Paramax Resources Ltd.
TSX VENTURE : PXM

Paramax Resources Ltd.

January 25, 2011 09:45 ET

Paramax Resources Ltd. Reserves Increase Over 200%

CALGARY, ALBERTA--(Marketwire - Jan. 25, 2011) - Paramax Resources Ltd. (TSX VENTURE:PXM) ("Paramax or the "Corporation") is pleased to announce that it has received an updated reserves and resource report incorporating the results of the most recent phase of drilling and completions on its 50% working interest in the Western Idaho Basin Project.

The updated reserves and resource report was prepared by AJM Petroleum Consultants ("AJM"), an independent qualified resource evaluator, with an effective date of December 31, 2010. The report complies with COGE Handbook standards and National Instrument 51-101 entitled "Standards of Disclosure for Oil and Gas Activities as adopted by the Canadian Securities Regulators."

Reserves

AJM have determined the Corporation's Proved (1P) and Proved plus Probable (2P) reserves pertaining to the successful wells that were drilled in 2010. The 2P reserves total 6,236 MBOE, representing a 243% increase from the previous report, with a net present value of $17.1 million, discounted at 10% before tax using AJM's escalating price forecasts as at December 31, 2010. The table below summarizes Paramax's working interest reserves and associated net present values, and compares them to a report completed by AJM in May 2010, which was generated prior to the addition of several key wells.

  Proven Reserves Probable Reserves P+P Reserves
May 31/2010 Dec. 31/2010 May 31/2010 Dec. 31/2010 May 31/2010 Dec. 31/2010 % Increase
Sales Gas (MMcf) 1,364.7 3,097.7 453.7 3,138.5 1818.4 6,236 243%
NGL's (Mbbl) 14.4 39.1 4.8 13.0 19.1 52.1 173%
MBOE (Mboe) 241.8 555.4 80.4 536.0 322.2 1,091.5 239%
NPV – BTAX 10% discount (M$) 6,070 9,542 1,624 7,539 7,694 17,081 122%

Resources

Paramax also retained AJM to prepare a contingent resource report dated effective December 31, 2010, in regard to the potential of the Western Idaho basin. The resource report excludes the reserve numbers stated above.

Probabilistic analysis was used for the preparation of the volumetric resource estimate on Paramax's Idaho lands. The report includes the total original gas in place ("OGIP") volumes for the Willow and Hamilton projects, including a best estimate of 68.6 BCF of gas initially in place. The table below represents Paramax's 50% working interest in the Idaho lands.

  Low Estimate Best Estimate High Estimate
  May 31/2010 Dec. 31/2010 May 31/2010 Dec. 31/2010 May 31/2010 Dec. 31/2010
Original Gas in Place (BCF) 26.8 44.1 52.1 68.6 101.0 117.4
Recoverable Gas in Place (BCF) 17.9 28.1 32.8 43.8 62.1 71.9
             
Recoverable Liquids (MSTB) 75 195 191 345 486 633
             
Total Recoverable (BCFE) 18.4 29.4 33.9 46.1 65.0 76.1
Total Recoverable (MBOE) 3,058 4,876 5,657 7,642 10,836 12,611
  1. Contingencies which prevent the classification as reserves for the properties include the drilling of additional wells, production of the wells and tie in of the drilled wells.
  1. By definition, there is no certainty that it will be commercially viable to produce any portion of resources.

Operations Update

Paramax, along with its partner, have five Hamilton area completed gas wells. The Corporation is currently planning to undertake stimulation treatments on four of the five wells.. High levels of equipment utilization will prevent the stimulations from taking place until mid-February. Negotiations with the local pipeline company and potential mid-stream companies for the construction and financing of the infrastructure are ongoing. After the stimulations have been analyzed and assuming successful negotiation of an arrangement for tie-in, construction of the gathering system for commercial production would be expected to commence in the 2nd quarter of 2011 with production to commence immediately thereafter.

In the Willow area, the DJS 1-15 well has also been identified as an excellent stimulation candidate. The location is not scheduled to be included in the current round of stimulations, but will be considered once further development in the area is resumed. Paramax, along with its partner have applied to reduce the well spacing in the Willow project area and following down-spacing approval, additional drilling locations directly offsetting the ML 1-10 well are being planned

Definitions

"Best Estimate" means the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

"High Estimate" means an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

"Low Estimate" means a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.

"Probable reserves" means those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable reserves.

"Proved reserves" means those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved reserves.

Forward-Looking Statements and Advisories

Barrel of Oil Equivalent: Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to boe at a ratio of 6,000 cubic feet of natural gas to one barrel of oil equivalent. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOE figures may be misleading, particularly if used in isolation.

Statements herein that are not historical facts may be considered forward looking statements including estimated stimulation and drilling plans and the timing thereof, capital expenditures and the allocation thereof and the method of funding thereof and the timing thereof, timing of tie-in and commencement of production of wells, plans to increase proved producing reserves by drilling existing drilling inventory. These forward-looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Corporation's future plans are forward-looking statements. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling and completion rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, Paramax's actual results may differ materially from those expressed in, or implied by, the forward-looking statements.

Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although Paramax believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Paramax can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Paramax operates; the timely receipt of any required regulatory approvals; the ability of Paramax to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which Paramax has an interest in to operate the field in a safe, efficient and effective manner; the ability of Paramax to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline and facility construction and expansion; the ability of Paramax to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Paramax operates; and the ability of Paramax to successfully market its oil and natural gas products.

Readers are cautioned that the foregoing list of factors and assumptions is not exhaustive. Additional information on these and other factors that could affect Paramax's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at Paramax's website. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Paramax does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Estimates of values disclosed do not represent fair market value. The estimates of reserves and future net revenue for additional properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregation.

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