Expedition Energy Inc.

Expedition Energy Inc.

March 21, 2007 13:08 ET

Expedition Energy Inc. Announces 2006 Year-End Reserves and Q4 2006 Drilling & Unaudited Interim Financial Results

CALGARY, ALBERTA--(CCNMatthews - March 21, 2007) - Expedition Energy Inc. (TSX VENTURE:XPD) ("Expedition" or the "Corporation") is pleased to announce its 2006 year-end reserves as evaluated by GLJ Petroleum Consultants Ltd. ("GLJ" or "Independent Engineers") for all of Expedition's oil and gas properties in accordance with National Instrument 51-101 ("NI 51-101"). The full report will be available when filed with the Corporation's annual filing information by April 30, 2007.

Highlights of Expedition's 2006 Reserves Report (the "Reserves Report") - all dollar amounts in $000's except per share and per BOE

- The Corporation achieved modest reserve growth in 2006 based on results of its 2006 drilling program and well performance from existing properties

- Expedition replaced 2006 production by 1.4 times on a Proved basis, and 1.5 times on a Proved plus Probable basis

- Total Proved reserves at year-end were 925 MBOE, comprised of 251 Mbbl of oil & NGL's and 4,046 MMcf of natural gas

- Total Proved plus Probable reserves at year-end were 1,361 MBOE, comprised of 379 Mbbl of oil & NGL's and 5,892 Mmcf of natural gas

- Net Present Value ("NPV") of the Corporation's reserves discounted at 10% is $14,686 for Proved, and $19,682 for Proved plus Probable

The following tables summarize the GLJ estimates and are based upon the most
recent GLJ price forecast of January 1, 2007:

Reserves Summary
Light and Heavy Natural Natural Gas Oil
Medium Oil Oil Gas Liquids Equivalent
Gross Net Gross Net Gross Net Gross Net Gross Net
Mbbl Mbbl Mbbl Mbbl Mmcf Mmcf Mbbl Mbbl MBOE MBOE
PROVED 11 9 141 116 4,046 3,325 99 70 925 749
PROBABLE 27 23 46 38 1,846 1,524 55 42 436 357

PROBABLE 37 31 187 155 5,892 4,849 154 112 1,361 1,106

Before Tax Present Value ($000)
Discount Factor
0% 5% 8% 10%
PROVED 22,263 17,561 15,693 14,686
PROBABLE 12,173 7,169 5,698 4,996

PROVED Plus PROBABLE 34,437 24,730 21,391 19,682

Notes: (1) Columns may not add due to rounding
(2) "Gross" consists of Expedition's working interest reserves before
deduction of royalties payable to others, "Net" consists of
Expedition's working interest reserves after the deduction of
royalties payable to others
(3) It should not be assumed that the undiscounted and discounted
future net revenues estimated by the GLJ Report represent the
fair market value of the reserves

Net Asset Value

Expedition has internally determined the Corporation's net asset value at year-end 2006 at $0.47 per share. This calculation is based on the before tax value of proved plus probable reserves discounted at 10% using GLJ's January 1, 2007 price forecast, adding estimated hedging gains, adding the value of net undeveloped land & seismic, and deducting the net debt & working capital. Details of the calculation are as follows:

($ million)
Proved plus probable reserve value (at 10%) $ 19.7
Estimated hedging gains (not in GLJ reserve values) $ 0.5
Net undeveloped land & seismic data $ 1.7
Net debt & working capital $ (7.0)

Total $14.9

Basic Common Shares O/S 31.6 million
Net Asset Value per share $ 0.47

Q4 2006 Drilling Results

During the fourth quarter, 2006, Expedition participated in the drilling of three (1.4 net) wells; a deep exploratory gas well at Phoenix/Strachan, AB, a step out oil well and a gas well at Ante Creek, AB. All wells were cased for potential oil/gas.

The exploratory Phoenix/Strachan well (operated, 40% working interest) offered the Corporation a high risk / high reward opportunity in an area characterized by long life, liquids rich, gas reserves. While initial drilling and log results looked encouraging, the testing results following completion of the well were disappointing. Several gas zones were perforated; fracture stimulated, and tested but yielded only low deliverability gas rates. At this time, the well is classified as a 'standing gas' well. Various tie-in alternatives are being evaluated to determine if it is economic to tie-in the well.

