Eagle Rock Exploration Ltd.

Eagle Rock Exploration Ltd.

April 19, 2007 15:27 ET

Eagle Rock Reports 2006 Results and Operational Update

CALGARY, ALBERTA--(CCNMatthews - April 19, 2007) - Eagle Rock Exploration Ltd. ("ERX" or the "Corporation") (TSX VENTURE:ERX) is pleased to present its audited financial and operating results for 2006 and an update of its 2007 operations.

2006 marked the first year of operations for ERX during which it achieved rapid growth and significant increases in production since completing its qualifying transaction on February 7, 2006.

The Corporation exited 2006 with production of 800 boe/d, an increase of 2000% over its initial production of 40 boe/d.

Eagle Rock Exploration Ltd achieved the following milestones in 2006:

- Established two core exploration areas, Antelope Lake in Southwestern Saskatchewan and Coutts/Red Coulee in Southern Alberta, where the combined current production is 700 boe/d with the upside of increasing production to approximately 1,000 boe/d by end of 2007 (100% oil).

- Discovered a new multi-zone oil field at Antelope Lake in Saskatchewan and participated in the drilling of 35 wells (15.2 net wells) with a 71% success rate.

- Developed a by-passed zone at Red Coulee in Alberta and built an oil battery with the capacity to handle 10,000 bbls/day of total fluid which will assist in the reduction of future operating costs.

- Increased original land base from 7 sections to over 45 sections of prospective lands on which the company has identified numerous new drilling locations based on 24 square miles of 3D seismic program at a cost of $2.2 million.

- Grew reserves (proved plus probable) by 1,178 mboe from 95 mboe at December 31, 2005 to 1,273 mboe at December 31, 2006 primarily through the drill bit

- Acquired 100% of Sword Energy Ltd., a private oil and gas company, and the operating partner at Coutts/Red Coulee in Alberta which gave ERX a 100% working interest and operator status in Red Coulee and 89% working interest in Coutts.

- Assembled an expert team of 7 people with an average of 23 years of industry experience.

- Negotiated a $6,500,000 credit facility.

- Raised a total of $10,800,000 of equity through private placements.

Financial and Operational highlights for the year are summarized in the
following table.

Q4 Q3 Q2 Q1
2006 2006 2006 2006
$000's except production and per share
amounts $ 000's $ 000's $ 000's $ 000's
Average daily production - boe/d 464 202 225 82
Petroleum and Natural Gas Revenue 2,127 1,086 1,249 340
Total revenues net of royalties 1,905 832 892 294
Cash flow from operations 561 345 515 -
Loss for the period (626) (63) (46) (211)
Basic and diluted per share (0.020) (0.010) (0.002) (0.005)
Capital expenditures, net 7,904 1,924 1,993 1,068
Total assets 29,929 29,230 4,636 6,802
Working capital surplus (deficiency) (4,710) 2,650 7,042 1,282
Shareholder's equity 21,949 22,654 12,109 5,211
Common shares outstanding - basic 39,636 38,686 26,021 20,501
Common shares outstanding - 100%
dilution 43,057 41,801 28,131 22,356
Weighted average common shares
outstanding 39,285 28,086 21,415 13,910

Gross revenue for the year ended December 31, 2006 was $4,801,348, ten times 2005 revenue of $477,658. The loss for the year of $946,300 included one time start up and transition costs related to becoming a public company and acquisitions.

Non-cash expenses included $2,749,593 for depletion, depreciation and amortization and $616,672 for stock-based compensation expenses.

Cash flow from operations was $1,421,000 ($0.05 cents/weighted share) and at year-end the company had a working capital deficiency including bank debt of $4,710,507. The increased bank credit limits arranged in 2007 are adequate to fund 2007 capital programs.

Capital expenditures totalled $12,889,408 which includes the expenditure of $4,000,000 for the oil battery and gathering system at Red Coulee, Alberta.

Finding & development costs for proven and probable reserves added in 2006 was $12.08/boe excluding the Red Coulee infrastructure costs and $15.85/boe in total.

Reserves Summary

ERX's independent engineering evaluation, effective December 31, 2006, was prepared by GLJ Petroleum Consultants Ltd. ("GLJ") in accordance with the Canadian Securities Administrator's National Instrument 51-101 ("NI 51-101"). Under NI 51-101, proved reserves are defined as having a high degree of certainty to be recoverable, and probable reserves are defined as those reserves that are less certain to be recovered than proved reserves. The targeted levels of certainty, in aggregate, are at least 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves and at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves.

