Nevarro Energy Ltd.

Nevarro Energy Ltd.

August 16, 2005 15:58 ET

Nevarro Energy Ltd.: News Release

CALGARY, ALBERTA--(CCNMatthews - Aug. 16, 2005) -

Not for distribution to United States newswire services or for dissemination in the United States.

Nevarro Energy Ltd. (TSX VENTURE:NEL) ("Nevarro") announces that Fortress Financial Corp. ("Fortress") has withdrawn its previously mailed cash offer to the Nevarro shareholders to acquire by way of take-over bid all of the outstanding Nevarro common shares. The offer to acquire the outstanding Nevarro common shares was withdrawn, as Fortress was unable to secure the necessary loan facility or alternate source of financing to complete the acquisition. All Nevarro common shares previously tendered to the offer will be returned to Nevarro shareholders.

Nevarro is pleased to announce an update to its 2005 drilling program. Nevarro, along with its industry partners have recently drilled fourteen wells. Ten of the fourteen wells are currently on production, three wells are cased and waiting for completion and one well was D&A. Nevarro's average working interest in the fourteen new wells is 59.86%.

Concurrent with Nevarro's drilling program, Nevarro converted an uneconomical Sparky oil well into a Colony Gas well, which currently is producing at 250 MCF/d. Nevarro's working interest is 57.3%.

Nevarro has recently acquired 50% interest in ten shut-in and two producing oil wells in the Freemont Area of Saskatchewan. Nevarro has targeted ten potential drilling locations in this new Area.

Nevarro expects to exit August 2005 with production exceeding 1,000 boe/d based on current field estimates. Based on the encouraging results of its recent drilling program, Nevarro plans on drilling an additional twenty-five wells prior to year-end. The $5,000,000 drilling program will be funded from cash flow and existing bank lines.

Nevarro recently engaged DeGolyer MacNaughton to update its December 31, 2004 independent reserve evaluation using the forecast price as at June 30, 2005. Based on the June 30, 2005 price deck, Nevarro's December 31, 2004 independent reserve evaluation has a 10% forecast discounted value of $33,972,000, which represents $3.72 per common share outstanding and $3.42 per common share fully diluted.

Nevarro currently has 9,107,891 common shares outstanding. Fully diluted, Nevarro has 9,912,500 common shares outstanding. Nevarro's current bank debt is $4,276,200.

This news release contains certain forward-looking statements, which are based on the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. Some of the forward-looking statements may be identified by words such as 'expects', 'anticipates', 'believes', 'projects', 'plans' and similar expressions. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Corporation's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, changes in general economic, market and business conditions; changes or fluctuations in production levels, commodity prices, currency exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements or changes to legislation, the Corporation's ability to comply with current and future environmental or other laws; the Corporation's success at acquisition, exploitation and development of reserves; actions by governmental or regulatory authorities including increasing taxes or other regulations; and the occurrence of unexpected events involved in the operation and development of oil and gas properties. The Corporation disclaims any responsibility to update these forward-looking statements.

The TSX Venture Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • Nevarro Energy Ltd.
    J.W. Grant Robertson
    Vice-President Business Development
    (403) 231-1230
    Nevarro Energy Ltd.
    Rick Bennett
    (403) 231-1235