Cinch Energy Corp.
TSX : CNH

Cinch Energy Corp.

January 31, 2011 06:00 ET

Cinch Energy Corp. Provides Operational Update

CALGARY, ALBERTA--(Marketwire - Jan. 31, 2011) - Cinch Energy Corp. (TSX:CNH) ("Cinch" or the "Company") provides the following update of its operations.

Dawson Area, North East British Columbia

Facility construction and tie-in of Cinch's working interest Montney wells drilled in 2010 is underway with gas expected to be on stream during the first quarter of 2011. It is anticipated that, net to Cinch, this will add 1,100 boe/d of production to the 400 boe/d (net) already on stream in the area. Based on success to date and assuming all Cinch's lands are developed with four horizontal wells per section there is the potential for over 90 additional locations (gross) in the upper Montney zone. Vertical well control in the area also indicates additional potential in the lower Montney zone. Cinch has an average working interest of 34.5% in 26 sections of land with Montney rights.

The Company completed and tested the Parkland 9-8-81-16 W6M (50% working interest) Wabamun well. The well was drilled on a separate structure to extend the play concept over a larger area and tested gas and water but is not expected to be productive. Cinch also acquired a 50% working interest in 8 additional sections of land and now as operator has a total of 80 sections (gross) with Wabamun rights at an average working interest of 57%. Cinch has 9 (gross) 4.9 (net) additional locations identified on 3D seismic near previous successful wells that are not impacted by the results of the Parkland 9-8 well.

Deep Basin Area, West Central Alberta

Cinch drilled and cased the Kakwa 5-18-61-4 W6M (60% working interest) horizontal Dunvegan liquids rich gas well. This well is scheduled to be completed with a 15 stage fracture stimulation in early February 2011. This well is located next to existing facilities in a Cinch operated area and is expected to be brought on stream during the first quarter of 2011.

The Kakwa 1-26-61-6 W6M (25% working interest) horizontal Falher gas well was completed and tested at rates in excess of 15 mmcf/d (gross) with 40 bbl/mmcf of condensate. This well is expected to be brought on stream in February 2011 at a restricted rate of 2 mmcf/d (gross) due to pipeline restrictions. Options to increase the rates are currently being reviewed.

The Kakwa 12-34-61-6 W6M (20% working interest) vertical well that tested at rates in excess of 4 mmcf/d (gross) is expected to be brought on stream in February 2011 at a restricted rate of 1 mmcf/d (gross) also due to short term pipeline restrictions.

Cinch has interests in 75 gross sections of land (29 net sections) in the Deep Basin area, primarily in Musreau, Kakwa and Chime. Based on recent success and industry activity there is the potential for an additional 45 gross vertical (16.0 net) and 24 gross horizontal (9.2 net) gas locations in this area.

Oil Opportunities

In addition to the current inventory of opportunities, Cinch continues to develop a number of oil prospects to better balance its gas and liquids mix.

The Lator 13-22-66-2 W6M (100% working interest) horizontal well was production tested during January 2011 and is currently producing at approximately 20 bbl/d. Further analysis of the core and pressure data is underway to determine the reason for the lower than expected inflow rates. Cinch has 14 sections of land (100% working interest) in this multi-zone area.

Cinch farmed-in and will earn an 80% working interest in 5 sections of land by drilling a horizontal Slave Point oil test prior to mid May 2011. The timing of drilling is subject to rig availability and is planned to be drilled prior to spring break up. If successful, a 60% working interest in an additional 3.75 sections could be earned by drilling an option well.

Cinch acquired a total of 35 sections of land (100% working interest) on 3 additional oil prospects. It is expected that a number of wells will be drilled in 2011, however, the timing of drilling is subject to rig availability and completion of additional land negotiations.

2011 Outlook

Cinch ended 2010 with a December average production rate of approximately 2,750 boe/d, estimated year end net debt of $12.5 MM and is positioned for an active 2011 focusing on oil and liquids rich gas projects. With the behind pipe Montney gas and the Deep Basin tie-ins, volumes are expected to reach 4,000 boe/d during the first quarter of 2011. A preliminary outlook for 2011 based on $4.00/GJ AECO gas prices and US $85/bbl WTI oil prices with capital of $40 MM results in average volumes of 3,600 boe/d, cash flow of $19 MM, and year end debt of $34 MM. A finalized budget, audited financial statements and year end reserve volumes will be provided in early March, 2011.

Forward-looking Statements

Statements throughout this release that are not historical facts may be considered to be "forward-looking statements." These forward-looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals, or future plans, including management's assessment of future plans and operations, drilling plans, timing of bringing wells on stream and anticipated production, estimated production rates for 2011, capital expenditures for 2011, 2011 estimated cash flow and year end debt and timing of release of additional information with respect to a finalized budget, audited financial statements and year end reserve volumes may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to complete and/or realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals, the ability to access sufficient capital from internal and external sources, and changes in the regulatory and taxation environment. Consequently, the Company's actual results may differ materially from those expressed in, or implied by, the forward-looking statements.

Forward-looking statements or information is based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which the Company has an interest to operate the field in a safe, efficient and effective manner; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through development or exploration; future oil and natural gas prices; interest rates; the regulatory framework regarding royalties; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at the Company's website (www.cinchenergy.com). The estimate of cash flow for 2011 and of the debt at the end of 2011 represents future oriented financial information and a financial outlook in accordance with applicable securities laws. Such information has been included to provide investors with information related to the expected cash flow of the Company and the resulting net debt based on the assumptions set out which will also provide information as to the ability of the Company to fund its capital expenditures and other expenses and resulting net debt and may not be appropriate for other purposes. Furthermore, the forward-looking statements contained in this release are made as at the date of this release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Barrel of Oil Equivalency

Natural gas volumes are converted to barrels of oil equivalent (BOE) on the basis of six thousand cubic feet (mcf) of gas to one barrel (bbl) of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A BOE conversion ratio of six mcf to one bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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