Sierra Vista Energy Ltd.

Sierra Vista Energy Ltd.

October 16, 2007 18:01 ET

Sierra Vista Announces the Termination of Farm-In Agreement and Provides Update

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


Sierra Vista Energy Ltd., (TSX VENTURE:SVR.A) (TSX VENTURE:SVR.B) ("Sierra Vista" or the "Company") announces that pursuant to its continuing review of its operations and plans, the Company has decided not to proceed with drilling the next well under its farm-in agreement in the Ante Creek area. In arriving at this decision, the Company considered a variety of factors, including the costs of drilling the well, the anticipated results and the overall commitment required to realize the full benefit of the farm-in. Under the terms of the farm-in agreement and as a result of the Company's decision, the farmor has terminated the farm-in agreement in accordance with its terms, and the Company has forfeited 50% of its working interest in 3.25 sections of land earned thereunder. The forfeited production represents approximately 45 boe/d based on current production. After the production forfeiture, the Company is producing approximately 220 boe/d, approximately 65% of which is natural gas. As previously disclosed, the Company is in the process of updating its reserves report which will reflect the impact of the forfeited production and reserves. The updated reserves report is expected to be completed by the end of October 2007. As a result of termination of the farm-in agreement, the Company has eliminated approximately $6,868,000 in future capital commitments that would have been required to satisfy its obligations under the Ante Creek farm-in agreement.

Currently, the Company has an obligation to spend approximately $1,455,000 on qualified Canadian Exploration Expenses ("CEE"), prior to December 31, 2007. The Company has identified a qualified CEE well in the Peace River Arch area available to it under a separate farm-in agreement that is expected to fulfill this remaining CEE obligation and expects to spud the well prior to December 1, 2007. In addition, the Company has committed to spend $5,000,400 before December 31, 2008 on qualified CEE.

The Company currently has net debt, excluding its $10M convertible debenture, of $1,265,000 under a $6,500,000 credit facility with its bank. The Company's credit facility will be reviewed by its bank upon receipt of the updated reserves report. Due to the current natural gas pricing environment and the reduction in the Company's reserves, the Company expects the credit facility to be reduced.

The Company also is continuing its efforts to identify and recruit a new President and Chief Executive Officer and will provide an update in the future on these efforts.

Sierra Vista is a junior oil and gas company engaged in the exploration for, and development and production of, crude oil and natural gas focusing in the Peace River Arch region of central Alberta. The Corporation's shares trade on the TSX Venture Exchange under the symbols "SVR.A" and "SVR.B".


Some of the statements contained herein including, without limitation, financial and business prospects, financial outlooks, and production forecasts may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. In particular, this news release contains forward-looking statements pertaining to the quality of reserves, oil and natural gas production levels, capital expenditure programs, projections of market prices and costs, supply and demand for oil and natural gas; and expectations regarding the Company's ability to raise capital and to continually add to reserves through acquisitions and development.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and elsewhere in this news release including uncertainty of reserve estimates, volatility in market prices for oil and natural gas, liabilities and risks inherent in oil and natural gas operations, uncertainties associated with estimating reserves, competition for, among other things, capital, acquisitions or reserves, undeveloped lands and skilled personnel, geological, technical, drilling and processing problems.

Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", continue" and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current expectations and are based on uncertainties. Although the forward-looking statements contained within this news release are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances unless required under applicable securities laws.

Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to BOE using a ratio of 6,000 cubic feet of natural gas to one barrel of oil equivalent. This conversion ratio is based upon energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOE figures may be misleading, particularly if used in isolation.

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

Contact Information

  • Sierra Vista Energy Ltd.
    Mr. Morley Mychaluk
    Interim President & CEO
    (403) 265-9393 ext 202
    (403) 265-9224 (FAX)
    Sierra Vista Energy Ltd.
    Mr. Bruce Stewart
    Chief Financial Officer
    (403) 265-9393 ext 205
    (403) 265-9224 (FAX)
    Sierra Vista Energy Ltd.
    Suite 850, 101-6th Avenue SW
    Calgary, Alberta T2P 3P4