Masters Energy Inc.
TSX : MSY

Masters Energy Inc.

February 27, 2009 18:14 ET

Masters Energy Inc. Reports 2008 Reserves Results

CALGARY, ALBERTA--(Marketwire - Feb. 27, 2009) - Masters Energy Inc. (TSX:MSY) ("Masters" or "the Company") is pleased to provide the results of its independent reserve evaluation prepared by McDaniel & Associates Consulting Ltd. ("McDaniel") in accordance with NI 51-101 for the year ended December 31, 2008. The following reserves information has been prepared using McDaniel forecasted prices and costs.



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Summary of Reserves 2008 2007
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Proved
Crude Oil (mbbl) 1,797 2,107
Natural Gas Liquids (mbbl) 22 28
Natural Gas (mmcf) 5,306 6,447
BOE (mboe) 2,496 3,213
Proved plus Probable
Crude Oil (mbbl) 5,800 6,532
Natural Gas Liquids (mbbl) 34 44
Natural Gas (mmcf) 8,859 10,225
BOE (mboe) 7,311 8,280


Total proved plus probable reserves decreased 12 percent over the previous year from 8,280 mboe to 7,311 mboe as a result of production, revisions to proved plus probable reserves as a result of lower than expected well performance during the year and the final agreed upon working interest related to the enhanced oil recovery project at Little Bow. As of December 31, 2008, the Company proved and probable reserve mix is comprised of 80 percent crude oil and natural gas liquids and 20 percent natural gas.

The following tables summarize Masters working interest reserves as at December 31, 2008, including the NPV, before income taxes, of the proved and probable reserves using forecasted prices and costs, at various discount rates. The probable reserves are further shown in detail to indicate the reserves assigned to the enhanced oil recovery project at our Little Bow property. The project will involve an alkaline surfactant polymer ("ASP") injection flood complementing Masters' existing waterflood.



Summary of Gross(1) Oil and Gas Reserves
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Natural Gas Natural Total Total
Reserves Category Crude Oil Liquids Gas 2008 2007
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(mbbl) (mbbl) (mmcf) (mboe) (mboe)
Proved - developed
producing 1,697 18 4,689 2,496 2,712
Proved - non-producing 100 4 617 208 501
Proved - undeveloped - - - - -
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Total Proved 1,797 22 5,306 2,704 3,213
Probable - without ASP 572 10 3,339 1,139 1,367
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Proved plus Probable -
without ASP 2,369 32 8,645 3,843 4,580
Probable - ASP 3,431 2 214 3,469 3,700
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Total Proved plus Probable(2) 5,800 34 8,859 7,311 8,280
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NOTES:
(1) "Gross" reserves means the total working interest (operating and non-
operating) share before deduction of royalties payable to others and
excluding any royalty interests (approximately 28 mboe) of Masters.
(2) May not add due to rounding.


Summary of Oil and Gas Reserve Net Present Values ("NPV") of future net
revenue based on forecasted prices and costs.

Reserves Category Before Income Taxes Discounted at
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($ million) 0% 5% 10% 15%
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Proved - developed producing 75.7 60.3 50.2 43.1
Proved - non-producing 4.8 4.1 3.7 3.4
Proved - undeveloped - - - -
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Total Proved 80.4 64.4 53.9 46.5
Probable - without ASP 38.5 24.8 17.5 13.4
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Proved plus Probable - without ASP 118.9 89.2 71.4 59.9
Probable - ASP 144.6 80.3 48.2 29.9
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Total Proved plus Probable (1) 263.6 169.5 119.7 89.8
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NOTE:
(1) May not add due to rounding.


Masters crude oil, natural gas and natural gas liquids ("NGLs") reserves were evaluated using McDaniel's product price forecasts effective January 1, 2009 prior to provision for debt service charges and general and administrative expenses. It should not be assumed that the discounted future net production revenues estimated by McDaniel's represent the fair market value of the reserves.



The following table summarizes McDaniel's forecasted benchmark prices and
Masters' prices.

Oil Natural Gas NGLs
--------------------- --------------------- ---------------------

Bow River AECO
Medium Spot Edmonton
Benchmark Company Benchmark Company Benchmark Company
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($/bbl) ($/bbl) ($/mcf) ($/mcf) ($/bbl) ($/bbl)
2009 54.80 53.67 7.40 7.42 52.00 62.36
2010 65.30 64.18 8.00 8.04 61.10 74.71
2011 72.00 69.52 8.45 8.53 66.90 81.41
2012 73.90 70.33 8.80 8.89 68.90 83.17
2013 75.90 71.93 9.05 9.17 70.70 83.96
2014 77.40 73.29 9.25 9.38 72.20 86.75


Prices increase at a rate of approximately 2.0 percent per year for oil, natural gas and natural gas liquids after 2014. Adjustments were made to the benchmark prices to reflect varied delivery points and quality differentials in the products delivered.

