E4 Energy Inc.
TSX VENTURE : EFE

E4 Energy Inc.

November 21, 2007 20:09 ET

E4 Energy Announces Third Quarter 2007 Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Nov. 21, 2007) - E4 Energy Inc. ("E4" or the "Company") (TSX VENTURE:EFE) is pleased to report today its financial and operating results for the third quarter of 2007.

President's Letter to Shareholders

Adding to Shareholder Value

- Production in the third quarter of 2007 averaged 964 boe/d, an increase of 7 percent from 905 boe/d for the same period of 2006. After well completions and tie-ins from third quarter drilling, E4 is now producing over 1,200 boe/d and remains on track to meet its previously announced expected exit rate of 1,350 boe/d.

- Funds generated from operations for the third quarter of 2007 were $2.3 million compared to 2006 third quarter funds generated from operations of $2.2 million.

- Funds generated from operations for the nine-months ended September 30, 2007 were 33 percent higher than the same period of 2006.

- Cash G&A expenses for the three and nine month periods ended September 30, 2007, 25 percent lower on a per boe basis compared to the same periods of 2006.

- Successfully drilled 6 wells during Q3, 2 wells in Northeast British Columbia and 4 wells in Alberta for a success rate of 100 percent.

- Continued to increase the undeveloped land base in both Northeast British Columbia and Alberta with the addition of 9,212 acres in Q3 for a corporate total of more than 85,000 net undeveloped acres.

- Based on internal reserve estimates from mechanical updates of existing assets, the addition of exploration and development drilling in 2007 and the addition of the corporate undeveloped lands, E4's present net asset value (NAV) at a Before Tax 10 percent discount is calculated to be greater than $1.40/share.

- Discovery of 4 new oil pools and 3 new gas pools, supported by strong third quarter and fourth quarter drilling results, position the Company with greater than 50 high quality, operated, high working interest, development drilling locations provide for significant production and reserve growth potential in existing core areas.

Third Quarter Operating Review and Fourth Quarter Update

E4 continues to add shareholder value. During the third quarter of 2007, E4 remained focused as to the execution of its overall business plan and drilling program. In the third quarter, the Company successfully drilled 6 wells resulting in 2 (2.0 net) oil wells, 3 (1.6 net) CBM gas wells and 1 (1.0 net) well still to be tested, for a 100 percent success rate. Investment expenditures for the quarter were $6.5 million which also is comprised of crown land acquisitions, production tie-ins and required expenditures on production facilities.

In the Richdale area of Alberta where the Company drilled a new pool discovery in Q3, E4 has recently tied-in this new oil well at restricted rates of approximately 150 bbls/day. Based on this success, E4 has identified several follow up drilling locations to be pursued in 2008.

In the greater Fort St. John area of Northeast British Columbia, specifically in the Teal and Oak areas, E4 drilled 2 (2.0 net) higher risk, exploration wells during the third quarter. The Oak, new oil pool discovery well is expected to have facilities built and the well on production in late Q4 for the addition of 50 bbls/day. The Company has identified additional development drilling locations targeting both oil and gas on Company lands to be pursued in early 2008.

In the Teal area, a potential gas well is presently standing and is still to be tested. Having drilled this well into a Q3 crown land sale, E4 acquired an additional 1,320 acres of land for a present total of 7,100 acres in this multi-zone, exploration area. E4 also maintains extensive 3D seismic data coverage over both proprietary and crown lands in the area.

In the Chain/Mikwan area of Alberta, E4 recently has drilled 3 (1.6 net) successful wells during the third quarter for Horseshoe Canyon CBM gas. These wells are expected to be on production in the first quarter of 2008 adding approximately 50 boe/d net to E4.

In the Provost East area of Alberta, E4 has recently received all final regulatory approvals, and now is moving ahead with constructing a new water handling facility, to significantly increase production rates for the Company's recent oil discoveries. This facility is expected to be in place and operating by the end of 2007 at which time E4 can progress to further enhance development of the two existing oil pools with additional horizontal drilling. Going forward, E4 expects to see further significant reductions in operating costs in the area. One additional oil well was recently drilled and successfully completed. This oil well is expected to be brought on production by the end of 2007. These pools combined are characterized by large OOIP of more than 6 million barrels and have expected recovery factors of 30 - 50 percent.

In the Northeast British Columbia area of Lagarde, E4 has recently tied in new gas production from the Company's new pool discovery drilled in the first quarter of this year. Able to overcome several delays in the design, approval and construction of the 4 km tie-in, E4 is encouraged with the project area, and has purchased an additional 1,320 acres in Q3, creating additional offsetting development drilling locations.

Impact of the New Royalty Regime

On October 25, 2007 the Alberta government released The New Royalty Framework report, which summarizes the government's decisions on Alberta's new royalty regime. While these new rules will not come into effect until January 1, 2009, it is expected that these changes will generally have a negative impact overall on conventional oil and gas production in the province of Alberta. Notwithstanding this, E4 and its independent reserve engineers have evaluated the potential impact of this framework, and have determined that the new royalty costs will have a minimal to no effect on E4's future cash flows as the Company has more than 50 percent of its production from the province of British Columbia, and most of its assets within Alberta will not be penalized under the new provincial royalty structure. E4 will continue to analyze the impact of this new royalty regime on its current and future operations, within the Province of Alberta.

Business Outlook

Through the third quarter and into the fourth quarter, E4 continued to focus and execute on its exploration and development strategic business plan. During the third quarter, the Company drilled 6 wells of which today, only 1 of the 6 wells have been tied-in. The Company plans to further add production from its third quarter drilling program and in addition from the recently drilled fourth quarter horizontal well.

