Canext Energy Ltd.
TSX VENTURE : CXZ

Canext Energy Ltd.

February 25, 2008 18:56 ET

Canext Announces Year End Reserves and Provides Operational Update

CALGARY, ALBERTA--(Marketwire - Feb. 25, 2008) - Canext Energy Ltd. ("Canext" or "the Company") (TSX VENTURE:CXZ) is pleased to announce the results of its independent reserve report as at December 31, 2007.

Highlights:

- Proven reserves have increased 300% to 1,821,900 boe,

- Proven and Probable (P+P) reserves have increased 265% to 3,087,700 boe,

- Proven and P+P reserves per common share have increased 44% and 31% respectively,

- P + P reserve replacement was 894%,

- Finding and Development costs (F&D) including revisions and changes to future capital were $18.21/boe Proven and $14.45/boe P + P ($17.10 and $11.69/boe without future capital) based on un-audited capital spending of 15.6 MM$,

- Sold non core properties for proceeds of $4,253,000 or $33.20/boe,

- F&D including acquisitions and dispositions was $35.80/boe Proven and $24.96/boe P + P on un-audited capital spending of 56 MM$,

- A 234% increase in NPV 10% (forecasted price before income taxes) (P+P) to $51,124,000,

- A 20% per share increase in the NPV 10% P+P to $0.67/share,

- Undeveloped land increased 252% to 105,783 net acres,

- Drilled 20 (9.3 net) wells resulting in 3.2 net oil wells, 4.4 net gas wells and 1.7 net dry holes for an 82% success rate.

The Company was very active in its first full year, operating 97% of its drilling program on a net basis. Drilling was heavily weighted (70%) to exploration including two New Field Wildcats and three New Pool Wildcats. Despite taking on additional risk with exploration drilling, the Company enjoyed a high success rate and good finding and development costs of $14.45/boe for Proven and Probable additions including future capital.

During the year the Company also completed a major transaction with the merger of Trimox Energy Inc. ("Trimox") and Tasman Exploration Ltd. ("Tasman"). The transaction was accounted for as a reverse takeover of Tasman and Trimox with Canext issuing shares at a deemed price of $0.88/share. The transaction was strategic and allowed Canext to expand its exploration and development program. The acquired properties experienced high production declines resulting in negative revisions which increased the cost of the acquisition per boe.

The Company's reserve information has been prepared in accordance with National Instrument "NI" 51-101 by Trimble Engineering Associates Ltd ("Trimble Report"). The Trimble Report contains several cautionary statements that are required by NI 51-101. Additional information on the Company's reserves as required by NI 51-101 will be filed prior to April 30, 2008 on SEDAR (www.sedar.com).

Reserves Summary - Company working interest before royalties using forecasted prices as at December 31, 2007



Light Oil Heavy Oil NGL's Gas BOE 6:1
mstb mstb mstb mmscf mstboe
----------------------------------------------------------------------------

Proven Developed Producing 135 - 44 5,812 1,147
Proven Developed Non Producing 117 - 17 2,396 533
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Total Proven Developed 252 - 61 8,208 1,681
Proven Undeveloped - - 10 784 141
----------------------------------------------
Total Proved 252 - 71 8,992 1,822
Probable 179 - 48 6,236 1,266
----------------------------------------------
Total Proved + Probable 431 - 119 15,228 3,088
----------------------------------------------
----------------------------------------------

(Tables may not add due to rounding.)

Summary of Net Present Values of Future Net Revenue
Forecasted Prices and Costs
Before Income Taxes, Discounted at (%/year)

As at December 31, 2007
0% 5% 10%
M$ M$ M$
----------------------------------------------------------------------------

Proven Developed Producing 28,254 24,666 22,046
Proven Developed Non Producing 15,937 13,015 10,922
------------------------------
Total Developed 44,191 37,681 32,968
Undeveloped 1,813 1,303 934
------------------------------
Total Proved 46,004 38,984 33,901
Probable 31,555 22,613 17,223
------------------------------
Total Proved + Probable 77,559 61,597 51,124
------------------------------
------------------------------

Note: NI 51-101 disclosure requires Canext to provide the following warning:
It should not be assumed that the present value of estimated future
net cash flows shown above are representative of the fair market value
of the reserves.


The proven developed non producing reserves are from the Company's interest in 13 wells which were not on production on December 31, 2007. It is expected that nine of these wells representing 91% of the value will be on production by March 31, 2008. The other wells are expected to be on-stream by March 31, 2009 (next winter).

The following tables prepared by management summarize the reconciliation of the Company's working interest reserves on a Proven and Proven plus Probable basis using boe equivalents of 6:1.



