Buffalo Resources Corp.
TSX VENTURE : BFR

Buffalo Resources Corp.

October 31, 2007 09:00 ET

Buffalo Resources Announces Q2 2007 Results

CALGARY, ALBERTA--(Marketwire - Oct. 31, 2007) - Buffalo Resources Corp. (TSX VENTURE:BFR) is pleased to announce its second quarter 2007 financial and operating results.

Q2 2007 HIGHLIGHTS



-Completed the amalgamation of Choice Resources Inc. and The Buffalo Oil
Corporation.
-Daily average production of 2,641 boe/d, a 63% increase over Q2 2006.
-4 wells drilled in the quarter with a 100% success rate.
-Revenue increased 108% over Q2 2006 to $10.1 million
-Field netback increased 75% over Q2 2006 to $3.9 million.

FINANCIAL ($000s except shares and per share amounts)
Three Months Six Months
Period ended August 31 2007 2006 2007 2006
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Revenue 10,146 4,859 18,544 10,429
Cash flow from operations 404 1,144 3,314 3,583
Basic per share $ 0.01 $ 0.03 $ 0.08 $ 0.11
Net earnings (loss) (2,264) (32) (2,140) 513
Basic per share $ (0.05) $ 0.0 $ (0.05) $ 0.02
Capital expenditures, net 60,369 33,287 63,817 40,444

August 31 February 28
As at 2007 2007
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Working capital surplus
(deficit) (52,521) (41,703)
Shareholders' equity 94,285 61,018
Total assets 197,618 133,396
Common Shares outstanding (000s) 63,051 39,886
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OPERATIONS Three Months Six Months
Period ended August 31 2007 2006 2007 2006
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Average daily production
Oil and NGLs (bbls/d) 933 76 670 75
Natural gas (mcf/d) 10,246 9,296 9,344 8,862
Barrels of oil equivalent
(boe/d) 2,641 1,625 2,227 1,552
Average realized prices
Oil and NGLs ($/bbls) 55.92 76.24 55.67 77.09
Natural gas ($/mcf) 5.67 4.95 5.62 5.63
Barrels of oil equivalent
($/boe) 41.75 31.88 44.94 35.85
Field netback ($/boe) 16.13 14.91 20.51 17.83
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AMALGAMATION

On August 2, 2007, The Buffalo Oil Corporation ("Former Buffalo") and Choice Resources Corp. ("Choice") amalgamated to form Buffalo Resources Corp. ("Buffalo" or the "Company"). The transaction has been accounted for as an acquisition of the net assets of Former Buffalo by Choice, which is deemed the acquirer for accounting purposes. The results of operations and cash flows of Former Buffalo have been included only from the date of acquisition by Buffalo. Consequently the operating results for those portions of the three and six months periods that were prior to the acquisition include only the results of Choice and all comparative information is that of Choice. The full impact of the acquisition on both the average daily production and the operating results will be realized in future periods.

OPERATIONS

Production for the quarter averaged 2,641 boe/d, a 63% increase over 1,625 boe/d produced in the second quarter of 2006. At the time of the amalgamation, Former Buffalo was producing 2,150 boe/d. Because its operations were acquired on August 2, 2007 they are only included for 30 days resulting in the addition of 750 boe/d to the average daily production for the quarter. Continuing high oil and NGL prices and strengthening natural gas prices have resulted in the average realized price per boe improving from $31.88 per boe in 2006 to $41.75 per boe for the current quarter. Non-recurring expenditures totalling in excess of $1.1 million related to the amalgamation with Buffalo have been recorded as G&A expenses, resulting in a net loss of $2.3 million for the quarter compared with a net loss of $32,000 for Q2 2006.

EXPLORATION AND DEVELOPMENT

In the current quarter, the Company drilled 4 (2.7 net) wells. All wells were successful, resulting in a 100% success for the quarter and 67% success for the six months. Two wells were drilled in the Viking/Killam area resulting in one oil well and one gas well. These wells are 100% working interest and the gas well was awaiting tie-in at the end of the quarter. There are more than 50 identified drilling locations in the Viking area which will be drilled selectively dependent on gas prices. Work was undertaken on the Company's production facilities at Killam and the initial startup was done in September. At Whitecourt, the Company drilled two wells (0.7 net) resulting in successful gas tests. The wells were awaiting tie-in at the end of the quarter. In the months preceding the acquisition, Former Buffalo drilled 7 (5.4 net) successful oil wells and acquired 4 sections (100%) in the Clayhurst area of the Peace River Arch.

The Company is currently in the process of making an AEUB Holding Application for reduced spacing of producing wells over certain lands at Frog Lake, Whitecourt, Gilby and Cecil. Once approved, these will result in many additional drilling locations which will set up the 2008 development drilling program.

