Birchcliff Energy Ltd.
TSX : BIR

Birchcliff Energy Ltd.

January 24, 2008 16:10 ET

Birchcliff Energy Ltd. Announces Operational Update, 2008 Capital Expenditure Program and Exploration Success

CALGARY, ALBERTA--(Marketwire - Jan. 24, 2008) -

THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Birchcliff Energy Ltd. ("Birchcliff" or the "Company") (TSX:BIR) is pleased to announce an operations update, its 2008 capital expenditure program, successful exploration drilling and the appointment of Mr. Lawrence Backmeyer as Vice President, Engineering.

Production

Birchcliff Energy Ltd. is pleased to announce that it achieved its exit production of 10,500 boe/day in mid December 2007. Current production is approximately 10,000 boe/day.

2008 Budget

The Board of Directors has approved a capital budget of $105 million for 2008, which is less than expected 2008 cash flow. Birchcliff expects to spend approximately $55 million during its winter drilling program. Depending on drilling results, future commodity prices and industry conditions, Birchcliff can prudently increase its capital expenditure program in the second half of 2008 bringing the total CAPEX Program up to $175 million.

Birchcliff's winter drilling program includes utilizing up to 4 drilling rigs which will be focused on the Montney/Doig horizontal natural gas drilling program, the Worsley light oil development and exploitation program and other oil and natural gas exploration drilling in the Peace River Arch. Birchcliff currently has 3 rigs working and anticipates a 4th rig commencing in early February 2008.

Montney/Doig Gas Resource Play

Fourth Quarter 2007 Horizontal Drilling Results

Birchcliff is pleased to announce that it successfully drilled, completed and tied in its first two 100% working interest Montney/Doig horizontal natural gas wells in North and South Pouce Coupe. Each well cost approximately $4.5 million to drill, complete, tie-in and bring on production. The first well commenced production at approximately 4 mmcf/day (666 boe/day) and is currently producing 2 mmcf/day (333 boe/day) which is within Birchcliff's projected production profile for this well. The second 100% working interest horizontal natural gas well commenced production at approximately 7 mmcf/day (1166 boe/d) and is currently producing in excess of 5 mmcf/day (833 boe/day), well ahead of Birchcliff's projected production profile.

2008 Winter Drilling Program

Birchcliff is currently drilling its third horizontal natural gas well. Birchcliff expects to drill, complete and tie-in 3 to 4 Montney/Doig horizontal natural gas wells in its 2008 winter drilling program. Birchcliff expects to drill 4-6 Montney/Doig horizontal natural gas wells in the second half of 2008 bringing the aggregate total to 10 Montney/Doig horizontal natural gas wells for 2008. Further, Birchcliff is executing the operational planning to significantly increase (beyond 6) the number of horizontal wells it could drill in the second half of 2008. The drilling of these wells will be dependent on drilling results, commodity prices, and industry conditions.

Montney/Doig Proven Play Trend Lands and Horizontal Drilling Locations

To date Birchcliff has drilled 22 (19.5 net) successful vertical wells on the Montney/Doig gas resource play. These vertical wells have proven a producing fairway where Birchcliff has accumulated 33 net sections of land. Birchcliff has previously indicated that it had a potential of drilling 60 horizontal natural gas wells, two horizontal natural gas wells per section on 30 net sections of land. Birchcliff now sees increased potential to drill 4 or more horizontal natural gas wells per section, at least doubling the number of proven potential locations.

Birchcliff continues to evaluate reservoir parameters, new advances in technology, economic variables including well costs and commodity prices to determine the optimal number of horizontal wells that should be drilled, per section, to optimize the recovery factor and production of natural gas on our land. Competitors have announced plans to drill up to 8 horizontal natural gas wells per section on this play trend.

Undeveloped Lands with Montney/Doig Gas Resource Play Potential

Birchcliff has approximately 20 net sections of undeveloped land in the Pouce Coupe area where Birchcliff believes there is a high likelihood of the extension of the Montney/Doig play on these lands. This undeveloped land has had considerable offset drilling or other activity which indicates to Birchcliff that the Montney/Doig play is present. Over time, Birchcliff plans to aggressively prove up the existence of the Montney/Doig play on these lands, which represents significant upside potential to Birchcliff.

Worsley Light Oil Program

Birchcliff recently initiated its drilling program on it's new Worsley light oil pool. Birchcliff expects to drill approximately 10 vertical light oil wells on the Worsley property and potentially four horizontal light oil wells during the winter drilling program. Birchcliff is actively planning and has commenced the operational activities to significantly increase the water flood program on the Worsley property. Subject to positive drilling results and commodity prices, Birchcliff expects a very active drilling program at Worsley in the second half of 2008.

High Impact Exploration

In the third quarter of 2007, Birchcliff announced a significant Triassic gas discovery. This 100% working interest well is on production and is producing in excess of 4 mmcf/day (666 boe/d). Currently, Birchcliff is drilling a follow up exploration well on trend to this discovery.

Birchcliff expects to drill a number of other vertical exploration and development wells with the third rig in its winter drilling program which will target a number of potential horizons. Birchcliff continues to high grade its drilling portfolio and may increase the number of exploration wells it could drill in 2008 depending on results, commodity prices and industry conditions.

Appointment of Vice President Engineering

Birchcliff is pleased to announce that Mr. Lawrence Backmeyer has been appointed to Vice President, Engineering effective January 7th, 2008. Mr. Backmeyer has over 27 years of experience in the oil and gas industry. Mr. Backmeyer graduated from the University of British Columbia in 1980 with a Bachelor of Applied Science in Chemical Engineering.

Further Update

Birchcliff expects to issue a further 2007 financial and reserves update in late February or early March as these results become available.

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

Advisory

FORWARD LOOKING STATEMENTS

Certain information set forth in this press release contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Birchcliff's control, including 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 competition for qualified personnel and management, stock market volatility and ability to access sufficient capital from internal and external sources. 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 incorrect and, as such, undue reliance should not be placed on forward-looking statements. Birchcliff's actual results, performance or achievement 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 will derive there from. Except as required by law, Birchcliff 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 Conversions: The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent ("6:1"). A boe conversion ratio of 6:1 is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Birchcliff is a publicly traded company that trades on the TSX Exchange under the symbol "BIR".

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Birchcliff Energy Ltd.
    Jeff Tonken
    President and Chief Executive Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    or
    Birchcliff Energy Ltd.
    Myles Bosman
    Vice President Exploration and Chief Operating Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    Website: www.birchcliffenergy.com