MegaWest Energy Corp.
OTC Bulletin Board : MGWSF

MegaWest Energy Corp.

December 11, 2007 14:49 ET

MegaWest Energy Announces Combined Independent and Management High Estimate of 2 Billion Barrels of Gross Original Resources (OOIP)

CALGARY, ALBERTA--(Marketwire - Dec. 11, 2007) - MegaWest Energy Corp., (the "Company" or "MegaWest"), an independent oil and gas company (OTCBB:MGWSF) (Cusip: #585168 107), specializing in non-conventional oil and gas projects with a focus on North American heavy oil, today announced that GLJ Petroleum Consultants ("GLJ"), has completed an independent engineering report of the reserves and resources associated with certain of its key projects. The combined GLJ and Management high estimate of combined recoverable Reserves, Contingent Resource and Prospective Resource is 332 million barrels out of a high estimate of Gross Original Resource (OOIP) of over 2 Billion barrels.

GLJ has independently estimated the oil reserves and resources attributable to MegaWest's interests in its Chetopa Kansas Project, the Upper Warner Sand at its Deerfield Missouri Project and the Big Clifty Sand at its Kentucky Reserves Project, encompassing only 43,982 of the total 111,514 mineral acres leased by MegaWest. Volume estimates have been completed, with Net Present Value estimates to be finalized at fiscal year-end. The GLJ reserves and resource estimates were prepared in accordance with the requirements of Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Capitalized terms related to reserve and resource classifications used in this press release are based on the definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook").

GLJ Reserves and Resource Estimates

- Total high estimate (P10) Gross Original Resource (OOIP) is 983 million barrels

- Total best estimate (P50) Gross Original Resource (OOIP) is 709 million barrels

- Total high estimate recoverable resource is 210 million barrels. This includes:

- Proved plus Probable plus Possible Reserves of 0.84 million barrels

- High estimate (P10) Contingent Resource of 131 million barrels, and

- High estimate (P10) Prospective Resource of 78 million barrels

- Total best estimate recoverable resource is 123 million barrels. This includes:

- Proved plus Probable Reserves of 0.35 million barrels

- Best estimate (P50) Contingent Resource of 77 million barrels, and

- Best estimate (P50) Prospective Resource of 46 million barrels

The results of the independent third party GLJ estimates are presented in Appendix A in Tables 2 and 4. The portion classified as resources has not been classified as reserves at this time, pending further delineation drilling, development planning, project design and receipt of regulatory approvals. Criteria other than economics may require classification as resources rather than reserves. Contingencies affecting the classification as reserves versus resources relate to the following issues as detailed in COGE Handbook: ownership considerations, drilling requirements, testing requirements, regulatory considerations, infrastructure and market considerations, timing of production and development, and economic requirements. There is no certainty that any portion of contingent resources will be commercially viable to produce. There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

Management Estimates

In addition to the GLJ estimated resources, MegaWest has identified the presence of oil accumulations in the Blue Jacket Sand at its Deerfield Missouri Project and in the Tar Springs and Hardinsburg Sands at the Kentucky Reserves Project not included in the GLJ report. MegaWest also has an interest in over 67,500 acres of leases in its Trinity Sands Texas and Big Sky Montana projects, which also have not been evaluated by GLJ at this time. Independent third party reserve and resource estimates will be completed on these resources after the initial round of exploration drilling and analysis is completed in each area.

MegaWest's management has undertaken a statistical estimate of the resource potential of the zones and projects which have not been completed by GLJ and these results are presented in the Appendix A, Tables 3 and 5. Table 1 in Appendix A presents MegaWest's mineral lease ownership in the various areas.

Combining the GLJ results with Management estimates indicates:

- Total high estimate (P10) Original Resource (OOIP) is 2.004 billion barrels. This includes:

- GLJ high estimate (P10) Original Resource is 983 million barrels

- Management high estimate (P10) Original Resource is 1.021 billion barrels

- Total best estimate (P50) Original Resource (OOIP) is 1.228 billion barrels. This includes:

- GLJ best estimate (P10) Original Resource is 709 million barrels

- Management high estimate (P10) Original Resource is 519 million barrels

- Total high estimate recoverable resource is 332 million barrels. This includes:

- GLJ Proved plus Probable plus Possible Reserves of 0.84 million barrels

- GLJ High estimate (P10) Contingent Resource of 131 million barrels, and

- GLJ High estimate (P10) Prospective Resource of 78 million barrels

- Management estimate (P10) Prospective Resource of 122 million barrels

- Total best estimate recoverable resource is 171 million barrels. This includes:

- GLJ Proved plus Probable Reserves of 0.35 million barrels

- GLJ Best estimate (P50) Contingent Resource of 77 million barrels, and

- GLJ Best estimate (P50) Prospective Resource of 46 million barrels

- Management Best estimate (P50) Prospective Resource of 48 million barrels

Additional potential exists in MegaWest's 37.5% interest in the deep gas rights underlying 35,217 acres of the Kentucky leases and its interest in the deep gas rights on 22,903 acres in the Texas Trinity Sands Project leases. This additional potential has not been estimated by MegaWest's management at this time and is not included in the figures shown above.

