Milagro Energy Inc.
TSX : MIG

Milagro Energy Inc.

January 17, 2007 16:52 ET

Milagro Energy Inc. Announces Reserve Additions for the Battle Creek Property, in the Duperow Formation

CALGARY, ALBERTA--(CCNMatthews - Jan. 17, 2007) - Milagro Energy Inc. (TSX:MIG) ("Milagro" or the "Company") is pleased to announce that it has received a reserve report (the "Battle Creek Report") with respect to its Battle Creek (Duperow) property located in south western Saskatchewan (the "Battle Creek Property"). The Battle Creek Report was prepared by DeGolyer and McNaughton Canada Limited ("D&M") in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities, and provides an evaluation of the Company's crude oil reserves in the Duperow formation at the Battle Creek Property as at December 31, 2006. The Company has not previously obtained an evaluation of Duperow reserves of the Battle Creek Property.

D&M concluded in the Battle Creek Report that Milagro's 100% working interest gross probable light crude oil reserves in the Duperow formation at the Battle Creek Property are 3,679,258 barrels. The Battle Creek Report did not report proved reserves at the Battle Creek Property. The Battle Creek Property is an undeveloped property and has reported no production to date.

Based upon D&M's forecast price case, the Company's share of future net revenue from probable reserves at the Battle Creek Property as at December 31, 2006, discounted at 10%, is $68.44 million.

The reserves attributed to the Duperow formation at the Battle Creek Property in the Battle Creek Report are in addition to the reserves at the Company's other properties. The Company has previously reported a total proved plus probable future net revenue, discounted at 10% of $57.01 million from its other properties as at December 31, 2005 comprised of 3,999,615 net BOE.

The Company's independent reserve engineers are currently preparing evaluations of the Company's other properties and the Company will disclose updated reserve information as at December 31, 2006 for its other properties later in the first quarter of 2007.

Milagro is an exploration and production company engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada.

READER ADVISORY

The reserve estimates set forth in this news release are limited to the reserves attributed to the Battle Creek Property and do not include reserves at the Company's other properties. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

The estimated values regarding future net revenue from probable reserves disclosed in this news release do not represent fair market value.

Barrels of Oil Equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Statements in this press release may contain forward-looking information including expectations of production, future revenue and components of cash flow and earnings. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the company. These risks include, but are not limited to, the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information. See "Risk Factors" in the Company's annual information form for the year ended December 31, 2005 for a further discussion of risks faced by the Company. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available and as the economic environment changes.

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