E4 has continued to grow the corporate asset base in reserves and undeveloped land. Over the past ten months, E4 has discovered 4 new oil pools and 3 new gas pools. In the majority of these areas, the Company has also been able to grow the undeveloped land base and thereby providing for significant future growth opportunities. Today, E4 is well positioned with a large inventory of more than 50 high quality, high working interest, operated development locations.

E4 remains on track to meet its previously announced expected exit rate of 1,350 boe/d. The Company expects to formalize and approve its capital expenditure budget and corresponding market guidance for 2008 in December, 2007.



On behalf of the Board of Directors,

Paul Starnino
President and Chief Executive Officer
November 21, 2007


FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements concerning the Company's expectations of future production, cash flow, earnings and expansion of its oil and gas property interests and concerning the Company's exploration and development drilling, seismic operations, regulatory applications, payout estimates, capital expenditures, number and drilling locations, seismic acquisitions and facility upgrades. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), acquisitions, commodity price, price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other risk factors that could affect the Company's operations and/or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.

The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Oil and Gas Advisory

This press release contains disclosure expressed as "Boe/d". Boe means barrel of oil equivalent and Boe/d means Boe per day. All oil and natural gas equivalency volumes have been derived using the ratio of 6,000 cubic feet of natural gas to 1 barrel of oil. Boe equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6,000 cubic feet of natural gas to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

In this press release: (i) mmboe means million boe; (ii) boe/d means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic feet; (v) mmcf means million cubic feet; (vi) mcf/d means thousand cubic feet per day; and (vii) mmcf/d means million cubic feet per day.

MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

The following discussion is intended to assist the reader in understanding E4's business and the results of operation and financial condition. The Company's interim MD&A should be read in conjunction with E4's audited consolidated financial statements for the year ended December 31, 2006 and E4's financial statements for the interim period ended September 30, 2007.

Description of Company - E4 Energy Inc. is an independent, emerging crude oil and natural gas company actively engaged in the exploration for, development and production of natural gas and crude oil reserves in Alberta and British Columbia, Canada. The Company is subject to the provisions of the Alberta Business Corporations Act and its common shares are publicly listed and traded on the TSX Venture Exchange under the symbol EFE.

Non-GAAP Measures- The MD&A contains the term "netbacks", "funds generated from operations" and "funds generated from operations per share", all of which are non-GAAP terms. The Company uses these measures to help evaluate its performance. Management defines netbacks as revenue less royalties, hedging gains and losses, operating expenses and transportation expenses and considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices. Management uses funds generated from operations to analyze operating performance and leverage and considers funds generated from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds generated from operations should not be considered an alternative to, or more meaningful than cash flow from operating activities as determined in accordance with GAAP as an indicator of the Company's performance. Therefore references to funds generated from operations or funds generated from operations per share (basic and diluted) may not be comparable with the calculation of similar measures by other entities. All references to funds generated from operations throughout this report are based on cash flow from operating activities before changes in non-cash working capital. Funds generated from operations per share are calculated using the basic and diluted weighted average number of shares for the period.

Boe Presentation - Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) to one barrel (bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this report are derived by converting natural gas to oil in the ratio of 6 mcf of natural gas to 1 bbl of oil.

Forward-Looking Information - Statements throughout this MD&A that are not historical facts may be considered "forward-looking statements". These forward-looking statements sometimes include words to the effect that management believes or expects a stated condition or result. Forward-looking statements included in the MD&A concern anticipated production and capital expenditures.

Forward-looking statements and information are based on the Company's current beliefs as well as assumptions made by and information currently available to the Company concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs and capital expenditures; the imprecision of reserve estimates and estimates of recoverable quantities of oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third-party operators; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax laws; and the Company's ability to access external sources of debt and equity capital.

The Company cautions that the foregoing list of factors that may affect future results is not exhaustive. When relying on the Company's forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The forward-looking statements and information contained in this MD&A are as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.



SELECTED QUARTERLY INFORMATION

The financial data presented below has been presented in accordance with
GAAP, with the exception of funds generated from operations. The reporting
and the measurement currency is the Canadian dollar.

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2007 2006 2005
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Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Operational
Results

Production
- Natural gas
(mcf/d) 3,449 3,562 3,990 4,086 3,352 2,766 3,171 2,848
- Crude oil
and NGLs
(bbls/d) 389 435 390 371 346 214 275 248
- Total
production
(boe/d) 964 1,029 1,055 1,052 905 675 804 723

Average
realized
pricing
- Natural gas
($/mcf) 6.68 7.80 7.44 7.38 6.10 6.15 7.74 12.28
- Crude oil
($/bbl) 69.22 61.56 57.67 55.36 70.30 68.94 64.74 67.63
- Combined
average
($/boe) 51.85 53.04 49.47 48.20 49.45 47.08 52.68 71.61

Selected
Financial
Results ($
thousands)

Petroleum and
natural gas
revenue 4,598 4,967 4,697 4,665 4,117 2,892 3,812 4,768

Royalties 808 851 793 852 656 521 840 880

Operating
expenses and
transportation 1,124 1,110 1,003 1,088 858 667 766 774

General and
administrative
expenses 379 549 271 505 462 714 752 775

Funds
generated from
operations 2,258 2,296 2,518 2,191 2,221 1,252 1,838 2,752

Cash flow from
operating
activities 3,095 1,886 2,998 2,862 479 834 2,672 2,161

Depletion,
depreciation
and accretion
expense 2,976 3,053 2,897 2,838 2,433 1,875 2,287 2,254

Net earnings
(loss) (9,320) (232) (426) (347) 173 826 (771) 409
- Basic per
share (0.22) (0.01) (0.01) (0.01) 0.00 0.02 (0.02) 0.01
- Diluted per
share (0.22) (0.01) (0.01) (0.01) 0.00 0.02 (0.02) 0.01

