Valiant Energy Inc.
TSX : VLE

Valiant Energy Inc.

June 06, 2006 09:00 ET

Valiant Energy Announces Reserves and Operations Update

CALGARY, ALBERTA--(CCNMatthews - June 6, 2006) - Valiant Energy Inc. (TSX:VLE) ("Valiant" or the "Company") is pleased to release the results of its May 31, 2006 reserves report which was prepared by Sproule Associates Limited ("Sproule"), an independent reserves engineering firm.

Highlights:

- Working Interest proved plus probable reserves increased by 61 % to 3.54 million boe and proved reserves increased by 26 % to 2.31 million boe since December 31, 2005.

- Reserve additions replaced production by 370 percent for proved reserves and 850 percent for proved plus probable reserves based on production of 179 mboe since December 31, 2005.

- Reserve additions for the 11 months since Company inception in July, 2005 to May 31, 2006 are 1552.5 mmboe proven and 2570 mmboe probable. Capital expenditures for the time period are estimated at $ 31.5 MM (unaudited). Associated finding, development and acquisition costs are $ 18.31/ boe (proved plus probable). Finding and development costs associated with the Company's drilling program were $14.22/boe (proved plus probable).

- Net present value (NPV) of future net revenue at eight percent discount rates of $ 72.1 million on a pre-tax basis, an increase of 39 % from December 31, 2005.

- Net asset value (fully diluted), determined using a reserves value of $72.1 million (8% P+P PV before tax), 94,095 acres of undeveloped land at $200/acre, and estimated net debt (unaudited) as of May 31, 2006 of $15.0 million, is estimated to be $4.22/share.

At May 31, 2006, the Company's working interest proved plus probable reserves, using forecast prices and costs, totaled 3,545 mboe, consisting of 1,547 mbbls of oil, 11,077 mmcf of natural gas and 152 mbbl of natural gas liquids. At December 31, 2005, the Company's working interest proved plus probable reserves, using forecast prices and costs, totaled 2,202 mboe, consisting of 1,122 mbbls of oil, 5,697 mmcf of natural gas and 131 mbbl of natural gas liquids. The reserves additions since the date of the 2005 year end reserve report were the result of a successful exploration and development drilling program in the Company's core operating areas at Leaman, Niton, the Peace River Arch, and west central Alberta during the first five months of 2006.

Upon commencement of the Company's operations on July 7, 2005 Valiant acquired proved plus probable reserves of 1327 mmboe and 84,000 net acres of undeveloped land in its core areas of Leaman, Niton, west central Alberta, and the Peace River Arch, Alberta as well as minor properties in Alberta, Saskatchewan, and B.C. Subsequent to the initial property acquisition, Valiant commenced an active exploration and development drilling program on its core properties and, as a result, added 1,048.5 mboe of proved plus probable reserves as of December 31, 2005. With continued drilling in the first five months of 2006, additional proved plus probable reserves of 1521.5 mmboe have been added.

The following is a tabulation of Valiant's reserves as of May 31, 2006 and a reconciliation of reserves from inception of the Company's operations:



------------------------------------------------------------------------
Table 1
NI 51-101
Summary of Oil and Gas Reserves as of May 31, 2006
Forecast Prices and Costs
------------------------------------------------------------------------
Light and
Medium Oil Heavy Oil
------------------------------------------------------------------------
WI Net WI Net
Reserve Category (Mbbl) (Mbbl) (Mbbl) (Mbbl)
------------------------------------------------------------------------
Proved
Developed Producing 888 724 - -
Developed Non-Producing - - - -
Undeveloped 176.7 144.4 - -
Total Proved 1,064.6 867.9 - -
Probable 465.9 408.2 16.2 15.6
Total Proved Plus Probable 1,530.5 1,276.1 16.2 15.6
------------------------------------------------------------------------


------------------------------------------------------------------------
Natural Gas
(non-associated Natural Gas
& associated) Liquids BOE
------------------------------------------------------------------------
WI Net WI Net WI Net
Reserve Category (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboel) (Mboe)
------------------------------------------------------------------------
Proved
Developed
Producing 4,623.2 3,587.2 82.9 57.1 1,741.3 1,378.5
Developed
Non-Producing 753.3 577.5 20.7 14.4 146.3 110.7
Undeveloped 1,451.0 1,043.7 6.9 4.4 425.4 322.8
Total Proved 6,827.5 5,208.5 110.5 76.0 2,313.0 1,812.0
Probable 4,249.2 3,207.6 41.2 28.3 1,231.5 986.7
Total Proved
Plus Probable 11,076.7 8,416.0 151.7 104.3 3,544.5 2,798.7
------------------------------------------------------------------------
Reference: Item 2.2(1) of Form 51-101F1



