Orleans Energy Ltd.
TSX : OEX

Orleans Energy Ltd.

October 14, 2010 09:50 ET

Orleans Energy Provides Operations Update and Announces Reaffirmed Bank Line

CALGARY, ALBERTA--(Marketwire - Oct. 14, 2010) - Orleans Energy Ltd. ("Orleans" or the "Company") (TSX:OEX) is pleased to provide a Waskahigan operational update and announce a reaffirmed bank line.

Operations Update

On September 20, 2010, the Company brought on-stream its previously-announced 5-25 Waskahigan Montney horizontal oil well (100% working interest). The 5-25 well is a follow-up drill to Orleans' 4-36 Montney oil discovery. As of October 9, 2010, after 20 days of production, the 5-25 well was producing approximately 450 barrels per day ("bbls/d") of light gravity sweet crude oil (42° API), 0.7 million cubic feet per day ("mmcf/d") of associated natural gas and an estimated 11 bbls/d of natural gas liquids ("NGLs"), for a combined rate of 580 barrels of oil equivalent per day ("boe/d"). The 5-25 well qualifies for the Alberta Government's Horizontal Oil New Well royalty rate of 5% for the first 36 months of production, up to a maximum of 80,000 barrels of oil equivalent produced.

With regards to Orleans' Waskahigan 4-36 horizontal well, after 113 days of production, this 100% working interest oil well is presently flowing, without artificial lift, approximately 100 bbls/d of light gravity sweet crude oil (42° API), 0.5 mmcf/d of associated natural gas and an estimated 8 bbls/d of NGLs, for an oil equivalent rate of approximately 192 boe/d. The Company is quite encouraged by the initial production performance of this oil well as there are early signs of production stabilization. The 4-36 well, since start-up on June 19, 2010 through to October 9, 2010, has produced 25,100 barrels of oil, approximately 95 million cubic feet ("mmcf") of natural gas and an estimated 1,470 barrels of NGLs, for a combined cumulative production of 42,435 barrels of oil equivalent. Financially, since start-up through to August 31, 2010 (74 days), the 4-36 well has generated field operating income netbacks of approximately $46 per barrel of oil equivalent (wellhead revenue less royalties, operating and transportation costs). The quality of the 4-36 light oil has resulted in a realized wellhead oil price discount to the Canadian (Edmonton) Par postings of less than $0.50 per barrel. Enhancing the wellhead economics is the Horizontal Oil New Well eligibility, whereby the 4-36 well's royalty rate is capped at 5% for the first 36 months of production, up to a maximum of 80,000 barrels of oil equivalent produced.

Orleans is at the early stage of establishing an oil resource play at Waskahigan to complement its Kaybob Montney and Pine Creek Wilrich natural gas development drilling inventory. As outlined in the Company's September 2, 2010 news release, Orleans will focus on the systematic delineation of its Waskahigan Montney acreage, specifically the light oil prospective lands on the eastern portion of Orleans' 35 section, 100% working interest Montney land block. Within this strategic, delineation drilling objective, Orleans will concurrently drill two (2.0 net) additional Waskahigan horizontal oil locations in the fourth quarter of 2010. The Company anticipates providing initial drilling and completion results on these two operations in December 2010. 

Corporately, for the three months ended September 30, 2010, Orleans achieved corporate average daily production of 3,925 boe/d; comprised of 18.7 mmcf/d of natural gas, 317 bbls/d of crude oil and 491 bbls/d of natural gas liquids. Orleans' liquids-rich natural gas stream, wherein 26.3 bbls of NGLs per mmcf of gas are yielded, continues to augment the Company's cash flow generating capabilities in the context of presently low natural gas prices. For fiscal 2010, Orleans remains on-track to achieve its annual production guidance as released in its September 2, 2010 news release. 

Reaffirmed Bank Line

The Company also announces that based on a recent semi-annual review of the borrowing base and facility amount associated with Orleans' committed, extendible revolving credit facility (the "Credit Facility") with a two-bank lending syndicate (the "Lenders"), the Lenders have reaffirmed the existing $60 million borrowing base associated with the Credit Facility. The borrowing base, which is re-determined semi-annually, represents the maximum amount that can be borrowed from a credit standpoint based on, among other things, the Lenders current and forecasted commodity prices, the Company's proved oil and gas reserves and results of operations, and the current economic and credit environment, as confirmed by the Lenders. The borrowings, under the Credit Facility, are available on a fully revolving basis for a period of at least 364 days, until April 30, 2011, at which time Orleans can request approval by the Lenders for an extension for an additional 364 day cycle or convert the outstanding bank indebtedness to a one-year term loan with full repayment due on April 30, 2012. The next scheduled Credit Facility review and borrowing base re-determination is set for April 2011. The Company presently has approximately $46 million drawn under the Credit Facility.

Orleans Energy Ltd. is a Calgary, Alberta-based crude oil and natural gas company, with common shares trading on the Toronto Stock Exchange under the symbol "OEX". Orleans commenced active oil and gas operations in January 2005 and is committed to maximizing value for its shareholders through successful drilling of internally-generated prospects supplemented with strategic and focused property and/or corporate acquisitions. Orleans has several operated, high working interest, light oil and liquids-rich natural gas "resource plays" in West Central Alberta, specifically the Montney and Duvernay in Kaybob, Waskahigan and Ante Creek, along with the Wilrich in Pine Creek.

The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry ; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 

Any references in this news release to initial and/or final raw test or production rates and/or "flush" production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

Net debt refers to outstanding bank debt plus any working capital deficit or minus any working capital surplus (excludes current unrealized amounts pertaining to risk management contracts and current future income taxes). Net debt is not a recognized measure under Canadian GAAP. 

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