Emerge Oil & Gas Inc.
TSX : EME

January 13, 2011 18:15 ET

Emerge Announces 2011 Budget and Provides Operational Update

CALGARY, ALBERTA--(Marketwire - Jan. 13, 2011) - Emerge Oil & Gas Inc. ("Emerge" or the "Company") (TSX:EME) is pleased to announce its 2011 budget and guidance and to provide an operational update.

2011 Budget

Emerge's Board of Directors has approved a 2011 capital expenditures budget of $75 million for exploration and development activities, with approximately 66% of the budget allocated toward drilling, completions and well equipping activities. The Company anticipates drilling a total of 80 (80 net) wells, with approximately 70 net locations planned for its core Lloydminster area, primarily in Saskatchewan, targeting multi-zone, heavy oil within the Mannville group. Emerge also plans to drill the first 4 to 6 wells on its farm-in lands in the Reward/Ear Lake/Macklin area targeting Waseca, McLaren, Lloydminster, Colony and Birdbear prospects. The Company plans to drill a further 4 to 6 wells in the Coronation area of Alberta targeting the Viking formation, where Emerge has identified a total of 41 locations on its lands in the emerging Viking light oil play. Of the remaining budget, approximately 20% is expected to be allocated to undeveloped land acquisitions and seismic and 10% is expected to be directed toward facilities and infrastructure projects. The Company expects to fund its capital expenditures budget through a combination of cash flow and existing credit facilities.

Execution of the 2011 capital budget is anticipated to result in average daily sales of 7,000 to 7,200 boe/d (weighted 97% toward oil) for 2011, representing greater than 40% growth from 2010 average daily sales estimated at approximately 4,900 boe/d. The 2011 budget is designed to deliver continued low-cost production and reserves additions, attractive netbacks and per share growth in production, cash flow and reserves from 2009 and 2010 levels. The budget is based on an oil pricing assumption of US$80.00/bbl WTI, a 0.9700 US$/C$ exchange rate and a 20% discount of the Western Canadian Select heavy blend price to WTI C$.

Based on the above production and commodity price assumptions, Emerge is expecting to generate funds flow from operations in 2011 of $55 to $60 million and 2011 year-end net debt is anticipated to be approximately $55 to $60 million, representing 0.9 times Q4 2011 annualized funds flow from operations.

Emerge continues to be excited and optimistic about its growth prospects being generated in 2011 and is also committed to deliver continued per share growth and capital efficiency. Emerge currently has over 500 drilling locations in its inventory and looks forward to continued growth in production and reserves in 2011 and beyond.

Operational Update

Emerge's average sales volumes grew to approximately 5,970 boe/d (estimated) in Q4 2010, representing an increase of 20% from 4,993 boe/d reported in Q3 2010, and an increase of 145% from 2,440 boe/d reported in Q4 2009. The Company's significant production growth in 2010 is attributed to a combination of drilling success, to our reactivation/recompletion activity on standing wells and a 400 boe/d asset acquisition in Reward/Ear Lake which closed in late June 2010.

The Company completed its drilling program in late December 2010, resulting in a total 2010 program of 66 (66 net) wells drilled at a 98% success rate. Emerge also focused its Q4 2010 capital program on facilities and gathering systems, where approximately one-third or $8 million was invested in disposal sites, intra-field water flowlines and central battery expansion, all designed to reduce 2011 operating costs. Emerge exited 2010 with field production of approximately 6,600 boe/d, weighted 97% toward oil. The Company exited 2010 with net debt of approximately $40 million and the Company has current credit facilities with its lender totaling $60 million. The Company's credit facilities are due to be reviewed by our lender in early March 2011 upon completion of our 2010 year-end reserve evaluation.

Emerge anticipates announcing details of its 2010 reserves evaluation in late February 2011, with Q4 and full-year 2010 financial and operational results to follow in late March 2011.

About Emerge Oil & Gas Inc.

Emerge is engaged in the exploration for and development and production of oil and natural gas in Western Canada. The Company currently operates within two principal areas, namely, the Lloydminster area of West-Central Saskatchewan and East-Central Alberta and the Battlebend area of East-Central Alberta. Emerge is headquartered in Calgary, Canada.

Advisories:

Barrel of Oil Equivalent

The Company may present petroleum and natural gas production and reserve volumes in barrel of oil equivalent ("boe") amounts. For purposes of computing such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) is used. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

Forward-Looking Statements and Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this news release contains forward-looking statements and information concerning: Emerge's 2011 capital budget, including allocation of expenditures associated therewith; expectations regarding the number of wells to be drilled during 2011 and the allocation of Emerge's capital budget thereto; specific drilling plans including the number of locations to be drilled in the Reward/Ear Lake/Macklin and Coronation areas in 2011 as well as the total number of drilling locations in inventory; anticipated 2011 growth in average daily sales; funding of the 2011 capital budget and financial flexibility; estimated commodity prices and foreign exchange rates for 2011; expectations regarding production and reserve additions; and estimated cash flow.

The forward-looking statements and information in this news release are based on certain key expectations and assumptions made by Emerge, including but not limited to expectations and assumptions concerning: prevailing and future commodity prices and foreign exchange rates; applicable royalty rates, tax rates and related laws and regulations; future production rates; the performance of existing and future wells; the success obtained in drilling new wells; the inventory of new drilling locations; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services, including but not limited to drilling and completion equipment and services; adequate weather and environmental conditions for drilling and completion activities, including the transportation of associated equipment; the receipt, in a timely manner, of regulatory and third party approvals; the timing of development and construction plans; and the ability of Emerge to secure adequate product processing and transportation and to market its crude oil and natural gas successfully.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties, certain of which are beyond the control of the Company. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the oil and gas industry in general such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration and development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production rates, costs and expenses; health, safety and environmental risks; risks associated with adverse weather and the impact on drilling and completion activities and the transportation of associated equipment; fluctuations in foreign exchange rates and in commodity prices, and in particular in the price of heavy oil; transportation and marketing of crude oil and natural gas and the loss of markets; the impact of competitors; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other third party approvals; unanticipated fluctuations or declines in production; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive. Additional information on these and other factors that could impact Emerge can be found in Emerge's Annual Information Form for the year ended December 31, 2009 which may be accessed through Emerge's SEDAR profile at www.sedar.com.

This news release also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about prospective and potential operating and financial results of Emerge in 2011, all of which are subject to the same assumptions, risk factors and qualifications as set forth in the paragraphs above. The FOFI contained in this news release was made as of the date of this news release and was provided for the purpose of giving a general overview of management's expectations regarding the anticipated results of Emerge's planned 2011 operations and capital expenditures. Readers are cautioned that the FOFI contained in this news release should not be used for purposes other than for which it is disclosed herein as such information may not be appropriate for other purposes.

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

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