C1 Energy Ltd.

C1 Energy Ltd.

November 01, 2005 18:59 ET

C1 Energy Operations Update

CALGARY, ALBERTA--(CCNMatthews - Nov. 1, 2005) - C1 Energy Ltd. (TSX:CTT) ("C1") is pleased to provide the following update with respect to current operations, production and reserve valuation. The summary of these results are:

- New gas discovery in Blueberry. This 100% well, which was drilled and cased in Q1/2005, has been completed and production tested at a sustained rate of 2.0 mmcf/d.

- An updated reserve valuation has resulted in a 30% increase in net asset value, prior to additions or revisions to $2.36 per share based on total proved plus probable reserves.

- Commenced completion program at the C1 et al Sarcee 12-13 gas discovery.

- Q3/Q4 Drilling program has resulted in a 75% success rate on four wells drilled.

- Current production is 670 boe/d, increasing to 1240 boe/d when near term behind pipe production is included.

- Revised 2005 exit production to a range of 1,100 to 1,300 boe/d due to field declines, regulatory and weather delays and restricted access to services. C1 anticipates achieving its earlier target of 1,900 boe/d production in the first half of 2006.

Current and Non-Producing Production

- C1 estimates that third quarter production averaged 570 boe/d which compares to 470 boe/d in the same quarter of last year and 770 boe/d in the second quarter of this year. Field declines, surface access problems due to wet weather, and delays related to the procurement of services have impeded our growth objectives.

- Our current production capacity is estimated to be 1,240 boe/d which consists of 670 boe/d of on-stream production and 570 boe/d of behind-pipe production. C1 estimates that 480 boe/d of this behind-pipe production will be placed on stream by year-end 2005 with the remaining 90 boe/d to be brought on-stream during 2006.

- C1's behind-pipe production includes a new pool discovery at Blueberry which was drilled in the first quarter and recently completed. This is a 100% well which tested at a stabilized rate of 2 mmcf/d (330 boe/d) at 950 psi over an extended period of time. Follow-up drilling to develop this new discovery is planned for in Q1/2006.

2005 Production Exit Rate

While we have had strong results with successful wells at Sarcee, Hobbema and Blueberry, continuing restricted access to services and uncertainty in timing for approvals has made it necessary for us to revise our 2005 exit production guidance. The projects that have been delayed will be completed as services and approvals are acquired through the balance of 2005 and early 2006.

Our estimated exit rate for 2005 has been revised from 1,900 boe/d to a range of 1,100 to 1,300 boe/d pending tie-in of the 11-3 discovery. This consists of our current production plus 480 boe/d of behind-pipe production to be brought on stream, as indicated above. This estimate does not include any contribution from the Sarcee 12-13 discovery previously announced in September 2005 or possible additions from the remaining drilling program for 2005.

Pending the results from the balance of our operations in 2005, and the impact of the Sarcee 12-13 completion, as discussed below, we anticipate that our productive capacity will meet or exceed our previous exit target of 1,900 boe/d. We plan to reach this higher production level in early to mid 2006.

Sarcee Completion and Possible Production Impact

Completion operations of the Sarcee 12-13 well commenced on October 26, 2005. The operation includes an acid stimulation treatment which is typically required to establish commercial productivity in these types of wells. The total completion and production testing operation is expected to take up to four weeks.

C1 estimates that the potential productivity of this well could be up to 3.2 mmcf/d of natural gas and 210 bbl/d of NGLs (740 boe/d in total) net to C1's 55 percent working interest. This estimate is based on analogous producing wells in the region. If successful, C1 will attempt to secure third party processing capacity as soon as possible. Discussions to date with third party operators suggest that it could possibly be mid year 2006 before firm processing capacity is available. The well may be produced on an interruptible basis prior to that time. The inclusion of production from this well could cause C1 to meet or exceed its earlier production target of 1,900 boe/d.

Updated Reserve Valuation and Net Asset Value

Sproule Associates Limited ("Sproule") has prepared an independent reserve evaluation December 31, 2004. Sproule has updated this evaluation mechanically to subtract production for the nine months ended September 30, 2005 and to reflect the higher commodity price assumptions as of September 30, 2005. No adjustment has been made for new discoveries, reserve revisions or additions or cost changes in 2005, which items may be material when taken into account. Our actual production has tracked very closely to that forecast by Sproule in the December 31, 2004 report.

Based on this reserve update, C1's net asset value is $2.00 per share on a fully diluted basis using forecast prices and $2.36 per share using constant prices for proved plus probable reserves on a fully diluted basis using a 10 percent discount rate before tax. C1 has 35,028,707 fully diluted shares outstanding as at September 30, 2005 (assuming exercise of all options and conversion of performance shares as at that date). This estimate incorporates $18 million of value for undeveloped lands (at $85 per acre), including certain lands subject to exclusive access by C1 (valued at $35 per acre), and our estimated debt of $1.5 million as of September 30, 2005. It does not include seismic assets which we currently estimate to have a value of $11 million, which would add an additional $0.17 per share to the net asset value if included. In C1's press release of September 22, 2005, Sproule estimated that the previously announced Sarcee 12-13 may contain original gas in place of between 20 to 30 BCF. C1 believes that this well and the possible associated pool development could have a significant positive impact to C1's net asset value.

C1 currently has a large inventory of drilling locations on an undeveloped land base of approximately 146,000 net acres. C1 has exclusive access to an additional 168,000 acres of undeveloped land bringing the company's total undeveloped land inventory to 314,000 acres. C1 currently has approximately 33 million common shares outstanding.

Boe's maybe misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an equivalency conversion method primarily applicable at the burnertip and does not represent a value equivalency at the well head.

Certain information set forth in this press release contains forward-looking statements. All statements other than historical fact contained herein are forward-looking statements, including, without limitation, statements regarding the future financial position, business strategy, production rates and plans and objectives of or involving C1 Energy Ltd. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond C1's control, including the impact of general economic conditions, industry conditions, governmental regulation, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. C1's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that C1 will derive therefrom. C1 disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact Information

  • C1 Energy Ltd
    Hugh Pattillo
    President & CEO
    (403) 232-1115
    (403) 232-1130 (FAX)
    C1 Energy Ltd
    Gary Lobb
    VP Finance & CFO
    (403) 232-1115
    (403) 232-1130 (FAX)
    C1 Energy Ltd
    500, 521-3rd Avenue S.W.
    Calgary, AB T2P 3T3 Canada
    (403) 232-1115
    (403) 232-1130 (FAX)