Capital
spending 6,548 3,325 5,241 4,482 3,617 7,848 7,596 4,458

Total debt and
working
capital
deficiency
(surplus) 17,339 12,968 12,404 9,649 13,952 12,694 6,337 796

Shareholders'
Equity 35,655 44,707 44,751 47,103 40,543 40,006 38,557 40,446

Common shares
outstanding
(000's) 42,644 42,644 42,644 42,644 38,755 38,755 38,755 38,671


Petroleum and Natural Gas Production

The following table highlights E4's production profile:

Third Quarter First Nine Months
2007 2006 % Change 2007 2006 % Change
-------------------------------------------------
Natural Gas (mcf/d) 3,449 3,352 3 3,665 3,097 18
Crude oil and NGLs (bbls/d) 389 346 12 405 279 45
Total production (boe/d) 964 905 7 1,016 795 28
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During the third quarter of 2007 ("Q3 2007"), E4's total daily production increased from the comparable quarterly period in 2006 ("Q3 2006") by 7 percent. On a year to date basis, the first nine months of 2007 resulted in a production increase of 28 percent from the first nine months of 2006. In particular, the oil production increases for the respective periods were due to a successful drilling program in the Provost area of Alberta and Boundary area of British Columbia.



Revenue and Commodity Pricing

The following table highlights the composition of E4's PNG revenue stream:

Third Quarter First Nine Months
($000s) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------
Natural Gas 2,121 1,880 13 7,323 5,638 30
Crude oil and NGLs 2,477 2,237 11 6,939 5,182 34
Total 4,598 4,117 12 14,262 10,820 32
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The following table highlights E4's corporate realized wellhead prices and
select industry benchmark prices:

Third Quarter First Nine Months
2007 2006 % Change 2007 2006 % Change
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E4 prices:
Natural gas ($/mcf) 6.68 6.10 10 7.32 6.67 10
Crude oil and NGLs ($/bbl) 69.22 70.30 (2) 62.80 68.03 (8)
Oil equivalent ($/boe) 51.85 49.45 5 51.44 49.85 3

WTI Cushing oil (US$/bbl) 75.33 70.55 7 66.15 68.24 (3)
Edmonton Par light oil
($/bbl) 79.95 79.17 1 72.97 75.63 (4)
Bow River medium oil
($/bbl) 56.01 59.06 (5) 52.31 57.50 (9)
WTI - Lloyd. differential
(US$/bbl) 23.20 19.08 22 20.00 15.50 29

Nymex Henry Hub (US$/mmbtu) 6.13 6.52 (6) 6.88 7.48 (8)
AECO natural gas - monthly
index
($/mcf) 5.32 5.98 (11) 6.46 7.14 (10)
Currency Exchange rate
(US$:Cdn$) 0.957 0.892 7 .905 0.883 2
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-------------------------------------------------


E4's petroleum and natural gas ("PNG") revenue for Q3 2007 (before royalties) was 12 percent higher than Q3 2006. E4 reported revenues that were 32 percent higher for the nine month period ended September 30, 2007 compared to the same period of 2006. The increases in revenues for the respective periods of 2007 were due to higher average per boe commodity prices. Higher production volumes were also a driver of higher revenues for the three and nine months ended September 30, 2007.



Unrealized Gain on Commodity Contract

In January 2007, E4 entered into a fixed natural gas commodity contract as
follows:

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Forward Price Mark to
Fixed at September Market
Term Index Price 30, 2007 Daily Volume ($000s)
----------------------------------------------------------------------------
April 1, 2007 to
October 31, 2007 AECO-C $7.40/GJ $4.9824/GJ 1,500 $112
----------------------------------------------------------------------------


An unrealized gain of $0.1 million (nil - September 30, 2006) on the commodity contract represents the fair value of the contract at September 30, 2007, as the forward price is less then the contracted price.



Royalties

The following table highlights the composition of E4's royalty type:

Third Quarter First Nine Months
($000s) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------

Crown, net ARTC 723 588 23 2,172 1,701 28
Freehold and overrides 85 68 25 280 316 (11)
Total 808 656 23 2,452 2,017 22
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Per unit ($/boe) 9.11 7.87 16 8.84 9.29 (5)
Effective royalty rate (%) 17.6 15.9 11 17.2 18.6 (8)
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E4's petroleum and natural gas royalties for Q3 2007 were 23 percent higher in total dollars and 11 percent higher in percentage terms compared to Q3 2006. These increases are due to there being no Alberta Royalty Tax Credits in 2007.

On a year to date basis, E4's petroleum and natural gas royalty rates were 8 percent lower during the first nine months of 2007 compared to the same period of 2006. The first nine months of 2006, however, included royalty adjustments booked early on that year that skewed the true royalty rate.

On October 25, 2007 the Alberta government released The New Royalty Framework report, which summarizes the government's decisions on Alberta's new royalty regime. While these new rules will not come into effect until January 1, 2009, the Company has evaluated the potential impact of this framework and has determined that it will have a minimal effect on its future cash flows. This is because approximately one-half of the Company's production is from British Columbia and is therefore not subject to this framework.



Operating Expenses

The following table highlights E4's operating expenses:


Third Quarter First Nine Months
2007 2006 % Change 2007 2006 % Change
-------------------------------------------------
Total ($000s) 935 742 26 2,733 1,939 41

Per unit ($/boe) 10.55 8.92 18 9.86 8.93 10
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E4 reported per unit of production field operating costs that were 18 percent higher in Q3 2007 compared to Q3 2006. The Q3 2007 figure, however, was somewhat skewed with one-time adjustments for an area in which E4 quitclaimed its ownership. The operating costs relating to this quitclaim contributed $0.40 per boe to the $10.55 per boe total. For the first nine months of 2007, E4 reported per unit of production operating expenses that were 10 percent higher compared to the same period of 2006. E4, like all junior oil and gas companies, continues to be effected by the escalation of oil and gas service industry costs. The Company has undertaken several initiatives to decrease its operating costs.



