Dynamic Oil & Gas, Inc.

Dynamic Oil & Gas, Inc.

March 01, 2005 09:01 ET

Dynamic Announces Reserves, Cap-Ex Budget and Targets for Fiscal 2005


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DYNAMIC OIL & GAS, INC.

TSX SYMBOL: DOL
NASDAQ SYMBOL: DYOLF

MARCH 1, 2005 - 09:01 ET

Dynamic Announces Reserves, Cap-Ex Budget and Targets
for Fiscal 2005

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - March 1, 2005) - Dynamic Oil
& Gas, Inc. (TSX:DOL)(NASDAQ:DYOLF) -

Dynamic is pleased to announce its estimated reserves of natural gas,
natural gas liquids and oil, and their corresponding discounted net
present values, before taxes and after royalties ("NPV"). These
estimates are independently prepared by Sproule Associates Limited
("Sproule"), of Calgary, Alberta, and are effective December 31, 2004.

Estimated Reserves and NPV Values

Our reserves and NPV values were determined according to National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities,
using constant prices and operating costs. The following table shows our
estimated reserves before royalties:



Petroleum and Natural Gas Reserves (Before Royalties)
---------------------------------------------------------------------
Crude Oil
--------------
Natural Light/
gas NGL's medium Heavy Equivalent
---------------------------------------------------------------------
(mmcf) (mbbls) (mbbls) (mbbls) (mboe)(1)
Proved
Developed producing 14,300 835 205 314 3,738
Developed
non-producing 672 7 13 83 215
Undeveloped 1,165 11 23 223 451
Total Proved 16,137 853 241 620 4,404
Probable 11,044 379 409 712 3,340
---------------------------------------------------------------------
Total Proved +
Probable
- As at
Dec. 31, 2004 27,181 1,232 650 1,332 7,744
- As at
Dec. 31, 2003 42,086 1,393 794 6 9,218
Increase (decrease) (14,905) (161) (144) 1,326 (1,474)
Increase (decrease) - % (35) (12) (18) - (16)
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) mboe equals one thousand barrels of oil equivalent,
where 1 boe equals 1 barrel of oil equals 6 mcf of natural gas.


As at December 31, 2004, our proved and proved plus probable reserve
equivalents on an after- royalties basis is approximately 82% of the
before-royalties equivalents, compared to 80% last year.

The estimate of our proved reserves on a constant-pricing basis, and
their associated net present values, have been based on posted commodity
prices on December 31, 2004 as determined by Sproule. These prices have
been adjusted for applicable quality and transportation differentials to
reflect actual historical prices received by us from each of our
properties. Adjusted prices and our associated operating costs incurred
have been assumed to remain constant over the life of the reserves. The
following table shows the base prices used in the determination of our
estimated NPV, discounted at 10%:



December 31, 2004 Base Prices Used to Estimate Reserves and
10% Discounted NPV(1)
---------------------------------------------------------------------
Crude Oil
-------------------------
Light/
Price Indices Natural gas NGL's Medium Heavy
---------------------------------------------------------------------
Alberta AECO-C $6.78/MMBtu(2)
B.C. Westcoast
Station 2 $6.68/MMBtu(2)
Propane $36.11/bbl
Butanes $39.78/bbl
Pentanes Plus $51.80/bbl
Edmonton Par $46.51/bbl
Hardisty Heavy,
12 degree API $15.26/bbl(3)
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) For comparison purposes, December 31, 2003 base prices used for
natural gas, NGL's and light/medium crude oil were: 6.18/mcf;
$5.38/bbl and $39.69/bbl, respectively.
(2) The weighted average natural gas price expressed on an "mcf"
basis was $6.92/mcf.
(3) The average price for Hardisty Heavy, 12o API during 2004 was
$30.40/bbl.


