Milagro Energy Inc.

Milagro Energy Inc.

March 02, 2007 09:29 ET

Milagro Energy Inc. Announces Summary 2006 Reserves Information Including 96% Growth in Proved Plus Probable Reserves

CALGARY, ALBERTA--(CCNMatthews - March 2, 2007) -


Milagro Energy Inc. (TSX:MIG) ("Milagro" or the "Company") is pleased to announce that the Company has increased its proved and probable reserve base to 9.21 million barrels of oil equivalent ("boe") as at December 31, 2006. This represents a 96% increase over the Company's 4.69 million boe of proved and probable reserves as at December 31, 2005. Milagro has continued its strategy of focusing on expanding its crude oil reserves and as a result 72% of its proved and probable reserves are comprised of light crude oil.

Milagro is further pleased to report that the Company achieved strong reserves per share and net asset value growth on a cost effective basis despite being in an environment of capital restraint, increasing costs and decreasing commodity prices throughout the oil and gas industry. Proved and probable reserves per share increased by 67% to 0.15 boe per share as at December 31, 2006 compared to 0.09 boe per share at December 31, 2005.

Milagro's estimated net asset value as at December 31, 2006 is calculated

Net Asset Value ($000s except per share) Basic Fully Diluted
NPV 10% of Proved and Probable reserves $128,370 $128,370
Net undeveloped land value(1) $ 10,901 $ 10,901
Year end net debt(2) $(24,740) $(24,740)
Proceeds from options - $ 1,177
Net asset value $114,531 $115,708
Shares outstanding 59,451 61,208
NAV per share $ 1.93 $ 1.89

(1) Net undeveloped land value is a management estimate of market value for
the Company's 62,290 acres based on land sales information in
comparable areas.

(2) Net debt based on management's unaudited estimates as at December 31,
2006 calculated as outstanding loans and current liabilities minus
current assets.

In 2006, Milagro added 4.52 million boe of high-quality oil and gas reserves. Milagro continues to execute on its business development plan of making strategic acquisitions balanced by a focused program of exploration, exploitation and development. Milagro's strategy for the coming year will be concentrated on the development and delineation drilling phase targeting the Company's extensive portfolio of identified prospects and reserves. Milagro's dedicated program of converting these high quality reserves into near term production, cash flow and earnings will result in the Company achieving a sound financial position and sustainable growth for several years to come.


Milagro is also pleased to announce that the Company has filed a short form preliminary prospectus today in the provinces British Columbia, Alberta, Manitoba and Ontario in connection with the proposed equity offering announced on February 27, 2007. Westwind Partners Inc. is acting as agent to the equity offering which is expected to close by the end of March.


In accordance with NI 51-101, DeGolyer and MacNaughton Canada Limited ("D&M") prepared an evaluation, as at December 31, 2006, of 100% of Milagro's oil, natural gas and natural gas liquids reserves (The "Milagro D&M Report").

The full reserve disclosure tables and other information as required under NI 51-1012 in respect of Milagro's reserves will be set out in Milagro's 2006 Annual Information Form or in a separate filing under Part 2 of NI 51-101 which is to be filed on SEDAR on or before March 31, 2007.

SUMMARY OF RESERVES AS OF DECEMBER 31, 2006 (Forecast Prices & Costs)

Light & Natural Gas Natural Gas Oil
Medium Oil (1) Liquids Equivalent
(mbbls) (mmcf) (mbbls) (mboe)
Gross Net Gross Net Gross Net Gross Net
RESERVES CATEGORY (2) (3) (2) (3) (2) (3) (2) (3)
Developed Producing 444 419 2,375 1,987 15 10 855 760
Developed Non-Producing 252 232 1,559 1,193 19 12 531 443
Undeveloped 547 480 503 367 5 4 636 545
TOTAL PROVED 1,243 1,131 4,437 3,547 38 26 2,021 1,748
Probable 6,176 5,034 5,616 4,215 76 50 7,188 5,787
TOTAL PROVED + PROBABLE 7,418 6,165 10,053 7,762 114 76 9,208 7,535

(1) Estimates of Reserves of natural gas include associated and
non-associated gas.
(2) "Gross Reserves" are Corporation's working interest share of remaining
reserves before the deduction of royalties.
(3) "Net Reserves" are Corporation's working interest share of remaining
reserves less all Crown, freehold, and overriding royalties and
interests owned by others.