Transportation Expenses

The following table highlights E4's transportation expenses:

Third Quarter First Nine Months
2007 2006 % Change 2007 2006 % Change
-------------------------------------------------
Total ($000s) 189 116 63 504 352 43
Per unit ($/boe) 2.13 1.39 53 1.82 1.62 12
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E4 reported per unit of production transportation expenses that were 53 percent higher for Q3 2007 compared to Q3 2006 and 12 percent higher for the first nine months of 2007 compared to the same period of 2006. These higher transportation costs are a direct result of the commencement of trucking oil from E4's Boundary area in British Columbia, which increases the corporate per unit transportation costs.



General & Administrative Expenses ("G&A")

The following table highlights E4's G&A expenses:

Third Quarter First Nine Months
($000s) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------
Cash costs 418 426 (2) 1,636 1,558 5
Capitalized cash costs (219) (192) 14 (779) (660) 18
Stock based compensation
(net of capitalization) 180 228 (21) 342 1,031 (67)
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Total 379 462 (18) 1,199 1,929 (38)
Per unit G&A ($/boe)
Cash costs 4.71 5.12 (8) 5.90 7.18 (18)
Capitalized cash costs (2.47) (2.31) 7 (2.81) (3.04) (8)
Stock based compensation
(net of capitalization) 2.03 2.74 (26) 1.23 4.75 (74)
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Total 4.27 5.55 (23) 4.32 8.89 (51)
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E4's total cash G&A expenses for Q3 2007 and the first nine months of 2007 were relatively flat compared to the same periods of 2006. This is due to the fixed nature of E4's G&A expenses.

Non-cash G&A expenses, or stock based compensation, were $0.2 million for both Q3 2007 and Q3 2006. On a year to date basis, stock based compensation was significantly lower for the first nine months of 2007 compared to the same period of 2006. This was a result of most of the outstanding stock options now being vested and fully expensed.

E4 utilizes the full cost method of accounting for its oil and gas operations. Accordingly, the Company capitalized employee and associated direct overhead costs of its technical personnel in the amount of $0.3 million during Q3 2007 and $0.2 million for the same period of 2006. E4 currently employs 10 office personnel, including five technical staff and engages the services of two consultants on a part-time basis.



Financing Charges

The following table highlights E4's financing charges by reporting period:


Third Quarter First Nine Months
2007 2006 % Change 2007 2006 % Change
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Interest expense, including
Part XII.6 tax 209 148 41 644 270 139

Per unit interest expense
($/boe) 2.36 1.78 33 2.32 1.24 87
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-------------------------------------------------


E4 incurred interest expenses that were higher in both Q3 2007 and the first nine months of 2007 compared to the same periods of 2006. This was due to a larger outstanding loan balance throughout 2007 and expenses associated with the federal government's interest charges in regards to E4's 2007 flow-through share financing of November 30, 2006.

Depletion, Depreciation and Accretion on Asset Retirement Obligation

The following table highlights E4's depletion and depreciation and accretion on asset retirement obligation by reporting period:




Third Quarter First Nine Months
($000s) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------

Depletion & depreciation 2,938 2,405 22 8,823 6,513 35
Accretion on ARO 38 28 36 103 82 26
Total 2,976 2,433 22 8,926 6,595 35
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-------------------------------------------------

Per unit ($/boe) 33.56 29.22 15 32.18 30.39 6
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E4's depletion, depreciation and accretion expense was higher in both Q3 2007 and the first nine months of 2007 compared to the same periods of 2006. This was due to the natural declines of E4's PNG reserves.

Income and Capital Taxes

E4 is presently not subject to any current income tax exposures. The Company currently has approximately $39.9 million in tax deductions available against future taxable income (net of any projected pool usage necessary to offset taxable income for the nine months ended September 30, 2007).

In February 2007, E4 renounced $7.0 million of qualifying expenditures in relation to its November 30, 2006 flow-through common share financing. This caused the future income tax liability to increase by $2.1 million over the balance at December 31, 2006. In addition, for the nine months ended September 30, 2007, E4 recorded a future income tax benefit of $0.6 million to reflect the temporary differences between the net book value of the assets and the related tax pools.

Goodwill

As at September 30, 2007 the Company assessed its balance of goodwill and determined that based on the currently prevailing market conditions, there is a full impairment of recorded goodwill of $8.5 million and therefore it has been written down with a corresponding non-cash charge to the income statement in Q3 2007. Market conditions have resulted in a significantly reduced market valuation of E4 at the end of Q3 2007 compared to the prevailing conditions when E4 acquired P3 Energy Ltd. and two private companies and upon which the resultant goodwill was recognized. E4 notes that the write-down is a non-cash charge. This eliminates the entire balance of goodwill from the balance sheet and therefore, there will be no further charges to income with respect to the impairment of goodwill.

Cash Flow from Operating Activities, Funds Generated from Operations and Net Earnings/(Loss)

The following table highlights E4's cash flow from operating activities, funds generated from operations and net earnings/(loss) by reporting period.




