MegaWest Energy Corp.
OTC Bulletin Board : MGWSF

MegaWest Energy Corp.

August 14, 2008 09:30 ET

Megawest Energy Announces Third Party Valuation of Reserves and Contingent Resources

CALGARY, ALBERTA--(Marketwire - Aug. 14, 2008) - 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, is pleased to announce that GLJ Petroleum Consultants ("GLJ"), an independent petroleum consulting firm, has confirmed and updated prior estimates of volumes and has completed a net present value (NPV) cash flow evaluation report of reserves and contingent resources for the core assets held in Missouri, Kansas and Kentucky. The GLJ report was prepared as of July 31, 2008 with an effective date of April 30, 2008 pursuant to National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators. This report has been accepted by the Board of Directors of the Company. The Company's filings under NI 51-101 can be found at www.sedar.com.

Reserves and Resource Summary



Reserve and Resource Summary as of April 30, 2008
-----------------------------------------------------------
Company Gross Company WI Initial Remaining
Gross WI OOIP OOIP Reserves Reserves
Area Area (PIIP) (PIIP) Resources Resources
acres acres mstb mstb mstb mstb
-----------------------------------------------------------
RESERVES
CATEGORY
TOTAL PROVED 15 15 229 229 57 45
-----------------------------------------------------------
TOTAL PROVED +
PROBABLE 95 95 2,227 2,227 599 586
-----------------------------------------------------------
TOTAL PPP 185 185 4,353 4,353 1,193 1,180
-----------------------------------------------------------

-----------------------------------------------------------
RESOURCE
CATEGORY
-----------------------------------------------------------
BEST ESTIMATE
CONTINGENT 27,415 18,230 455,143 305,116 76,359 76,359
-----------------------------------------------------------
HIGH ESTIMATE
CONTINGENT 27,415 18,230 630,183 420,112 129,788 129,788
-----------------------------------------------------------

-----------------------------------------------------------
BEST ESTIMATE
PROSPECTIVE 17,032 13,011 284,024 218,526 54,753 54,753
-----------------------------------------------------------

-----------------------------------------------------------
HIGH ESTIMATE
PROSPECTIVE 17,032 13,011 387,780 295,919 90,626 90,626
-----------------------------------------------------------

-----------------------------------------------------------
RESOURCE NOT
ASSIGNED 1,207 1,207
-----------------------------------------------------------
RESOURCE NOT
EVALUATED(i) 71,975 29,314
-----------------------------------------------------------
117,814 61,946
-----------------------------------------------------------
(i)Note: "Resource not Evaluated" includes Texas, Montana and the deep
rights in Kentucky


In addition to the above volumes, GLJ has estimated recoverable prospective resources to be 54.8 MMbbl (best estimate) and 90.6 MMbbl (high estimate). As is typical, economic valuation of prospective resources was not completed. The distribution of GLJ evaluated resource between reserves and resources is consistent with the early stage nature of the Company. As the Company continues to demonstrate its capacity to delineate, design, construct and operate projects on its leases, reclassification of resources to reserves categories should follow. Upon completion of further technical analysis including seismic, exploration drilling, coring, well testing, geologic evaluation and reservoir engineering evaluation, the Company may submit Montana (36,571 gross acres - 16,767 net acres as of April 30, 2008), Texas (34,603 gross acres - 12,042 net acres as of April 30, 2008) and Kentucky deep rights which lie below the heavy oil rights that GLJ evaluated (36,008 gross acres - 13,503 net acres as of April 30, 2008) to GLJ for evaluation.

Reserves and Resource Valuation

Reserves valuation was conducted for the three reserves categories of Total Proved, Total Proved plus Probable and Total Proved plus Probable plus Possible. The GLJ valuation is based on preliminary cost and timing estimates provided to GLJ by MegaWest. Two scenarios of NPV cash flows were generated; one using the April 1, 2008 GLJ price forecast and the other a constant price reflecting the posted WTI price at fiscal year end of April 30, 2008. In both cases the WTI price was discounted by 20% to obtain the estimated field-gate price.

Summary tables of the net reserves valuation for each of the two price scenarios are detailed below:



Net Present Value of Future Net Revenue (Before Income Tax)
Using GLJ Price Forecast as of April 1, 2008(i)

------------------------------------------------------------
Net Present Value (NPV) of Future Net Revenue
------------------------------------------------------------
Unit Value
Before Income
Tax-Discounted
Before Income Taxes-Discounted at (%/yr) at 10%/yr
------------------------------------------------------------
RESERVES 0% 5% 10% 15%
CATGEGORY (M$) (M$) (M$) (M$) $/bbl
------------------------------------------------------------

------------------------------------------------------------
TOTAL PROVED 258 222 191 165 4.87
------------------------------------------------------------
TOTAL PROVED +
PROBABLE 9,938 8,626 7,554 6,669 14.78
------------------------------------------------------------
TOTAL PPP 18,334 15,550 13,326 11,527 12.94
------------------------------------------------------------

------------------------------------------------------------

------------------------------------------------------------
RESOURCE
CATGEGORY
------------------------------------------------------------
BEST ESTIMATE
CONTINGENT 560,464 218,285 118,358 74,121 1.55
------------------------------------------------------------
HIGH ESTIMATE
CONTINGENT 2,355,139 738,411 335,973 190,039 2.59
------------------------------------------------------------
------------------------------------------------------------
(i)Note: as per GLJ prepared and published price and market forecasts for
April 1, 2008


Net Present Value of Future Net Revenue (Before Income Tax)
Using Year-end Constant Price ($113.70/bbl WTI)(i)

