Nexstar Energy Ltd.

Nexstar Energy Ltd.

October 16, 2007 09:15 ET

Nexstar Energy Announces Nine Well Drilling Program, Production and Operational Updates

CALGARY, ALBERTA--(Marketwire - Oct. 16, 2007) -


Nexstar Energy Ltd. (TSX VENTURE:NXE.A) (TSX VENTURE:NXE.B) ("Nexstar Energy" or the "Company") is pleased to announce the commencement of its fall drilling program, which includes the drilling of up to nine exploratory wells, all of which are supported with 3-D seismic. The Company also announces its 50% participation in a multi-well farmin and option on 35,000 undeveloped gross acres in the Pembina area of Alberta as well as the successful completion of two wells from its summer drilling program. In addition, the Company is pleased to announce an increase to its undrawn credit facility from $4.25 million to $6.0 million.

Multi-Well Fall Drilling Program

Nexstar Energy's fall drilling program includes the planned drilling of nine exploratory wells, eight of which are located within the Company's existing core areas. The Company plans to operate four of the wells within the scope of the program. Two of the planned wells will target shallow natural gas while the remaining seven wells have oil and natural gas potential. All of these drilling locations are confirmed with 3-D seismic.

Pembina Area Farmin

As a key part of the fall drilling program, the Company is pleased to announce that it has signed a Letter of Intent to secure its participation in a multi-well exploratory farmin drilling program with a joint venture operator in the Pembina area. The farmout lands include 55 sections of 100% farmor working interest lands with the initial commitment to include the drilling of four exploratory wells and the re-entering and completion of two existing wells. The Company has agreed to participate for a 60% share of the drilling and casing costs of three of these wells and a 65% share of the costs of the fourth well. In addition, the Company will participate for a 50% share of the costs to complete and equip the four commitment wells and a 50% share of the costs to re-enter and complete and equip, or abandon the two existing wells. All of these Pembina area wells are scheduled to be drilled or re-entered and completed by year end.

For its participation in the costs and obligations for each earning well drilled, completed, capped or abandoned, Nexstar Energy will earn a 50% working interest in a three section block of the farmout lands to the base of the deepest formation penetrated, subject to a non-convertible gross overriding royalty if the well is drilled on Alberta Crown rights. If an earning well is drilled on lands other than Alberta Crown rights, the Company shall earn an interest in three year petroleum and natural gas leases, subject to lessor royalty. For the Company's 50% participation in the costs of each well re-entered and completed, or abandoned, the Company will earn a 50% interest before payout and a 45% interest after payout in a two section block of the farmout lands to the base of the deepest zone completed, subject to non-convertible royalties equivalent to those applicable to the drilled earning wells. The farmin and option agreement also provides the Company with the opportunity to continue to drill option wells on the unearned farmout lands and to earn an interest in these lands under similar terms.

Production and Operational Update

During September, four of six cased wells from the Company's summer drilling program were completed, resulting in two successful wells (0.40 net) with combined net production potential of approximately 50 boepd. The first successful well in the Macleod area is now on production from one of two completed intervals and the second Macleod well is expected to be on production in November. The completion, stimulation and testing of two recently drilled wells (1.0 net) in the Pembina area has been delayed until the fourth quarter of 2007 due to extremely wet local surface conditions. At Goodwin, the Company drilled the 16-19 farmin earning well (0.50 net) for a seismically indicated Falher channel sand which was not present. A secondary zone in the Nordegg area was completed and tested oil with significant amounts of water and the well has been abandoned. Additional targets have been identified in the Goodwin area and are expected to lead to the drilling of a further three operated wells in the fourth quarter of 2007. At Rycroft, the non-operated 1-18 well (0.50 net) has been fracture stimulated and has tested natural gas with water, which will require remedial down-hole work to reduce water inflow. In the Pembina area, due to scheduled maintenance at the non-operated Buck Lake gas plant, the Company's natural gas production from the Pembina area was shut-in for the last three weeks of September. With the restarting of the Buck Lake facility in early October and the addition of volumes from the first Macleod well, the Company has increased production to approximately 110 boepd with a further 20 boepd expected to be added later this quarter from currently completed wells.

Capital Program Expenditures

As of September 30, 2007, the Company had incurred total capital expenditures of approximately $7.2 million, of which approximately $5.9 million were flow-through qualifying expenditures. A further $5.5 million of flow-through qualifying expenditures are expected to be incurred with the drilling and completion of the planned fall drilling program, which also includes the planned expenditure of up to $0.8 million for new 3-D seismic programs. Provided these planned qualifying expenditures are incurred, the Company will have spent approximately $11.4 million of the $12 million flow-through capital obligations required by the end of 2007. Nexstar Energy continues to review exploration projects, which meet its criteria in order to meet these obligations prior to year end.

Credit Facility Increased

Nexstar Energy has accepted an Offering Letter from its bank to increase its demand revolving operating credit facility ("Credit Facility") from $4.25 million to $6.0 million. The Credit Facility has no specific repayment aside from the bank's right of demand and periodic review. As of September 30, 2007, the Company's Credit Facility was undrawn.

Short Term Investments

On August 28, 2007, the Company provided an update on the status of its ownership of $5.0 million in Asset Backed Commercial Paper ("ABCP"). The Company advises that there is no change in the status of the $5.0 million ABCP. In support of its ownership of the ABCP, the Company will continue to monitor events and will update shareholders as appropriate. Nexstar Energy is unable to predict how long the current market disruption of ABCP liquidity will continue, however, the Company presently has a $6.0 million undrawn Credit Facility to meet its short term requirements.

Stock Options Granted

Nexstar Energy also announces that the Board of Directors has approved the granting of a total of 100,000 stock options to non-management employees and key consultants of the Company. The options have been granted with an exercise price of $0.51 per share and for a term of five years with vesting provisions as provided in the Company's stock option plan.

Nexstar Energy is an emerging junior oil and gas company that is focused on drilling multi-zone crude oil and natural gas prospects in west central Alberta, complemented by strategic acquisitions.

This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOEs 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.

9,200,000 Class A Shares

1,080,000 Class B Shares

ADVISORY: The TSX Venture Exchange has neither approved nor disapproved the contents of this news release. The TSXV does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Nexstar Energy Ltd.
    Peter A. Carwardine
    President and CEO
    (403) 263-6133 ext. 201
    (403) 263-3629 (FAX)
    Nexstar Energy Ltd.
    Brian J. Spilchen
    VP Finance and CFO
    (403) 263-6133 ext. 202
    (403) 263-3629 (FAX)
    Nexstar Energy Ltd.
    603 - 7 Avenue SW, Suite 525
    Calgary, Alberta T2P 2T5