Milagro Energy Inc.
TSX : MIG

Milagro Energy Inc.

March 20, 2006 10:18 ET

Milagro Energy Inc. Announces Summary of Year-End Reserves & 2005 Financial Results

CALGARY, ALBERTA--(CCNMatthews - March 20, 2006) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Milagro Energy Inc. (TSX:MIG) today announces a summary of its 2005 year-end reserves information, financial and operating results. A summary of the Chirripo Resources Inc. reserves, as at December 31, 2005, are also included, to reflect Milagro's previously announced take-over of Chirripo which was completed on March 7, 2006. All reserves stated herein are based on forecast prices and costs and are gross reserves except where indicated.

Highlights for 2005 include:

- The drilling of 9 wells at Judy Creek with an 89 percent success rate.

- Raising a total of 7.2 million of new equity capital

- Achieving gross revenues of 8.4 million and 2.7 million of net cash flow

- Reserve base of 4.7 million barrels on a proven plus probable basis with a reserve life index of 14.3 years calculated from the engineering report's forecasted 2006 production volumes.

- Finding and development cost of $9.71 per BOE for proven plus probable reserves.

- Recycle ratio of 1.6 for proven plus probable reserves.

Milagro Reserves Highlights

As of December 31, 2005, Milagro's proven plus probable net present value 10%, before taxes, is $57.0 million (2004 - $24.9 million) which is a 129 percent increase. Milagro's total proven net present value 10%, before taxes, is $21.6 million (2004 - $17.9 million) which is a 20 percent increase.

As of December 31, 2005, Milagro's proven plus probable reserves are 4.7 million BOE (2004 - 2.6 million) which is a 79 percent increase. Milagro's total proven reserves are 1.69 million BOE (2004 - 1.73 million) which is a 3 percent decrease.

The quality of reserves targeted by Milagro during 2005 resulted in an improvement to the reserve life index for total proved plus probable reserves of 14.3 years (2004 - 9.2 years).

Chirripo Reserves Highlights

As of December 31, 2005, Chirripo's proven plus probable net present value 10%, before taxes, is $16.2 million, Chirripo's total proven net present value 10%, before taxes, is $11.3.

As of December 31, 2005, Chirripo's proven plus probable reserves are 0.74 million BOE. Chirripo's total proven reserves are 0.48 million BOE.

Following Milagro's acquisition of Chirripo, crude oil and natural gas liquids reserves represent approximately 74 percent of the combined total proved plus probable reserves and natural gas reserves represent approximately 26 percent of the proved plus probable reserves.

Reserves Evaluator Information

The Milagro reserves were evaluated by the independent reserves evaluators DeGoyler and MacNaughton Canada Limited and the Chirripo reserves were evaluated by the independent reserves evaluators Paddock Lindstrom & Associates Ltd. Both reserve reports were evaluated in accordance with National Instrument 51-101 ("NI 5I-101") for the year ended December 31, 2005. The full reserve disclosure tables and other information as required under NI 51-101 in respect of Milagro's reserves will be set out in Milagro's 2005 Annual Information Form which is to be filed on SEDAR on or before March 31, 2006.



Milagro's year-end 2005 financial and operating results are as follows:

2005 2004
Financial
($000s except per share data)
Oil and natural gas revenue 8,361 9,205
Cash flow from operations 2,670 3,564
Per share - basic 0.05 0.07
Per share - diluted 0.05 0.07
Net earnings (103) (2,499)
Per share - basic (0.00) (0.06)
Per share - diluted (0.00) (0.06)
Capital expenditures (net) 16,577 9,960
Debt and Working capital 12,901 5,702
Shareholders' equity 30,075 24,280
Total assets 49,375 34,152

Common Share Information
Shares outstanding (000s)
Weighted average during the period 50,530 44,672
Period end - basic 53,531 47,780
Period end - fully diluted 54,863 49,458

Operating
Average daily production
Oil (bbls per day) 340 461
Natural gas (mcf per day) 834 1,334
Equivalent barrels (BOE per day) 479 684

Wells drilled
Gross 9 8
Net 9.0 8.0

Undeveloped land
Net acres 49,296 50,520


The complete Financial Statements and Notes plus the Management Discussion and Analysis will be filed on SEDAR on or before March 31, 2006.

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

Where amounts are expressed on a BOE basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

ADVISORY REGARDING FORWARD-LOOKING STATEMENTS

Statements in this press release may contain forward-looking information including expectations of future production and components of cash flow and earnings. 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 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.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    President and CEO
    (403) 693-4000
    or
    Milagro Energy Inc.
    Brad Haack
    VP Finance and CFO
    (403) 693-4000
    (403) 693-4001 (FAX)
    Website: www.milagroenergy.com