Magnus Energy Inc.
TSX VENTURE : MEI.A
TSX VENTURE : MEI.B

Magnus Energy Inc.

October 20, 2006 13:50 ET

Magnus Energy Announces Operational Update

CALGARY, ALBERTA--(CCNMatthews - Oct. 20, 2006) - Magnus Energy Inc. (TSX VENTURE:MEI.A) (TSX VENTURE:MEI.B) ("Magnus" or the "Company") is pleased to announce the following operational, production and land sale updates.

Since the previous update, three additional Colony gas wells in Paradise Valley in east central Alberta have been tied in and the production from these wells is slowly being increased. This brings the total number of gas wells on production in Paradise Valley up to nine gross (8.9 net) wells. The tie-in of an additional Colony gas well (100% working interest) in Paradise Valley is underway and the new well is expected to be on production at controlled rates within ten days. Current gas production from Paradise Valley is 1.5 MMCF per day (250 BOE per day). As volumes are slowly increased, production from the Paradise Valley gas wells will fill the capacity of the infrastructure of 2.0 MMCF per day (333 BOE per day) which is estimated to occur by November 1, 2006.

In the month of August, the Company's total production reached 834 BOE per day with the average production volume for the month being 413 BOE per day. Due to one of the gas wells at Paradise Valley watering out in early September, and declines in production from the Antler area as well as downtime for wells in the Leahurst area, the Company's overall production for the month of September averaged 465 BOE per day. The Company's average production for the month of October is presently 588 BOE per day and with recent volumes being brought on in Paradise Valley, Magnus is currently producing approximately 617 BOE per day. With wellsite compression being installed in Leahurst and production from the Paradise Valley wells filling the capacity of the infrastructure there, management estimates that the Company's overall production will increase to approximately 800 BOE per day by mid November. Further additions at Antler, Retlaw and Leahurst occurring in October and November will result in the Company's production increasing to an estimated 900 BOE per day, which is in line with the Company's exit target for 2006.

Magnus also reports that the Company was successful in a recent land sale in the Retlaw area in southern Alberta. The Company acquired an additional section of 100% working interest land prospective for Sunburst oil, bringing the Company's gross acreage in the Retlaw area up to three sections (2.775 net). Prior to the land sale, Magnus recompleted an existing well in the Sunburst zone which is currently producing 70 barrels per day of 24 degree API oil and associated gas. The Company expects the oil production from this well to stabilize at approximately 30 to 35 barrels per day (100% working interest). An additional operated well was drilled, completed and production tested into the Retlaw land sale. Although currently production testing at high initial rates, this well is also expected to produce at a similar stabilized oil rate of 30 to 35 barrels per day (100% BPO and 77.5% APO). Based on 40 acre spacing, management estimates that there are a further 10 to 15 gross (9.3 to 13.8 net) Sunburst locations on the Company's lands in Retlaw.

In conjunction with the progress in the field, Magnus is pleased to announce that it has received an increase in its credit facility from the National Bank of Canada from a current level of $11.0 million up to $14.5 million. The facilities are now composed of a revolving operating demand loan of $11.0 million and a non-revolving acquisition/development demand loan of $3.5 million.

"We are pleased with our progress and continue to learn more about the nature of the exploration and development opportunities in front of us," said Murray Stewart, President and CEO of Magnus. Mr. Stewart further remarked, "We have a large inventory of drilling locations on all of our core properties and look forward to further profitable growth through 2006 and into 2007."

About Magnus Energy

Magnus is a junior oil and gas company focused on the acquisition, exploration, exploitation and development of oil and natural gas properties in Western Canada.

READER ADVISORY

This press release includes forward-looking statements and assumptions respecting the Company'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 the Company may not be able to control. The reader is therefore cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any intention or obligation to update or revise these forward-looking statements, as a result of new information future events or otherwise. 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 has not reviewed and does not accept responsibility for the adequacy or accuracy of this release and has neither approved nor disapproved the contents of this release.

Contact Information

  • Magnus Energy Inc.
    Murray M. Stewart
    President and Chief Executive Officer
    (403) 233-4963
    Email: stewartm@magnusenergy.ca
    or
    Magnus Energy Inc.
    Stewart Larsen
    Chief Financial Officer
    (403) 233-4960
    Email: larsen@magnusenergy.ca
    or
    Magnus Energy Inc.
    Suite 1650, AMEC Place
    801 - 6th Avenue S.W.
    Calgary, Alberta T2P 3W2
    (403) 262-9920 (FAX)
    Website: www.magnusenergy.ca