Canext Energy Ltd.
TSX VENTURE : CXZ

Canext Energy Ltd.

November 25, 2008 18:35 ET

Canext Announces Third Quarter Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Nov. 25, 2008) - Canext Energy Ltd. ("Canext" or the "Company") (TSX VENTURE:CXZ) is pleased to announce its operating and financial results for the three months ended September 30, 2008.

Highlights:

- Production averaged 988 boepd following the sale of 209 boepd at Retlaw and Hines Creek which represented 19% of the second quarter production,

- Drilled seven (4.4 net) wells for a 100% success ratio,

- Drilled and completed the Company's first Montney horizontal multi-frac well,

- New wells tested a combined rate of 360 bopd and 2,700 mscf/d (810 boepd net),

- Subsequent to the quarter, achieved production growth at Pouce Coupe and Sweeney,

- Capital spending including acquisitions totaled $11,808,000 in the quarter,

- Maintained a strong balance sheet with a debt to annualized Q3 cash flow ratio of 0.4 years.

The following table summarizes some of the key financial results. Complete financial statements with accompanying notes along with management's discussion and analysis have been filed on SEDAR (www.sedar.com).



Three Months Ended Nine Months Ended
September September
2008 2007 2008 2007
----------------------------------------------------------------------------

Production (boe/d) 988 1,254 1,053 674

Highlights ($ 000's)
Revenue 4,859 4,678 16,768 7,924
Cash flow (1) 1,914 1,623 7,735 2,871
Net loss 432 10,989 840 11,794
Capital spending 10,708 3,261 15,129 8,737
Acquisitions/(dispositions) 1,100 (2,286) (4,924) (2,286)

Per Common Share
Cash flow (1) 0.02 0.02 0.10 0.06
Net Loss 0.00 0.14 0.01 0.25

Balance Sheet at period end
($ 000's)
Property, plant and equipment 62,507 58,166
Working capital deficiency 3,110 6,153
Shareholders' equity 57,768 50,291

Wt average shares 000's 88,485 77,400 80,634 46,521

(1) Cash flow as presented does not have any standardized meaning prescribed
by Canadian GAAP and therefore may not be comparable with the
calculation of similar measures for other entities.


Operations Update

Capital spending in Q3 was primarily directed towards the Montney-Doig gas resource and Sweeney oil resource plays. A number of different prospective zones and drilling prospects were evaluated, drilling techniques employed and completion techniques refined. As a result, Canext has improved its understanding of the reservoirs, the resource and production potential. All but one of the wells drilled in Q3 will be placed on production by year end.

Pouce Coupe

As announced on October 27, 2008, the Company's first horizontal well at Pouce Coupe was placed on production at a rate of 1,200 mscf/d (930 mscf/d net). After being shut-in for two weeks for pressure work and facilities modifications, the well has recently been placed back on production at rates of 1,500 to 2,000 mscf/d (1,160 - 1,550 mscf/d net). Canext is encouraged as the well continues to clean-up while unloading frac fluid.

A second, non operated horizontal (25% working interest) was recently completed and tested. The well has been flowing at rates of 1,000 mscf/d (250 mscf net) while still unloading frac fluid. Due to operational issues the last frac in the wellbore was cancelled. The partners have agreed to proceed with tie-in plans and monitor production. Based on these results, work may be restarted on the last frac to increase production.

A third party compressor expansion project at Pouce Coupe is planned for the first two weeks of December 2008. The operation will likely result in 5-7 days of downtime on a portion (1,800 mscf/d) of Canext's Pouce Coupe production. It is currently estimated for completion by December 15, 2008 at which time the Company will have access to additional processing capacity. The Company is also proceeding with the tie-in of a multi zone vertical well that should add 500 - 1,000 mscf/d. The tie-in should be completed by mid December through a separate third party facility. Restricted processing capacity may prevent the full 1,000 mscf/d potential.

Sweeney

Subsequent to the quarter (as announced on October 16, 2008) the Company placed two wells on production. The wells added 230 bopd (140 boepd net). Canext is encouraged by the results and additional information gained from these wells and the implications for expanded development. The Company is proceeding with plans to drill two (0.85 net) step out wells and shoot 12 square miles of 3D seismic prior to year end. These wells will qualify and benefit from the Alberta government's transitional royalty structure announced on November 19 and modified on November 20, 2008.

Canext is currently planning to drill three (2.2 net) step out wells in the first quarter of 2009. Based on these results and the current economic environment, the Company may proceed with the construction of a central oil battery capable of processing up 2,000 bbls/d. Based on the preliminary design it is anticipated to cost $3,500,000 ($2,100,000 net). Assuming drilling success, the plan is to follow-up with four (3.7 net) wells in the summer/fall of 2009.

Normal Course Issuer Bid

On October 16th the Company announced its intention to complete a normal course issuer bid. To date the Company has purchased and cancelled 293,000 shares at an average price of $0.366/share. The Company will continue to acquire shares for cancellation under the rules of the normal course issuer bid if they represent a discount to the underlying net asset value.

2009 Business Plan

Canext is currently finalizing its 2009 capital program. A majority of the budget will be spent on oil development at Sweeney based on the current outlook for oil and gas prices. Canext has a preliminary capital budget that is operating within its existing cash flow and lines of credit for 2009 to grow the production and reserve base. The Company expects to give more guidance in the first quarter after completing an updated reserve report and drilling Sweeney step out wells. The reserve report will be used to access expanded bank lines and/or equity markets while the drilling results will drive the need for the Sweeney central battery.

With the falling commodity prices and reduced access to capital, the Company will focus its efforts on its highest margin properties at Pouce Coupe and Sweeney. Operating costs are less than $10.00/boe at these properties compared to $15.00/boe on the non core properties. These properties also represent a lower risk for adding reserves at a $10-15/bbl range resulting in strong recycle ratios that can stand up to short periods of lower commodity prices.

Outlook

Wells drilled and tested in the third quarter will add production in the fourth quarter. Canext anticipates year end exit production at 1,400 - 1,500 boe/d. Achieving the exit rate is contingent on a third party completing the installation of a field booster compressor at Pouce Coupe and access to additional processing capacity at Gordondale.

Uncertainty in the global markets and future commodity prices have caused the Company to take a more cautious approach for the balance of the year and 2009. Spending is being restricted to the highest return projects with the best chance of adding immediate production. The Company is also focusing on reducing costs to maintain margins.

Canext has well defined prospects and development opportunities. The Company has a significant acreage position (12 net sections) in the Pouce Coupe Montney Doig natural gas resource play. In addition, the Company operates and continues to add production and reserves on its exciting Sweeney oil development. Limited access to capital from the debt and equity markets will provide an added challenge in moving these prospects forward. However, the Company has a strong balance sheet and good cash flow to continue to develop these properties albeit at a somewhat reduced rate.

The Company is well positioned to take advantage of the current weakness in the sector. Canext has the experienced management team and senior staff to evaluate and execute in this environment.

Reader advisory:

The term "BOE" may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for natural gas of 6 mscf: 1 bbl has been used which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Investors are cautioned that the preceding statement of the Company may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Company may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections, in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including natural gas/oil prices, reserve estimates, drilling risks, future production of gas and oil, rates of inflation, changes in future costs and expenses related to the activities involving the exploration, development and production of gas and oil hedging, financing availability and other risks related to financial activities.

Canext undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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

Contact Information