Orleans Energy Ltd.

Orleans Energy Ltd.

November 01, 2007 17:13 ET

Orleans Energy Announces Record Quarterly Production and Provides Clarity on New Alberta Royalty Regime

CALGARY, ALBERTA--(Marketwire - Nov. 1, 2007) - Orleans Energy Ltd. ("Orleans" or the "Company") (TSX VENTURE:OEX) is pleased to announce that it achieved record production levels for the three month period ended September 30, 2007, as a result of successful, internally-generated exploration and development drilling activities undertaken throughout 2007. Production in the third quarter averaged 3,002 barrels of oil equivalent ("boe") per day, weighted 78% towards natural gas. Orleans' record third quarter production represents an increase of 38% over the third quarter of 2006 (2,181 boe per day) and a significant increase of 22% over the preceding second quarter of 2007 (2,460 boe per day). The Company, with positive operational momentum resulting from prolific drilling activities at Kaybob, is presently on-track to achieve its forecasted year-end 2007 exit rate target of 3,500 boe per day.

Operations Update

During the third quarter of 2007, the Company drilled eight (7.1 net) wells with 100% success. This year, through to November 1, 2007, Orleans has drilled 15 gross (12.8 net) wells with 100% success. Orleans has drilled wells across the majority of its focus areas, including: eight gas wells (7.5 net) in Kaybob, three horizontal oil wells (3.0 net) in Leo, two gas wells (0.75 net) in Pine Creek, and two oil wells (1.5 net) in Gordondale.

Throughout 2007 Orleans' primary focus has been on its West Central Alberta Kaybob property, wherein the Company has expanded its land base from six sections (4.4 net) to 27.5 sections (25.0 net), via Crown land acquisitions and farm-ins, concentrating on exploration and development of an exciting "deep basin" resource-style natural gas prospect in the Triassic Montney formation.

Since commencement of drilling operations at Kaybob in January 2007, Orleans has drilled eight (7.5 net) gas wells, with six (5.5 net) wells currently on-stream, one (1.0 net) well tested and awaiting tie-in and one (1.0 net) well awaiting completion. Orleans has undertaken a number of operational initiatives, including the application of improved and larger fracture stimulation technology, horizontal drilling utilizing the "Packer Plus" multi-stage fracture assembly and common lease pad drilling as a means to improve productivity and reserves recovery and minimize lease construction, pipeline costs and surface disturbance. The Company has received approval from the Energy Utilities Board to drill on reduced spacing up to three wells per section across approximately 10 sections of its Kaybob acreage and has applied for similar reduced spacing on the majority of its remaining lands. In 2007, Orleans' working interest productive capacity in Kaybob has grown from approximately 80 boe per day to currently over 1,500 boe per day.

For the remainder of 2007, Orleans intends to drill two to three additional wells, and with success, could "prove up" a substantial, incremental inventory of drilling locations. Orleans currently has in excess of 200 drilling locations throughout its five core, operated properties in Alberta.

The Company anticipates releasing its financial and operating results for the three month and nine month periods ended September 30, 2007 on or about November 15, 2007. Included therein will be a more detailed operations review, further elaborating on the Company's operational activities.

Impact of the New Alberta Royalty Regime

On October 25, 2007, the Alberta government released The New Royalty Framework report which summarizes the government's decisions on Alberta's new royalty regime. As a result of the Alberta government's changes to their royalty structure on all Crown mineral rights owned by the Province of Alberta and leased by oil and gas producers such as Orleans, scheduled to take effect on January 1, 2009 upon legislation enactment, the Company would like to provide clarity on the potential impact to Orleans' royalty burdens and operating cash flow stream.

If the changes were enacted and applicable today, and based on the Company's interpretation of publicly available information, Orleans estimates that its corporate effective royalty rate, defined as total royalties as a percentage of total revenue, would increase approximately 3% based on the core area composition of its third quarter 2007 production revenue profile. As a result of this estimated royalty rate change, the Company forecasts that the potential effect on its operating cash flow would be a reduction of approximately 7%. The aforementioned royalty and cash flow changes are predicated on an assumed AECO gas price of Cdn.$7.00 per gigajoule and a light crude oil price of Cdn.$75.00 per barrel. The Company's geographic, geologic and individual well production diversity of its asset base within Alberta, in conjunction with the production revenue derived from its freehold leases which are not impacted by the proposed new Crown royalties, is anticipated to temper the overall unfavourable impact to Orleans of the announced changes to Crown royalties.

It should be noted that the actual effect of the Alberta Crown royalty rate changes on Orleans will be determined subsequent to January 1, 2009, based on, among other things, the actual legislation to be enacted, well production rates and drilling depths, prevailing commodity prices, foreign exchange rates, and the Company's commodity composition of its production profile.

In assessing the impact of the Alberta government's proposals, Orleans has identified several anomalies which the Company believes produce unintended consequences on the economics of future activity. Orleans plans to constructively work with the Alberta government to identify areas of clarification and modification to address these issues.

Orleans Energy Ltd. is a Calgary, Alberta-based emerging crude oil and natural gas company, with common shares trading on the TSX Venture Exchange under the symbol "OEX". Orleans is a team of dedicated, experienced professionals focused on the creation of shareholder value via acquisition and development of crude oil and natural gas assets in Alberta.

Certain information regarding the Company contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, anticipations, expectations, intentions, opinions, forecasts, projections, guidance or other similar statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

The term cash flow from operations or operating cash flow contained herein should not be considered as an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with Canadian generally accepted accounting principles ("GAAP"). This term does not have a standardized meaning under GAAP and may not be comparable to other companies. Orleans believes that cash flow from operations is a useful supplementary measure as investors may use this information to analyze operating performance, leverage and liquidity. Cash flow from operations, as disclosed within this news release, represents funds from operations before any asset retirement obligation cash expenditures and is expressed before changes in non-cash working capital.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.

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