Peerless Energy Inc.
TSX : PRY.A
TSX : PRY.B

Peerless Energy Inc.

October 16, 2007 14:28 ET

Peerless Energy Inc. Provides Increased Production, Capital Budget and Operational Update

CALGARY, ALBERTA--(Marketwire - Oct. 16, 2007) - Peerless Energy Inc. ("Peerless" or "the Company") (TSX:PRY.A) (TSX:PRY.B) is pleased to announce an update to its 2007 exit production guidance, an increase to its capital budget and an operational update relating to recent successful Saskatchewan Bakken light oil exploration and development drilling activity.

Increase to 2007 Production Guidance

As a result of its successful Bakken light oil drilling program undertaken in the greater Viewfield area of Saskatchewan, Peerless has met its previously stated 2007 production exit guidance. The Company's current production is in excess of 4,000 boe/d, comprised of approximately 65% light oil and liquids, and 35% long life sweet natural gas. As a result of the success to date, and planned drilling and completion operations to year end, the new exit production guidance is:



2007 Exit Production Guidance (boe/d):

Previous Updated

3,600 - 4,000 4,200 - 4,600


Increase to Capital Budget

Peerless' Board of Directors have approved a 14% increase to the 2007 capital program to approximately CDN $64 million from the previous CDN $56 million, with a continued focus on its Bakken light oil development drilling and completion program. The capital program scheduled for the rest of the year calls for a fourth quarter expenditure of approximately CDN $21 million which will be financed from cash flow and a small incremental draw on the company's existing credit facility.

The success of the light oil drilling program has led to an increase in the Company's light oil weighting which in turn has grown the Company's current operating netback to greater than CDN $40.00/boe. This higher netback has allowed Peerless to increase its budget, while maintaining an unlevered balance sheet, with a current net debt to forward cash flow ratio of less than 1.

Operations

To date in 2007, Peerless has drilled 20 (15.3 net) wells targeting Bakken light oil with a 100% success rate. These wells are comprised of 9 (7.8 net) unstimulated "pitchfork tri-lateral horizontals" and 11 (7.5 net) single leg horizontal wells designed for fracture stimulation. With the emergence of new fracture stimulating technology, Peerless has seen a significant increase in the productivity of a typical Bakken oil well, with a marginal increase in the capital costs for drilling and completion. Results to date using the new technology have seen up to a two fold increase in initial production rates when compared to previous drilling and completion styles.

Peerless plans a total of 13 (11 net) operations in the fourth quarter of 2007 comprised of 10 (9 net) new wells, and 2 (1 net) fracture stimulations on existing single leg wells. In addition, the Company will fracture stimulate one (1 net) of its existing pitchfork tri-laterals during the third week of October, 2007. If successful, it will allow for 18 (16.6 net) additional re-completion operations to add to its inventory of greater than 135 net Bakken development drilling locations.

In addition to the drilling activity, Peerless has now started the process of tieing in and conserving its significant volumes of associated natural gas and natural gas liquids from its Bakken light oil production. The Company currently delivers a portion of its gas to a third party processing facility, on a differential pricing basis to AECO with no value provided for the associated liquids production. This operation will provide the Company with 150 - 200 boe/d of incremental production.

Peerless is a Canadian junior oil and gas company engaged in the exploration, development and production of light oil and sweet natural gas in the provinces of Saskatchewan, Alberta and British Columbia.

ADVISORY

This press release may contain forward-looking statements including management's assessment of future plans and operations, expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other factors that could affect Peerless' operations and/or financial results are included in Peerless' reports on file with Canadian securities regulatory authorities.

BOE PRESENTATION

Petroleum and natural gas reserves and volumes are converted to an equivalent measurement basis referred to as a "barrel of oil equivalent" ("boe") on the basis of 6 thousand cubic feet of natural gas equal to 1 barrel of oil. This conversion is based on an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

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

Contact Information

  • Peerless Energy Inc.
    Wade Becker
    President and Chief Executive Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    or
    Peerless Energy Inc.
    Dan Toews
    Vice President, Finance and Chief Financial Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    Website: www.peerlessenergyinc.com