Canext Energy Ltd.

Canext Energy Ltd.

November 18, 2009 16:30 ET

Canext Announces Third Quarter Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Nov. 18, 2009) - Canext Energy Ltd. ("Canext" or the "Company") (TSX VENTURE:CXZ) is pleased to announce its operating and financial results for the three and nine months ended September 30, 2009.

Three Months Ended Nine Months Ended
September September
2009 2008 2009 2008

Average daily production
Oil and NGL's (bbls/d) 228 124 207 147
Natural gas (mcf/d) 4,089 5,184 4,906 5,439
Production (boe/d) 910 988 1,025 1,053
Percentage Oil and NGL's 25% 13% 20% 14%

Highlights ($000's)
Revenue 2,412 4,859 8,258 16,768
Funds from operations 454 1,914 1,385 7,735
Net income/(loss) (1,652) (432) (4,614) (840)
Net capital spending 1,707 11,808 1,000 10,322

Per Common Share
Funds from operations 0.01 0.02 0.02 0.10
Net earnings/(loss) (0.02) (0.00) (0.05) (0.01)

Balance Sheet at period end
Property, plant and equipment 61,344 62,507
Net debt 7,735 3,110
Shareholders' equity 52,127 57,768

Wt average shares 000's 87,981 88,485 87,981 80,634
Outstanding at period end 000's 87,981 88,485 87,981 88,485

Revenue $/boe 28.81 53.44 29.51 58.11
Royalty $/boe (6.42) (14.28) (6.60) (12.75)
Opcost $/boe (11.30) (13.11) (12.07) (12.55)
Transportation $/boe (0.52) (0.42) (0.48) (0.41)
Operating Netback $/boe 10.57 25.63 10.36 32.40
G&A (4.59) (5.06) (4.91) (4.96)

(1) Funds from operations and operating netbacks as presented do not have
any standardized meaning prescribed by Canadian GAAP and therefore they
may not be comparable with the calculation of similar measures for other


- Production averaged 910 boe/d down 7.9% from same period last year as a result of property dispositions, shut-in production, and deferred capital spending limiting new well tie-ins,

- Percentage of oil and NGL's production increased to 25% as a result of increases in oil production at Sweeney,

- Drilled two (1.2 net) successful oil wells at Sweeney including the pool's first horizontal well. The wells were brought on production subsequent to the quarter end,

- Net capital spending for the nine month period ended September 30, 2009 was $1,000,000 (2008 - $10,322,000),

- Operating costs per boe ($11.30/boe) continued to decline despite a one time adjustment for 2008 third party facility usage which added $0.62/boe,

- Funds from operations for Q3 2009 increased from Q2 2009 despite decreases in both production and natural gas prices,

- Operating netback averaged $10.57/boe up slightly from the first two quarters of 2009.

Third Quarter Summary and Operational Update

In the third quarter, natural gas prices declined 61% from the same period last year. Canext elected to shut-in 240 - 300 mcf/d (40-50 boe/d) representing about 6% of the gas production for the quarter. In addition, several gas tie-in and recompletion projects were deferred pending higher gas prices. At the end of the quarter the Company still had a 100% well at Pouce Coupe capable of 800 mcf/d (130 boe/d) waiting on tie-in. In addition, a horizontal well at Pouce Coupe was waiting on higher natural gas prices prior to completing the remaining five fracs which are expected to add 70 - 90 boe/d.

Canext continued to focus capital spending on its oil properties. The percentage of oil and NGL production increased to 25% in the third quarter, is expected to increase to 30% in the fourth quarter, with the potential to reach 40% by the year end.

As disclosed on September 22, 2009, Canext successfully drilled and completed two (1.2 net) oil wells at Sweeney. One of the wells was a short length horizontal well. The horizontal well was left open hole without a stimulation and is producing at 90 bbls/d. This rate is being severely restricted pending solution gas conservation and good production practice (GPP). Based on the measured high pumping fluid level and using an inflow performance ratio (IPR) the well is estimated capable of production at rates of over 1,000 bbls/d. The most productive vertical well in the pool continues to produce at rates up to 260 bbls/d with a high fluid level. Based on its IPR the well is estimated capable of 400 bbls/d. The Company is evaluating a larger pumping unit to increase production on this well.

Construction on the Sweeney oil battery has started. The battery will be capable of 2,600 barrels of fluid per day and up to 1,000 mcf/d of natural gas. The first phase will include 4,000 barrels of fluid storage. The target completion date is prior to December 31, 2009.

Strategic Alternatives

As disclosed on October 27, 2009, the Company has initiated a process to evaluate various strategic alternatives for the Company. These alternatives may include a sale, merger, major asset disposition, major financing, or any other alternative to assist in unlocking additional value for the benefit for all shareholders. The Company has opened a data room and the process is underway.


The Company anticipates the Sweeney battery will be online prior to year end. At that time, pending GPP approval, production for the pool is expected to increase by 300 - 400 boe/d (180 - 240 boe/d net).

Canext will continue to focus on its oil development and exploration opportunities. The Company anticipates drilling three to four (2.2 to 2.8 net) wells during this winter drilling season from December 2009 to March 2010 in the Clear Prairie/Sweeney area. The plan is to drill up to two (1.2 net) horizontal wells at Sweeney targeting undrilled 80 acre infill spacing units. Two of the targets will be exploration wells including a 100% working interest step-out well at Sweeney. The step-out well is approximately one mile from the recently drilled horizontal. Another exploration well (60% working interest) is planned for Clear Prairie targeting a multi zone 3D seismically defined structure. All the wells will qualify for the Alberta drilling and royalty incentives which greatly improve the economics of these prospects.

The Company is well positioned to take advantage of strong oil pricing and favorable industry costs to expand its oil production while continuing to explore for new oil pools. Should natural gas prices start to recover this winter, the Company can move quickly to tie-in additional gas at Pouce Coupe.

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 Company's forward looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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