------------------------------------------------------------
Net Present Value (NPV) of Future Net Revenue
------------------------------------------------------------
Unit Value
Before Income
Tax-Discounted
Before Income Taxes-Discounted at (%/yr) at 10%/yr
------------------------------------------------------------
RESERVES 0% 5% 10% 15%
CATGEGORY (M$) (M$) (M$) (M$) $/bbl
------------------------------------------------------------

------------------------------------------------------------
TOTAL PROVED 1,127 1,022 932 853 23.72
------------------------------------------------------------
TOTAL PROVED +
PROBABLE 22,265 19,383 17,020 15,062 33.31
------------------------------------------------------------
TOTAL PPP 44,214 37,518 32,176 27,860 31.24
------------------------------------------------------------

------------------------------------------------------------

------------------------------------------------------------
RESOURCE
CATGEGORY
------------------------------------------------------------
BEST ESTIMATE
CONTINGENT 2,352,948 976,749 544,436 355,265 7.12
------------------------------------------------------------
HIGH ESTIMATE
CONTINGENT 4,805,971 1,761,208 893,887 545,191 6.89
------------------------------------------------------------
------------------------------------------------------------
(i)Note: Constant price used to estimate values is referencing the
benchmark price (reflecting the posted WTI price corresponding to
the last day of the Company's most recent financial year) for
April 30, 2008.


MegaWest is continuing to aggressively execute its business plan to add shareholder value. MegaWest's experienced management seeks to prove up significant resources and achieve early production from its world-class suite of operated heavy oil properties. MegaWest owns or has the right to earn an interest in over 125,000 acres in Missouri, Kansas, Kentucky, Montana and Texas. MegaWest's strategy for growth is underpinned by three converging market factors; the need for security of energy supply in North America, the current high world oil price, and the new technical developments in commercial thermal recovery of heavy oil. MegaWest plans to establish proven and producing unconventional heavy oil reserves in each of its core areas through delineation drilling and the completion of enhanced recovery production projects.

ON BEHALF OF THE BOARD OF DIRECTORS

George T. Stapleton, II, President & CEO

Notes:

The following are excerpts from the definitions of resources and reserves, contained in Section 5 of the COGE Handbook, which is referenced by the Canadian Securities Administrators in "National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities".

A. Fundamental Resource Definitions

Total Petroleum Initially-In-Place (PIIP) (formerly referred to as Original Oil-in-Place or OOIP) is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered (equivalent to "total resources").

Discovered Petroleum Initially-In-Place (equivalent to discovered resources) is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable.

Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of certainty associated with the estimates and may be subclassified based on development and production status. (Reserves are further defined below).

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status. (Criteria for determining commerciality are further detailed in the COGE Handbook Section 5.3.4).

Undiscovered Petroleum Initially-In-Place (equivalent to undiscovered resources) is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of undiscovered petroleum initially in place is referred to as "prospective resources," the remainder as "unrecoverable".

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity.

B. Uncertainty Categories for Resource Estimates

The range of uncertainty of estimated recoverable volumes may be represented by either deterministic scenarios or by a probability distribution. Resources should be provided as low, best, and high estimates as follows:

Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

This approach to describing uncertainty may be applied to reserves, contingent resources, and prospective resources. There may be significant risk that sub-commercial and undiscovered accumulations will not achieve commercial production. However, it is useful to consider and identify the range of potentially recoverable quantities independently of such risk.

C. Reserves Categories

Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on:

- analysis of drilling, geological, geophysical, and engineering data;

- the use of established technology;

- specified economic conditions(1), which are generally accepted as being reasonable, and shall be disclosed.

Reserves are classified according to the degree of certainty associated with the estimates.

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 plus 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 plus probable plus possible reserves.

Other criteria that must also be met for the classification of reserves are provided in (Section 5.5 of the COGE Handbook).

D. Levels of Certainty for Reported Reserves

The qualitative certainty levels referred to in the definitions above are applicable to individual reserves entities (which refers to the lowest level at which reserves calculations are performed) and to Reported Reserves (which refers to the highest level sum of individual entity estimates for which reserves estimates are presented). 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 plus probable reserves;

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

A quantitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates are prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods.

Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in Section 5.5.3 (of the COGE Handbook).

E. Commercial Risk Applicable to Resource Estimates

Estimates of recoverable quantities are stated in terms of the sales products derived from a development program, assuming commercial development. It must be recognized that reserves, contingent resources, and prospective resources involve different risks associated with achieving commerciality. The likelihood that a project will achieve commerciality is referred to as the "chance of commerciality." The chance of commerciality varies in different categories of recoverable resources as follows:

Reserves: To be classified as reserves, estimated recoverable quantities must be associated with a project(s) that has demonstrated commercial viability. Under the fiscal conditions applied in the estimation of reserves, the chance of commerciality is effectively 100 percent.

Contingent Resources: Not all technically feasible development plans will be commercial. The commercial viability of a development project is dependent on the forecast of fiscal conditions over the life of the project. For contingent resources the risk component relating to the likelihood that an accumulation will be commercially developed is referred to as the "chance of development." For contingent resources the chance of commerciality is equal to the chance of development.

Prospective Resources: Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the "chance of discovery." Thus, for an undiscovered accumulation the chance of commerciality is the product of two risk components - the chance of discovery and the chance of development.

(1) For securities reporting, the key economic assumptions will be the prices and costs used in the estimate. The required assumptions may vary by jurisdiction, for example:

(a) forecast prices and costs, in Canada under NI 51-101

(b) constant prices and costs, as at the last day of a reporting issuer's financial year, under US SEC rules (this is optional disclosure under NI 51-101).

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.

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. These risks and uncertainties are different for each category of reserves, with less risk associated with Proved Reserves and increasing risk associated with Probable and Possible Reserves respectively.

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.

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