Milagro Energy Inc.

Milagro Energy Inc.

December 04, 2007 17:30 ET

Milagro Energy Inc. Announces Updated Reserve Information for the Battle Creek (Madison) Property

CALGARY, ALBERTA--(Marketwire - Dec. 4, 2007) - Milagro Energy Inc. ("Milagro" or the "Company") (TSX:MIG) announced today that it has received an updated reserve report (the "GLJ Battle Creek Report") with respect to its Battle Creek (Madison) property located in south western Saskatchewan (the "Battle Creek Property"). The Battle Creek Report was prepared by GLJ Petroleum Consultants Ltd. ("GLJ") in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities, and provides an evaluation of the Company's and medium crude oil reserves in the Madison formation at the Battle Creek Property as at November 1, 2007 with a focus on the Company's proposed CO2 injection scheme for enhanced oil recovery by immiscible CO2 injection into the Battle Creek Property. The Company previously obtained an evaluation of Madison reserves of the Battle Creek Property prepared by DeGolyer and MacNaughton Canada Limited ("D&M") as part of D&M's evaluation of all of the Company's reserves effective December 31, 2006 (the "D&M Report"). Reference is made to the Company's annual information form for the year ended December 31, 2006 filed on the SEDAR website for a description of the results of the D&M Report.

GLJ concluded in the GLJ Battle Creek Report that proved medium crude oil reserves in the Madison formation at the Battle Creek Property are 588 Mbbls compared to 505 Mbbls in the D&M Report, proved plus probable reserves are 1,558 Mbbls compared to 933 Mbbls in the D&M Report. Upon approval of the CO2 injection scheme from Saskatchewan Industry and Resources, Milagro expects to commence injection of CO2 in early 2008.

Based upon GLJ's forecast price case, the Company's share of future net revenue from proved reserves and proved plus probable reserves at the Battle Creek Property as at November 1, 2007, discounted at 10%, are $5.9 million and $24.5 million, respectively, compared with $3.9 million and $6.1 million, respectively, attributed to the Battle Creek Property in the D&M Report.

The following table summarizes the results of the GLJ Battle Creek Report and compares them to previously disclosed results contained in the D&M report. The aggregate reserve numbers below have been calculated by the Company by removing the volume of reserves attributable to the Battle Creek Property in the D&M Report from the Company's aggregate reserves as reported in the D&M Report, and adding the volume of reserves estimated by GLJ in the GLJ Battle Creek Report. Readers are cautioned that the aggregate estimates below reflect different price estimates (December 31, 2006 in the case of the D&M Report and October 31, 2007 in the case of the GLJ Battle Creek Report) and different effective dates. Milagro holds a 100% interest in the Battle Creek Property.

Battle Creek Property All Properties
(Light & Medium Oil) (Light & Medium Oil)
----------------------- -------------------------------
GLJ Battle D&M Plus
Creek GLJ Battle
D&M Report Report D&M Report Creek Report
------------ ---------- -------------- ---------------
Gross Net Gross Net
Reserves Category (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
------------------- ------------ ---------- ------- ----- ------ -------
Developed Producing 124 189 444 419 509 476
Developed Non-
Producing 0 0 252 232 252 232
Undeveloped 381 399 547 480 565 544
------------ ---------- ------- ----- ------ -------
Total Proved 505 588 1,243 1,131 1,326 1,252
Probable 428 970 6,176 5,034 6,718 5,471
------------ ---------- ------- ----- ------ -------
Total Proved plus Probable 933 1,558 7,418 6,165 8,044 6,723
Possible - 783 4,859 3,819 5,642 4,473
------------ ---------- ------- ----- ------ -------
Total Proved plus Probable 933 2,341 12,278 9,984 13,686 11,196
plus Possible ------------ ---------- ------- ----- ------ -------
------------ ---------- ------- ----- ------ -------

The reserves attributed to the Madison formation at the Battle Creek Property in the GLJ Battle Creek Report are in addition to the reserves at the Company's other properties.

The Company is currently in initial discussions with a number of parties with respect to refinance its existing credit facilities and to fund future operations. There is no certainty that the Company will enter into any definitive agreements with any of these parties with respect to any such transaction, or that such a transaction will be completed.

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


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.

Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is only a 10% certainty that the quantities actually recovered will equal or exceed the sum of probable plus possible reserves.

Statements in this press release may contain forward-looking information including expectations of production, future revenue, components of cash flow and earnings and the prospect of future financings or other transactions. 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, access to drilling equipment and personnel, 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, 2006 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.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    (403) 693-4006
    Milagro Energy Inc.
    Travis Doupe
    (403) 693-4007