($000s) (Except per share Third Quarter First Nine Months
data) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------

Cash flow from operating
activities 3,095 479 546 7,980 3,983 100

Change in non-cash working
capital (837) 1,742 (148) (908) 1,328 (168)
Funds generated from
operations 2,258 2,221 2 7,072 5,311 33

Cash flow from operating
activities per share -
basic ($) 0.07 0.01 600 0.19 0.10 90
Cash flow from operating
activities per share -
diluted ($) 0.07 0.01 600 0.19 0.10 90

Funds generated from
operations
per share - basic ($) 0.05 0.057 (12) 0.17 0.14 21
Funds generated from
operations
per share - diluted ($) 0.05 0.057 (12) 0.17 0.14 21

Net earnings (loss) (9,320) 173 (5,487)(9,978) 228 (4,476)
Per share - basic ($) (0.22) 0.00 N/a 0.23) 0.01 (2,400)
Per share - diluted ($) (0.22) 0.00 N/a (0.23) 0.01 (2,400)
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The higher production volumes and commodity prices discussed above contributed to both higher cash flow from operating activities and funds generated from operations in Q3 2007 and the first nine months of 2007 compared to the same periods of 2006.

Earnings for both Q3 2007 and the first nine months of 2007 were adversely affected by the non-cash goodwill impairment discussed above compared to the same periods of 2006.



Capital Expenditures

Outlined below, by category, is E4's capital program for the respective
periods:

Third Quarter First Nine Months
($000s) 2007 2006 % Change 2007 2006 % Change
-------------------------------------------------

Land 594 869 (32) 929 3,643 (74)
Seismic 120 - n/a 382 1,121 (66)
Drilling & completions 3,995 1,191 235 9,154 10,798 (15)
Field facilities & equipment 1,527 1,227 24 3,616 2,183 66
Other (1) 224 193 16 795 662 20
Total cash capital
expenditures 6,460 3,480 86 14,876 18,407 (19)
Non-cash capitalized stock
based compensation 88 137 (36) 238 654 (64)
Total capital expenditures 6,548 3,617 81 15,114 19,061 (21)
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-------------------------------------------------

(1) Includes office equipment, computer hardware and direct G&A.


E4's Q3 2007 capital expenditure program consisted of drilling 2 wells in northeast British Columbia and 4 wells in Alberta for a total cost of $2.7 million. In addition in Q3 2007, E4 completed 3 wells in northeast British Columbia and 4 wells in Alberta for a total cost of $1.3 million. In Q3 2007, E4 also incurred $1.5 million of facility and equipment costs which brought on 1 well in northeast British Columbia and 1 well in Alberta on production. Minor land purchases, seismic and other capitalized costs highlighted the remainder of E4's Q3 2007 capital expenditure program.

Liquidity and Capital Resources

E4's primary sources of liquidity to meet operating expenses and fund its exploration and development capital program are derived from the Company's internally generated funds flow from operations and E4's revolving operating bank credit facility, which is currently set to a maximum of $18 million. This existing facility is currently being reviewed by the Company's bank. E4 utilizes this facility to fund daily operating activities and acquisitions as needed. Because of the liquidity and capital resource alternatives available to the Company, including internally generated funds flow, E4 believes that its liquidity is sufficient to fund operating, interest and general and administrative expenses, and planned spending on exploration and development projects and undeveloped acreage necessary for long-term, profitable growth. The Company anticipates that public capital markets will serve as the principal source of capital to finance any future corporate acquisitions and/or significant property purchases. E4 has issued equity in the past, and expects that these sources of capital will continue to be available to the Company in the future for potential acquisitions.

As at September 30, 2007, E4 was capitalized with $15.1 million of bank debt, a working capital deficiency of $2.2 million and 42.6 million common shares with a book capitalization of $45.4 million and a market capitalization of $30.7 million. In comparison, at September 30, 2006, the Company was capitalized with bank debt of $13.9 million, a working capital deficiency of $0.1 million and 38.8 million common shares with a book capitalization of $40.8 million and a market capitalization of $48.1 million.



($000s) Quarter-End (September 30)
--------------------------------------
2007 2006 % Change
--------------------------------------
Total assets 64,863 66,919 (3)
Cash 42 42 -
Working capital deficiency, excluding
cash 2,246 111 1,923
Bank debt 15,135 13,883 9
Shareholders' equity 35,655 40,543 (12)
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--------------------------------------


Business Risks and Uncertainties

The Company's exploration and development activities are focused in the Western Canada Sedimentary Basin within Alberta and British Columbia, which is characterized as being highly competitive with competitors varying in size from small junior producers to significantly larger, fully-integrated energy companies possessing greater financial and personnel resources. The Company recognizes certain risks inherent in the crude oil and natural gas industry, such as finding and developing oil and natural gas reserves at economic costs, drilling risks, producing oil and natural gas in commercial quantities, environmental and safety risks, and commodity price and political risks and uncertainties. E4 has engaged professional management and technical personnel with many years of experience in the oil and natural gas business to address and prudently manage and mitigate these risks.

Changes in Accounting Policies

On January 1, 2007 E4 adopted the new accounting standards regarding the recognition, measurement, disclosure and presentation of financial instruments. The new standard requires all financial instruments to be recognized on the balance sheet initially at fair market value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income until the investment is de-recognized or impaired at which time the amounts would be recorded in net earnings. At September 30, 2007, the fair value of the Company's financial instruments approximate their carrying amounts due to their short-term maturities and, in the case of the derivative commodity contract, because it has been re-measured to its fair value using available market data.

The Company may utilize financial derivatives and non-financial derivatives, such as commodity sales contracts requiring physical delivery, to manage the price risk attributable to anticipated sale of petroleum and natural gas production as described in note 7 to the financial statements. The Company has elected not to account for its sole natural gas sales contract, which was entered into in 2007 and is held for the purpose of receipt or delivery of the underlying natural gas in accordance with its expected sale requirements, as an executory contract on an accrual basis. Accordingly, this natural gas sales contract has been treated as a non-financial derivative, which is measured at fair value at each balance sheet with changes in fair value recognized in earnings each period.