The following table shows our 10% discounted NPV values estimated by
Sproule as at December 31, 2004 and compared to December 31, 2003 on a
before-royalties basis:



Estimated NPV Reserves, Discounted @ 10% (Before Income Taxes)
---------------------------------------------------------------------
As at December 31 Increase (Decrease)
------------------------------------------
2004 ($) 2003 ($) ($) (%)
---------------------------------------------------------------------
Proved
Developed producing 56,325 72,958 (16,633) (23)
Developed non-producing 1,905 2,756 (851) (31)
Undeveloped 2,357 12,229 (9,872) (81)
Total Proved 60,587 87,943 (27,356) (31)
Probable 27,726 42,693 (14,967) (35)
---------------------------------------------------------------------
Total Proved + Probable 88,313 130,636 (42,323) (32)
---------------------------------------------------------------------
---------------------------------------------------------------------


Our estimated 10% discounted NPV of proved and probable reserves as at
December 31, 2004 was $C88,313 million, which represents a net present
value per share (basic) of $C3.73, before income taxes.

Changes to Estimated Reserves in Fiscal 2004

The reconciliation table below, followed by discussion and analysis,
show changes to our estimated reserves during Fiscal 2004 on a
before-royalties basis.



Petroleum and Natural Gas Reserves Reconciliation (Before Royalties)
---------------------------------------------------------------------
Crude Oil
--------------
Natural Light/
Reserve Changes gas NGL's medium Heavy Equivalent
---------------------------------------------------------------------
(mmcf) (mbbls) (mbbls) (mbbls) (mboe)
Balance as at
Dec. 31, 2003 42,086 1,393 793 6 9,207
Acquisitions 18 - - 278 281
Extensions 462 15 36 - 128
Discoveries 415 - - 1,115 1,184
Improved Recovery 1,369 90 49 - 367
Revisions (12,217) (57) (164) (45) (2,302)
Production (4,952) (209) (64) (22) (1,121)
---------------------------------------------------------------------
Balance as at
Dec. 31, 2004 27,181 1,232 650 1,332 7,744
---------------------------------------------------------------------
---------------------------------------------------------------------


Our production for the year included 4,952 mmcf of natural gas, 209 bbls
of natural gas liquids, 64 mbbl of light crude, and 22 mbbls of heavy
oil, for a total equivalent production of 1,121 mboe.

Estimated reserves of natural gas decreased by 14,905 mmcf or 35%, to
27,181 mmcf. Of this decrease, 12,217 mmcf or 82% was due to technical
revisions, most of which was at our Cypress field in northeastern
British Columbia. Cypress revisions were effected by a combination of
higher-than-expected decline rates from four producing wells and lower
reserves expectations from two, recently-drilled development wells.

Cypress is an early-stage exploration area and our land base is
significant, totaling 56,675 gross acres (19,911 net). Initial drilling
results were highly favourable, with the first five wells being
classified as new-pool discoveries. Recent results, including our two
latest wells, have been much less favourable. Of our total gross acreage
at Cypress, 81% is not yet developed.

We have budgeted further work at Cypress in 2005, through re-completion
of two gas wells and drilling of two new exploration wells. Our working
interest share of the re-completions and the drilling is 50% and 30%,
respectively.

Also included in technical revisions to our natural gas reserves was a
decrease of approximately 650 mmcf due to third-party acid-gas
contamination of a single Ostracod sweet gas well at St. Albert that,
since March 1, 2004, was no longer able to produce into existing
facilities. In early 2005, we expect to receive full cash value for the
loss of reserves and production associated with this well.

Extensions, discoveries and improved recoveries increased our estimated
reserves of natural gas and natural gas liquids by 2,246 mmcf and 105
mbbls, respectively. The majority of this increase was due to our
success with various optimization projects that were designed to
mitigate natural production declines at St. Albert.

At St. Albert, an increase of 85 mbbls to estimated light/medium crude
oil reserves was mainly due to extensions and improved recovery, while a
decrease of 164 mbbls was mainly due to revisions. The revisions were
largely based upon disappointing 2004 drilling results in the Wabamun
and Leduc formations. Two drill targets that may recover a portion of
the revisions are being considered for Fiscal 2005.

Estimated reserves of heavy oil increased by 1,393 mbbl due to the
discovery of a new oil pool (1,115 mbbls) and subsequent acquisition of
a partner's interest (278 mbbls) at Mantario East in southwestern
Saskatchewan. We operate and own a 76% weighted average interest in
3,895 gross acres (2,951 net) in the Mantario East area.

