Midnight Oil Exploration Ltd.
TSX : MOX

Midnight Oil Exploration Ltd.

March 11, 2010 21:12 ET

Midnight Oil Exploration Ltd. Announces 2009 Year End Results and Successful Deep Basin Program With Tremendous Unbooked Potential

CALGARY, ALBERTA--(Marketwire - March 11, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA.

Midnight Oil Exploration Ltd. ("Midnight") (TSX:MOX) is pleased to announce its financial and operational results for the year ended December 31, 2009. Midnight has filed its audited Consolidated Financial Statements and related Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2009 on www.sedar.com and the documents are available on its website at www.midnightoil.ca.

Certain selected financial and operational information for the three and twelve months ended December 31, 2009 and the 2008 comparatives are set out below and should be read in conjunction with Midnight's Consolidated Financial Statements and related MD&A.



----------------------------------------------------------------------------
Financial ($000's, except for per
share amounts) Q4 2009 Q4 2008 2009 2008
----------------------------------------------------------------------------
Petroleum and natural gas sales $ 6,148 $ 7,828 $ 23,173 $ 49,577
Royalties 1,134 1,515 5,087 10,794
Operating expenses 1,631 1,683 6,286 7,654
Transportation expenses 31 64 179 465
----------------------------------------------------------------------------
Operating netback $ 3,352 $ 4,566 $ 11,621 $ 30,664
G&A - cash charge 889 1,012 3,423 4,293
Interest expense 132 257 509 1,372
Other income - (1,385) (39) (1,527)
----------------------------------------------------------------------------
Funds from operations $ 2,331 $ 4,682 $ 7,728 $ 26,526
Gain on investments - (2,037) (479) (2,037)
Depletion, depreciation and
accretion 4,733 5,349 21,802 21,468
Stock-based compensation 219 144 637 551
Future taxes (550) 466 (3,396) 1,955
----------------------------------------------------------------------------
Net income (loss) $ (2,071) $ 760 $(10,836) $ 4,589

Funds from operations per share
Basic $ 0.03 $ 0.10 $ 0.13 $ 0.56
Diluted $ 0.03 $ 0.10 $ 0.13 $ 0.56

Net income (loss) per share
Basic $ (0.03) $ 0.02 $ (0.18) $ 0.10
Diluted $ (0.03) $ 0.02 $ (0.18) $ 0.10

Petroleum and natural gas additions $ 5,091 $ 13,423 $ 37,500 $ 36,167
Property disposition - (30,371) - (30,371)
Net debt 12,667 8,730 12,667 8,730

Shares outstanding
Basic 75,335 46,175 75,335 46,175
Diluted 78,294 50,318 78,294 50,318
----------------------------------------------------------------------------


----------------------------------------------------------------------------
Operations Q4 2009 Q4 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average daily production
Natural gas (mcf/d) 6,904 5,465 6,966 5,651
Oil (bbls/d) 457 683 534 754
Natural gas liquids ("NGLs")
(bbls/d) 108 120 15 138
----------------------------------------------------------------------------
Combined (boe/d) 1,715 1,714 1,810 1,834

Average prices received
Natural gas ($/mcf) $ 4.20 $ 6.96 $ 3.79 $ 8.53
Oil ($/bbl) 74.12 61.63 62.68 102.49
NGLs ($/bbl) 27.52 40.95 28.06 65.87
----------------------------------------------------------------------------
Combined ($/boe) $ 38.96 $ 49.65 $ 35.09 $ 73.87
Royalties 7.19 9.61 7.70 16.08
Operating expenses 10.33 10.67 9.52 11.41
Transportation expenses 0.20 0.41 0.27 0.69
----------------------------------------------------------------------------
Operating netback ($/boe) $ 21.24 $ 28.96 $ 17.60 $ 45.69
G&A - cash charge 5.63 6.42 5.19 6.40
Interest expense 0.84 1.63 0.77 2.05
Other income - (8.78) (0.06) (2.28)
----------------------------------------------------------------------------
Funds from operations ($/boe) $ 14.77 $ 29.69 $ 11.70 $ 39.52
----------------------------------------------------------------------------
----------------------------------------------------------------------------


