Canex Energy Inc.

Canex Energy Inc.

June 27, 2005 20:28 ET

Canex Issues Stock Options and Provides Operational Update

CALGARY, ALBERTA--(CCNMatthews - June 27, 2005) - Canex Energy Inc ("Canex" or "the Company") (TSX VENTURE:CXO) announced today that the Company has granted incentive stock options to certain officers, directors and employees, subject to regulatory approval, for a total of 208,000 common shares of the Company at a price of $3.25 per share for a period of five years. Under the formal stock option plan approved at the Annual General Meeting held on June 15, 2005, a maximum of 10% of the issued and outstanding common shares are reserved for issuance for the Company's stock option plan. After this grant the Company will have 1,779,334 options outstanding representing approximately 7.3% of the outstanding shares.

Worsley/Clearhills Update

Canex got an early jump on its summer drilling program and has drilled and cased five (2.9 net) additional light oil development wells and one (0.35 net) step-out and earning well in the second quarter. The step-out well has further extended the pool boundaries. For the year to date the Company has drilled and cased nine (4.5 net) wells for 100% success at Worsley. Six of these wells have since been completed and tested. By the end of the second quarter the Company expects to have two of these wells on-stream. The remaining wells are in various stages of equipping and tie-in. Additional upfront work was required to construct headers and satellites prior to bringing on new wells. The pace of this work has been somewhat affected by weather. Looking ahead, the Company expects to bring one new well on-stream every seven to ten days.

During the second quarter Canex significantly increased its interest in undeveloped acreage along the Worsley - Clearhills fault trend. Through several farm-ins and crown landsales, the Company has access to an additional 25 sections representing a 200% increase from the year end. Working interests and options vary from 50 to 100%. Canex is planning several exploratory wells on separate high impact targets for the late fall and winter drilling season.

Other Peace River Arch (PRA)

Aside from Worsley and Clearhills, Canex continues to expand its prospect inventory on the PRA. In the second quarter, Canex acquired 3D seismic and additional undeveloped land primarily on Triassic light oil and gas plays. The Company is proceeding with plans to drill six exploration and/or step out wells for its summer/fall PRA drilling program. The first well, a non-operated (50% WI) well should spud at Pouce Coupe within a week.


Canex expects strong second half production growth as a result of the 20-25 well development program at Worsley. Third quarter production should average 1100 boepd up 480% from last year. Fourth quarter is expected to increase to 1500 boepd. The Company remains on track to exit the year at 2000 boepd.

In the second quarter Canex strengthened its balance sheet with the closing of the $12,150,000 financing. With the stronger balance sheet the Company was able to accelerate its development drilling and assemble a larger prospect inventory including some high impact exploration plays. Currently, Canex is sitting on a two year prospect inventory. The Company is well positioned for growth through balanced exploration (35%) and development (65%) programs.

Reader advisory:

The term "BOE" may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for natural gas of 6 mscf: 1 bbl has been used which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Investors are cautioned that the preceding statement of the Company may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Company may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections, in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including natural gas/oil prices, reserve estimates, drilling risks, future production of gas and oil, rates of inflation, changes in future costs and expenses related to the activities involving the exploration, development and production of gas and oil hedging, financing availability and other risks related to financial activities.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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