MONTREAL, Aug. 10 /CNW Telbec/ - Rolland Virtual Business System Ltd. is a designer and manufacturer of e-business and management software. Founded in Montreal in 1996 by MM. Martial Rolland and Robert Jones, the compagny is listed on the Toronto Stock Exchange in the IT category. Along with its core activities, RVBS owns oil-related assets which origin and nature are described in this release.
Since November 2004, the company has published many press releases informing the public and its shareholders with respect to the situation of its oil assets and its intents regarding such assets. These releases notably include some forecasts based on previous production reports and analyses performed by Core Lab, a Saskatchewan-based firm specialized in the assessment of oil and gas resources. RVBS is carrying out a complete analysis of the proven and probable reserves in compliance with the National Instrument 51-101. Meanwhile the company wishes to sum up the situation of its oil assets and provide factual and accurate data regarding their actual yield.
How RVBS came into possession of its oil-related assets
In 2001, RVBS has been bought out by Americ Resources Corporation, a Canadian oil company having its business place at (pound sign) 280, 815 Hastings Street West, Vancouver, British Columbia. Later became the main shareholder of Americ, RVBS carried out a reverse takeover of this company on April 30, 2001, and changed the core activities of Americ which then became Rolland Virtual Business System Ltd, a software designer. Details of the reverse takeover can be found on SEDAR, in a Material Change Report dated May 1, 2001. Americ owned the Woodnorth Wells in Manitoba which include twelve oil wells, production equipment, a battery operation, and ten pipelines that connect each of the wells to the battery refining operation. In September 2000, 8 months before its reverse takeover by RVBS, an option to purchase eight of these wells was granted by Americ to Adamas Resource Corporation. Details of the option were made publicly available in a news release by Americ on September 18, 2000. The option was never exercised by Adamas and therefore the rights to the Woodnorth Wells were retained by RVBS.
However the wells were not in production anymore and RVBS was not aware that it still owned them until July 2004, when the company received tax bills related to these wells. Taking into account the upward pressure on crude oil price, RVBS Board of Directors then considered the possibility to bring them back into production and sent a representative to Manitoba to assess this possibility. To this day, however, the company has not contracted any obligation to carry out exploration program or drilling operations on the Woodnorth Wells. RVBS made perfectly clear in all its previous news releases that it has no intention to change its core activities which remain the designing and marketing of e-business and management software. The company's intent is to secure its oil-related assets and improve their value before divesting of them in the best possible conditions. Further information on this matter will be provided in the conclusion of this release.
Situation of the Woodnorth Wells before their bringing into production
RVBS owns all the rights to the 12 oil wells of Woodnorth as well as production equipment and a battery operation. The company also owns the ten pipelines that connect each of the wells to the battery refining operation which is located in the municipality of Pipestone, Manitoba. These wells are part of the Mississippian, a larger oil deposit. Two of them are closed permanently. Of the remaining potential wells, four have been tested and found to have adequate pressure to be brought into production immediately. Four of the Woodnorth Wells were producing significantly until 1998. However their previous owner stopped producing significantly in 1995. Continuing production would not have been commercially viable in 1998, due in part to the lower price of oil.
Recently, RVBS has contracted to have two geological analyses performed on three of the wells and on the lands to which it owns the mineral rights. These analyses were performed by Dan Barchyn, a geologist, at the request of Mr. Jamil Belkassem, a consulting expert in oil production hired by RVBS. The first one assessed the three wells that were kept in production the latest. The second one assessed the potential for new wells to be drilled on the Woodnorth field. RVBS has also performed down-hole testings on two of the wells on which the geological analysis was performed. Down-hole testing tests all aspects of a well's viability. This includes testing the pumping equipment and measuring the physical output. The initial sample showed an oil cut equal or superior to 50 %. The reason for such a high oil cut is the build-up of pressure in the wells resulting from approximately five years of disuse. The flush period may last a few weeks, after which production will continue at normal levels. After two complete months of production, the oil cut was 5 % for the RVBS-Daly 6-6-9-27, 6.6 % for the RVBS-Daly 5-6-9-27 and 2.5 % for the RVBS-Daly 8-1-9-28, according to our consulting expert, Mr. Jamil Belkassem.
The fluid extracted from the wells is composed in part of oil/water emulsion and simple water. Oil must be separated from the water before being sold. The higher the percentage of oil in the fluid extracted, the less it will cost to dispose of the waste fluid (water), which impacts on the profitability of the wells.
Bringing the Woodnorth Wells back into production
Production
Prior to bringing the Woodnorth Wells into production, RVBS announced on April 14, 2005, the purchasing of the 160 acres land on which are located two of the company's wells and its battery. The purchase price for the land was $50,000. On the same occasion, the company also acquired an unclaimed well to be used as a disposal well. As a result of the work done to improve the new disposal well, RVBS is eligible for a tax exemption of 500m3 of its oil production, which represents 3145 barrels. Further tax relief of this nature is available each time the company performs major work to improve an oil well.
The following provides further information regarding RVBS's press release of June 29, 2005, announcing the bringing of the Woodnorth Wells into production. This announcement was made after a production report was transmitted by Mr. Jamil Belkassem to RVBS. Two of these wells have been brought into production on June 3 and the third one on June 18. The average output of these three wells amounted to 124 barrels per day for the first month of production. However, the pressure in the wells, which was very high at the beginning, has decreased as expected, causing a slight decrease in the production. For the month of July, while the three wells were producing without interruption, their average yield amounts to 121,13 barrels per day.