------------------------------------------------------------------------
Table 2
NI 51-101
Summary of Net Present Values of
Future Net Revenue as of May 31, 2006
Forecast Prices and Costs
------------------------------------------------------------------------
Net Present Values of Future Net Revenue
------------------------------------------------------------------------
Before Income Taxes
Discounted at (%/Year)
------------------------------------------------------------------------
Reserves 0 5 8 10 15 20
Category (M$) (M$) (M$) (M$) (M$) (M$)
------------------------------------------------------------------------
Proved
Developed
Producing 53,692.2 46,734.4 43,569.4 41,742.5 37,909.6 34,850.2
Developed
Non-
Producing 4,039.9 3,156.2 2,793.4 2,597.2 2,217.9 1,945.7
Undeveloped 6,841.9 5,279.5 4,536.0 4,102.8 3,193.4 2,475.1
Total
Proved 64,574.1 55,170.1 50,898.7 48,442.5 43,321.0 39,271.0
Probable 36,560.1 25,368.7 21,194.3 19,013.8 14,946.9 12,164.2
Total
Proved
Plus
Probable 101,134 80,539 72,093 67,456 58,268 51,435
------------------------------------------------------------------------


------------------------------------------------------------------------
Net Present Values of Future Net Revenue
------------------------------------------------------------------------
After Income Taxes
Discounted at (%/Year)
------------------------------------------------------------------------
Reserves 0 5 8 10 15 20
Category (M$) (M$) (M$) (M$) (M$) (M$)
------------------------------------------------------------------------
Proved
Developed
Producing 56,773.9 44,374.8 41,318.0 39,558.6 35,879.7 32,956.1
Developed
Non-
Producing 3,358.5 2,793.9 2,164.9 1,989.7 1,657.5 1,426.2
Undeveloped 4,894.5 3,552.7 2,922.8 2,558.8 1,802.2 1,213.0
Total
Proved 65,026.9 50,421.4 46,405.8 44,107.1 39,339.5 35,595.3
Probable 27,094.1 18,074.3 14,889.9 13,254.6 10,255.8 8,244.0
Total
Proved
Plus
Probable 92,121 68,496 61,296 57,362 49,595 43,839
------------------------------------------------------------------------
Reference Item 2.2(2) of Form 51-101F1
Notes:
- NPV of FNR includes all resource income:
-- Sale of oil, gas, by-product reserves
-- Processing third party reserves
-- Other income
- Income Taxes
-- Includes all resource income
-- Apply appropriate income tax calculations
-- Include prior tax pools
Values disclosed do not necessarily represent fair market value



------------------------------------------------------------------------
Table 5
NI 51-101
Summary of Pricing and
Inflation Rate Assumptions as of May 31, 2006
Forecast Prices and Costs
------------------------------------------------------------------------
Oil
------------------------------------------------------------------------
WTI Edmonton Hardisty
Cushing Par Price Lloydblend
Oklahoma 40 degrees API 22.3 API
------------------------------------------------------------
Year ($US/bbl) ($Cdn/bbl) ($Cdn/bbl)
------------------------------------------------------------------------
Historical
------------------------------------------------------------------------
2002 26.09 40.12 30.59
2003 31.14 43.23 31.16
2004 41.42 52.91 36.18
2005 56.45 69.29 42.79
2006 5 mo 66.12 72.95 48.16
------------------------------------------------------------------------
Forecast
------------------------------------------------------------------------
2006 7 mo 71.24 80.43 49.87
2007 73.26 82.75 51.31
2008 61.08 68.73 46.74
2009 50.19 56.20 42.71
2010 47.76 53.38 40.57
------------------------------------------------------------------------
Thereafter Various Escalation Rates
------------------------------------------------------------------------


------------------------------------------------------------------------
Natural
Gas(1) Pentanes
AECO Gas Plus Butanes Inflation Exchange
Prices Edmonton Edmonton Rate(2) Rate(3)
------------------------------------------------------------
Year ($Cdn/MMBtu) ($Cdn/bbl) ($Cdn/bbl) (%/Yr) ($US/$Cdn)
------------------------------------------------------------------------
Historical
------------------------------------------------------------------------
2002 4.04 40.80 25.39 2.7 0.637
2003 6.66 44.16 34.55 2.5 0.716
2004 6.87 53.91 41.37 1.3 0.770
2005 8.58 69.13 45.20 1.6 0.826
2006 5 mo 8.48 76.21 58.22 0.2 0.875
------------------------------------------------------------------------
Forecast
------------------------------------------------------------------------
2006 7 mo 7.38 82.37 55.15 2.3 0.87
2007 10.12 84.75 55.51 2.5 0.87
2008 9.59 70.39 46.10 2.5 0.87
2009 7.66 57.55 37.70 2.5 0.87
2010 7.37 54.67 35.81 1.5 0.87
------------------------------------------------------------------------
Thereafter Various Escalation Rates
------------------------------------------------------------------------

(1) This summary table identifies benchmark reference pricing schedules
that might apply to a reporting issuer.
(2) Inflation rates for forecasting prices and costs.
(3) Exchange rates used to generate the benchmark reference prices in
this table.

Notes:
Product sale prices will reflect these reference prices with further
adjustments for quality and transportation to point of sale.



