July 27th, 1999
Primeline Energy Holdings Inc. (“Primeline”, the “Company”) wishes to clarify its press release issued July 23, 1999 announcing that the Company has received a STRONG BUY recommendation in a research report published by Richard Fraser on behalf of IPO Capital Corporation. The report, with a C$12.00 per share target price focuses on Primeline’s 75% interest in Block 32/32, an oil and gas concession located in the East China Sea. The report reviews test results of the first exploration well, the Vicky 1 gas discovery, which places the most likely recoverable reserves at 660 Bcf of hydrocarbon gas and 7.9 million barrels of gas liquids. The report estimates the potential discounted net present value (12.5%) of Primeline to be approximately US$170 million. In addition, Block 32/32 contains other prospects which could significantly increase the reserve estimate up to a possible 4.4 Tcf plus associated liquids. Primeline calculated its reserve estimates using normal industry practice based on Vicky-1 well data. However, since this is a frontier discovery, the hydrocarbons discovered cannot be classified as either “proved” or “probable” as defined in Canadian National Policy Statement 2-B. The report details IPO’s major assumptions used in deriving its valuation estimates, including - Primeline securing approximately US$157 million of capital expenditures, US$28 million with respect to exploration and US$129 million with respect to development, related to Vicky-1 discovery; the report assumes that Primeline will raise the exploration capital through an equity placement and the development capital through project debt financing tied to a gas sales contract against future production. - the report assigns no value to potential reserves from Block 32/32’s prospects other than the Vicky-1 discovery but does assume a 50% exploration share premium attributable to Vicky-1’s success; - the report’s cash flow model is based on Vicky-1 production going on stream by 2002; delays in that schedule will lower valuation estimates. The $12 target price depends on the validity of these assumptions. Primeline owns a 75% interest in Block 32/32, a 4,500 sq. km (1.125 million acres) concession in the East China Sea. Primeline is exclusively focused on oil and gas exploration and upstream business opportunities in China. The Company’s shares are listed on the Vancouver Stock Exchange under the symbol “PEH”. For a copy of this research report please contact IPO Capital Corporation at (800) 246-1378 or the Company directly at (800) 499-0988. On behalf of the Board of Directors: “Peter C. Kelty” Mr. Peter C. Kelty Director, Primeline Energy Holdings Inc. For More Information, Please Contact: Investor Relations Toll Free: 1-800-499-0988 Fax: (604) 488 1145 Email: email@example.com The Vancouver Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.