Bulldog Resources Inc.
TSX : BD

Bulldog Resources Inc.

December 07, 2006 19:06 ET

Bulldog Resources Announces Additional Fertile Locations, a New Pool Discovery, a Strategic Acquistion, and Initial 2007 Guidance

CALGARY, ALBERTA--(CCNMatthews - Dec. 7, 2006) - Bulldog Resources Inc. (TSX:BD) is pleased to announce an expansion of our horizontal drilling inventory at Fertile, a new pool discovery and a strategic asset acquisition in Southeast Saskatchewan, and our initial 2007 guidance.

Operational Update

An Exceptional Light Oil Pool

Our step out drilling using vertical stratigraphic test wells has significantly expanded the defined size of the Fertile light oil pool. To date, seven vertical stratigraphic test wells have logged and cored the reservoir confirming an aerial pool size in excess of 3.5 sections. Based on our vertical delineation drilling, 17 horizontal oil wells (8.5 net) and normal 150 meter inter well spacing, we have identified approximately 35 additional horizontal drilling locations (17.5 net) setting up a very active program for 2007.

Bulldog has a 50% working interest and is the operator of the Fertile property.

Fertile Production Facilities

We have pursued three initiatives to improve the production and economics of our Fertile operations:

- We recently completed a second expansion of the Fertile production facilities to 4,800 Bbls/day through the installation of a second treater and free water knock-out.

- Enbridge Pipelines Inc. has completed an oil pipeline tie-in to the Fertile central oil battery. This pipeline will eliminate oil trucking expenses (which were $1.29 per Bbl in Q3, 2006) as well as eliminate potential disruption in transporting our oil production during spring break up.

- Construction has commenced on a pipeline to recover natural gas volumes produced at the Fertile facility. This pipeline will eliminate flaring and provide improved resource conservation and economics. Completion of the pipeline is expected in early 2007 and will result in gas sales of approximately 250 mcf/day net. Payout of the estimated $1.3 million required to build the pipeline is approximately 18 months.

A New Pool Discovery at Browning

The expansion of our exploration program has resulted in a new pool light oil discovery in Southeast Saskatchewan.

At Browning, Bulldog has drilled one vertical and one follow up horizontal well resulting in 140 Bbls/day of net oil production. Additional drilling is planned for 2007 on this 100% owned property. Bulldog operates a 96% working interest oil facility near this discovery.

A Strategic Acquisition

After a sales process, Bulldog, though a series of transactions, has entered into an agreement to acquire oil and gas assets of a privately held oil and gas company whose President is the Chairman of the Board of Bulldog. The transaction was approved by the remaining independent members of the Board of Directors prior to its completion.

The properties are located in Bulldog's operating area of Southeast Saskatchewan and are near our existing properties. The property acquisition is subject to regulatory and other approvals and is expected to close in January, 2007.

The consideration to be paid by Bulldog is $17.0 million consisting of 2,500,000 common shares issued from treasury and $7.0 million cash.

This strategic acquisition increases Bulldog's undeveloped land holdings, reserves, production volumes and cash flow. It expands our drilling opportunities with a diversified inventory of prospects on play types Bulldog has enjoyed previous success.

- Production:

Estimated January 2007 production (light oil) 300 Bbls/day.

- Land:

Bulldog will acquire interests in more than 5,000 net acres of undeveloped land (valued by Bulldog at approximately $1.0 million).

- Drilling locations:

Greater than 17 gross horizontal and vertical drilling locations.

- Reserves:

Three of the properties were evaluated by GLJ Petroleum Consultants. Bulldog did an internal evaluation on all the properties for proven and probable reserves and is acquiring these assets at a competitive market price. NI 51-101 does not permit the publishing of internal estimates of reserves.

The acquisition metrics of this transaction are favourable. Excluding the valuation attached to undeveloped land, our cost is approximately $53,500 per flowing Boe and the cash flow multiple based upon our 2007 projections is less than four times. While we are precluded from publishing a reserve cost per barrel, management has thoroughly evaluated the properties and is comfortable that the acquisition is competitive with recent market transactions. Our analysis also concludes that this acquisition is accretive on a per share basis, to Bulldog's reserves, production volumes and cash flow.