Proven Working Interest Reserves

Oil & NGL's Gas Equivalents
mstb mmcf mstboe

December 31, 2006 69 2,322 456
Production (33) (1,489) (281)
Trimox Acquisition 83 2,235 456
Tasman Acquisition 45 2,541 469
Revisions to Acquisitions (43) (430) (114)
Dispositions (4) (445) (79)
Additions / Extensions 204 3,669 815
Revisions to previous 2 595 100
-----------------------------------
December 31, 2007 323 8,992 1,822
-----------------------------------
-----------------------------------

(Tables may not add due to rounding.)

Proven and Probable Working Interest Reserves

Oil & NGL's Gas Equivalents
mstb mmcf mstboe

December 31, 2006 99 4,487 847
Production (33) (1,489) (281)
Trimox Acquisition 144 4,891 959
Tasman Acquisition 64 4,076 743
Revisions to Acquisitions (51) (2,042) (392)
Dispositions (6) (735) (128)
Additions / Extensions 335 6,088 1,350
Revisions to previous (2) (43) (11)
-----------------------------------
December 31, 2007 550 15,228 3,088
-----------------------------------
-----------------------------------

Forecasted price assumptions used in the Trimble Report as at
December 31, 2007

Exchange WTI Edmonton AECO
Rate @ Cushing Light Spot
YEAR US$/CDN$ US$/bbl CDN$/bbl $/MMbtu

2008 Forecast 1.00 91.00 90.00 6.75
2009 Forecast 1.00 88.00 87.00 7.25
2010 Forecast 1.00 85.00 84.00 7.50
2011 Forecast 1.00 82.00 81.00 7.75
2012 Forecast 1.00 82.00 81.00 7.75

Prices escalating at 2.5 percent annually thereafter.


Pouce Coupe Montney/Doig Update

Canext has been actively exploring and developing its Montney/Doig tight gas play at Pouce Coupe. In 2007 Canext drilled and completed three (1.8 net) vertical wells. Two of the wells were exploration targets. The Company completed and successfully tested six zones (4 net) in the three wells. In addition, the Company recompleted three zones in two older wells which resulted in two (0.55 net) successful gas tests.

The Company continues to monitor activity in the area. A competitor has recently announced successful horizontal wells offsetting Canext's acreage with initial production rates over 3,000 mcf/d (500 boepd). In addition, a senior producer has announced its intention to down space to eight wells per section offsetting Canext after paying over $1,500,000 for two sections of land in November 2007.

Assuming all of Canext's land is prospective there are 43 net locations based on four wells per section. The Company has 4.2 net undeveloped locations or recompletions in its proven plus probable reserve report leaving room for continued reserve growth assuming success on its step out and recompletion program. The Company is targeting initial production rates for vertical wells of 400 - 600 mcf/d and reserves of 400 - 500 mmcf per zone. Canext's business plan is to continue to prove up as many additional sections as possible prior to implementing a large scale development program. The Company will evaluate the merits of horizontal wells versus multiple vertical wells. The decision will ultimately be based on expected costs, estimated recovery, impacts of the new Alberta royalty regime, and number of zones per well.

Operations Update

The Company's production continues to lag behind management's expectations. Higher than expected declines combined with poor production additions on the Company's Worsley Devonian prospects and a fire at a third party facility at Clear Hills has restricted production growth in the first quarter. The Company estimates current field production is about 1115 boepd. The plant fire has taken approximately 75 boepd off line and affected certain first quarter recompletion and tie-in projects. The Company has been advised the plant will be offline until early April. Additionally, Canext has approximately 200 boepd behind pipe which is expected to be online by March 31, 2008.

Updates to Share Structure

Canext commenced a normal course issuer bid on October 5, 2007. To date the Company has purchased and cancelled 1,171,923 shares at an average price of $0.40/share. The issuer bid expires on October 4, 2008. At present, Canext has 76,227,893 common shares issued and outstanding.

Business Plan

Canext intends to sell up to 400 boepd of non core properties and sell or farm-out several of its exploration prospects. The proceeds will be used to expand the development drilling and completion program targeting the Triassic Montney/Doig at Pouce Coupe and shallower Triassic targets in the greater Clear Hills / Clear Prairie area. The Company is focusing on lower risk development drilling opportunities following up several new pool discoveries in 2007. This is a significant change from the heavy exploration component of the 2007 capital program.

Outlook

Due to the current plant outages, uncertainty surrounding the divestment program, and ongoing operations, the Company is unable to provide updated production and cash flow guidance at this time. After completion of the first quarter capital program and in conjunction with the release of the year end audited financial statements in April, the Company expects to be in a better position to update guidance.

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.

Contact Information

  • Canext Energy Ltd.
    Stephen Kapusta
    President & CEO
    (403) 263-3232
    (403) 234-8773 (FAX)
    Email: info@canextenergy.com