Kootenay Energy Inc. (KTY.v)

sold out at .61 and .62. Figured I could use the cash and didn't want to wait 2 or 3 months for the remaining .04 or .05. Kootenay was a nice little investment. I like buying undervalued producers that are already cashflow positive. Reduces risk and I think there will be a lot of consolidation in the junior sector. These little cashflow positive drillers are either going to be the acquirers or the acquirees. Either way, I will win. Bobwins

talked with David Wilson, CFO, yesterday. He feels the offer will be completed near C$.66. The stock closed at .52 Friday. I almost doubled my position because there are sellers taking the quick move from .40 to .52 rather than waiting 2 months for .66. Wilson said he was going to do the same thing but had to wait 24 hours per their attorney because he was an insider. He said the Korea public company wants a foothold in North America and will probably purchase other energy resources but may use KTY mgmt to help them find good candidates. This company is public in Korea and was second high bidder on a 950 million dollar deal in South America so he feels this 30 million dollar deal will not be difficult for them to accomplish. They are coming next week to review the books and get a better idea of how the convertible debt affects things. I noticed that getting all the convertible debt holders to agree to certain conditions was one of the things that needed to be accomplished. I asked Wilson if that was going to be a problem. He laughed. Said he and his business partners hold all the convertible debt so that won't be a concern.

I feel pretty good about buying more stock at .52. The upside is about 27% and if the deal takes two months to close, it will be a nice return. If the deal blows up, the stock price will tank back down but this was dramatically undervalued at .40 so I am comfortable waiting a few months for them to drill a couple of low risk development wells, getting production up another 200-300 bpd and doubling/tripling the share price. Bobwins


Kootenay Energy Inc. Announces Cash Offer to Purchase Common Shares
Thursday July 17, 8:37 pm ET CALGARY, ALBERTA--(Marketwire - July 17, 2008) - Kootenay Energy Inc. ("Kootenay") (TSX VENTURE:KTY - News) announces that it has entered into a pre-acquisition agreement ("Agreement"), with Golden Oil Corporation, a public corporation located in Seoul Korea, ("Offeror") pursuant to which the Offeror has agreed, subject to certain conditions, to make a cash offer to the security holders of Kootenay as soon as is practicable but in any event not later than August 5, 2008 ("Offer"), to purchase all of the outstanding common shares of Kootenay that are issued after the date of the Offer, on a fully diluted basis. The cash offer price pursuant to the terms of the Agreement, shall be the adjusted purchase price divided by the total number of issued and outstanding common shares of Kootenay on a fully diluted basis as of the date of the Offer. For the purposes of the Offer, the "adjusted purchase price" shall be the sum of $30 million plus or minus various working capital and expense adjustments as at July 31, 2008. As of the date hereof, it is estimated that the cash Offer price per common share, shall be approximately $0.66 per common share, subject to adjustments as here before described, representing an approximate 65% premium to the closing trading price of the common shares of Kootenay on July 15, 2008, being the date immediately prior to the date of the Agreement.

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It is expected that the Offer will be carried out pursuant to a take over bid circular under the Business Corporations Act (Alberta) on or before August 5, 2008. The Offeror's obligations to make the Offer is conditional upon, inter alia, (i) persons holding not less than 66 2/3% of the issued and outstanding common shares of Kootenay, not on a diluted basis, (including all directors and officers of Kootenay), shall have entered into lock-up agreements on or before the date of the Offer; (ii) the execution and delivery to the Offeror of agreements that the holders of Kootenay convertible debentures or other evidence satisfactory to the Offeror that prior to the effective time of the Offer all holders of Kootenay convertible debentures will waive or cancel all conversion rights under the Kootenay convertible debentures; (iii) the execution and delivery to the Offeror of agreements that each of the holders of stock options of Kootenay or other evidence satisfactory to the Offeror, that prior to the effective time of the Offer, all stock options of Kootenay will be exercised and, if not so exercised, any stock options of Kootenay shall terminate immediately prior to the effective time of the Offer in a form and substance satisfactory to the Offeror; (iv) completion of satisfactory due diligence of the business operations and affairs of Kootenay prior to July 30, 2008; (v) regulatory body approval; and (vi) the board of directors recommending to the security holders of Kootenay acceptance of the Offer.
Pursuant to the Agreement, the board of directors of Kootenay have unanimously affirmed the Offer and the terms of the Agreement and, subject to the terms of the Agreement, has determined that the Offer is in the best interests of Kootenay and the security holders of Kootenay and has unanimously resolved to recommend acceptance of the Offer by the security holders of Kootenay and to cooperate with the Offeror in finalizing the Offer.
The Offer shall expire on the first business day which falls after the thirty fifth day following the date of the mailing of the Offer documents to the Kootenay security holders, provided however, the expiry time of the Offer shall in no event be later than September 15, 2008.
The Agreement also contemplates a reciprocal break fee in the amount of $900,000 payable to either the Offeror or Kootenay as the case may be, in the event, inter alia, either party breaches any of the covenants, agreements, representations or warranties made in the Agreement.
If the Offeror takes up and pays for more than 66 2/3% of the outstanding common shares of Kootenay on a fully diluted basis pursuant to the terms of the Offer, it is anticipated that the Offeror shall use all commercial reasonable efforts to acquire, and Kootenay has agreed to use all reasonable efforts to assist the Offeror in acquiring, the balance of common shares of Kootenay by way of a statutory arrangement, amalgamation, merger, or other form of subsequent acquisition transaction.
The above disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the Corporation's control, including: the impact of general economic conditions in Canada, industry conditions, increased competition, the lack of available qualified personnel or management, equipment failures, fluctuations in product prices and in foreign exchange or interest rates and stock market volatility. The Corporation's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Corporation will derive there from.
THE TSX VENTURE EXCHANGE INC. DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.


Contact:Jack Marsh
Kootenay Energy Inc.
President and Chief Executive Officer
(403) 355-9800

Kootenay Energy is a small oil heavy producer(323/375boepd was oil). Q1 showed loss of 109K on gross revs of 2.895million. Cashflow was 846K or .037/share. Shares out are 22,598,000 + 2,150,000 out of the money options. Based on the oil heavy nature of production, I am estimating cashflow of .066/share for Q2 based on even production but increased prices for the crude. Annualized cashflow is .26 vs current price of .40.

I talked with CEO Jack Marsh a couple of weeks ago. He is straight forward and conservative. They are drilling out of cashflow. Not going to get excited and put company in high debt position in case the energy outlook changes. So drilling is scheduled for Q3 but they are building up cash before submitting the drilling apps. Going to drill two horizontal wells in Sasketchewan. Good province with less royalties.

If they hit, production could exceed 500boepd by year end. If they average 500boepd, their cashflow is near .10/share/qtr or .40/yr.

Very low trading volume so don't chase and expect low bids to occasionally get hit. I like the CEO's conservative philosophy and the prospects for the next two wells look good.

Bobwins