Diaz Resources Ltd.
TSX : DZR

Diaz Resources Ltd.

March 20, 2008 10:00 ET

Diaz Announces Year End Results and Reserves Summary

CALGARY, ALBERTA--(Marketwire - March 20, 2008) - Diaz Resources Ltd. (TSX:DZR) ("Diaz") announces that it has filed its 2007 MD&A, Financial Statements, and Annual Information Form ("AIF").

2007 was a difficult year for Diaz due to unsatisfactory exploration results, the deterioration of natural gas industry fundamentals and proposed negative regulatory changes.

While the foregoing negative factors have depressed industry activity, and stock prices of energy companies in Canada, the management of Diaz is optimistic that more positive factors now exist which could lead to a significant improvement during 2008.

Exploration and Development

United States

In the United States, Diaz participated in drilling 3 wells (0.5 net) during 2007. The Cheney #1 well was fracture stimulated on March 8, 2008, the well is being production tested and is producing 100 Mcfd which does not warrant installation of production facilities, at this time. Drilling and logging at N.W. Speaks, Robertson #1 well should be completed by March 31, 2008. The Black Owl #1 well has been producing on average 1.4 MMcfd (net 340 Mcfd) with 23 barrels (net 5.6 barrels) of condensate per day since early November 2007.

Canada

During 2007, Diaz participated in drilling or re-entering 15 wells (7.2 net) resulting in 8 gas wells (3.7 net), 4 oil wells (1.5 net) and 3 dry holes (2.2 net). In the first Quarter 2008 Diaz has connected two new gas wells, one new oil well and reworked an existing oil well which will add to Canadian production.

Financial

Revenue for 2007 totalled $12.1 million compared with $14.9 million for 2006. Cash flow from operations decreased to $5.4 million, or $0.08 per share compared with $8.6 million or $0.14 per share in 2006. Diaz reported a loss for the year of $1.6 million or $(0.02) per share versus income of $1.5 million or $0.02 per share in 2006.

Capital expenditures for 2007 totalled $10.9 million compared with $14.2 million in 2006 and were financed from cash flow, capital dispositions, a $7.1 million convertible debenture financing and a $1.0 million flow-through share financing.

Diaz completed 2007 with a net current debt of $8.5 million versus $11.2 million at the beginning of the year. Diaz also had outstanding convertible debentures of $7.1 million that mature on March 26, 2012.

Production

Natural gas production for the year decreased to average 4.6 MMcfd from 6.0 MMcfd for 2006 and oil production decreased to average 97 Bopd for 2007 compared with 130 Bopd for the prior year.

In Canada, 2007 average natural gas production was down 11% to 2.7 MMcfd from 3.0 MMcfd in 2006. Gas production in the United States was down 36% to average 1.9 MMcfd for 2007 compared with 3.0 MMcfd in 2006.

Reserves and Reserves Values

The independent engineering evaluation of Diaz's properties assigned proved reserves before royalties of 2.4 million BOE and total reserves before royalties totaled 4.8 million BOE at December 31, 2007. These reserve estimates result in a before tax present value of estimated future net revenues, discounted at 10%, of $83.2 million.

Business Outlook

Diaz has an improved market outlook for the natural gas industry in 2008. The first quarter of 2008 looks to be exciting for the Company as the drilling of the N.W. Speaks Robertson #1 well, Lava County, Texas should be completed. In Canada two new gas wells, one new oil well and the rework of an existing oil well will add to Canadian production. For 2008 the Company plans to carefully manage its cash and to develop existing reserves while maintaining a reduced exploration program. The Company's number one priority for 2008 is to optimize existing oil and gas properties.



