Anderson Energy Ltd.
TSX : AXL

Anderson Energy Ltd.

January 12, 2007 09:26 ET

Anderson Energy Ltd. Announces 2007 Preliminary Capital Budget

CALGARY, ALBERTA--(CCNMatthews - Jan. 12, 2007) - Anderson Energy Ltd. (TSX:AXL) is pleased to announce its preliminary capital program and associated guidance for 2007. As well, the Company is providing a year end operational update.

The Board of Directors of the Company has approved a preliminary capital spending program of $50 million (net of dispositions) for 2007. The Company estimates that it will drill 108 gross (52 net) wells in 2007, with the net Edmonton Sands well count being 38 wells and the net CBM well count being 7 wells. The Company is capable of conducting a much larger program, however, given the current weak natural gas market, management has elected to proceed with a conservative budget at the start of this year. As well, the Company is attempting to reduce the cost of doing business before considering an increase in its capital program. 2007 preliminary guidance is 5,000 to 5,400 BOED of production, a 22% to 32% increase over estimated 2006 production. Operating expenses are estimated to be approximately $10.00 to $10.50/BOE and G&A expenses are estimated to be approximately $3.00/BOE in 2007. Natural gas is estimated to be 90% of sales volumes.

The Company expects to finance its 2007 capital spending program through cash flow, bank lines and estimated property sales of $5 million. In this regard, the Company has recently negotiated a $20 million increase in its credit facility to $75 million, subject to execution and delivery of definitive documentation.

As previously announced, the Company has hedged 18,000 GJs per day of gas sales at an average price of $7.79 per GJ in the first quarter of 2007. This is approximately 17 Mmcfd at $8.00 per Mcf and represents approximately 65% of estimated first quarter gas sales.

Current production is approximately 4,900 BOED, which includes flush production from wells tied-in in December. Approximately 300 BOED is shut in at the Chinchaga field due to dewpoint control problems in the third party operated Ladyfern gas plant. The Chinchaga field did produce sporadically in the early part of the fourth quarter and was shut in early in November and has not produced since. The Company estimates that production will resume at Chinchaga when the property is connected to the third party operated Hamburg gas plant in March.

The Company drilled 43 gross (36 net) Edmonton Sands wells in the fourth quarter and participated in 11 gross (1.8 net) Horseshoe Canyon coal bed methane ("HSC CBM") wells in the fourth quarter. Edmonton Sands net drilling was more than anticipated and outside operated HSC CBM drilling was less than anticipated. The outside operated HSC CBM program has been delayed for six months which negatively impacted the Company's year end guidance, however, the Company was able to improve upon its Edmonton Sands on stream connection time and brought on sufficient Edmonton Sands production to offset the impact of the delay in the HSC CBM program.

The recent announcements by the federal government on changes in income trust taxation may have a positive impact on the Company, likely making the acquisition market economic to pursue. The Company is reviewing the potential of such acquisitions in its core areas.

We encourage anyone interested in further details on our Company to visit our website at www.andersonenergy.ca.

ADVISORY:

Certain information regarding Anderson Energy Ltd. in this news release including management's assessment of future plans and operations, number of locations in drilling inventory and wells to be drilled, timing of drilling and tie-in of wells, productive capacity of the wells, timing of construction of facilities, expected production rates, dates of commencement of production and capital expenditures and timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, wells not performing as expected, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Anderson's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), at Anderson's website (www.andersonenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Anderson does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Disclosure provided herein in respect of barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Anderson Energy Ltd.
    Brian Dau
    President and Chief Executive Officer
    (403) 206-6000
    (403) 261-2792 (FAX)
    Website: www.andersonenergy.ca