In 2009, Midnight followed a managed capital program and moved another step forward in our strategy to capture opportunities in the multi-zone resource potential of the Deep Basin. We have, through our extensive drilling and infrastructure program established and validated the potential of this area and put in place a large natural gas resource base. With a combination of both horizontal drilling and advanced multi-stage frac techniques, we have validated the significant resource potential of the Cadomin and Nikanassin along the trend from Elmworth and Chinook Ridge to Red Rock and Bilbo. Each of these areas is part of/or surrounded by full scale resource development being pursued by major international companies including Shell, Conoco, Devon and EnCana. Our program has benefited from the offset and joint operations conducted by these companies. The Deep Basin Tight Gas Resource Fairway is an area of advanced resource development in which Midnight is well and uniquely positioned. At this stage of our Company, and in the current gas price environment, we have prudently chosen to pace our development, and have clearly established a large resource holding with tremendous unbooked potential on our lands.

We are pleased to include a summary of our recent drilling and operational activities in our Elmworth, Bilbo, Chinook Ridge, and Red Earth areas later in this operational update.

Q4 2009 and Year End 2009 Highlights

Midnight delivered solid growth in reserves while executing a disciplined capital program:

-- Reserves

- Total proved ("TP") reserves increased 50% to 5.6 million boe.

- Total proved plus probable ("2P") reserves increased 44% to 10.1 million boe.

- TP finding and development costs of $14.87 per boe excluding changes in FDC; $21.41 per boe including changes in FDC.

- 2P finding and development ("F&D") costs of $10.02 per boe excluding changes in future development capital ("FDC"); $16.59 per boe including changes in FDC.

- TP finding and development costs of $14.87 per boe excluding changes in FDC; $21.41 per boe including changes in FDC.

- Reserve life index of over 8.5 years for TP reserves and 15.2 years for 2P based on 2009 production.

- Reserve additions replaced annual production 3.8 times for TP and 5.7 times for 2P.

-- Operations

- Expanded drilling program delineated our Deep Basin Tight Gas Resource Fairway.

- Large scale farm-in at East Bilbo and West Wapiti added significantly to opportunity base.

- Drilled 10 gross (3.6 net) wells including 3 gross (1.4 net) horizontal wells.

- Completed farm-in obligations and earned over 35,000 gross acres along the Deep Basin Tight Gas Resource Fairway.

- Maintained production over 1,800 boe/d after West Central disposition of 550 boe/d in October 2008.

- 2009 production averaged 1,810 boe/d.

- Natural gas production averaged 7.0 mmcf/d.

- Oil and Liquids production averaged 649 bbls/d.

-- Financial

- Executed a program of operational diligence and financial discipline to maintain a strong balance sheet.

- Year-end bank debt of $8.9 million drawn on a $35 million credit facility.

- Year-end net debt of $12.7 million.

- Operating and transportation costs declined 19% on a per boe basis from 2008 to average $9.79/boe.

- Cash general and administration costs declined 19% on a per boe basis from 2008 to average $5.19/boe.

- Interest expense declined 62% on a per boe basis from 2008 to average $0.77/boe.

- Successfully completed two equity financings in the year for gross aggregate proceeds of $27.3 million.

Operation update - Successful Cadomin development plus added Nikanassin potential

Midnight had a very successful year proving the resource potential of our extensive Cadomin asset base, the recently identified Nikanassin opportunities and the multi-zone potential of the conventional uphole Cretaceous sands. It has been tremendously successful and it is a great accomplishment for Midnight to have assembled such a large and extensive opportunity base in such a high potential area. We continue to develop and grow and have driven down our initial drilling and on-stream costs and increased our overall capital efficiency. At Bilbo, we recently completed our capital commitments and have earned a 30% working interest in 42 gross sections of mineral rights. As we evolve our multi-stage frac techniques and technology, we continue to generate improved results from our Cadomin and Nikanassin horizontal wells and the conventional uphole zones. On our high potential Nikanassin play in Chinook Ridge, we have expanded our land base and have added to our opportunities by drilling two additional farm-in wells into the Nikanassin in Q1 2010. We continue to grow and expand our opportunity base and have amassed significant resource potential for a company of our size. 2009 was a tumultuous year for financial markets yet we were able to deliver solid results while maintaining a clean balance sheet.

