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Mahalo Adds 'High-Risk, High-Reward' Prospects Through Acquisition

Calgary-based unconventional gas player Mahalo Energy Ltd. says its pending acquisition of Peregrine Energy Ltd., also of Calgary, will complement its existing low-risk U.S. and Canadian coalbed methane and shale portfolio with high-risk, high-reward prospects in Northeast British Columbia and west-central Alberta.

"While the integration of these assets will be highly accretive to Mahalo's low-risk portfolio, Mahalo remains primarily focused on our unconventional base and its strong predictability and now has the human resources available to develop this asset base efficiently," Mahalo said in a press release.

Mahalo agreed to acquire Peregrine for C$90 million, including about C$13 million in debt. The price represents an approximate 26% premium on closing share prices of Mahalo and Peregrine on the Toronto Stock Exchange April 11. The deal requires Peregrine shareholder approval as well as certain regulatory approvals. The deal has a kill fee of C$1 million, payable by either company under certain circumstances.

In July 2004 Tesoro Energy Corp. combined with Peregrine. In September 2004, Peregrine acquired about 430 Boe/d of oil and gas producing assets in Northeast British Columbia and Alberta. Peregrine's current production is about 1,600 Boe/d, and the company has "a large inventory of drillable locations in Northeast BC," where it has a "significant exploration alliance with Anadarko Canada Resources," according to its website.

Mahalo is active in Alberta and Oklahoma. In Alberta the company is active in the Corbett Creek, Camrose, Wizard Lake, and Trochu areas. Oklahoma activity is in Lakeview, Poteau, and Island.

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