OUTLOOK

The merger and restructuring of Buffalo is essentially complete with the Company now positioned to move forward. Retention of personnel has been successful during the transition. The Company has an excellent asset base, consisting of 130,000 net acres of undeveloped land, 4,000 boe/d of production split equally between natural gas and oil and a 10 year reserve life index. With a well seasoned Board, an experienced management team and an excellent portfolio of projects, Buffalo possesses all the ingredients to grow quickly from a junior into the ranks of the intermediate oil and gas producers.

Buffalo is reducing its market guidance production exit rate by 7% to between 4,200 and 4,500 boe/d based upon:

- Regulatory delays in drilling program approvals at Frog Lake, Alberta;

- The need to direct capital to meet flow-through expenditure commitments;

- Reduced natural gas drilling as a result of continuing depressed natural gas prices.

Frog Lake:

The large land base and numerous opportunities on the Reserve Lands of the Frog Lake First Nation provide the cornerstone for Buffalo to continue the exceptionally strong organic growth to which its shareholders have become accustomed. The Company anticipates drilling an additional 11 (8.5 net) wells at Frog Lake by the end of the year.

The currently identified 160 drilling locations will increase to approximately 250 following approval by the AEUB of a 20 acre Holding Application. The Frog Lake resource base will allow the Company to drill up to 50 wells a year for the next five years.

A recently completed third party feasibility study has determined that certain Frog Lake oil reservoirs are appropriate for SAGD development. The successful application of SAGD technology at Frog Lake would improve oil recoveries from the current 8% achieved through conventional cold-flow development to in excess of 20%. A single SAGD commercial pilot could produce, from 4 well pairs, between 2,000 and 2,400 bbls/d. According to the feasibility study, the pilot would recover approximately 5 million barrels of oil, be brought on-stream for $20,000 per flowing barrel at a finding and development cost of approximately $10.00 per barrel. Buffalo will now commence modelling the Frog Lake oil reservoirs and anticipates drilling the first stratigraphic test well in late 2007 or early 2008.

Pincher Creek:

This asset gives Buffalo the ability to develop high impact 15+ year reserve life natural gas. Buffalo has a 75% working interest in 42 sections of land encompassing the Pincher Creek Rundle gas pool, discovered by Gulf Oil Canada Ltd. in the 1950's. The Company currently records 25 bcf of proved plus probable reserves based on the February 2007 NI51-101 independent engineering report completed by Sproule Associates Limited.

In October 2007, Paddock Lindstrom & Associates Ltd. completed a Resource Potential Study on the Pincher Creek Rundle gas pool. This study estimated original gas in place of between 770 and 850 bcf with 505 bcf of gas having been produced and between 31 and 34 bcf of gas remaining to be recovered from existing wells. More importantly, the study identified a potential additional recoverable resource of between 35 and 95 bcf of sales gas.

Buffalo is planning to drill up to 4 Mississippian horizontal wells for natural gas in the Rundle pool over the next 2 years. Buffalo will be re-completing some older wells as well as drilling new wells to test a shallower Cretaceous zone that has recently been exploited by another operator in the immediate area for 40+ degree light oil and sweet gas. Buffalo is currently in the process of raising capital to fund this program and has delayed the spudding of the first Mississippian well until mid December.

Peace River Arch:

Buffalo's exploration program in the Peace River Arch of northern Alberta is now starting to unfold. Five project areas have been developed over the past several years. The first two deep wells for natural gas will be drilled at Cecil prior to year end and between 2 and 4 wells will be drilled for Charlie Lake medium gravity oil in the first half of 2008. A 3D seismic program covering approximately one township is planned for the Clayhurst area in the fourth quarter 2007.

Corporate:

Buffalo will assess the impact of the recently announced changes to the Alberta royalty system as more details become available. With such a diversified opportunity base, the Company finds itself in the fortunate position of having the ability to direct capital to those projects that will maximize return for shareholders.

Buffalo remains committed to its natural gas program, confident that the current huge disparity in value per energy unit between natural gas and crude oil will correct over time, leading to an increase in natural gas prices. The 15+ year reserve life index of the Pincher Creek gas reserves gives Buffalo the potential for strong growth in share value over the coming years.

The Company will change its financial year end from February 28 to December 31 effective 2007 and plans to apply to list its shares for trading on the Toronto Stock Exchange in early 2008.

Buffalo is a 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.

The interim financial statements and management's discussion and analysis for the six months ended August 31, 2007 are available on SEDAR (www.sedar.com) and on Buffalo's website (www.buffaloresources.com).

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) 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 terms "cash flow from operations" and "field netback" are non-GAAP financial measures that do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. Both "cash flow from operations" and "field netback" provide useful information to investors and management since they are an indicator of the Corporation's profitability and ability to fund future capital expenditures which drives growth. Cash flow from operations is calculated as earnings (loss) before charges for depletion, depreciation and accretion, stock-based compensation and future income taxes. The inclusion of asset retirement expenditures and changes in non-cash operating working capital results in cash flow from operating activities. Field netback represents the profit margin from the sale of oil, natural gas and natural gas liquids and is calculated as revenues less royalties and operating expenses.

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

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