(Forecast Prices & Costs)

Net Present Value (NPV) of Future Net Revenue (FNR) (1)(2)
Before Income Taxes - After Income Taxes -
Discounted at (%/yr) Discounted at (%/yr)
RESERVES 0% 5% 10% 15% 0% 5% 10% 15%
CATEGORY (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$)
Producing 19,015 15,389 13,017 11,333 19,015 15,389 13,017 11,333
Producing 14,567 9,845 7,180 5,497 11,914 8,263 6,147 4,780
Undeveloped 8,445 5,750 3,880 2,257 6,441 4,232 2,699 1,596
TOTAL PROVED 42,027 30,984 24,077 19,367 37,370 27,884 21,863 17,709
Probable 213,621 143,195 104,293 79,299 164,329 108,993 78,338 58,645
+ PROBABLE 255,648 174,179 128,370 98,666 201,699 136,877 100,201 76,354

(1) NPV of FNR includes all resource income: sale of oil, gas, by-product
reserves; processing of third party reserves; other income.
(2) Income taxes includes all resource income, appropriate income tax
calculations and prior tax pools.

The tables above disclose in the aggregate, the Corporation's gross and net proved and proved plus probable reserves and Net Present Value (NPV) as estimated in the Milagro D&M Report. These estimates were calculated using forecast prices and costs.

"Forecast prices and costs" means future prices and costs used by D&M in the D&M Report that are generally accepted as being a reasonable outlook of the future, or fixed or currently determinable future prices or costs to which the Corporation is bound.

"Working Interest" reserves equate to those reserves that are referred to as "Company Gross" reserves by the Canadian Securities Administrators (CSA) in NI 51-101. Gross Reserves are Company gross reserves, which are the Company's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the Company.

"Net After Royalty" reserves are the Company's working interest (operating or non-operating) share after deduction of royalty obligations plus the Company's royalty interests in reserves.

The net present value of future net revenue attributable to Milagro's reserves is stated without provision for interest costs and general administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only wells evaluated by D&M. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to Milagro's reserves estimated by D&M represent the fair market value of those reserves. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregations. Other assumptions and qualifications relating to costs, prices and future production and other matters are summarized herein. The recovery and reserve estimates of Milagro's oil, natural gas, and NGL reserves provided herein are estimates only and there is not guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.

The above summary of reserves and values was based on the following price and cost assumptions from the Milagro D&M Report:

(Forecast Prices & Costs)

Oil Field Costs Exchange WTI @Cushing Edm. Oil Price Alberta
Year Inflation % $US/$CDN $US/BBL D2S2 $/BBL Plantgate Spot
2007 0.0 0.862 65.00 75.12 7.32
2008 4.0 0.862 65.52 75.71 7.91
2009 3.0 0.862 64.27 74.26 7.72
2010 2.0 0.862 61.73 71.30 7.48
2011 2.0 0.862 59.07 68.20 7.68
2012 2.0 0.862 59.11 68.25 7.77
2013 2.0 0.862 60.29 69.62 7.92
2014 2.0 0.862 61.50 71.01 8.07
2015 2.0 0.862 62.73 72.43 8.22
2016 2.0 0.862 63.98 73.88 8.38
2017 2.0 0.862 65.26 75.35 8.59
2018 2.0 0.862 66.57 76.86 8.80
2018+ 2.0 escalate oil, gas and product prices at 2.0% per
year thereafter

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


Statements in this press release may contain forward-looking information including expectations of funds to be raised in a financing, production, and future capital expenditures and cash flow. 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, conditions in the capital markets in Canada and elsewhere and 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, 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.

Barrels of Oil Equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio is 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.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    (403) 693-4006
    Milagro Energy Inc.
    Brad Haack
    (403) 693-4007