Mahalo Energy Ltd.
TSX : CBM

Mahalo Energy Ltd.

January 07, 2008 19:23 ET

Mahalo Announces Non-Core Asset Sales and Provides Operational Update

CALGARY, ALBERTA--(Marketwire - Jan. 7, 2008) -

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Mahalo Energy Ltd. (TSX:CBM) ("Mahalo" or the "Company") is pleased to announce the following:

Non-Core Asset Sales

Mahalo completed the sale of its 100 per cent working interest in a natural gas processing facility and gathering lines at Corbett Creek, Alberta to an Alberta-based, midstream company for Cdn $4.7 million, subject to standard industry adjustments. Mahalo also entered into a natural gas gathering and processing arrangement with the purchaser under which all of Mahalo's existing and future natural gas production from the Corbett Creek area will be dedicated to the Corbett Creek facility. The asset sale and the gathering and processing arrangement were completed on December 14, 2007. The asset sale allows for redeployment of related proceeds into higher return drilling prospects.

Mahalo completed the sale of approximately 6,700 net acres of oil, gas and mineral deep rights below the base of the Hartshorne formation in its Island, Oklahoma field to a private United States oil and gas company for US $8.4 million (US $1,250 per net acre). The Company realized proceeds of US $6.6 million from the sale, after deduction and settlement of US $1.8 million of outstanding farm-in obligations. In addition, Mahalo retained an overriding royalty. The transaction, which was subject to standard industry adjustments, closed on December 28, 2007. Proceeds from the sale of the Island deeper rights will be directed towards shallow Hartshorne coal bed methane ("CBM") development within Mahalo's Poteau, Island and Lakeview, Oklahoma fields. Mahalo continues to hold approximately 40,000 net acres of deep oil, gas and mineral rights in Oklahoma.

In November 2007, Mahalo sold an Alberta property with approximately 40 boe per day of high operating cost, conventional production for Cdn $1.5 million.

The Company will continue to focus on unconventional natural gas development, primarily in the United States, where it has realized its best level of drilling success and production additions. Mahalo's current portfolio of drilling prospects, however, materially exceeds its capital investment capability. The periodic sale of non-core assets, with minimal production loss, allows the Company to continually high grade its drilling portfolio, maintain prudent debt levels and enhance financial capacity for future capital needs.

US Multi-Lateral CBM Drilling Update

In fourth quarter 2007, Mahalo drilled and completed its first US Hartshorne CBM multi-lateral horizontal well in its Lakeview, Oklahoma area. Well performance exhibited to date is highly encouraging; the Company will closely monitor and compare the behavior of this multi-lateral well with Hartshorne CBM single-lateral horizontal wells. Based on these results, Mahalo is licensing additional high interest, multi-lateral wells in the immediate vicinity. Ideally, extended application of multi-lateral drilling and production techniques will add capital efficiencies and more cost effective production.

Year-End 2007 Production Exit Rate

At December 31, 2007, the Company's aggregate production amounted to 3,792 boe per day, net to Mahalo, in line with its previously announced 2007 target exit rate. During 2007, Mahalo sold approximately 500 boe per day of non-core oil and gas production.

About Mahalo

Mahalo is a junior, unconventional natural gas producer, focusing on the development and production of coal bed methane and shale gas prospects in the United States and coal bed methane in Canada.

For additional information on the Company, please go to the Company's profile on SEDAR at www.sedar.com or the Company's website at www.mahaloenergy.com

ADVISORIES

Forward-looking Statements - Certain matters discussed in this document may be considered forward-looking statements. Such statements include declarations regarding management's intent, belief or current expectations. Such statements include declarations regarding management's intent, belief or current expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties; actual results could differ materially from those indicated by such forward-looking statements.

Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: (i) that the information is of a preliminary nature and may be subject to further adjustment, (ii) the possible unavailability of financing, (iii) risks related to the exploration and development of oil and gas properties, (iv) the impact of price fluctuations and the demand and pricing for oil and natural gas, (v) the seasonal nature of the business, (vi) start-up risks, (vii) general operating risks, (viii) dependence on third parties, (ix) changes in government regulation, (x) the effects of competition, (xi) dependence on senior management, (xii) impact of economic conditions, and (xiii) fluctuations in currency exchange rates and interest rates. The forward-looking statements contained in this document are expressly qualified by this cautionary statement. Mahalo undertakes no obligation to update or revise any forward-looking statements, except as required by law.

Barrel of Oil Equivalent Measures - Disclosure provided herein in respect of barrel of oil equivalent ("boe") units may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

Contact Information

  • Mahalo Energy Ltd.
    Duncan Chisholm
    President and CEO
    Direct: (403) 716-3114
    Email: dchisholm@mahaloenergy.com
    or
    Mahalo Energy Ltd.
    Bill Gallacher
    Chairman of the Board
    Direct: (403) 233-4451
    or
    Mahalo Energy Ltd.
    540, 734 - 7th Avenue SW
    Calgary, Alberta T2P 3P8
    (403) 451-3500
    (403) 451-3501 (FAX)
    Website: www.mahaloenergy.com