Delphi Energy Corp.

Delphi Energy Corp.

March 23, 2005 18:07 ET

Delphi Energy Increases Production, Cash Flow, Reserves in 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DELPHI ENERGY CORP.

TSX SYMBOL: DEE

MARCH 23, 2005 - 18:07 ET

Delphi Energy Increases Production, Cash Flow,
Reserves in 2004

CALGARY, ALBERTA--(CCNMatthews - March 23, 2005) - Delphi Energy Corp.
(TSX:DEE) is pleased to announce the consolidated financial and
operational results for the year ended December 31, 2004.

2004 Highlights

- Increased average production by 60 percent to 1,706 boe/d, largely a
result of development activities on existing assets offset by natural
declines.

- Increased cash flow from 2003 by 81 percent to $12.1 million ($0.45
per share).

- Achieved net earnings of $2.0 million ($0.07 per share) compared to
$2.1 million ($0.10 per share) for 2003.

- Capital costs in 2004 of $85.7 million resulted in a net addition of
6.1 million boe of proved plus probable reserves at $16.70/boe.

- Increased proved and probable reserves by 122 percent to 9.96 million
boe.

- Closed the corporate acquisition of a private company, giving Delphi a
significant presence in North East British Columbia and long-life
natural gas production.

- Graduated from the TSX Venture Exchange to the Toronto Stock Exchange
on August 3, 2004.

Subsequent Events

- Closed a $50.7 million acquisition of natural gas assets at Bigstone
in Delphi's core area of Berland River, Alberta.

- Increased proved and probable reserves from December 31, 2004 by 31
percent to 13.1 million boe at February 1, 2005.

- Extended corporate reserve life index to a current nine years from 7.4
years in 2003.

- Announced a flow-through financing for gross proceeds of $12 million
expected to close in March 2005.

- Divested of non-core properties for $6 million.



Financial Highlights (1)
($000s except per boe and per share amounts)
Year Ended December 31 2004 2003 % Change
------------------------------------------------------------------------
Gross petroleum and natural gas sales 24,474 14,305 71
------------------------------------------------------------------------
Per boe 39.19 36.87 6
------------------------------------------------------------------------
Cash flow from operations 12,124 6,666 82
------------------------------------------------------------------------
Per boe 19.41 17.19 13
------------------------------------------------------------------------
Per share - Basic 0.45 0.31 45
------------------------------------------------------------------------
Per share - Diluted 0.43 0.30 43
------------------------------------------------------------------------
Net earnings 1,952 2,134 (9)
------------------------------------------------------------------------
Per boe 3.12 5.50 (43)
------------------------------------------------------------------------
Per share - Basic and diluted 0.07 0.10 (30)
------------------------------------------------------------------------
Capital costs 85,707 27,580 211
------------------------------------------------------------------------
Debt plus working capital deficit 61,274 10,688 473
------------------------------------------------------------------------
Total assets 171,947 51,468 234
------------------------------------------------------------------------
Shares outstanding
------------------------------------------------------------------------
Basic 47,704 25,218 89
------------------------------------------------------------------------
Diluted 49,599 27,216 82
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Certain amounts for 2003 are restated.


Operating Highlights
Year Ended December 31 2004 2003 % Change
------------------------------------------------------------------------

------------------------------------------------------------------------
Natural gas production (mcf/d) 5,822 5,082 15
------------------------------------------------------------------------
Oil and NGLs production (bbl/d) 736 216 241
------------------------------------------------------------------------
Total production (boe/d) 1,706 1,063 60
------------------------------------------------------------------------
------------------------------------------------------------------------


% Change
from
Company Interest February 1, Dec. 31, December 31, %
Reserves (1) 2005 2004 2004 2003 Change
------------------------------------------------------------------------

------------------------------------------------------------------------
Proved oil and NGLs
(mbbls) 2,145.7 23 1,748.7 1,112.0 57
------------------------------------------------------------------------
Proved natural gas
(mmcf) 41,900.9 39 30,076.0 12,507.0 140
------------------------------------------------------------------------
Total proved (mboe) 9,129.2 35 6,761.4 3,196.5 112
------------------------------------------------------------------------
Probable oil and NGLs
(mbbls) 1,159.6 10 1,050.6 525.5 100
------------------------------------------------------------------------
Probable natural gas
(mmcf) 16,822.0 31 12,886.0 4,548.0 183
------------------------------------------------------------------------
Total probable (mboe) 3,963.3 24 3,198.3 1,283.5 149
------------------------------------------------------------------------
Proved plus probable oil
and NGLs (mbbls) 3,305.3 18 2,799.3 1,637.5 71
------------------------------------------------------------------------
Proved plus probable
natural gas (mmcf) 58,722.9 37 42,962.0 17,055.0 152
------------------------------------------------------------------------
Total proved plus
probable (mboe) 13,092.5 31 9,959.7 4,480.0 122
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Gross reserves represent the Company's interest including royalty
interests before the deduction of royalties.


In 2004, Delphi operated out of three core areas, based on a defined
strategy of balancing low-risk development opportunities in East Central
Alberta with high-impact exploration and development drilling in North
West Alberta. In December 2004, the Company added North East British
Columbia to its inventory. All three core areas carry a substantial
drilling prospect inventory.

Delphi increased production by 60 percent to 1,706 barrels of oil
equivalent per day during 2004 and announced more than $109 million in
corporate and property acquisitions. Delphi exited 2004 at 2,900 boe/d.
The two major acquisitions position the Company for an exceptional 2005,
with current production of approximately 4,000 boe/d.