According to the analysis report provided by Plains Marketing, the company that buys the oil from RVBS, the oil extracted from the three wells during June and July 2005 has an absolute density of 843.8 Kg/m3. Its API gravity, at 15 degrees celsius, is 36.1 degrees. Sulfure quantity amounts to 12.5 grams by kilogram.
As of the date of this release, the three wells are still in production.
Marketing and transportation
The company has made arrangements with Morris Hauling & Acidizing Ltd. to regularly transport crude oil from the battery refinery to Plains Marketing Canada Ltd. The company has also concluded a contractual agreement with Plains Marketing Canada Ltd. whereby it will purchase any of its crude oil.
Purchasing of a land adjoining Woodnorth
As expected, production period from June to July 2005 has benefited from a high pressure in the wells due to their prolonged disuse. In order to ensure a regular yield when this pressure will decrease, RVBS decided to acquire the Maples field, a land adjoining Woodnorth, which includes a battery, a disposal well, underground pipelines and two additional wells. The purchasing of this land has been announced on August 4, 2005. The facilities already used by RVBS can easily support the production from both Woodnorth and Maple wells. Therefore this acquisition does not incur any additional operating costs.
According to the purchase agreement, RVBS has committed to pay $ 250.000 in shares at the unit price of $ 0.472 for a total of 529,661 shares and $ 450.000 in cash for the acquisition of Maples. Take note, in addition to the press release of August 4, 2005, that the output of the Maples wells for June and July 2005 amounted to 646.8 and 799.85 barrels respectively, according to Plains Marketing.
The Maples oil field with the battery and the two wells occupies one quarter of the 9-10-26 section, for a total of 160 acres. By acquiring Maples, RVBS also obtains the production rights for all the minerals of both the 9-10-26 and 4-10-26 sections.
Hiring of a Director of Operations and independent reserves report from an oil service firm
In December 2004, RVBS has hired Mr. Jamil Belkassem as a Director of Oil Operations. Mr. Belkassem will manage on premises the maintenance and production of the company's oil assets until their divestiture by RVBS and the creation of a new company to this end.
RVBS has also engaged an oil services firm, Sproule Associates, to prepare an independent report of proven and probable reserves for both the wells already in production and the Maples wells. Following this report of proven and probable reserves, the company will submit a Filing Statement on the state of its oil assets to the Toronto Stock Exchange. On the same occasion, RVBS will also update all its technological assets.
RVBS's intents regarding its oil-related assets
Following the delivery of the reserves report, RVBS's Board of Directors will determine the better way to divest of its oil-related assets. The company is currently assessing two possibilities: 1) selling its oil assets, or 2) carrying out a spin-off with a view to list a new company on the Toronto Stock Exchange in the Oil and Gas category, provided this new company meets all the TSX's eligibility requirements. As it was stated in every press release related to its oil assets, RVBS reiterates its firm intention to pursue its core activities in the IT sector. Following the completion of an independent report of proven and probable reserves in compliance with the National Instrument 51-101, RVBS will be able to take the necessary decisions.
In summary, RVBS's oil-related activities aim at protecting and maximizing its shareholders' equity. The new acquisitions, that is the purchase of a 160 acres land and Maples, were made by RVBS to ensure the long- term profitability of its oil assets and allow for a durable management of these assets by a new company. Once the report of proven and probable reserves is completed and approved by its Board of Directors, RVBS will provide a copy of this report to SEDAR and issue a press release.
Further information about the proceedings instituted by AMF against some insiders
On January 11, March 15 and May 3rd, the Autorités des Marchés Financiers (AMF) of Quebec has issued a press release announcing that it has instituted proceedings against Martial Rolland, Robert Jones and Hervé Rolland before the Court of Quebec for having been in default of declaring within a ten-day period the changes regarding their control over the stocks of an issuer of which they were insiders, that is Rolland Virtual Business System Ltd., thus contravening article 97 of the Loi sur les Valeurs Mobilières du Québec, with reference to article 174 of the Réglement sur les Valeurs Mobilières. The proof has not been established yet. The case has not been heard yet and the insiders involved have informed the company that they intend to defend themselves and explain their positions before the Court.
The board of directors has been informed of the proceedings instituted by the AMF and, following the judgements of the Court of Quebec, will take the appropriate measures according to the company's policy.
Pursuing of core activities
Members of RVBS's Board of Directors are: Martial Rolland, President and CEO; Robert Jones, Treasurer and Vice-president, operations; Thomas Burdett, independent administrator; Gilles Laverdière, independent administrator; and Michael McLellan, Vice-president, Finances.
Working in the field of information technologies since 1996, RVBS has a diversified customer-base which mainly gathers small to medium-size businesses. Since two years, however, the company markets its e-business and management software to large enterprises and governments. Sobeys Inc., a leading Canadian grocery chain, is one of its main clients.
The company has also established a strong network of partners in the IT industry to market its software on a larger scale, in North America, Europe and Latin America. The 3.5.0.0 version of its Fractal Commerce software has recently been certified by UPS, one of RVBS's partners.
On July 14, 2005, the company has announced an agreement with Skyline Investors relations Inc., an investor relations firm. It is a three-month agreement renewable for 9 additional months. According to its terms, RVBS grants to Skyline Investors Relations Inc. an option to purchase 200,000 shares at $ 0.472 per shares for a limited time of 5 years.
RVBS is aware of the negative impact that any ambiguity regarding its core activities may have on its present and future clientele. Therefore the company wanted to set things right with regard to its oil assets and its intentions in this matter. RVBS has always been and remains a provider of e- business and management software for its valued clients.
"The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release."
For further information: Martial Rolland, president & CEO, (514) 333-9292, (pound key)222, Martial.Rolland@rvbs.com
© CNW Group
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