In the Ante Creek area, two non-operated wells were drilled (50% working interest). The step out oil well targeted light oil in a Dunvegan channel sand at approximately 1400 m. depth. The well encountered the edge of the channel and was cased, completed, and put on pump in January 2007. Initial oil rate was approximately 30 bbl/d but quickly declined to an uneconomic level. The well is currently suspended. The Operator is reviewing the possibility of re-drilling this well to a thicker, more permeable part of the channel - additional seismic is being obtained. The gas well drilled in the Ante Creek/Waskahigan area targeted Dunvegan gas, but also encountered poorer than expected gas pay. As a result, Expedition decided not to participate in the casing, completion, and testing of the well - instead electing a penalty position. The Operator has cased the well for potential gas and is also obtaining additional seismic to evaluate other joint undeveloped lands in the vicinity.

Q4 and 2006 Unaudited Interim Financial Results

Expedition has completed its estimate of fourth quarter financial results and releases the following unaudited financial information:

- Production averaged 466 BOE/d during the 3 month period ending December 31, 2006 which was comprised of approximately 64% natural gas and 36% crude oil & NGL's. Average production for the year 2006 was 445 BOE/d, a 90% increase over 2005

- Gross revenue during the same 3 month period was $1.9 million. This results in total year 2006 gross revenue of $6.8 million, a 51% increase over 2005, despite an average drop in commodity prices of 18%

- Cash flow from operations in Q4 is estimated to be $1.0 million ($0.03 per share) for an annual 2006 cash flow of $2.8 million ($0.09 per share)

- Operating costs remained steady at $9.03 per BOE in Q4 with the total year 2006 operating cost averaging $8.64 per BOE

Expedition expects that audited financial results for the year ended December 31, 2006 will be available in late April following the completion of a financial audit by the Corporation's independent auditors KPMG LLP. Full details of the financial results, MD&A, and Reserve Report will be filed prior to April 30, 2007 and will be available for viewing on either the Corporation's website www.xpdenergy.com , or the SEDAR website www.sedar.com.

2007 Outlook

Expedition is pursuing a business plan that strives to attain continued value growth for our shareholders in 2007.

Project spending will be focused on lower risk oil and gas development prospects, with higher risk prospects made available for farm-out to others. Expedition's high risk exploration activity in Q4 2006 was largely unsuccessful and resulted in the Corporation having a debt position of 1.7 times Q4 annualized cash flow. While this level of debt is manageable, Expedition expects to restrict 2007 capital spending to levels consistent with available cash flow and credit facilities. In addition, the Corporation has taken steps to secure cash flow in 2007 through various natural gas hedges ending October 31, 2007. In the first quarter of 2007, no wells have been drilled. Efforts have been directed at prospect development and project planning. It is expected that drilling will start after breakup on several projects, likely in July, 2007. Expedition is also considering the sale of minor properties that would bring in capital without sacrificing a significant drop in production. In light of current business factors (such as weaker commodity prices and availability of capital) that are adversely affecting many junior oil and gas companies, management will continue to review opportunities that would result in a financially stronger entity going forward.

The term barrels of oil equivalent "BOE" may be misleading, particularly if used in isolation. The BOE conversion ratio used by Expedition of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions herein are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.

This information contains forward-looking statements (forecasts) under applicable securities laws. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, and the regulatory and legal environment. Many of these factors can be difficult to predict. As a result, the forward-looking statements are subject to known or unknown risks and uncertainties that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements.

Expedition Energy Inc. is an emerging Alberta based public corporation actively engaged in the exploration, development and production of crude oil and natural gas in Western Canada. The Corporation's current strategy is to internally develop prospects, secure land in core areas, and pursue low risk development drilling. In addition, management will continue to review other opportunities that will strengthen Expedition. Expedition's shares are listed for trading on the TSX Venture Exchange under the symbol XPD.

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

Contact Information

  • Expedition Energy Inc.
    Scott St. John
    President and CEO
    (403) 264-1699
    (403) 264-1499 (FAX)
    Expedition Energy Inc.
    Neil Burrows
    Vice President Finance and CFO
    (403) 264-1699
    (403) 264-1499 (FAX)
    Expedition Energy Inc.
    725, 435 - 4th Avenue S.W.
    Calgary, Alberta T2P 3A8
    Website: www.xpdenergy.com