In Elmworth, we continue to have great success. We recently drilled and completed a medium reach horizontal Cadomin gas well that tested at rates in excess of 6.0 mmcf/d (Midnight 55%). This well was placed on stream in March of 2010. Midnight performed a 10 stage frac in the 800 meter horizontal section. Due to the prolific production from this Cadomin horizontal interval we have deferred the completion of the six additional uphole Cretaceous zones until later in 2010. We have received approval to downspace our lands to four wells per section for both the Cadomin and the Nikanassin in this area which allows us to drill an additional 28 gross wells on our operated lands. In summary, Midnight is extremely pleased with the quality of its asset base in the Elmworth area and we look forward to updating our shareholders with continued positive results from this area over the ensuing quarters.

In Bilbo, Midnight completed its final earning well under its farm-in in Q1 2010 which concluded our obligations where Midnight paid 50% of the drilling and completion costs to earn a 30% working interest in over 42 sections of prospective mineral rights. These lands are highly prospective for the tight gas resource potential of both the Cadomin and the Nikanassin and the conventional uphole zones in the Gething and Falhers. In total, Midnight drilled and completed seven wells under this farm-in. All seven of the farm-in wells have proven the multi-zone potential of this area as each well was completed, in not only the resource targets of the Cadomin/Nikanassin, but also in at least two uphole conventional zones in the Gething or the Falhers. The first six wells were the first stage of our exploration effort and consisted of five vertical and one horizontal well to validate the potential of this area. The seventh well was a horizontal Cadomin/Nikanassin development well that performed very well on completion (IP test rates of over 5 mmcf/d) and should be tied-in late in Q1 2010. With over 20 new wells drilled in the past year, offset landholders have received downspacing and are drilling four development wells per section. Based on the results of our activities to date, we are confident in our ability to pursue further development of this area through a combination of horizontal drilling in both the Cadomin and Nikanassin with the uphole conventional program. This has been a highly successful drilling program and Midnight will now commence the staged development of this property to capitalize on its successes.

In Chinook Ridge, Midnight spud the second option well under its farm-in in Q4 2009 and finished completing this well in Q1 2010. This well will be tied-in and on production by the end of Q1 2010. In Q1 2010, Midnight also re-entered a well on previously earned lands and will delay completion of this well to Q4 2010 due to access restrictions. Both of these wells were Nikanassin tests and we are very pleased with the results. We anticipate drilling additional wells on the earned lands later in 2010. In Q4 2009, Midnight entered into a further farm-in agreement where Midnight agreed to pay 100% of the costs to re-enter, complete and tie-in one well and drill and complete another well to earn a net 11 sections of land. Both of these commitments will be concluded by the end of Q1 2010. This clearly extends the Nikanassin potential off the Chinook Rise to our recently farmed-in wells. Midnight's use of 3D seismic data greatly assisted in targeting the sweet spots of this tight gas reservoir.

At Red Earth, we managed our capital in 2009 and had limited investment. This is a high quality light oil property and despite the increased Crown royalties, continues to provide strong cash flow with a netback of $26.70 per boe in 2009. In Q1 2010, Midnight drilled a 100% exploration well targeting the Keg River and Granite Wash. The well was completed late in Q1 2010 and placed on production at a restricted rate of 200 barrels per day. With the success of this well, and continued strong oil prices, we may expand our program in Red Earth later in 2010.

Reserve Growth with Large Property Disposition and Limited Capital

The reserve data set forth below is based on an independent reserves evaluation conducted by GLJ Petroleum Consultants Ltd. ("GLJ") effective December 31, 2009 ("GLJ Report") and prepared in accordance with the definitions set out under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Midnight has a Reserves Committee comprised of a majority of independent board members who review the qualifications and appointment of the independent reserve evaluators. The committee also reviews the process for providing information to the evaluators and meets with the independent evaluators to discuss the procedures used in the independent report, to review the Company's major properties and to identify and discuss any areas of risk. The GLJ Report was reviewed by the Reserves Committee of Midnight and was approved by the Company's Board of Directors.