MegaWest owns or has the right to earn an interest in over 110,000 acres in Kansas, Missouri, Kentucky, Texas and Montana. MegaWest's strategy is to grow shareholder value through the selective acquisition of projects with large resource potential located in the vicinity of existing infrastructure and the application of emerging and proven commercial developments in thermal recovery technologies. Delineation drilling and the completion of thermal and enhanced recovery production demonstration projects may increase the value of the unconventional heavy oil resources in each of its core areas.

ON BEHALF OF THE BOARD OF DIRECTORS

George T. Stapleton, II, President & CEO

For further information please visit the Company's Website at www.megawestenergy.com.

Forward-Looking Statement Disclaimer

Except for statements of historical fact relating to the Company, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "potential", "prospective" and other similar words, or statements that certain events or conditions "may" "will" or "could" occur. Forward-looking statements in this release include MegaWest's management's estimates of gross original resources and recoverable resources associated with projects and zones which were not analyzed by GLJ Petroleum Consultants. In completing these estimates, MegaWest has used a volumetric calculation approach combined with a statistical analysis of the results. Based on results of recent drilling and published data available to MegaWest at the date of the estimates, MegaWest has created low, best and high estimates of various parameters used in volumetric calculations. These include net pay (the thickness of reservoir meeting minimum criteria), rock porosity, oil saturation, and formation volume factor (a factor that estimates the stock tank volume of oil occupied by one barrel of oil at reservoir conditions). In addition, MegaWest estimated the low, best and high probability that oil pay meeting the minimum criteria would be present under the gross mineral leases held by the Company. Every possible combination of these various factors was used in standard volumetric determination of Gross Original Resource (OOIP). A statistical analysis of the resultant values for Gross Original Resource (OOIP) was completed to determine the low, best and high estimates of Gross Original Resource (OOIP) likely to be present under the gross mineral acres held by the Company. MegaWest determined low, best and high estimates of recovery factor for each of the zones analyzed based on published data and/or internal reservoir engineering estimates from analogues or numerical reservoir simulation available to MegaWest at the date of the estimate. These recovery factors were combined in all possible combinations with the volumetric factors to create a dataset of estimated speculative Prospective Resource associated with the Gross Original Resource.
A statistical analysis of the resultant values for gross Prospective Resource was completed to determine the low, best and high estimates of gross Prospective Resource likely to be present under the gross mineral acres held by the Company. MegaWest's current ratio of net mineral acres to gross mineral acres in each area were applied to the results to arrive at low, best and high estimates of Company net Prospective Resource. Further drilling, geological interpretation, engineering interpretation or the results of field testing of recovery using various technologies could result in management revising its current estimates of parameters used in its analysis.

In general, estimates of gross original resources and recoverable resources are based upon a number of factors and assumptions made as of the date on which the estimates were determined, such as geological, technological and engineering estimates and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking estimates. In respect to management's estimates, these risks and uncertainties include but are not limited to: (1) the fact that there is no certainty that the zones of interest will exist to the extent estimated or that the zones will be found to have oil with characteristics that meet or exceed the minimum criteria in terms of net pay thickness, porosity or oil saturation, or that the oil will be commercially recoverable to the extent estimated; (2) risks inherent in the heavy oil and oil sands industry; (3) the lack of additional financing to fund the Company's exploration activities and continued operations; (4) fluctuations in foreign exchange and interest rates; (5) the number of competitors in the oil and gas industry with greater technical, financial and operations resources and staff;
(6) fluctuations in world prices and markets for oil and gas due to domestic, international, political, social, economic and environmental factors beyond the Company's control; (7) changes in government regulations affecting oil and gas operations and the high compliance cost with respect to governmental regulations; (8) potential liabilities for pollution or hazards against which the Company cannot adequately insure or which the Company may elect not to insure; (9) the Company's ability to hire and retain qualified employees and consultants; (10) contingencies affecting the classification as reserves versus resources which relate to the following issues as detailed in the COGE Handbook: ownership considerations, drilling requirements, testing requirements, regulatory considerations, infrastructure and market considerations, timing of production and development, and economic requirements; (11) the fact that there is no certainty that any portion of contingent resources will be commercially viable to produce; (12) the fact that there is no certainty that any portion of the prospective resources will be discovered and if discovered, there is no certainty that it will be commercially viable to produce any portion of the resources; and (13) and other factors beyond the Company's control. MegaWest Energy undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change, except as required by law. Readers should also refer to MegaWest Energy's current annual report or other document filings, which are available at www.sedar.com and at www.sec.gov for additional discussion of risks and uncertainties. The reader is cautioned not to place undue reliance on forward-looking statements.



