2011-06-20-2011-06-03

To acquire 50% WI working interest in the Altares, Lily and Kahta properties covering 149,910 acres in BC, to develop LNG export capacity.

Malaysian national oil company Petronas plans to acquire 50% working interest in the Altares, Lily and Kahta properties in British Columbia from Progress Energy Resources Corp., Calgary, (Toronto: PRQ) for US$1.1 billion (C$1.07 billion).

The properties are part of Progress' Montney shale assets in the Foothills of northeastern British Columbia. The deal provides both parties the opportunity to develop LNG export capacity in British Columbia.

The North Montney joint venture comprises 149,910 working interest acres. The joint venture lands represent approximately 20% of Progress' rights in its northeastern British Columbia Foothills land holdings, which total approximately 700,000 net acres. Progress holds approximately 900,000 net acres of Montney rights over its entire British Columbia and Alberta land base, making it one of the largest Montney land rights holders. The joint venture properties include five wells with minimal current production.

Petronas will pay 25% of the total consideration (C$267.5 million) in cash at closing and 75% of the total consideration in the form of a capital carry whereby Petronas will pay 75% of Progress' share of future capex in the North Montney joint venture during the next five years for a total C$802.5 million. The transaction provides Progress with the capital required to accelerate the development of its unconventional assets and unlock the value underlying the company's vast Montney land holdings.

In addition to the above transaction, Petronas and Progress will establish an LNG export joint venture to be 80% and 20% owned, respectively. The LNG export joint venture will launch a feasibility study to evaluate building and operating a new LNG export facility on the West Coast of British Columbia. Petronas would be the operator of this facility, and Petronas and Progress would jointly market the LNG utilizing Petronas' well-established and extensive network of customers in the largest LNG markets globally.

"This is a breakthrough transaction for Progress. The partnership we are launching will enable us to accelerate our growth strategy," says Michael Culbert, president and chief executive of Progress. "We are very pleased to form this long-term partnership with Petronas. They share our belief that our North Montney shale assets are a world-class resource that deserves significant investment."

In connection with the LNG export joint venture, Petronas will provide a standby equity financing commitment of up to C$600 million, for Progress' capital requirements arising from the North Montney and LNG export joint ventures from which Progress can draw down at the time of a successful LNG final investment decision.

BMO Capital Markets is exclusive financial advisor to Progress.