Reserve Highlights:

- Finding development and acquisition costs of $16.59 per boe proved plus probable and $21.41 per boe proved.

- Company interest proved reserves at December 31, 2009 were 5.6 million barrels of oil equivalent ("boe").

- Company interest proved plus probable reserves at December 31, 2009 were 10.1 million boe.

- Proved reserve additions of 2.5 million boe and proved plus probable reserve additions of 3.7 million boe.

- Proved reserve additions replaced 381% of 2009 production.

- The net present value (before tax discounted at 10%) of total proved plus probable reserves increased 2% to $128.2 million.

Reserves Advisory

- Reserves included herein are stated on a company interest basis where reserves include royalty interests (operating and non-operating) but do not include royalty burdens.

- Natural gas is converted to barrels of oil equivalent ("boe") at a ratio of six thousand cubic feet to one barrel of oil.

- Boe's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a boe conversion ratio for natural gas of 6 mcf: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.

- Tables may not add due to rounding.



Forecast Prices and Costs

Summary of Oil and Gas Reserves - Company Interest Reserves

----------------------------------------------------------------------------
Reserves Category Natural
Natural gas 2009 2008
Light Oil Gas Liquids Total Total
(Mbbls) (MMcf) (Mbbls) (Mboe) (Mboe)
----------------------------------------------------------------------------
Proved
Developed Producing 571 10,336 246 2,540 1,936
Developed Non-Producing 120 3,115 47 686 1,110
Undeveloped 305 11,991 50 2,354 680
----------------------------------------------------------------------------
Total Proved 996 25,442 343 5,580 3,726
----------------------------------------------------------------------------
Probable 942 19,644 262 4,478 3,259
----------------------------------------------------------------------------
Total Proved Plus
Probable 1,939 45,086 605 10,058 6,985
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net Present Value ("NPV") Summary 2009

Midnight's crude oil, natural gas and natural gas liquids reserves were evaluated using GLJ's product price forecasts effective January 1, 2010 prior to provision for income taxes, interest, debt service charges and general and administrative expenses. It should not be assumed that the discounted future net production revenues estimated by GLJ represent the fair market value of the reserves.



Net Present Value of Reserves, before income taxes

----------------------------------------------------------------------------
December 31, 2009 ($000's) 0% 5% 10% 15%
----------------------------------------------------------------------------
Proved Reserves
Developed Producing 75,286 60,447 50,770 44,025
Developed Non-Producing 17,561 14,067 11,690 9,982
Undeveloped 55,320 36,316 24,999 17,787
----------------------------------------------------------------------------
Total Proved 148,167 110,831 87,458 71,794
----------------------------------------------------------------------------
Probable 127,510 68,321 40,737 25,948
----------------------------------------------------------------------------
Proved plus Probable 275,268 179,152 128,196 97,743
----------------------------------------------------------------------------
----------------------------------------------------------------------------


At year end, Midnight's proved non-producing and undeveloped reserves account for 3.0 million boe of the total proved reserves booked with the majority of the reserves relating to development drilling locations. All of these locations will be drilled into known horizons with offset production as infill or step out locations. The majority of these reserves are booked on our Elmworth, West Wapiti and Bilbo lands and on our light oil property at Red Earth. We plan to drill these wells in the next two years. The future capital associated with proved reserves included in the 2009 GLJ Report is approximately $30.2 million and has been subtracted from the future value of the proved reserves.