The following tables summarize the GLJ evaluation of the Company's interest in reserves and future net production revenue from these reserves. All evaluations of future net production revenues set forth in the following tables are stated prior to any provision for income tax and indirect costs but after estimated abandonment costs. It should not be assumed that the present worth of future net cash flow represents fair market value of the reserves. There is no assurance that the price and cost assumptions used by GLJ to prepare the evaluation will be attained, and variances could be material. Net reserves are the Company's reserves after deducting royalties.

Reserves Summaries

Light and Total Oil
Medium Oil Natural Gas Equivalent
Gross Net Gross Net Gross Net
Mbbl Mbbl Mmcf Mmcf Mboe Mboe
Producing 509 446 138 119 532 466
Developed Non
producing - - - - - -
Undeveloped 276 240 6 4 277 241
Total Proved (P) 785 686 144 124 809 707

Total Probable 453 388 65 55 464 397

Total Proved Plus
Probable (P+P) 1,238 1,074 209 179 1,273 1,104

Net Present Value Summary
Forecast Prices and Costs ($000's)

Net Present Values of Future Net Revenue
Before Income Taxes Discounted At (%/yr)
0% 5% 10% 15%
Producing 13,482 12,363 11,464 10,723
Developed Non producing 0 0 0 0
Undeveloped 6,015 4,482 3,486 2,788
Total Proved (P) 19,496 16,846 14,950 13,510

Total Probable 13,259 9,446 7,381 6,079

Total Proved Plus Probable (P+P) 32,755 26,291 22,331 19,589

Net Asset Value Summary

Net asset value calculations and the related assumptions are provided in the following table. The Corporation believes that future development based on proven drilling and recovery techniques and longer production history will allow more recoverable reserves to be recognized in future evaluations.

$000's except per share
Net present value of pre-tax proved plus probable reserves
discounted at 10% using GLJ price forecast at January 1, 2007 22,331
Undeveloped land (management's estimate of $125/acre) 2,887
3D Seismic for Coutts/Red Coulee shot in 2006 (management's
estimated fair value) 600
Net debt (includes working capital deficiency) ( 4,710)
Net asset value for NAV - basic 21,108
Net asset value for NAV - diluted (proceeds of options added) 23,346

Number of common shares - basic 39,636
Number of common shares - diluted 43,057
NAV ($/share) - December 31, 2006 - Basic $0.53
NAV ($/share) - December 31, 2006 - Diluted $0.54

2007 Activities

Subsequent to year-end ERX successfully drilled the initial well of a seven (7) well program at Red Coulee, based on its 3D seismic which identifies structurally higher locations than the four (4) recompletions currently on production. Production from this well is approximately 75 bbls/d of oil.

Activity at Antelope Lake in Saskatchewan will commence after break-up and is subject to the operator's timing.

ERX is a publicly traded energy company involved in the exploration and development of low to medium risk oil and gas properties in Western Canada.

ERX has filed with Canadian securities regulatory authorities its December 31, 2006 year end audited financial statements, management's discussion and analysis (MD&A) and reports relating to reserves data and other oil and gas information pursuant to National Instrument 51-101 which are available at www.sedar.com or the ERX website at www.eaglerockexploration.com.

Forward-looking Information

This press release includes forward-looking statements and assumptions respecting ERX's strategies, future operations, expected financial results, financial sources, commodity prices, costs of production and quantum of oil and natural gas reserves and discusses certain issues, risks and uncertainties that can be expected to impact on any of such matters. By their nature, forward-looking statements are subject to numerous risks and uncertainties that can significantly affect future results. Actual future results may differ materially from those assumed or described in such forward-looking statements as a result of the impact of issues, risks and uncertainties whether described herein or not, which ERX may not be able to control. The reader is therefore cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and ERX undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement. In addition, the term BOE or BOE's may be misleading, particularly if used in isolation. A BOE (barrel of oil equivalent) conversion ratio of 6 Mcf per one (1) BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

Contact Information

  • Eagle Rock Exploration Ltd.
    Jim Silye
    President and Chief Executive Officer
    (403) 269-4040
    (403) 261-1978 (FAX)
    Email: jimsilye@eagler.ca
    Eagle Rock Exploration Ltd.
    Steven Glover
    Vice-President Finance and Chief Financial Officer
    (403) 269-4040
    (403) 261-1978 (FAX)
    Email: sglover@eagler.ca
    Website: www.eaglerockexploration.com