Milagro Energy Inc.

Milagro Energy Inc.

November 27, 2007 13:04 ET

Milagro Energy Inc. Announces Acquistion of Certain CO2 Assets in Battle Creek, Saskatchewan

CALGARY, ALBERTA--(Marketwire - Nov. 27, 2007) - Milagro Energy Inc. (TSX:MIG) (or the "Company" or "Milagro") is pleased to announce that it has closed the acquisition of certain Saskatchewan helium and associated gases leases (which leases include the CO2 rights) and 5-31-3-26W3M well bore and related surface leases and equipment at Battle Creek, Saskatchewan from Hardie & Kelly Inc., in its capacity as Receiver of Interex Oilfield Services Ltd. The acquisition has an effective date of November 26, 2007.

The Company will use the acquired 5-31-3-26W3M well bore already set up for CO2 production as the source well to inject the CO2 gas into the Madison formation in a secondary and tertiary recovery scheme awaiting approval from Saskatchewan Industry and Resources. The acquisition has provided Milagro with a natural source of CO2 on location and no further expense will be required to purchase CO2 for flooding the Madison formation at Battle Creek. Milagro expects additional benefits to be derived from the initial phase of CO2 injection, which will require no additional capital costs other than the costs of pipelining the 5-31 well bore into the initial injectors to inject the CO2 gas.

Milagro considers itself to be unique in the Western Canada Sedimentary Basin, as Milagro is not aware of any other company with its own natural source CO2 on location. CO2 EOR projects remain rare in Western Canada due the scarcity of natural occurring CO2 as well as the costs associated with process gas sources of CO2, mainly the costs of purchasing the CO2 and the costs of transporting, pipelining and compressing the CO2. Also, there currently is no economic technology for recovering flue gas CO2 sources due to the added cost of removing impurities.

Milagro considers this tertiary operation to be advantageous to its business and operations for the following reasons: (i) CO2 investments provide a favourable rate of return, even at relatively low oil prices, (ii) tertiary flooding exhibits a lower risk profile, and (iii) Milagro does not depend on third party suppliers for CO2. Milagro is not aware of any significant natural sources of carbon dioxide from Alberta to Manitoba except the one acquired by Milagro, and these volumes of CO2 are the foundation for Milagro's entire tertiary program.

CO2 is one of the most efficient tertiary recovery mechanisms for crude oil. The CO2 acts somewhat like a solvent for the oil, removing it from the oil bearing formation as the CO2 passes through the rock. CO2 tertiary floods are unique because they require large volumes of CO2 which to our knowledge is limited to a few geological basins, one of which is our source at Battle Creek. Further, the most economical way to transport CO2 is via dedicated pipelines, which are also in limited supply in the United States and virtually non-existent in Canada (in Canada the only dedicated CO2 pipeline is from the United States to Weyburn, Saskatchewan). Because the sources and methods of transportation of CO2 are limited, the US Department of Energy reports that only 3% or 250,000 Bbls/d of the United States domestic oil production is derived from tertiary recovery projects and negligible amounts in Canada.

Milagro is an exploration and production company engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada.

Reader Advisory

Readers should be aware that historical results are not necessarily indicative of future performance.

Statements in this press release may contain forward-looking information including expectations of production, expectations regarding the results of its CO2 flood program, plans for future operations and capital expenditures. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the company. These risks include, but are not limited to, the risks associated with the oil and gas industry, commodity prices, general economic conditions, the availability of financing to fund operations, conditions in the capital markets in Canada and elsewhere, exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, the availability of drilling equipment and personnel, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    President & CEO
    (403) 693-4006
    Milagro Energy Inc.
    Travis Doupe
    Vice-President, Finance & CFO
    (403) 693-4007