Reconciliation of Company Interest Reserves

------------------------------------------------------------------------
Light, Medium and Heavy Oil Gas
------------------------------------------------------------------------
WI WI
Proved Proved
WI WI Plus WI WI Plus
Proved Probable Probable Proved Probable Probable
(mbbl) (mbbl) (mbbl) (mmcf) (mmcf) (mbbl)
------------------------------------------------------------------------
Opening Balance 0 0 0 0 0 0

Acquisitions 623.5 81.0 704.5 2557.2 713.2 3270.4
Discoveries 36.5 73.0 109.5 1909.4 1591.3 3500.7
Extensions 471.7 16.2 471.7 2528.4 1292.1 3820.5
Technical
Revisions 123.8 122.1 245.9 672.6 652.6 1325.2
Production -198.3 0 -198.3 -840.1 0 -840.1

May 31, 2006 1064.6 465.9 1530.5 6827.5 4249.2 11076.7
------------------------------------------------------------------------


------------------------------------------------------------------------
NGLs Total
------------------------------------------------------------------------
WI WI
Proved Proved
WI WI Plus WI WI Plus
Proved Probable Probable Proved Probable Probable
(mbbl) (mbbl) (mbbl) (mboe) (mboe) (mboe)
------------------------------------------------------------------------
Opening Balance 0 0 0 0 0 0

Acquisitions 61.7 14.1 75.8 1111.4 214.0 1325.4
Discoveries 48.9 18.8 67.7 403.6 357.0 760.7
Extensions 11.7 2.5 14.2 904.8 234.1 1138.9
Technical
Revisions 0.7 5.8 6.5 244.0 426.5 670.5
Production -12.5 0.0 -12.5 -350.8 0 -350.8

May 31, 2006 110.5 41.2 151.7 2313.0 1231.5 3544.5
------------------------------------------------------------------------


Recent Operations

During 2006, as the result of a successful drilling program, Valiant achieved an 89 percent completion rate. Results for wells drilled from January, 2006 through May, 2006 are 4 gross (1.94 net) oil wells, 2 (0.75 net) gas wells and 2 (0.82 net) dry and abandoned wells. During 2006, the Company is continuing its drilling program on lands in its core areas of Niton, Leaman, Bigstone in central Alberta and the Progress, Grande Prairie, and Puskwaskau areas of the Peace River Arch in northern Alberta.

Central Alberta

Leaman - Valiant has an 83 percent drilling success rate to date at the Leaman property, targeting Paleozoic age oil and Lower Cretaceous age natural gas. The Company has now installed central fluid handling and gas conservation facilities for the Leaman pool, as well as water injection facilities to enhance oil recoveries and reduce operating costs. Current production is approximately 530 boed from this area. Valiant intends to conduct additional exploration activity in this area during 2006.

Bigstone - Valiant's working interests range from 25% to 50% in this deep basin gas prospect. Current net production from three working interest wells in the property is 135 boepd. The recently drilled 10-7-60-21W5 Gething well will be tied in this month, with an initial net production rate of 60 boepd expected. Two additional wells are planned to be drilled prior to year end.

Niton - Valiant now has interests ranging from 33 percent to 55 percent in seven wells drilled into a Rock Creek Formation oil pool, with current net production of approximately 215 boepd. Valiant's drilling success rate at Niton is 100 percent to date, and management anticipates an active development drilling program on this property during 2006.

Peace River Arch

Progress - During December 2005, Valiant drilled an oil well (100 percent working interest) at 1-31-77-9W6. First production in early March yielded rates of up to 130 boepd from the Halfway formation. Four additional locations have been identified for further development. In addition, a shallow multi-zone gas prospect will be drilled at 100 % W.I. with offset opportunities on our 100% W.I. lands.

Grande Prairie - Valiant has drilled and completed an exploratory test (61 percent W.I.) at 02/6-3-72-4W6 during 2006. Production equipment is currently being installed on the well. Additional drilling locations are being reviewed.

Puskwaskau - Valiant and partners (20 % W.I. before payout and 48 % W.I. after payout) have recently drilled and cased an exploratory test well at 2-36-73-1W6. Completion operations are expected to commence within two weeks.

Other exploration and development drilling on Company-owned lands in southern and central Alberta and north east B.C. are planned for the balance of the year.

Valiant is a Calgary, Alberta based oil and gas exploration and production company commencing operations in July 2005. Valiant's shares trade on the Toronto Stock Exchange under the trading symbol "VLE".

FORWARD LOOKING STATEMENTS

This press release may contain forward-looking statements including 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 from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (eg. 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 an projections relating tot production, costs and expenses and health, safety and environmental risks), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect the Company's operations or financial results are included in Valiant's reports on file with Canadian regulatory authorities.

A barrel of oil equivalent (boe) is derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil and may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Valiant Energy Inc.
    Douglas N. Baker
    Chief Financial Officer
    (403) 237-5163
    Email: dbaker@valiantenergy.ca
    or
    Valiant Energy Inc.
    Tom MacKay
    Chairman and Chief Executive Officer
    (403) 237-5163
    (403) 237-5256 (FAX)
    Email: tmackay@valiantenergy.ca
    Website: www.valiantenergy.ca
    or
    Valiant Energy Inc.
    2400, 500 - 4th Avenue S.W.
    Calgary, Alberta T2P 2V6