The new standards require a new statement of comprehensive income, which is comprised of net earnings and other comprehensive income. The Company had no components of "other comprehensive income (or loss)" during the three and nine months ended September 30, 2007 and no opening or closing balances for the accumulated other comprehensive income (or loss).

Two new Canadian accounting standards have been issued which will require additional disclosure in the Company's financial statements commencing January 1, 2008 about the Company's financial instruments as well as its capital and how it is managed.

Changes in Internal Control Over Financial Reporting

During the most recent interim period, there have been no changes in E4's policies and procedures that compromise its internal controls over financial reporting, that have materially affected, or are reasonably likely to affect, E4's control over financial reporting. For further discussion of internal controls over financial reporting, refer to E4's 2006 Annual Report.

Off-Balance Sheet Arrangements and Related Party Transactions

The Company has not entered into any off-balance sheet transactions or into any related party transactions.

A director of the Company is a partner at a law firm that provides legal services to the Company. During the nine month period ended September 30, 2007, the Company paid and accrued a total of $70,000 to this firm for legal fees and disbursements.

The Company files an Annual Information Form and certain related documentation applicable Canadian securities regulators, which provides additional information relating to the Company. This information can be retrieved electronically from the SEDAR system by accessing E4's public filings under "Search for Public Company Documents" at www.sedar.com

For further information, please refer to www.sedar.com.



----------------------------------------------------------------------------
E4 Energy Inc.
Balance Sheets
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------

September 30, December 31,
2007 2006
ASSETS

Current
Cash $ 42 $ 42
Accounts receivable 3,214 4,863
Prepaid expenses and deposits 170 251
Derivative commodity contract 112 -
-----------------------------------
3,538 5,156

Property, plant and equipment 61,325 54,640
Goodwill (Note 4) - 8,509
-----------------------------------

$ 64,863 $ 68,305
-----------------------------------
-----------------------------------

LIABILITIES

Current
Bank facility (Note 5) $ 15,135 $ 7,925
Accounts payable and accrued liabilities 5,742 6,880
-----------------------------------
20,877 14,805

Asset retirement obligations 2,012 1,613
Future income tax liability 6,319 4,784
-----------------------------------

29,208 21,202
-----------------------------------

SHAREHOLDERS' EQUITY

Share capital (Note 3 (b)) $ 45,413 $ 47,464
Contributed surplus (Note 3 (c)) 3,952 3,371
Deficit (13,710) (3,732)
-----------------------------------
35,655 47,103
-----------------------------------

$ 64,863 $ 68,305
-----------------------------------
-----------------------------------
Commitments (Note 3 (d))

See accompanying notes to the interim consolidated financial statements.

----------------------------------------------------------------------------
E4 Energy Inc.
Statements of Operations and Deficit
(in thousands of Canadian dollars, except per share amounts) (unaudited)
----------------------------------------------------------------------------

Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
-----------------------------------------
Revenue
Petroleum and natural gas $ 4,598 4,117 $ 14,262 $ 10,820
Royalties (808) (656) (2,452) (2,017)
Unrealized gain/(loss) on commodity
contract (170) - 112 -
-----------------------------------------

3,620 3,461 11,922 8,803

Expenses
Operating 935 742 2,733 1,939
Transportation 189 116 504 352
General and administrative (Note 3
(e)) 379 462 1,199 1,929
Financing charges 209 148 644 270
Depletion, depreciation and
accretion 2,976 2,433 8,926 6,595
Goodwill impairment (Note 4) 8,509 - 8,509
-----------------------------------------
13,197 3,901 22,515 11,085
-----------------------------------------

Loss before taxes (9,577) (440) (10,593) (2,282)

Future income tax reduction (257) (613) (615) (2,510)
-----------------------------------------

Net earnings (loss) and
comprehensive earnings (loss) (9,320) 173 (9,978) 228

Settlement of stock options - - - 165

Deficit, beginning of period (4,390) (3,558) (3,732) (3,778)
-----------------------------------------

Deficit, end of period $ (13,710) $ (3,385) $(13,710) $ (3,385)
-----------------------------------------
-----------------------------------------

Earnings (loss) per share
Basic and diluted $ (0.22) $ - $ (0.23) $ 0.01
-----------------------------------------
-----------------------------------------

See accompanying notes to the interim consolidated financial statements.


----------------------------------------------------------------------------
E4 Energy Inc.
Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------

Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
-----------------------------------------

Cash provided from (used in):

Operating activities
Net earnings (loss) $ (9,320) $ 173 $ (9,978) $ 228
Items not affecting cash:
Unrealized gain/(loss) on
derivative commodity contract 170 - (112) -
Stock-based compensation 180 228 342 1,031
Depletion, depreciation and
accretion 2,976 2,433 8,926 6,595
Future income tax reduction (257) (613) (615) (2,510)
Goodwill impairment (Note 4) 8,509 - 8,509
Asset retirement costs - - - (33)
Change in non-cash working capital 837 (1,742) 908 (1,328)
-----------------------------------------

3,095 479 7,980 3,983
-----------------------------------------

Financing activities
Issuance of bank facility 2,870 4,247 7,210 13,883
Proceeds from stock options
exercised - - - 108
Settlement of stock options - - - (168)
Repayment of capital lease
obligation - - - (35)
-----------------------------------------

2,870 4,247 7,210 13,788
-----------------------------------------

Investing activities
Property, plant and equipment
additions (6,460) (3,480) (14,876) (18,407)
Change in non-cash working capital 495 (1,242) (314) (131)
-----------------------------------------

(5,965) (4,722) (15,190) (18,538)
-----------------------------------------

Decrease in cash - 4 - (767)

Cash, beginning of period 42 38 42 809
-----------------------------------------

Cash, end of period $ 42 $ 42 $ 42 $ 42
-----------------------------------------
-----------------------------------------

Supplemental cash flow information (Note 6)

See accompanying notes to the interim consolidated financial statements.