Capital Investment Program for Fiscal 2005

Our Board-approved capital investment program for 2005 has been set at
$21.9 million. Approximately 80% of our budget is directed toward
developed properties and the balance toward undeveloped or
exploration-type properties. We plan to drill at least 25 new wells this
year, of which 18 are development and seven are exploratory wells.
Fifteen development wells will target heavy oil, one will target light
oil and two will target natural gas. Four exploratory wells will target
natural gas and three will target light/medium oil. Of the 25 new wells
to be drilled, four are planned on two separate properties in northeast
B.C., 19 on three separate properties in Saskatchewan and the remainder
on two Alberta properties.

Based on forecasted annual average sales prices for our commodities of:
$6.64/mcf for natural gas; $58.69/bbl for light/medium crude; and $29.77
for heavy oil, we expect to finance our 2005 capital investment program
from operating cash flows, supported by a revolving line of credit with
our corporate bank. From time-to-time, as warranted, we may seek term
debt to finance long-life facilities, equity to fuel accelerated project
exploration plans, and make adjustments to our capital investment
program.

Production Targets for 2005

Our Fiscal 2005 target daily average production rate is 3,300 boe per
day ("boe/d") and our exit production rate is 3,400 boe/d. Our peak
production target mid-year is 3,600 boe/d.

Management believes that there is a higher certainty of meeting 2005
production targets than in the past two years. Eight heavy oil wells at
Mantario East have already been completed and are awaiting tie-in, with
11 more wells to be drilled. Further, our 2005 production targets focus
on the completion of projects over which management has greater
operational control.

The breakdown of our 2005 production targets is approximately 56%
natural gas, 14% natural gas liquids, 26% heavy crude oil, and 4%
light/medium crude oil. Our production targets do not include potential
increases that may result from investments on our undeveloped properties.

A discussion of our developed and undeveloped properties and the amount
of capital budgeted for them in 2005 will be included in the
Management's Discussion and Analysis section of our Fiscal 2004 Annual
Report.

Dynamic Oil & Gas, Inc. is a Canadian based energy company engaged in
the production and exploration of Western Canada's natural gas and oil
reserves. We own working interests in producing and early-stage
exploration properties located in central Alberta, southwestern
Saskatchewan, and northeastern and southwestern British Columbia.

On Behalf of the Board of Directors,

Wayne J. Babcock

President & CEO

THE NASDAQ AND TORONTO STOCK EXCHANGES HAVE NOT REVIEWED NOR ACCEPTED
RESPONSIBILITY FOR THE ACCURACY OF THIS RELEASE. SOME OF THE STATEMENTS
IN THIS PRESS RELEASE ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD LOOKING
STATEMENTS INCLUDE ALL PASSAGES CONTAINING VERBS SUCH AS 'AIMS,
ANTICIPATES, BELIEVES, ESTIMATES, EXPECTS, HOPES, INTENDS, PLANS,
PREDICTS, PROJECTS OR TARGETS' OR NOUNS CORRESPONDING TO SUCH VERBS.
FORWARD-LOOKING STATEMENTS ALSO INCLUDE ANY OTHER PASSAGES THAT ARE
PRIMARILY RELEVANT TO EXPECTED FUTURE EVENTS OR THAT CAN ONLY BE FULLY
EVALUATED BY EVENTS THAT WILL OCCUR IN THE FUTURE. FORWARD LOOKING
STATEMENTS IN THIS RELEASE INCLUDE, WITHOUT LIMITATION, UNCERTAINTY THAT
TERMS OF AN OFFER/ACCEPTANCE TO COMPENSATE DYNAMIC FOR THIRD-PARTY
CONTAMINATION WILL BE SIGNED EARLY 2005, THAT FUTURE DRILLING IS
SUCCESSFUL, THAT 2005 BUDGET ALLOCATIONS REMAIN UNCHANGED, THAT THE
COMPANY IS ABLE TO FINANCE ITS 2005 BUDGET, AND THAT 2005 TARGETS CAN BE
MET. FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND
INCLUDE OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S ANNUAL
REPORT ON FORM 20-F FILED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION, LAST FILED ON MAY 19, 2004 AND AS AMENDED ON MAY 20, 2004.

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