Appendix A

Table 1 Summary of Lease Ownership
----------------------------------
(December 7, 2007)

--------------------------------------------------------------------------
Mineral Company
Acres Average Net Mineral
Prospect Leased WI (%) Acres
Kansas Chetopa Project All Rights 392 100.0% 392

Missouri Deerfield Project All Rights 8,373 100.0% 8,373

Kentucky Reserves Project Shallow Rights 35,217 62.5% 22,010

Texas Trinity Sands Project Shallow
Rights(1) 33,963 35.3% 11,962

Montana Big Sky Project All Rights(2) 33,569 40.0% 13,428

Total 111,514 56,165

Kentucky Reserves Project Deep Rights(3) 35,217 37.5% 13,026

Texas Trinity Sands Project Deep
Rights(1, 3) 22,903 28.1% 6,432
--------------------------------------------------------------------------
Deep Rights(3) 58,120 19,458

(1) After Earn-In is complete, Average WI will increase to 66.7%.
(2) After Work Programs are completed, Average WI will increase to 60%.
(3) Deep rights acreage is coincident with shallow rights acreage. In
Texas, deep rights are not held on all acreage.


Table 2 Summary of Gross Original Resources (OOIP)
-------------------------------------------------
GLJ Evaluation
--------------

Entity P90 Low P50 Best P10 High
------ ------- -------- --------
(MMbbls)

Kansas Chetopa Project 2 5 8

Missouri Upper Warner Sand 41 130 170

Kentucky Big Clifty Sand 212 574 805

Texas Trinity Sands Project Not Evaluated

Montana Big Sky Project Not Evaluated
--------------------------------------------------------------------------

Total 255 709 983
--------------------------------------------------------------------------


Table 3 Summary of Speculative Additional Gross Original Resources (OOIP)
------------------------------------------------------------------------
Management Estimates
--------------------

Entity P90 Low P50 Best P10 High
------ ------- -------- --------
(MMbbls)

Missouri Blue Jacket Sand 7 13 26

Kentucky Hardinsburg and Tar
Springs Sands 92 170 286

Texas Trinity Sands 20 68 268

Montana Big Sky Project 156 268 441
--------------------------------------------------------------------------

Total 275 519 1021
--------------------------------------------------------------------------


Table 4 Summary of Potentially Recoverable Resources
----------------------------------------------------
GLJ Evaluation
--------------

Contingent Prospective
Reserves(1) Resources Resources
---------------------------------------------------------------------------
P90 P50 P10 P50 P10
Entity P 2P 3P Low Best High Best High
(MMbbls) (MMbbls) (MMbbls)
---------------------------------------------------------------------------

Kansas Chetopa Project 0.05 0.24 0.62 0.49 0.58 1.01 0.73 1.28

Missouri Upper Warner Sand - 0.11 0.22 8 14 22 18 29

Kentucky Big Clifty Sand - - - 26 62 108 27 47

Texas Trinity Sands Project Not Evaluated

Montana Big Sky Project Not Evaluated
---------------------------------------------------------------------------

Total(2) 0.05 0.35 0.84 35 77 131 46 78
---------------------------------------------------------------------------
(1) P stands for Proved Reserves, 2P for Proved Reserves plus Probable
Reserves and 3P for Proved Reserves plus Probable Reserves plus
Possible Reserves
(2) Totals may not add due to rounding.


Table 5 Summary of Speculative Additional Recoverable Resources
---------------------------------------------------------------
Management Estimates
--------------------

Speculative
Contingent Prospective
Reserves(1) Resources Resources
---------------------------------------------------------------------------
P90 P50 P10 P50 P10
Entity P 2P 3P Low Best High Best High
(MMbbls) (MMbbls) (MMbbls)
---------------------------------------------------------------------------

Kansas Chetopa Project

Missouri Blue Jacket Sand 3 6

Kentucky Hardinsburg and Tar
Springs Sands 11 33

Texas Trinity Sands 9 38

Montana Big Sky Project 24 45
---------------------------------------------------------------------------

Total(2) - - - - - - 48 122
---------------------------------------------------------------------------
(1) P stands for Proved Reserves, 2P for Proved Reserves plus Probable
Reserves and 3P for Proved Reserves plus Probable Reserves plus
Possible Reserves
(2) Totals may not add due to rounding.


COGEH DEFINITIONS OF OIL AND GAS RESOURCES AND RESERVES

Original Resources

Original resources are those quantities of oil and gas estimated to exist originally in naturally occurring accumulations. They are, therefore, those quantities estimated on a given date to be remaining in known accumulations plus those quantities already produced from known accumulations plus those quantities in accumulations yet to be discovered.

Contingent Resources

Contingent resources are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from known accumulations but are not currently economic. Contingent resources include, for example, accumulations for which there is currently no viable market.

Prospective Resources

Prospective resources are defined as those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. They are technically viable and economic to recover.

Classification of Resources

When evaluating resources, in particular contingent and prospective resources, the following mutually exclusive categories are recommended:

- Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term reflects a P90 confidence level.

- Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term is a measure of central tendency of the uncertainty distribution (most likely/mode, P50/median, or arithmetic average/mean).

- High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term reflects a P10 confidence level.

Reserves

Those quantities of oil and gas anticipated to be economically recoverable from discovered resources are classified as reserves.

Proved Reserves

Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

Probable Reserves

Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved + probable reserves.

Possible Reserves

Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved + probable + possible reserves.

Classification of Reserves

Reported Reserves should target the following levels of certainty under a specific set of economic conditions:

- at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves;

- at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved + probable reserves;

- at least a 10 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved + probable + possible reserves.

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