Reserve Reconciliation

Reconciliation of Changes in Company Interest Reserves by Principal Product
Type Forecast Prices and Costs

----------------------------------------------------------------------------
Factors Crude Oil & NGLs Natural Gas Total
-----------------------------------------------------
Proved Proved Proved
plus plus plus
Proved Probable Proved Probable Proved Probable
(Mbbls) (Mbbls) (MMcf) (MMcf) (Mboe) (Mboe)
----------------------------------------------------------------------------
December 31, 2008 1,605 2,883 12,724 24,612 3,726 6,985
Extensions & Improved
Recovery 89 156 11,437 21,521 1,995 3,743
Technical Revisions (118) (258) 3,823 1,495 520 (9)
Production (237) (237) (2,542) (2,542) (660) (660)
----------------------------------------------------------------------------
December 31, 2009 1,339 2,544 25,442 45,086 5,580 10,058
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Solid Finding Development and Acquisition Costs ("FD&A") in 2009

Midnight's 2009 exploration and development expenditures totalled $37.4 million. The Company's proved FD&A for 2009 was $14.87 per boe excluding changes in future development capital ("FDC") and $21.41 including changes in FDC. FD&A excluding changes in FDC decreased 31% from 2008 while FD&A including changes in FDC decreased 4%. The Company's proved plus probable FD&A for 2009 was $10.02 per boe excluding changes in FDC, down 4% from 2008, while the FD&A including changes in FDC was $16.59 a 10% increase from 2008.

NI 51-101 requires that FD&A costs be calculated including changes in FDC. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect the independent evaluator's best estimate of what it will cost to bring the proved undeveloped and probable reserves on production.



----------------------------------------------------------------------------
FD&A Costs - Company Interest 2009 2008
Reserves --------------------------------------
Proved Proved
plus plus
Proved Probable Proved Probable
----------------------------------------------------------------------------
Capital Costs ($000's)
Exploration and Development 37,397 37,397 35,971 35,971
Change in Exploration and
Development FDC 16,454 24,542 1,419 15,846
----------------------------------------------------------------------------
53,851 61,939 37,390 51,817

Disposition Capital - - (30,371) (30,371)
Reserve Additions(1)(Mboe)
Exploration and Development 2,515 3,734 1,668 3,433
----------------------------------------------------------------------------
Reserve Dispositions (Mboe) - - (1,499) (2,100)
----------------------------------------------------------------------------
Finding Development and Acquisition
Costs ($/boe)
Exploration and Development Capital
including change in FDC $ 21.41 $ 16.59 $ 22.41 $ 15.09
Exploration and Development Capital
excluding change in FDC $ 14.87 $ 10.02 $ 21.56 $ 10.48

Dispositions - - $ 20.26 $ 14.46
----------------------------------------------------------------------------

Note:

(1) Reserve additions include technical revisions.

----------------------------------------------------------------------------
FD&A ($/boe)
Exploration and Development Capital
including change in FDC 2007 2008 2009 3 year
----------------------------------------------------------------------------
Proved 41.04 22.41 21.41 29.81
Proved plus Probable 54.20 15.09 16.59 21.98
----------------------------------------------------------------------------


Net Asset Value

At December 31, 2009, Midnight estimated its net asset value was $1.75 per basic share. This estimate is based on the present value of proved plus probable reserves discounted at 10% before tax, includes estimates for undeveloped lands, seismic and other assets and excludes net debt. The present value of petroleum and natural gas reserves were determined by GLJ in their year end evaluation. Undeveloped land at December 31, 2009 was internally valued at an average price of $125 per acre and excludes 8,000 acres of unearned lands on the Bilbo farm-in which was earned in Q1 2010. Undeveloped seismic was internally evaluated based on the lower of cost or market.



----------------------------------------------------------------------------
Net Asset Value - Forecast Pricing and Costs at December 31, 2009
Mboe $/Boe PV ($M) $/Share
----------------------------------------------------------------------------
Proved Reserves Value at 10% BIT 5,580 15.67 87,458 $ 1.16
Probable Reserves Value at 10% BIT 4,478 9.10 40,738 0.54
------------------------------------------
Proved plus Probable Reserves
Value at 10% BIT 10,058 12.75 128,196 $ 1.70

(000's) $/acre
Undeveloped Land 108.7 acres 125 13,588 0.18
Seismic and Other Assets 2,517 0.03
Net Debt (12,667) (0.16)
----------------------------------------------------------------------------
Total Net Assets $ 131,634
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic Shares Outstanding 75,335
----------------------------------------------------------------------------
NET ASSET VALUE $ 1.75
----------------------------------------------------------------------------


At December 31, 2009 there are no material differences between basic and fully diluted net asset value calculations.