E4 Energy Inc.
Notes to the Interim Consolidated Financial Statements
For the 9 month period ended September 30, 2007 and 2006
(Unaudited)


1. Incorporation and Nature of Operations

E4 Energy Inc. ("E4" or "the Company") was incorporated under the laws of Alberta and is in the business of exploration and development of petroleum and natural gas in Western Canada.

2. Accounting Policies

The interim consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles and following the same accounting policies and methods of computation as the annual consolidated financial statements of the Company as at and for the year ended December 31, 2006. The interim consolidated financial statements contain disclosures, which are supplemental to the Company's annual consolidated financial statements. Certain disclosures, which are normally required to be included in the notes to the annual financial statements, have been condensed or omitted. The interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2006.

On January 1, 2007 E4 adopted new Canadian standards regarding the recognition, measurement, disclosure and presentation of financial instruments. The new standard requires all financial instruments to be recognized on the balance sheet initially at fair market value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income until the investment is de-recognized or impaired at which time the amounts would be recorded in net earnings. At September 30, 2007, the fair value of the Company's financial instruments approximate their carrying amounts due to their short-term maturities and, in the case of the derivative commodity contract, because it has been re-measured to its fair value using available market data.

The Company may utilize financial derivatives and non-financial derivatives, such as commodity sales contracts requiring physical delivery, to manage the price risk attributable to anticipated sale of petroleum and natural gas production as described in note 7. The Company has elected not to account for its sole natural gas sales contract, which was entered into in 2007 and is held for the purpose of receipt or delivery of the underlying natural gas in accordance with its expected sale requirements, as executory contract on an accrual basis. Accordingly, this natural gas sales contract has been treated as a non-financial derivative, which is measured at fair value at each balance sheet with changes in fair value recognized in earnings each period.

The new standards require a new statement of comprehensive income, which is comprised of net earnings and other comprehensive income. The Company had no components of "other comprehensive income (or loss)" during the nine months ended September 30, 2007 and no opening or closing balances for the accumulated other comprehensive income (or loss).


Two new Canadian accounting standards have been issued which will require additional disclosure in the Company's financial statements commencing January 1, 2008 about the Company's financial instruments as well as its capital and how it is managed.



3. Share Capital

a) Authorized

Unlimited number of common shares.
Unlimited number of cumulative redeemable convertible non-voting Class A
preferred shares.
Unlimited number of non-cumulative redeemable convertible non-voting Class B
preferred shares.
Unlimited number of preferred shares issued in series.

b) Issued and outstanding

Common Shares Continuity:
($ thousands)
# of shares Amount
Balance, December 31, 2006 42,643,672 $ 47,464
Tax effect of capital expenditures
renounced related to flow-through shares (2,051)
------------- ----------
Balance, September 30, 2007 42,643,672 45,413
----------------------------------------------------------------------------


c) Contributed surplus

Contributed Surplus Continuity:
($ thousands)

Amount
Balance, December 31, 2006 3,371
Stock-based compensation 581
----------

Balance, September 30, 2007 3,952
----------------------------------------------------------------------------


d) Flow-through shares

On November 30, 2006, the Company issued 3,889,000 flow-through common shares at a price of $1.80 per share for gross proceeds of $7.0 million. Capital expenditures of $7.0 million were renounced to investors of this financing in 2006. Under the terms of the flow-through share agreement, the Company is committed to spend the gross proceeds on qualifying exploration expenditures prior to December 31, 2007. As at September 30, 2007, the Company had incurred approximately $6.4 million of qualifying expenditures.

e) Stock options

Under the Company's stock option plan, the Company may grant options to its directors, officers, employees and consultants to purchase common shares from the Company at a fixed price not less than the fair market value of the stock on the day preceding the grant date. The options vest at a rate of one-third on the six-month anniversary of the date of grant and a further one-third on each of the one-year and two-year anniversaries from the date of grant. The option's maximum term is five years.

The following table summarizes the information about the Company's stock options:



-------------------------------
Weighted Average
Options Exercise Price
-------------------------------
$
Balance, December 31, 2006 3,209,000 1.58
Granted 738,000 1.13
Expired (356,667) 1.39
Forfeited (101,667) 1.38

-------------------------------
Balance, September 30, 2007 3,488,666 1.51
-------------------------------
-------------------------------

Number of options currently exercisable 2,454,326 1.58
-------------------------------
-------------------------------

The following table summarizes stock options outstanding and exercisable
under the plan at September 30, 2007.

----------------------------------------------------------------------------
Options outstanding Options exercisable
----------------------------------------------------------------------------
Weighted
average Weighted Number Weighted
Range of Number remaining average exercisable average
exercise outstanding contractual exercise at exercise
price at period end life (years) price ($) period end price ($)
----------------------------------------------------------------------------
$1.00 to $1.30 1,351,000 3.62 1.08 673,000 1.02
----------------------------------------------------------------------------
$1.75 to $1.82 2,137,666 3.11 1.78 1,781,326 1.79
----------------------------------------------------------------------------
3,488,666 3.31 1.51 2,454,326 1.58
----------------------------------------------------------------------------

The fair-value of options granted during the period was estimated on the
date of grant using the Black-Scholes option pricing model with weighted
average assumptions and resulting values for grants as follows:

----------------------------------------------------------------------------
Assumptions Three and Three and
nine months nine months
ended ended
September September
30, 2007 30, 2006
----------------------------------------------------------------------------
Risk free interest rate (%) 4.70 3.80
----------------------------------------------------------------------------
Expected life (years) 5.0 5.0
----------------------------------------------------------------------------
Expected volatility (%) 72 75
----------------------------------------------------------------------------
Weighted average fair value of options
granted $0.71 $1.01
----------------------------------------------------------------------------


The Company recognized in the first nine months of 2007, $0.3 million of stock-based compensation expense (2006 - $0.8 million). In addition, the Company capitalized $0.2 million of stock based compensation expense in the first nine months of 2007 (2006 - $0.5 million). The expensed portion of stock-based compensation is reflected in the Company's consolidated statement of operations.

