HOUSTON, Texas, May 6, 2004 (PRIMEZONE) -- Capco Energy, Inc. (OTCBB:CGYN) has agreed in principal to enter into merger talks with Mercantile International Petroleum Inc., a Cayman Island private company, based upon due diligence and a third party evaluation of oil and gas reserves, assets, and liabilities of both companies as of 6-30-04. The combined companies, plan to seek funding in the range of $15-25 million to finance its capital programs in USA, Colombia and Peru.
Capco's major operations are in the Gulf Coast USA, where the Company has production from offshore and on shore leases. There are a total of 50 wells in this region of which 7 are currently producing from 4 multi well platforms, 11 single well platforms and a coastal lease. While the wells have multiple pay sections, the Company is in the process of placing 13 additional wells on line from the current producing intervals after completion of the work plan to repair surface facilities and pipeline systems. The balance of the wells are being evaluated to determine production possibilities from alternative pay sections. In addition the Company has non operated producing properties in Montana, Alabama, Louisiana and Michigan. In 2004 the Company also plans to sell its Michigan holdings which have a Proved Producing PV 10 of about $5.3 Million. After debt reduction of about $1.0 million, the balance of the sales proceeds will be used to fund the Company's capital program which includes drilling two developmental wells and one exploratory well. The Company's proved reserves as of year end 2003 were about 3.5 million barrels of oil equivalent with net level of production being 750 barrels of oil equivalent. 85% of the Company's production and reserves are gas. The Company has 12 employees.
Mercantile's operations are in Colombia and Peru with estimated proved reserves as of year end 2003 of about 9.2 million barrels and net production being 2100 barrel of oil per day. Recently the Company made two exploration discoveries in Colombia. The Company has about 300 wells and 80 employees in this region.
Ilyas Chaudhary, CEO of Capco said that, "Combination of the two companies shall add management depth, diversified reserves and cash flow, resulting in attracting strong financial backers to see us through with our capital programs in USA, Colombia and Peru. In addition, the Company shall increase its standing to qualify in competing for certain lucrative international acquisitions and other development projects which have been in review by the Company."
The information herein includes forward-looking statements based on assumptions that may prove not to have been accurate. The business activities of Capco Energy, as usual to its industry, are subject to many risks both calculable and incalculable. Included in these risks are oil and gas prices, the need to develop replacement reserves, the reliability of reserve estimates, and the feasibility of extracting reserves, environmental risks, drilling and operating risks, and the ability of the Company to implement its business strategy.
For further information please contact Brenda Ruark at 281 565 0424 or visit our website: www.capcoenergy.com