Land Holdings

The following table sets out Midnight's land holdings as at December 31, 2009.



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Developed Undeveloped Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross(1) Net(2) Gross(1) Net(2) Gross(1) Net(2)
----------------------------------------------------------------------------
(acres)
Alberta 42,200 27,100 131,400 91,800 173,600 118,900
British
Columbia 1,400 800 21,400 16,900 22,800 17,700
----------------------------------------------------------------------------
Total 43,600 27,900 152,800 108,700 196,400 136,600
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:
(1) "Gross" refers to the total acres in which Midnight has an interest.
(2) "Net" refers to the total acres in which Midnight has an interest,
multiplied by the percentage working interest therein owned by Midnight.


Exploration capital investment in 2009 was $37 million, including $28 million in drilling and completions, $3 million in land and seismic, and $6 million in major facilities. The Company has a 366-day revolving credit facility of $35 million. Midnight has in excess of $142 million of tax pools to shelter income well into the future.

New Appointments

Midnight is pleased to announce the appointment of Mr. Thomas Simons to the Board of Directors of Midnight. Mr. Simons has over 15 years experience in the Canadian oilfield service industry. Mr. Simons is the President, CEO and a director of Canadian Energy Services & Technology Corp., a TSX listed oil and gas service company, and previously held the position of Vice President and Principal of Impact Fluid Systems Inc. Mr. Simons brings his operational expertise and business acumen to the Board at Midnight. The addition of Mr. Simons will currently expand the Board of Directors of Midnight to six members. We are very excited to welcome Tom to the Midnight team and feel confident in his guidance.

Midnight is also pleased to announce the appointment of Dale A. Miller, P. Eng. as Vice President and Chief Operating Officer of Midnight. Mr. Miller has over 25 years experience with oil and gas exploration and development in the Western Canadian Sedimentary Basin, which includes significant executive experience with growth companies. Prior to joining Midnight, Dale was Vice President, Operations & Engineering at Gibraltar Exploration Ltd., a private junior oil and gas exploration company, from its inception in 2003 until it was sold to Crescent Point Energy Corp. in July 2009. Prior to Gibraltar, Mr. Miller was Vice President, Operations & Engineering at Penn West Petroleum Ltd. During Mr. Miller's 10 year tenure, Penn West grew from a 1,500 boe/d junior producer to 100,000 boe/d senior producer. Mr. Miller obtained a BSc (Honors), Petroleum Engineering at the University of Tulsa and is a member of the Association of Professional Engineers, Geologists, and Geophysicists of Alberta (APEGGA). Mr. Miller brings a wealth of operational and management expertise that will assist the company in achieving its growth objectives.

Outlook

Over the past few years the oil and gas industry in North America has changed dramatically. The application of new technologies has brought quantum shifts to our business opening up new areas and marginalizing other areas. Midnight was very much an "early mover" in identifying the potential of these technologies and positioning ourselves in the Deep Basin area of the Peace River Arch, where we saw significant potential. Through a program of land sales, farm-in and acreage swaps, we were very successful assembling a very large and highly prospective acreage holding in this area. The Deep Basin is one of the top tier resource areas in all of North America that has and is being aggressively pursued and developed by major international energy companies including Shell, Conoco, Devon, BP and EnCana. In each of our Deep Basin areas, we are partnered with and/or surrounded by the aggressive drilling activities of these multinational energy companies. We are at the early stages with our land assembly and development, but in each of these areas (Elmworth, Bilbo and Chinook Ridge) our partners have evolved full scale exploitation and development and have downspaced to multiple wells per section including horizontal Cadomin and Nikanassin drilling. In 2009, we were able to grow our proven reserves by over 50% and have significant unbooked resource potential that will be added as we progress with our development.

