and gas holdings. Many of these same players are now participating in a full-scale gas rush into the Northwest Territories and the Mackenzie Delta, where five different pipeline proposals are jockeying for favour."

The sameCanadian Business article, in a summary, states: "- Natural gas is the fastest growing fuel in the world.
- World consumption has grown from 36 tcf in 1970 to 82 tcf in 1997.
- More than one-third of all natural gas production will be used for electrical generation by 2020.
- In the past decade, the share of Canadian gas exported to the US has risen to 55 % from 35 %.
- Since 1998, natural gas production in the US has been in decline.
It is difficult to estimate Sentry's gas and oil reserves in this area but it is safe to say they have 10's of billions of cf in gas and millions of barrels of oil. The value of these assets will be certainly higher than the $ 43 mm initially spent by the Georgian Group in this important resource area which is estimated by the Canadian National Energy Board to hold 55 tcf of gas yet to be discovered.

Source: Sentry Resources Inc.
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