Delphi redefined itself in 2004 as a Company capable of capturing
significant opportunities by capitalizing on key relationships. Delphi
is set apart from its peers through a proven acquisitions strategy and
niche joint-venture relationships with major producers. Delphi announced
the $57 million acquisition of a private company on October 26, 2004,
giving the Company a significant presence in North East British Columbia
with a long reserve life and a 100 percent natural gas focused asset
base. Delphi then capitalized on a strong relationship with a major
producer to negotiate the purchase on December 6, 2004 of properties at
Bigstone, Alberta for $50.7 million further enhancing the Company's
exposure to long-life natural gas producing assets with significant
development and exploration upside.

The assets in North East British Columbia added 1,100 boe/d and 4.7
million boe of proved plus probable reserves in 2004. The reserve life
index on these properties equates to a solid 11.7 years based on proved
plus probable reserves. This acquisition was an excellent fit for
Delphi's exploration and development expertise in the area. The assets
provide development and exploration upside on 21,000 net acres of
undeveloped land.

The acquisition of assets in the Bigstone area northwest of Edmonton in
the Company's core area of Berland River added production of 1,200 boe/d
of natural gas and natural gas liquids (100 percent working interest).
The acquisition included ownership in significant field pipeline
infrastructure and a 29 percent working interest in an 80 mmcf/d
processing facility, providing for low operating cost production and
excess processing capacity for future development. The current reserve
life index is 7.8 years on proved plus probable reserves of 3.4 million
boe.

The effect of Delphi's major acquisitions announced at the end of 2004
create a larger, stronger production and cash flow base to fund the
significant development and exploration upside within the Company's
assets that are expected to be realized over the next two to three
years. Delphi has moved quickly to initiate its capital programs and has
already begun to exploit the non-producing development upside within
both the North East British Columbia and Bigstone assets. The Company
expects to capitalize on several simple optimization, facility, and
workover opportunities prior to spring break-up, resulting in immediate
production growth from both areas of approximately 300 to 500 boe/d.

Delphi funded its 2004 capital program through cash flow of $12.1
million, common share equity issues of $26.5 million and an increase in
net debt of $37.8 million. The total net debt at the end of 2004 was
$61.3 million compared with $10.7 million in 2003. The Company
intentionally leveraged the balance sheet to fund the acquisitions,
reducing the dilutive effect of incremental equity. A solid asset base,
strong commodity prices and a well-managed capital program will provide
significant production and cash flow growth throughout 2005 and enable
Delphi to reduce its net debt levels. Delphi expects to exit the year at
1 to 1.2 times debt to forecast cash flow. Subsequent to the end of
2004, Delphi negotiated an increase in its operating credit facility to
$79.5 million, used to fund the acquisition of assets at Bigstone,
Alberta.

Delphi's growth strategy has translated into returns for its
shareholders. In March 2005, the share price was up 110 percent from
year-end 2003 and 167 percent from startup.

A key element of Delphi's success is ensuring the right team is in place
to drive the Company's growth. Delphi has quickly responded to its rapid
growth by adding six high-quality people to its management, technical,
and administrative teams. Delphi has been able to attract skilled people
with complementary skill sets to an already solid and proven team that
has allowed us to hit the ground running at closing of the recent
acquisitions.

Outlook

Delphi looks significantly different in 2005 than it did in 2004. The
Company now has almost 300 percent more reserves and more than twice the
average daily production than it did a year ago, a longer reserve life,
a greater weighting to gas, a lower decline profile and a significantly
greater inventory of growth opportunities. The Company is operating from
a solid, focused asset base with record cash flow to fund its capital
programs.

Delphi expects production volumes for 2005 to increase significantly as
its development program is successfully executed. Delphi anticipates
production growth of more than 280 percent from 2004 to 2005, between
4,800 and 5,300 boe/d during 2005. This would equate to a growth of 165
percent in production per share over three years. Delphi forecasts cash
flow of $40 - 45 million in 2005, which would result in more than 300
percent growth in cash flow per share over the past three years.

Delphi has developed a proven ability to deliver organic growth on its
existing asset base throughout 2003 and 2004. Although the acquisitions
have dominated the Company's recent growth profile, the 2005 capital
program is focused on development and exploration opportunities within
its asset base. In 2005, Delphi plans are to spend approximately 80
percent of projected cash flow, with the remainder directed toward
reducing the Company's debt. The $35 - 40 million capital program will
be focused 75 percent to development projects, with the remainder
allocated to high-impact exploration programs. Delphi expects to drill
40 wells, with an average working interest of 55 percent, taking
advantage of its more than 70,000 net acres of undeveloped land in 2005.
During the first quarter of 2005, the Company drilled 15 wells in Fontas
and four wells in Bigstone.

Delphi's 2004 financial statements and management's discussion and
analysis will be available on SEDAR at www.sedar.com and on Delphi's
website at www.delphienergy.ca by March 28, 2005.

Delphi Energy is a Calgary-based company directed by a proven and
experienced management team. The Company explores, develops and produces
oil and natural gas in Western Canada.

This news release contains forward-looking statements with respect to
Delphi. Forward-looking statements may include estimates, plans,
expectations, opinions, forecasts, projections, guidance or other
statements that are not statements of fact. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. These statements are
subject to certain risks and uncertainties and may be based on
assumptions that could cause actual results to differ materially from
those anticipated or implied in the forward-looking statements. These
statements speak only as of the date of this news release.

A barrel of oil equivalent (boe), derived by converting gas to oil in
the ratio of six thousand cubic feet of gas to one barrel of oil, may be
misleading, particularly if used in isolation. A boe conversion is based
on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Delphi Energy Corp.
    David J. Reid
    President and Chief Executive Officer
    (403) 265-6171
    Email: info@delphienergy.ca
    Website: www.delphienergy.ca
    or
    Delphi Energy Corp.
    1500, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8