During 2009, Midnight's activities focused on building and developing knowledge and expertise regarding the tight gas plays and the application of advanced drilling and completion technologies to prove the significant productive capability of tighter gas reservoirs in the Deep Basin. We have established this area as the key to adding natural gas production and reserves for the Company. Our ongoing successful results from the Deep Basin program have substantiated the upside of this multi-zone sweet gas resource play. We have tested and validated significant resource potential in the Cadomin and the Nikanassin together with numerous uphole zones, and are now positioned to move to the exploitation phase. Our results from this program have been good and getting better, however with continued volatility of the natural gas markets, the Company slowed and deferred a number of operations throughout the year, choosing to pace its investment and withhold capital. Slowing tie-ins and keeping behind pipe production offline resulted in the forecasted Q4 2009 production decline. We have had a successful Q1 2010, and have enhanced and expanded our resource opportunity base in the high potential Chinook Ridge area. Despite challenges in access and timing of oilfield services, including drilling and completion crews, coupled with the earlier than anticipated spring break-up, we will meet our forecasted production exit rate of over 2,500 boe/d by the end of March. Our current capital program is expected to be approximately $30 to $35 million for 2010 while production should average 2,500 boe/d. Average Q1 2010 production is expected to be approximately 1,800 boe/d to 1,900 boe/d as new production will come on stream in the latter part of March. Midnight's results from its Deep Basin Tight Gas initiative have validated our thesis of the resource potential of this area and put in place a solid foundation for material long-term growth.

Midnight is a Calgary based, junior energy company primarily focused on natural gas exploration, development and production in the Deep Basin portion of northwest Alberta. Common Shares of Midnight are listed on the Toronto Stock Exchange under the symbol "MOX".

All shareholders are invited to attend Midnight's 2010 Annual Meeting that will be held at the Sun Life Conference Centre, Plus 15 Level, Sun Life Plaza, 140 - 4th Avenue SW, Calgary, Alberta, Thursday, May 20, 2010 at 10:00 AM MDT.

Forward Looking Statements - Certain statements contained within this press release and in certain documents incorporated by reference into this document constitute forward looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward looking statements. Forward looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements.

In particular, this press release contains the following forward-looking statements pertaining to, without limitation, the following: the development opportunities of Midnight's lands; the ability of Midnight to earn farm-in lands through completion of its commitments; the timing of its future capital expenditures and its future drilling plans; the expected reserve additions from its capital program, the expected increase in its proved producing reserves; reduced capital investment in energy; increased future commodity prices; potential reduction in service costs; and its near term capital spending. In addition, statements relating to "reserves" or "resources" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitably produced in the future.

With respect to the forward-looking statements contained in this press release, Midnight has made assumptions regarding: future commodity prices; the impact of royalty regimes and certain royalty incentives; the timing and the amount of capital expenditures; production of new and existing wells and the timing of new wells coming on-stream; the performance characteristics of oil and natural gas properties; the size of oil and natural gas reserves; the ability to raise capital and to continually add to reserves through exploration and development; the continued availability of capital, undeveloped land and skilled personnel; the ability to obtain equipment in a timely manner to carry out exploration and development activities; the ability to obtain financing on acceptable terms; the ability to add production and reserves through exploration and development activities; and the continuation of the current tax and regulation.

We believe the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of this press release or as of the date specified in the documents incorporated by reference into this press release, as the case may be. The actual results could differ materially from those anticipated in these forward looking statements as a result of the risk factors set forth below: volatility in market prices for oil and natural gas; counterparty credit risk; access to capital; changes or fluctuations in production levels; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; stock market volatility and market valuation of Midnight stock; geological, technical, drilling and processing problems; limitations on insurance; changes in environmental or legislation applicable to our operations, and our ability to comply with current and future environmental and other laws; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; and the other factors discussed and included from time to time in our public disclosure documents including our Annual Information Form. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward looking statements contained in this press release and the documents incorporated by reference herein are expressly qualified by this cautionary statement. The forward-looking statements contained in this document speak only as of the date of this document and Midnight does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.

The TSX has neither approved nor disapproved the contents of this press release.

Contact Information