The Buffalo Oil Corporation
TSX VENTURE : BFO

The Buffalo Oil Corporation

January 11, 2007 09:00 ET

Buffalo Oil Provides Operational Update and 2007 Guidance

CALGARY, ALBERTA--(CCNMatthews - Jan. 11, 2007) - The Buffalo Oil Corporation ("Buffalo" or the "Company")(TSX VENTURE:BFO) is pleased to announce that the Company achieved its 2006 market guidance targets and provides the following capital and production market guidance for 2007.

Operational Update:

Initial estimates place Buffalo's December 2006 exit production at a rate of between 2,000 and 2,100 Boepd, with an additional 2.5 net wells drilled at Frog Lake in December 2006 to be on production in January and expected to deliver an additional 120 Boepd. This not only exceeds the Company's original market guidance of 1,800 to 2,000 Boepd, but fully meets the Q3 2006 revised exit production guidance levels of 2,000 to 2,200 Boepd. For the full year, Buffalo drilled a total of 41 (17.4 net) wells with a 100% success rate.

The fourth quarter was an active one for the Company and included the acquisition of Pocaterra Energy Inc. and the drilling and completion of 17 (4.9 net) wells. Highlights by area are as follows:

Frog Lake: 15 (4.3 net) wells drilled.

Buffalo has received proposals for an engineering study to assess the potential for thermal heavy oil recovery on various pools on its Frog Lake property. The study will address the application of cyclic steam and SAGD technologies on both developed and undeveloped reservoirs on the Company's lands.

Central Alberta: 2.0 (0.6 net) wells drilled.

In the Morningside/Gull Lake area the Company participated (35% WI) in a 2,800 meter Mannville test. Gas sands were encountered in Upper and Lower Ellerslie zones as well as the Glauconite zone. The Upper Ellerslie was completed and placed on production on December 10, 2006 and is currently producing at a rate of 1,135 Mcfd with approximately 24 bbls per MMcf of natural gas liquids. The Lower Ellerslie tested 2,450 Mcfd following perforation and frac, and is currently shut in pending receipt of a commingling approval from the AEUB. The approval is expected before the end of January 2007. The Glauconite sand will be evaluated at a later date.

In the Phoenix/Strachan area Buffalo participated (25% WI) in a 3,400 meter Rock Creek test. While drilling, the well encountered potential gas bearing sands in the Ellerslie, Glauconite, Viking and Cardium zones. A service rig has been moved onto the well and evaluation of the various zones is in progress.

Peace River Arch:

The Company is currently participating (14% WI) in a 2,600 meter multi-zone exploratory test in the Mulligan area. The well spudded on December 28th and is expected to reach total depth by mid January.

Buffalo completed a 12 square mile 3D seismic program (100% WI) over its Cecil lands. The data has been processed and interpreted and locations for the 2007 drilling program are being selected.

2007 Outlook:

The Board of Directors of Buffalo has approved a $16.5 million 2007 capital expenditure program. The Company anticipates spending $10.8 million on drilling and completions, $2.2 million on facilities and $3.5 million on land and seismic. This program includes drilling a total of 31 gross (18.1 net) wells of which 24 will be at Frog Lake in eastern Alberta, 4 in central Alberta and 3 in the Peace River Arch in northern Alberta, all on Company owned lands.

Buffalo expects to exit 2007 at a production rate of approximately 3,000 Boepd. Assuming an average West Texas Intermediate crude oil price of $60.00 US per barrel, a heavy oil differential averaging $20.00 US per barrel, and an average AECO-C natural gas price of $7.00 Cdn. per mmbtu, Buffalo expects to generate cash flow from operations of approximately $12.5 million in 2007.

The 2007 program will be financed using a combination of cash flow from operations and the Company's bank credit facility. Buffalo will continue to have a strong balance sheet, maintaining its financial flexibility, and expects to exit 2007 with a debt to cash flow ratio of less than one.

Buffalo is an emerging Canadian junior oil and gas company engaged in the exploration, development and production of oil and gas reserves in the provinces of Alberta and Saskatchewan. Buffalo has 21.7 million common shares issued and outstanding and 24.3 million fully diluted shares outstanding.

Certain information set forth in this press release contains forward looking statements. 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, reliance should not be placed on forward-looking statements. Buffalo's actual results, performance or achievements 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 Buffalo will derive therefrom. Buffalo disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (Boe's) and barrels of oil equivalent per day (Boepd) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf of gas = 1 Bbl of oil is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

Contact Information

  • The Buffalo Oil Corporation
    Trevor Penford
    President and C.F.O.
    (403) 252-2462
    or
    The Buffalo Oil Corporation
    William (Bill) Trickett
    Chairman and C.E.O.
    (403) 252-2462
    or
    The Buffalo Oil Corporation
    Suite 180, 1209 - 59th Avenue S.E.
    Calgary, Alberta T2H 2P6
    (403) 252-2462
    (403) 252-1399 (FAX)
    Website: www.buffalo-oil.com