Magnum Energy Inc.

Magnum Energy Inc.

October 31, 2011 09:30 ET

Magnum Announces Amendment to Viking Oil Joint Venture Agreement

CALGARY, ALBERTA--(Marketwire - Oct. 31, 2011) - Magnum Energy Inc. (The "Company" or "Magnum") (TSX VENTURE:MEN) is pleased to announce that it has amended its joint venture agreement ("JV Agreement") with Nextraction Energy Inc. (Nextraction).

Under the terms of the original JV Agreement, Nextraction was required to drill, complete, equip and tie-in two horizontal wells, at its sole expense, to earn a 50% working interest in each well and in certain lands in the Provost area Viking Oil Property.

Under the terms of the amendment, Magnum has released Nextraction from its obligation to drill a second horizontal well in exchange for approximately $1.2 million, which proceeds were used to fully repay the loan to Nextraction.

Effective October 1, 2011, Magnum will act as the operator of all drilling, re-completions and production of the Provost area properties. As it has now retired the debt to Nextraction, it is entitled to immediately retain the cash flows generated from its working interest in the Provost wells. Magnum is now also in a position to determine which projects will provide the best opportunities for future development of this Viking oil prospect.

Magnum has recently received approval of a Holding Application which allows for the drilling of up to four wells, whether vertical or horizontal, per quarter section on the 3.25 sections of land originally acquired in Provost.

Magnum's technical team is reviewing optimization programs to increase production levels from the first horizontal well. The completion of the gas pipeline for the well will be fully funded by Nextraction and is expected to occur no later than December 31, 2011. Concurrently, Magnum will acquire a new surface lease and drilling permit for drilling the second horizontal well. Both companies have agreed that a new location identified for the second horizontal well optimizes the full potential of the zone and can be drilled at lower costs using monobore technology.

About Magnum Energy Inc.

Magnum Energy is a junior oil and gas producer with operations located in the Western Canadian Sedimentary Basin in Alberta. The Company's has two producing core areas – the Viking oil operations in Provost and a natural gas producing property in the Sedalia area, where it maintains a 100% ownership of the Sedalia gas facility.

Forward-looking Statements

This news release contains certain forward-looking information and statements that are based on the Corporation's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In this news release, such forward-looking information and statements can be identified by terminology such as "will", "to be", "expected", "anticipated" and similar expressions.

In particular, this news release contains forward-looking statements and information relating to the planned use of proceeds and timing for the Offering. These forward-looking statements and information are being made by the Corporation based on certain assumptions that the Corporation has made in respect thereof as at the date of this document. These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties, including, but not limited to: non-performance of agreements in accordance with their terms; the impact of competition; commodity prices; regulatory environment and inability to obtain required regulatory approvals; fluctuations in operating results; the ability of the Corporation to raise sufficient capital to complete future projects and satisfy future commitments; labour and material shortages; and certain other risks detailed from time to time in the Corporation's public disclosure documents.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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