On closing of the acquisition in mid-January, Bulldog will have 27,459,202 common shares outstanding and 29,766,702 common shares outstanding on a fully diluted basis.

Initial 2007 Guidance

First Quarter Capital Expenditures

Bulldog's Board of Directors has approved a first quarter capital expenditure budget of $8.0 million. Seven horizontal wells and one vertical well (3.50 net) are planned for the Fertile property. Five wells (2.68 net) are planned for other areas including the acquisition properties.

We continually focus on the expansion of our drilling opportunities. In Q1, 2007 we have planned seismic expenditures of approximately $0.8 million and land expenditures of approximately $0.5 million to provide additional growth opportunities.

We will update our 2007 capital expenditure program in the second quarter after we have further evaluated the acquired properties and the results of our expanded exploration program are integrated into our plans.

Initial 2007 Average Production Forecast

Due to the evolving nature of our 2007 capital expenditure plans, we have forecasted Bulldog's initial 2007 average annual production at 1,700 Boe/day. We intend to provide an up-date to this forecast as our operations progress.

Initial 2007 Cash Flow Guidance

Based upon our initial average production forecast of 1,700 Boe/day and a 2007 estimated WTI oil price of US$60/Bbl, we project Bulldog will cash flow $24 million or $0.88 per share basic in 2007.

Positioned for Continued Growth

Strong Financial Position

Proforma the property acquisition, Bulldog will have approximately $4.3 million of net debt at December 31, 2006. This would represent approximately 0.2 times 2007 forecasted cash flow. Our bank lines of credit are in the process of being formally expanded and we estimate the authorized facility will exceed $14 million. Our strong cash flows and expanded bank line will position Bulldog to pursue additional expansion activities in 2007.

Expanding Growth Opportunities

The expansion of the number of horizontal locations at Fertile and the acquisition of the private company properties provides Bulldog with an exciting inventory of development and step out drilling opportunities. Expansion of our high impact exploration initiatives will provide Bulldog with a range of risk/reward drilling projects. We will continue to evaluate potential acquisitions within our activity areas.

Top Operating Performance

BMO Capital Markets recently compared the third quarter results of 31 public junior companies in Canada. According to the BMO report, Bulldog Resources had the highest cash flow netback in the industry at $56.86 per Boe, compared to the industry peer median of $23.22 per Boe. Bulldog's operating expenses were the lowest of the junior companies at $1.78 per Boe compared to the group median operating expenses of $9.25 per Boe. Bulldog led all junior companies with quarter over quarter production per share growth of 95%.

Forward Looking Information

Certain statements included in this press release constitute forward-looking statements under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this press release include but are not limited to capital expenditures, business strategy and objectives, net revenue, future production levels, developments plans and the timing thereof, operating and other costs, royalty rates etc. Such forward looking information involves substantial known and unknown risks and uncertainties. Most of these are beyond Bulldog's control and include: the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, and the availability of qualified personnel and services, stock market volatility, and the access to sufficient capital from internal and external sources.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Although Bulldog believes that the expectations reflected in such forward-looking statements or information are reasonable, undo reliance should not be placed on forward-looking statements because Bulldog can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Bulldog and described in the forward-looking statements or information.

Finally, in the presentation of the press release Bulldog uses two terms that are universally applied in analyzing corporate performance within the oil and gas industry as explained below.

Cash Flow - This measure is considered critical within our industry both in terms of measuring success in our historical operations and being an indicator of funding sources for on-going efforts to replace production volumes and increase reserve volumes. Canadian generally accepted accounting principles ("GAAP") requires that "funds flow from operating activities" be the measurement focus. This latter term is derived from "cash flow from operations" as defined by Bulldog adjusted for the change in non-cash working capital. Bulldog believes "cash flow " and "cash flow per share" to be more meaningful measures of our performance and therefore have used these terms throughout this press release. Accordingly, Bulldog is required to advise the reader that: (a) these are non-GAAP measures for purposes of Canadian accounting standards; and (b) our determinations may not be comparable to those reported by other companies.

Meaning of Boe and Boe/day - When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boe/day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

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