Milagro Energy Inc.
TSX : MIG

Milagro Energy Inc.

September 26, 2007 16:56 ET

Milagro Energy Inc. Provides Operational Update

CALGARY, ALBERTA--(Marketwire - Sept. 26, 2007) - Milagro Energy Inc. ("Milagro" or the "Company") (TSX:MIG) is pleased to provide the following operational update.

Battle Creek

At Milagro's Battle Creek property the Company has finished testing the A14-31-3-26W3M well. The well was drilled 15 meters down the crest of the structure to determine with confidence the size of the condensate/oil natural gas liquid carbon dioxide ("CO2") gas accumulation ("Duperow gas"). The well tested up to 1 mmcf/day of Duperow gas. The Company will do further testing on an additional well at Battle Creek that tested 5 mmcf/day of Duperow gas and is capable of sustained rates of 4 mmcf/day, to complete the design of additional equipment that will be needed to strip the condensate/oil and natural gas liquids from the CO2 gas and re-inject the gas back into the reservoir to enhance recovery of the condensate/oil and gas liquids from the Duperow gas.

The A14-31-3-26W3M well also confirmed that the Duperow pool (Milagro 100% working interest) will produce the Duperow gas as a gas liquid and condensate/oil pool rather than an oil pool with a gas cap. The initial phase of development is anticipated to require an additional 4 to 5 wells beyond the existing 2 wells and the reservoir would be produced at a sustained rate of 20 mmcf/day of gas to be constantly re-injected while stripping the condensate oil and gas liquids. Analog pools with similar gas type and analysis point to the importance of re-injecting the CO2 gas while producing the hydrocarbon liquids as was seen from the liquid recovery rates per mmcf increasing from 13.6 barrels per 1 mmcf to 50 barrels per 1 mmcf.

Milagro is also investigating the possibility of diverting a portion of the recycled carbon dioxide gas stream not required for Duperow pressure maintenance, into its existing over lying shallower Madison oil pool as the beginning of a "huff and puff" enhanced oil recovery scheme.

Elmworth

At Elmworth, the Company has finished testing the Milagro 100% working interest 10-16 recompletion of additional Fahler zones to be commingled with the existing Fahler zone. Test results yielded a maximum rate of 1.3 mmcf/day and after clean up of the new zones and the commingling of the existing zone the well is anticipated to produce, after flush production, at around 600 mcf/day or 100 Boe net to the Company. The well is currently shut-in on a pressure build up to satisfy government regulations and is expected to be on production within 3 weeks.

The recompletion at Kakwa is now on production at 800 mcf/day (7% working interest), or 9.3 Boe net to Milagro, and is still cleaning up and the operating Company expects that it will ultimately produce at 1.7 mmcf/day, or 20 Boe net to Milagro.

Judy Creek

At Judy Creek, the 13-22-63-10 W5M well targeting the Swanhills reef had reef build up but the Company determined that the buildup was insufficient in amount. Accordingly, Milagro considers the zone to be uneconomic and will further evaluate an up-hole zone for oil. The 13-22 well does not affect any of the company's proved plus probable reserve value. Also at Judy Creek, the Horizontal 5-14-63-9 W5M well targeting gas and oil is only capable of approximately 20 barrels of oil per day with minor amounts of gas due to large quantities of water produced during testing. Due to tie in distance to the company's battery and disposal facilities, the well is uneconomic and will be abandoned in preference to more economic projects at Judy Creek and elsewhere. The horizontal 5-14 well does not materially impair the company's proved plus probable reserve value.

Zama

The Company is in the process of pooling lands with Apache Canada at Zama whereby Apache as operator will recomplete the 1-5-110-9 W6M well for Sulpher point gas. The recompletion is anticipated to produce at 1 mmcf/day (Milagro 12.5% working interest; 21 Boe net) and is expected to be tied into Apache's gas gathering system around the end of Q4 2007. Additionally by the end of Q4 2007 at Zama, Milagro anticipates completing the 100% working interest recompletion it began on the 12-10-110-9 W6M well at the end of Q1 2007 and had to leave before completion due to weather. The recompletion will begin again in Q4 2007 and is expected to add 50 Bopd production net to Milagro. The Company also has identified a drilling location off-setting the 12-10 recompletion on 100% Company lands in the same Keg River reef which the Company believes it can gain significant thickness. Provided the 12-10 recompletion is successful, the Company will likely pursue an additional well. An analogues situation in the immediate area to the 12-10 step out opportunity resulted in a well that produced 200 Bopd and 175 mcf/day of solution gas.

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

Barrel of oil equivalent ("Boe") amounts may be misleading, particularly if used in isolation. BOE amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil ("6:1"). The 6:1 conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Readers should be aware that historical results are not necessarily indicative of future performance.

Statements in this press release may contain forward-looking information including expectations of production, and capital expenditure. Estimates of future production are based upon the data and assumptions above. 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, general economic conditions, conditions in the capital markets in Canada and elsewhere, 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.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    CEO
    (403) 693-4006
    or
    Milagro Energy Inc.
    Travis Doupe
    CFO
    (403) 693-4007
    Website: www.milagroenergy.com