Canext Energy Ltd.
TSX VENTURE : CXZ

Canext Energy Ltd.

March 04, 2009 16:16 ET

Canext Increases Bank Line and Comments on the Impact of New Alberta Drilling and Royalty Incentives

CALGARY, ALBERTA--(Marketwire - March 4, 2009) - Canext Energy Ltd. ("Canext" or "the Company") (TSX VENTURE:CXZ) is pleased to announce its bank credit facility has been increased to $14,000,000 as a result of the bank annual review. As at December 31, 2008, Canext had a working capital deficiency of $8,100,000 (unaudited) which included $2,082,000 of bank debt. Even at current oil and gas prices the Company can comfortably fund its $7,000,000 capital program through a combination of cash flow from operations and bank debt.

On March 3, 2009, the Alberta Government announced a new well incentive program and a drilling royalty credit for new wells. Wells brought on production after April 1, 2009 will pay a 5% royalty for the first 12 months, subject to certain limits. In addition, a drilling credit of $200 per meter drilled can be earned and applied to Alberta Crown royalties subject to certain limits. More details can be found on the Alberta Government website.

These programs will have an immediate positive impact on Canext's operations and cash flow. The Company is planning to complete its third Montney horizontal well (45% interest) at Pouce Coupe this month. The well will be brought on production in April at a 5% royalty compared to a 25-30% royalty at $5.00/mscf under the current royalty framework. In addition, the Company will tie-in another horizontal (25% interest) and a vertical well (100% interest) in the second and third quarters of 2009 which will qualify for these incentive volumes.

The Company estimates the drilling credit ($200/m) would have the effect of lowering the finding and development costs ("F&D"). Based on 2008 results, F&D for Pouce Coupe Montney gas would drop from $2.00/mscf to $1.72/mscf (14% reduction) and for the Sweeney Triassic oil it would drop from $10.00/bbl to $8.00/bbl (20% reduction).

The economic benefit of drilling Sweeney wells has improved significantly. Based on $40/bbl US WTI, the Company estimates the recycle ratio (netback/F&D) would be 3.5 assuming the 5% royalty, historical operating costs and the lower F&D.

Canext has placed an updated presentation on its website.

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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