SUMMARY OF OIL AND GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2007
FORECAST PRICES AND COSTS

RESERVES
---------------------------------------------------
COMPANY TOTAL LIGHT AND
------------- MEDIUM OIL HEAVY OIL NATURAL GAS
Gross Net Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBbl) (MBbl) (MMcf) (MMcf)
---------------------------------------------------------------------------
PROVED
Developed Producing 150 148 - - 6,473 5,300
Developed Non-producing 33 26 - - 1,344 999
Undeveloped - 3 - - 7,128 4,236
TOTAL PROVED 183 177 - - 12,922 10,535
PROBABLE 76 78 - - 13,742 10,774
TOTAL PROVED
PLUS PROBABLE 259 255 - - 26,664 21,309
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RESERVES RESERVES
--------------- -------- ---------
COMPANY TOTAL NATURAL GAS
------------- LIQUIDS TOTAL TOTAL
Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBOE) (MBOE)
------------------------------------------------------- ------- ---------
PROVED
Developed Producing 53 39 1,282 1,071
Developed Non-producing 8 6 265 199
Undeveloped 22 15 873 724
TOTAL PROVED 83 60 2,420 1,994
PROBABLE 31 23 2,397 1,897
TOTAL PROVED
PLUS PROBABLE 114 83 4,817 3,891
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NET PRESENT VALUES OF FUTURE NET REVENUE
-----------------------------------------
COMPANY TOTAL BEFORE INCOME TAXES
------------- DISCOUNTED AT (% per year)
0 5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$)
---------------------------------------------------------------------------
PROVED
Developed Producing 43.2 35.8 30.8 27.0 24.2
Developed Non-producing 6.1 5.2 4.6 4.1 3.6
Undeveloped 24.4 16.5 12.0 20.2 7.2
TOTAL PROVED 73.7 57.5 47.4 40.2 35.0
PROBABLE 91.1 52.8 35.8 26.5 20.8
TOTAL PROVED PLUS PROBABLE 164.8 110.3 83.2 66.7 55.8
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NET PRESENT VALUES OF FUTURE NET REVENUE
------------------------------------------
COMPANY TOTAL AFTER INCOME TAXES
------------- DISCOUNTED AT (% per year)
5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$)
---------------------------------------------------------------------------
PROVED
Developed Producing 31.8 27.4 24.0 21.6
Developed Non-producing 4.8 4.3 3.8 3.5
Undeveloped 12.9 9.3 7.1 5.6
TOTAL PROVED 49.5 41.0 34.9 30.7
PROBABLE 35.8 24.1 17.7 13.8
TOTAL PROVED PLUS PROBABLE 85.3 65.1 52.6 44.5
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More detailed information including pricing assumptions and reserve
classifications can be found in the Company's AIF which has been filed.


SEDAR Filings

Further information regarding financial and operating results may be obtained at www.sedar.com, where the Company's MD&A and financial statements have been filed.

Diaz has also filed its Annual Information Form which includes the Company's reserves data and other oil and gas information for the year ended December 31, 2007, as mandated by National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. Copies of Diaz's AIF may be obtained at www.sedar.com.



Summary of Operations

(Thousands, except per share amounts) Years Ended December 31
-------------------------
2007 2006
---------------------------------------------------------------------------
Financial
Total revenue $ 12,082 $ 14,925
Cash flow from operations 5,429 8,578
per share, diluted 0.08 0.14
(Loss) earnings for the period (1,605) 1,455
per share, diluted (0.02) 0.02
Capital additions 10,853 14,230
Dispositions 853 157
Net current debt 8,542 11,235
Convertible debentures(i) 5,832 -
Total assets $ 60,794 $ 59,745
Total shares outstanding 67,239 63,848
Operations
Production
Gas (MMcfd) 4.6 6.0
Oil (Bop d) 97 130
BOEd (6 Mcf equals 1 Bbl) 865 1,136
Product Prices
Gas ($/Mcf) 7.17 7.07
Oil ($ /Bbl) 67.39 63.95

Reserves (proved plus probable, future
costs and prices)
Gas (Bcf) 26.7 27.8
Oil (MBbl) 373.0 437.0
BOE (Millions) 4.8 5.1

Present value, before tax ($Millions at 10%) $ 83.2 $ 93.9

Undeveloped land holdings (net acres)
Canada 46,581 52,551
United States 1,853 1,830
Total net acreage 48,434 54,381
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(i) Convertible debentures issued in Q1 2007, have a face value of $7.1
million and mature on March 26, 2012.


BOE Presentation - the term barrels of oil equivalent (BOE) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in this report are derived by converting gas to oil in the ratio of six Mcf of gas to one Bbl of oil.

It should not be assumed that estimates of future revenues presented in this press release represent fair market value of the reserves.

Financial Reporting - all numbers are reported in Canadian dollars.

Forward-looking statements - statements included in this press release that are not historical facts may be considered "forward-looking statements." All estimates and statements that describe the Company's objectives, goals or future plans are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties where actual results could differ materially from those currently anticipated.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Diaz Resources Ltd.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)
    or
    Diaz Resources Ltd.
    Donald K. Clark
    Chief Operating Officer
    (403) 269-9889
    (403) 269-9890 (FAX)
    Email: info@diazresources.com
    Website: www.diazresources.com