Action Energy Has Exploration Success in Saskatchewan, Enters Bakken Land Fund Agreement and Releases 2008 Budget TSX-V Symbol "AEC-V"
CALGARY, March 10 /CNW/ - Action Energy Inc. ("Action" or "the Company"
is pleased to announce drilling success on its Lake Alma Midale play about
100 km south of Regina Saskatchewan. The Company has drilled, completed and
equipped the exploratory well for production and is currently production
testing the well. Interpretation of the well log and surrounding oil shows
suggests that the discovery well may contain an oil column in excess of 40
metres. Action has 6 contiguous sections (3,840 net acres) of land at 100%
working interest surrounding the discovery well and, based on 3-D seismic
interpretation, the Company has identified several additional drilling
locations prospective for Midale light oil production. This discovery well is
eligible for a fixed Crown royalty rate of 2 1/2 percent on the first 100,000
barrels of oil production and further development wells are eligible for the
same royalty rate on the first 50,000 barrels of oil production. Follow up
drilling is anticipated to commence immediately after spring breakup.
In other southeast Saskatchewan developments, Action Energy has entered
into a joint venture agreement with a private land acquisition fund (the "Land
Fund"
for the acquisition of Bakken mineral rights in southeast Saskatchewan.
The essential terms of the agreement provide for the Land Fund to acquire
Crown and freehold mineral rights land parcels based on geological mapping and
technical input from Action's management team. Upon successful acquisition of
a land parcel, Action would then have a two year exclusive right to earn a
100% working interest in all of the lands in the parcel by drilling a single
exploratory Bakken well (the "Earning Well"
. After Action drills the Earning
Well, the Land Fund retains a non-convertible 5% - 15% sliding scale
overriding royalty on all of the lands in the parcel.
At the February 11, 2008 Saskatchewan Crown land sale, the Land Fund was
successful in acquiring 11 net sections of contiguous Bakken mineral rights
south of the main Viewfield Bakken field. In addition, Action has successfully
acquired 5 net sections of Freehold Bakken rights immediately adjacent to the
Crown lands acquired by the Land Fund. These activities have provided Action
with a contractual right to a total of 10,240 net undeveloped acres in an area
that is prospective for Bakken light oil production. Action expects to drill
the Earning Well for this land parcel in June 2008. The well will be an
exploratory horizontal well and it is anticipated that the well will be
completed using the same interval fracture stimulation technique that has
worked successfully in other Bakken horizontal well completions in southeast
Saskatchewan. If the well is successful, Action would qualify for a fixed
Crown royalty rate of 2 1/2 percent on the first 100,000 barrels of production
on each horizontal well drilled in the area. With success, under full
development at 4 wells per section, there would be the potential for Action to
drill a total of 64 gross Bakken horizontal wells on the Crown and Freehold
lands acquired to date.
Action is also pleased to announce its 2008 Capital and Operating Budget.
The Company has taken a conservative production maintenance approach to its
budgeting for 2008 in an effort to live within its financial means for the
year while continuing to test its high impact exploration areas. To that end,
the Company's bankers have renewed the Company's $34 million revolving credit
facility. This credit facility is reviewed in July and December each year.
<<
Some highlights of the Capital and Operating Budget are as follows:
Total exploration
expenditures $9.8 million (Budgeted chance of success
= 10% - 15%)
Total exploitation
expenditures $10.9 million (Budgeted chance of success
= 50% - 80%)
Total capital expenditures $20.7 million
2008 average production
forecast 1,700 boed (40% gas, 35% heavy oil,
25% light oil)
2008 exit production forecast
1,800 boed (39% gas, 36% heavy oil, 25% light oil)
2008 exploration Wells: 8 (7.5 net) wells (4 Alberta,
4 Saskatchewan)
2008 exploitation Wells: 9 (6.3 net) wells (9 Alberta)
2008 natural gas price
forecast C$ 6.90/mcf (AECO)
2008 oil price forecast C$ 85.00/bbl (WTI)
>>
In an effort to provide a measure of certainty for cash flow toward
funding of the capital and operating budget, the Company has entered into two
costless collar hedging contracts. The first is a contract for 1.58 mmcf/d of
natural gas with a floor of C$7.00/mcf and a ceiling of C$8.46/mcf from April
2008 until March 2009. The second is a contract for 150 bbl/d of oil with a
floor of C$80.00/bbl and a ceiling of C$ 94.80/bbl from April 2008 to December
2008. The volumes hedged under these contracts represent less than 25% of 2008
total forecast average production.
As part of the restructuring of management, Action is very pleased to
announce the appointment of Warren Doenz, P.Geol to the position of Vice
President Exploration. Mr. Doenz is one of the founders of Action Energy Inc.
and he previously held the position of Vice President Exploitation. In his new
position, Mr. Doenz will be responsible for all of the exploration and
exploitation activities of the Company.
FORWARD LOOKING STATEMENTS
This press release may contain forward-looking statements including
expectations of future production, funds flow and earnings. These statements
are based on current expectations that involve a number of risks and
uncertainties, which could cause actual results to differ from those
anticipated. These risks include, but are not limited to: the risks associated
with the oil and natural gas industry (e.g., the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other industry participants, the lack of availability of
qualified personnel or management, stock market volatility, ability to access
sufficient capital from internal and external sources, operational risks in
development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of estimates and projections relating to production, costs and
expenses, and health, safety and environmental risks. Additional information
on these and other factors that could affect Action's operations or financial
results are included in Action's reports on file with Canadian securities
regulatory authorities.
Readers are cautioned that the assumptions used in the preparation of
such information, although considered reasonable at the time of preparation,
may prove to be imprecise and, as such, undue reliance should not be placed on
forward looking statements. The actual results, performance or achievement of
Innova could differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance 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 that Action will derive
therefrom. Action disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 bbl is based on a deemed energy equivalency
conversion method primarily applicable at the burner tip and is not intended
to represent a value equivalency at the wellhead.
Action Energy Inc. is a Canadian junior oil and gas company engaged in
the exploration, development and production of oil and natural gas reserves in
the provinces of Alberta and Saskatchewan.
For further information, the full 2006 Annual Report to Shareholders and
the Annual Information Form have been posted on the Company's website:
www.action-energy.com or, alternatively, can be viewed at
www.sedar.com.
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
For further information: Kelly D. Kerr, Vice-President Finance & CFO,
Action Energy Inc., Telephone: (403) 264-1112; ACTION ENERGY INC., Suite 800,
350 - 7th Avenue S.W., Calgary, Alberta, T2P 3N9, Phone: (403) 264-1112, Fax:
(403) 264-1116, E-mail:
info@action-energy.com
