Calgary-based Kodiak Energy Inc. said last Monday its two-phase definitive agreement to acquire Thunder River Energy is going according to plan, with Kodiak reserving for issuance 6,867,412 common shares of Kodiak at a issue price of US$1.75 per share. The company also said last week that it has nearly completed its US$5 million, 84 square-kilometer (52 square-mile) seismic program covering its Little Chicago Prospect located in the Mackenzie River block of the Northwest Territories. More important, the oil and gas company said the prospect could contain significantly more reserves than first expected.

This first phase of the acquisition transaction would give Kodiak controlling interest of Thunder River with Kodiak having 57% upon closing. Under the two-phase deal, Kodiak will subscribe for 5% of the total outstanding shares of Thunder River by a private placement. After the private placement, Kodiak will also acquire 52% of Thunder’s shares from five shareholders. The estimated value of the first phase of the transaction is US$12.02 million.

In the second phase announced in January, Kodiak will offer to purchase the balance of the shares of Thunder River when and if Kodiak becomes domiciled in Canada. The second phase of the transaction would be an additional issuance of up to 6,612,588 shares of Kodiak for an estimated value of US$11.57 million.

Thunder River Energy is an Alberta company that currently owns a 50% working interest in the 200,000-acre Exploration License 413 (Little Chicago Exploration) in the Northwest Territories and 95% of CIMA Holdings of New Mexico, which has 55,000 acres of mineral rights in northeast New Mexico.

An independent evaluation of the Little Chicago Exploration license was completed by a qualified engineering analyst. This report based its evaluation of potential reserves in only one of the several structures observed on the property. This report stated there could be up to 1 billion barrels of oil and up to 2 Tcf of natural gas in only one of the structures analyzed.

The new work completed by Kodiak on the 200,000-acre Mackenzie River block EL 413 potentially indicates, based on preliminary information received, that there may be up to 1 billion barrels oil and potentially up to 4 Tcf of gas, if all the identified zones are productive. Kodiak noted that these early estimates will require confirmation via the processing of seismic data acquired in March, along with the planned drilling programs for winter 2008/2009.

In February the National Energy Board (NEB) issued Kodiak the seismic permit for its Little Chicago Seismic Program. According to the NEB, upon completion of the program, Kodiak will have earned a 12.5% working interest in the 200,000 acres of Exploration License 413.

“The oil targets are interesting as they could provide early production while the Mackenzie Valley Pipeline moves through the regulatory process,” Kodiak said in a release. “The Mackenzie Valley Pipeline Group, headed by Imperial Oil Ltd., Shell and ConocoPhillips, recently advised Kodiak that the pipeline would be routed through EL 413. This will substantially reduce development costs for the gas production.”

Upon the completion of the 2007 seismic processing and the Thunder River acquisition, Kodiak’s control or working interest will rise to 56.25% of the acreage. Upon completion of the drilling programs planned for 2008, Kodiak’s working interest will increase via the farm-in to 78.12% per test block for each well drilled, with a rolling option to earn the same amount for the whole block.

The seismic work, which is now 95% completed according to the company, included the building of 2 kilometers (1.2 miles) of ice bridges and 140 kilometers (87 miles) of access ice roads to the work site. Despite temperatures averaging -35 to -55 degrees Celsius (and during critical stages, substantial equipment downtime) the project is virtually complete without accidents or incidents, within the planned schedule and most important within budget parameters, Kodiak reported.

Kodiak also said its New Mexico properties have potential of finding substantial economical oil, gas, carbon dioxide and possibly helium reserves in the near term. These high-impact prospects are well documented and located near existing infrastructure and at shallow to medium drilling depths, the company said.

Kodiak has lease holdings in Montana, southeastern Alberta, northeastern Alberta, and an agreement to purchase mineral rights both in the Northwest Territories and northeast New Mexico.

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