Emerge Oil & Gas Inc.

April 20, 2011 17:26 ET

Emerge Announces Viking Light Oil Well Results, New Heavy Oil Pool Discovery and Syndicated Credit Facility

CALGARY, ALBERTA--(Marketwire - April 20, 2011) -Emerge Oil & Gas Inc. ("Emerge" or the "Company") (TSX:EME) is pleased to announce the results of its first Viking light oil well at Coronation, Alberta, a new heavy oil pool discovery on its farm-in lands at Primate, Saskatchewan and a new syndicated credit facility.

Coronation Viking Light Oil Well

Emerge has successfully completed and placed on production its first Viking horizontal well (87.5% working interest, operated) in the Coronation area. The well was an 800 meter horizontal and was completed with a 16-stage, 15-ton per stage water-based frac. The well, which is pipeline-connected into an Emerge owned and operated oil battery in the area, was rig released on February 8, 2011 and placed on production on March 15, 2011. The well at 14-36-38-10W4 has produced at a sustained rate of 120 boe/d over the last 30 days, comprised of 70% light sweet 35 degrees API oil and 30% natural gas. Emerge has 2 (1.9 net) follow-up locations ready to be surveyed following spring break-up and plans to drill a total of 5 wells in this area in 2011. Emerge has 4 (3.0 net) sections of land with Viking potential in this area for future development.

Kirkpatrick Lake Viking Light Oil Farm-In

Emerge is also continuing to develop its drilling program on farm-in lands prospective for Viking light oil in the Kirkpatrick Lake area of Alberta, south of the Company's currently owned Coronation lands. The farm-in agreement, which was announced on January 25, 2011, provides Emerge with access to approximately 30,000 net acres (approximately 47 net sections) of land, of which 18,000 net acres (approximately 28 net sections) include Viking petroleum rights. Emerge has committed to drill 5 horizontal Viking wells to earn a 70% working interest in 10 sections of land, with a rolling option which allows Emerge to earn the remainder of the farm-in lands. The 5 commitment wells are required to be drilled by August 31, 2011. Emerge has surveyed 11 wells to-date and plans to spud its first well as soon as spring break-up permits.

Primate New Heavy Oil Pool Discovery

During the first quarter of 2011, Emerge completed the 4 (3.5 net) commitment wells of its heavy oil farm-in agreement entered into in 2010. The Company is pleased to announce that a farm-in well at 08-19-037-26W3 in the Primate area has produced at a 30-day average rate of 120 boe/d. This new heavy oil pool discovery is on trend with a heavy oil pool discovered in 2005 which has accumulated more than 1.5 million barrels of oil to-date. Emerge has access to 1,920 acres (3 sections) with a 100% working interest in the Primate area. The Company has 7 follow-up wells surveyed to-date with a potential to drill a total of 12 wells to develop this McLaren heavy oil pool. Emerge earns 100% working interest and is subject to provincial crown royalty and a 10% non-convertible gross overriding royalty.

New Credit Facility

Emerge is pleased to announce that it has today entered into a new syndicated credit facility agreement (the "New Credit Facility"), led by the National Bank of Canada ("NBC") and including Union Bank, Canada Branch. The New Credit Facility totalling $75 million replaces the Company's previous $75 million combined revolving and non-revolving credit facilities with NBC, and will provide greater flexibility in accommodating the Company's current and future growth plans and in supporting the Company's hedging activities.

The New Credit Facility is comprised of a $65 million demand syndicated credit facility and a $10 million demand operating facility. Both are revolving facilities with no fixed repayment requirements and are available for general corporate purposes, including capital expenditures. The terms and conditions of the New Credit Facility, including covenants and security provisions, are substantially unchanged from the Company's previous credit facilities. The next borrowing base review date is set for August 31, 2011.

Lloydminster Silverdale Oil Battery Update

Emerge is also pleased to report that all major construction is complete at its Silverdale oil battery, with final electrical tie-ins and start-up commissioning now underway. The facility, which includes an oil sales pipeline, natural gas metering station, emulsion processing, water injection and truck weigh scales, will have the capacity to treat 12,000 boe/d of oil and inject 60,000 boe/d of produced water. The facility is expected to be fully operational in early May 2011 and is a major component of the Company's operating cost reduction plans for 2011. The Company anticipates a $1.50-$2.50 per boe reduction in corporate operating costs over the second and third quarters of 2011 from the Silverdale battery expansion. Emerge has invested approximately $10 million into the construction of this state of the art facility, which will be capable of processing third party volumes once the facility is fully commissioned.

About Emerge Oil & Gas Inc.

Emerge is engaged in the acquisition and 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.

Reader 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

This news release contains forward-looking statements 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: the number of follow-up drilling locations in the Coronation, Kirkpatrick Lake and Primate areas; the size and composition of Emerge's drilling inventory; the number of wells to be drilled in 2011 and the composition thereof; the number of wells expected to fully develop the prospects in the Coronation, Kirkpatrick Lake and Primate areas; the timing of full operational capacity at the Silverdale oil battery; and the timing and extent of capital expenditures and operating cost reductions.

The forward-looking statements 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 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; the 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, 2010 which may be accessed through Emerge's SEDAR profile at www.sedar.com.

The forward-looking statements and information 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, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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