In January of 2006, the Company settled and cancelled an aggregate of 550,001 outstanding vested stock options with a weighted average exercise price of $1.44 per share, with its former employees. Total proceeds of $168,167 were paid to the former employees with respect to this settlement. The excess of the grant date fair value over the cash settlement has been recorded as a decrease to the deficit.

f) Loss per share

The weighted average number of common shares outstanding used in computing basic and diluted loss per share during the three and nine month period ended September 30, 2007 was 42,643,672. The weighted average number of common shares outstanding used in computing basic earnings per share was 38,754,672 and 38,753,939, respectively, during the three-month and nine-month period ended September 30, 2006. The weighted average number of common shares outstanding used in computing diluted earnings per share was 38,857,173 and 38,898,791, respectively, during the three-month and nine-month period September 30, 2006.

4. Goodwill

The Company reviewed the value of goodwill as of September 30, 2007 based upon the latest available information. Based upon this review, an impairment of goodwill of $8.5 million has been recorded as a non-cash charge to earnings as of September 30, 2007. This goodwill resulted from the acquisition of P3 Energy Ltd. during the year 2005 and two private companies in the years 2003 and 2002.

5. Bank Facility

The Company has an $18 million revolving term demand credit facility with a Canadian chartered bank. The credit facility provides that advances may be made by way of direct advances, bankers' acceptances or letters of guarantee. Direct advances bear interest at the bank's prime lending rate plus 0.125 percent. The credit facility is secured by a $50 million demand debenture secured by a first floating charge on all assets and a general assignment of book debts. As at September 30, 2007, the $18 million borrowing base is being reviewed by the bank.



6. Supplemental Cash Flow Information

a) Increase (decrease) in non-cash Nine Months Ended
working capital items September 30,
($ thousands) 2007 2006
----------------------------------------------------------------------------
Change in non-cash working capital:
Accounts receivable and other current assets (1,732) 1,679
Accounts payable and accrued liabilities 1,138 (220)
-------------------
(594) 1,459
-------------------
-------------------
Changes in non-cash working capital related to:
Operating activities (908) 1,328
Investing activities 314 131
-------------------
(594) 1,459
-------------------
-------------------

b) Other cash flow information Nine Months Ended
September 30,
($ thousands) 2007 2006
----------------------------------------------------------------------------
Interest paid 484 229


7. Derivative Commodity Contracts

The Company has a price risk management program whereby the commodity price associated with a portion of its future production can be fixed. The Company is able to sell forward a portion of its future production through a combination of fixed price sale contracts with customers and commodity swap agreements with financial counter parties. The forward and future contracts are subject to market risk from fluctuating commodity prices and exchange rates; however, gains or losses on the contracts are offset by changes in the value of the Company's production and recognized in income in the same period and category as the derivative commodity contract item.

The Company uses derivative instruments to reduce its exposure to fluctuations in commodity prices. The following table outlines the derivative contract in place as at September 30, 2007:



----------------------------------------------------------------------------
Physical/ Daily Price
Product Financial Term Volume received
----------------------------------------------------------------------------
Natural gas:
Oct 1, 2007 -
Fixed price Physical Oct 31, 2007 1,500 GJ $7.40 per GJ
----------------------------------------------------------------------------


CORPORATE INFORMATION

E4 Energy Inc. is a junior oil and gas company engaged in the exploration for, and development and production of natural gas and crude oil reserves primarily in the provinces of Alberta and British Columbia. E4's common shares trade on the TSX Venture Exchange under the symbol "EFE".



DIRECTORS Transfer Agent and Registrar

Jim Brown Computershare Trust Company of Canada
Vice President, Finance and
Chief Financial Officer
Fording Canadian Coal Trust Evaluation Engineers

John Brussa Paddock Lindstrom & Associates Ltd.
Partner, Burnet Duckworth &
Palmer LLP
Legal Counsel
Glenn Downey
Senior Vice President Heenan Blaikie LLP

James Pasieka
Partner, Heenan Blaikie LLP Banker

Scott Saxberg Scotiabank
President and Chief Executive Officer
Crescent Point Energy Trust
Auditors
Paul Starnino
President and Chief Executive Officer KPMG LLP


OFFICERS Stock Exchange Listing

Paul Starnino TSX Venture Exchange Symbol: EFE
President and Chief Executive Officer

Glenn Downey, P.Geol. HEAD OFFICE
Senior Vice President
Suite 540, 840 - 6th Avenue S.W.
Franco Civitarese, CMA Calgary, Alberta T2P 3E5
Vice President, Finance and Chief Tel: (403) 266-6747
Financial Officer Fax: (403) 266-6740
Website: www.e4energyinc.ca
Graham Cormack, P.Eng.
Vice President, Engineering and
Operations

Randy Bergmann, B.Comm.
Vice President, Land

Felicia Bortolussi
Corporate Secretary, Heenan Blaikie LLP


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • E4 Energy Inc.
    Paul Starnino
    President and Chief Executive Officer
    (403) 266-6747
    Email: pstarnino@e4energy.ca
    or
    E4 Energy Inc.
    Franco Civitarese
    Vice President, Finance and Chief Financial Officer
    (403) 266-6747
    Email: fcivitarese@e4energy.ca
    Website: www.e4energyinc.ca
    or
    E4 Energy Inc.
    540, 840 - 6th Avenue S.W.,
    Calgary, Alberta, T2P 3E5