Reserve Life Index

The Company's reserve life index ("RLI") using annualized fourth quarter production is 5.5 years of proved years (2007 - 5.7 years) and 15.0 years of total proved plus probable reserves (2007 - 14.6 years).



2008 Using 2007 Using
2008 Using McDaniel 2007 Using McDaniel
Annualized 2009 Annualized 2008
Q4 2008 Forecast Q4 2007 Forecast
Production Production Production Production
---------------------------------------------
Production (mmboe) 488 532 566 606
Proved reserves (mmboe) 2,704 2,704 3,213 3,213
Proved RLI (years) 5.5 5.1 5.7 5.3
Production (mmboe) 488 580 566 648
Proved plus probable reserves -
without ASP (mmboe) 3,843 3,843 4,580 4,580
Proved plus probable RLI -
without ASP (years) 7.9 7.2 8.1 7.6
Total Proved plus probable
reserves (mmboe) 7,311 7,311 8,280 8,280
Proved plus probable RLI
(years) 15.0 12.6 14.6 12.8
---------------------------------------------

Net Asset Value

At December 31, 2008, Masters had 106,000 net acres of undeveloped land, 250 kilometers of proprietary 2D seismic, 150 square kilometers of proprietary 3D seismic and net debt of $10.8 million (unaudited). Net debt is a combination of $1.4 million of working capital deficiency and bank debt of $9.4 million

Masters' net asset value per share at December 31, 2008, for total proved plus probable reserves, increased eight percent to $7.75 per basic share (2007 - $7.19) and by 14 percent to $7.55 per diluted share (2007 - $6.65).

The net asset value per share, for proved plus probable reserves excluding the reserves associated with ASP project at Little Bow, increased five percent to $4.62 per basic share (2007 - $4.42) and by seven percent to $4.56 per diluted share (2007 - $4.25).




Proved plus Probable Total Proved plus
- without ASP Probable
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($ thousands, except as indicated) 2008 2007 2008 2007
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Reserves value(1) (10% discount
before tax) 71,428 80,266 119,654 122,821
Undeveloped acreage (2) 10,610 8,384 10,610 8,384
Net debt (10,810) (20,788) (10,810) (20,788)
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Basic net asset value 71,228 67,884 119,454 110,417
Projected proceeds on exercise of
options and warrants 2,243 7,625 2,243 7,625
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Diluted net asset value 73,471 75,509 121,697 118,042
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Common shares outstanding (thousands)
- Basic 15,410 15,356 15,410 15,356
- Diluted 16,122 17,751 16,122 17,751
Net asset value per common share ($)
- Basic (3) 4.62 4.42 7.75 7.19
- Diluted (3) 4.56 4.25 7.55 6.65

(1) The reserves values are based on before tax future cash flows as
evaluated by the Company's independent qualified reserves evaluators,
McDaniel using their future commodity price forecast, then in effect.
(2) The land values are determined internally using an estimated value of
$100 per undeveloped acre.
(3) Calculated using outstanding common shares, stock options and
performance warrants at year-end. The warrants expired December 2008.


As at Feb 27, 2009, Masters has 15,410,021 common shares outstanding with directors and officers owning or representing approximately 11% of the shares issued and outstanding.

The Company anticipates that the 2008 year end and fourth quarter financial results will be released in mid March 2009.

Masters Energy Inc. is an Alberta based corporation engaged in the business of acquiring or exploring for and developing oil and natural gas reserves in western Canada. Masters' common shares are listed on the Toronto Stock Exchange under the trading symbol "MSY".

Additional information regarding Masters may be viewed on the SEDAR website (www.sedar.com) or the Company's website (www.mastersenergy.com).

ADVISORIES

The calculations of barrels of oil equivalent ("boe") are based on a conversion rate of six thousand cubic feet ("mcf") of natural gas to one barrel ("bbl") of crude oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio 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.

Certain information regarding the Company, including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of commodity prices, currency fluctuations, uncertainties of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources: as a consequence, actual results may differ materially from those anticipated. The Company assumes no obligation to update the forward-looking statements contained herein or to update the reasons why actual results could differ from those contemplated by the forward-looking statements, unless so required by applicable securities law.

Contact Information

  • Masters Energy Inc.
    Geoff Merritt
    President and CEO
    (403) 290-1785
    or
    Masters Energy Inc.
    Randall Boyd
    Chief Financial Officer
    (403) 290-1785
    Website: www.mastersenergy.com