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ENRON AFFILIATE TO ACQUIRE MINORITY
STAKE IN QUEEN SAND RESOURCES, INC.
FOR IMMEDIATE RELEASE: Tuesday, April 1, 1997
HOUSTON -- Enron Finance Corp. (EFC), a subsidiary of Enron Corp., and Queen Sand Resources, Inc. (QSR), an independent energy company, announced today that an EFC affiliate will acquire a 33 percent minority stake in QSR by purchasing convertible preferred stock.
QSR, a Dallas-based company established in 1994, engages in the acquisition, development, exploitation and operation of crude oil and natural gas properties. Closing is expected to occur prior to June subject to obtaining the consent of QSR's bank and other conditions more fully described in an Information Statement to be filed with the Securities and Exchange Commission.
"This transaction complements EFC's overall strategy to expand its financing opportunities in the energy industry through various equity investments," said Gene Humphrey, president of EFC. "Queen Sand Resources is a rapidly growing company with an outstanding management team and an excellent track record for identifying proved reserves."
"QSR's credibility and standing in the oil and gas industry will be enhanced by this investment in our company," said Ted Munden, president and CEO of QSR. "This relationship will present a significant opportunity for QSR's stockholders to grow with the company and maximize shareholder value. We are looking forward to our relationship with EFC and the benefits which will come from their experience, expertise, financial resources and innovative thinking as a sophisticated provider of financing in the energy industry."
QSR has been pursuing an aggressive acquisition strategy to expand its reserve position, enhance production and cash flow and identify future development opportunities. The company has properties in Texas, Louisiana, New Mexico and Mississippi. As of June 30, 1996, QSR had assets of $11.3 million (U.S.), total proved reserves of 9.1 million barrels of oil equivalent (BOE) with a PV-10 (net present value at 10%, SEC pre-tax) of $31.5 million and annual net operating revenue (NOR) in excess of $900,000.
Munden added, "As a result of acquisitions and ongoing operational improvements, QSR today estimates production of 545 BOE per day, NOR of $375,000 per month, total proved reserves of approximately 11.3 million BOE with a PV-10 of more than $43 million."
The acquisition involves two transactions. The EFC affiliate will purchase 9.6 million QSR preferred shares convertible into 9.6 million QSR common shares, preemptive rights and the right to common stock purchase warrants which, if exercised, would permit the EFC affiliate to maintain a 33 percent stake in QSR, for a price of $5 million cash plus future contingent cash payments of up to $9.4 million. Concurrently, QSR will purchase, for its treasury, 9.6 million QSR common shares from Forseti Investments Ltd. (Forseti) for a price of $5 million cash, warrants to purchase three million shares of common stock, exercisable prior to December 31, 1998, plus future contingent cash payments of up to $9.4 million. The contingent future cash payments to Forseti would only be payable from the contingent future payments from the EFC affiliate.
QSR is traded on the over-the-counter market and quoted on the NASDAQ bulletin board under the ticker symbol, "QSRI."
Enron Corp., one of the world's largest integrated natural gas and electricity companies with approximately $16 billion in assets, operates one of the largest natural gas transmission systems in the world; is the largest purchaser and marketer of natural gas and the largest non-regulated marketer of electricity in North America; markets natural gas liquids worldwide; manages the largest portfolio of fixed-price natural gas risk management contracts in the world; is among the leading entities arranging new capital to the energy industry; owns a majority interest in Enron Oil & Gas Company, one of the largest independent (non-integrated) exploration and production companies in the United States; owns a majority interest in Enron Global Power & Pipelines L.L.C., which is owner and manager of operating power plants and natural gas pipelines around the world; is one of the largest independent developers and producers of electricity in the world; and is a major supplier of solar and wind renewable energy worldwide. Enron is traded under the ticker symbol, "ENE."
For additional information please contact:
Terrie James - Enron Corp.
(713) 853-7727
Brian Greene - QSR
(613) 230-7211
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