Peerless Energy Inc.
TSX : PRY.A
TSX : PRY.B

Peerless Energy Inc.

December 12, 2006 17:39 ET

Peerless Energy Inc. Announces $56 Million Capital Budget for 2007

CALGARY, ALBERTA--(CCNMatthews - Dec. 12, 2006) -

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

Peerless Energy Inc. ("Peerless" or the "Company") (TSX:PRY.A) (TSX:PRY.B) is pleased to announce that the Board of Directors has approved a $56 million capital budget for 2007, allowing for the drilling of 34 gross wells (32.9 net) in the Company's core operating areas targeting light oil and liquids rich natural gas. The capital budget is anticipated to be funded by cash flow from operations and the Company's credit facility. Based on the capital program, the Company forecasts a 2007 exit rate of between 3,600 and 4,000 boe/d. Of the budgeted amounts, approximately $40.6 million representing 73% of the 2007 capital budget will be spent in southeast Saskatchewan targeting Peerless' Bakken sand play.

The Company's commodity price assumptions used for the purposes of its 2007 capital budget are: US$62 WTI per barrel of oil, CAD$7.30 AECO per mcf of natural gas and a $US/$CAD exchange rate of US$0.89. The budget projects a yearly production commodity mix of 65% light oil and 35% sweet natural gas.

With the budgeted increase in light oil production, the 2007 capital budget projection indicates an increase in the Company's operating netback and cashflow netback per boe to approximately $41 and $35 respectively.

The Company seeks to maintain a financially flexible balance sheet with a net debt target of less than one times annualized current cash flow. By keeping the Company's balance sheet relatively unlevered, management believes Peerless will be able to economically capture growth opportunities consistent with its mandate of adding reserves, production and cash flow per share with an integrated model of strategic acquisitions, exploitation and exploration.

Given the success of its southeast Saskatchewan drilling to date, the Company has focused the majority of budgeted capital on its inventory of light oil development prospects, dominated by Viewfield Bakken drilling. A total of 28 wells are planned to be drilled in the Bakken fairway in 2007. The Company plans on expanding its production base in comparable areas to Viewfield proper by further developing its recent light oil exploration discovery at Forget and drilling an exploration well at Midale, all targeting the Bakken sand. Peerless is encouraged with its results to date in the play which is characterized by strong operating netbacks. At today's US$ WTI price, management expects the Bakken play to yield the Company in excess of CAD$55/bbl.

The Company also anticipates participating with third parties in a number of multi-zone exploration targets in the western Peace River Arch areas of Alberta and Northeast British Columbia.

Peerless currently has over 170 net development drilling opportunities in its asset base, all identified using its in house geologic, geophysical and engineering expertise which provides the company with approximately 4 years of capital projects.

Peerless Energy Inc. is a junior oil and gas company engaged in the exploration for, and development and production of, natural gas and light oil reserves primarily in the provinces of Alberta, Saskatchewan, and British Columbia.

Peerless' Class A and Class B shares trade on the Toronto Stock Exchange under the symbols PRY.A and PRY.B respectively.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The Class A common shares have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of such Act.

Forward-looking statements

This news release contains statements concerning the reserves of Peerless, planned exploration and development activities, anticipated prospects and financial and operating matters that may constitute forward-looking statements or information under applicable securities laws. Also, statements made in this press release that are not historical facts may be considered forward-looking statements.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Such assumptions include, among other things, that Peerless will be able to successfully execute on its planned capital expenditures, that oil and gas prices remain relatively consistent with their current prices or forecasts and that Peerless achieves drilling success consistent with its expectations.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to any number of factors, including such variables as: volatility of oil and gas prices, fluctuations in currency and interest rates, product supply and demand, risks inherent in Peerless' operations, imprecision of resource estimates, Peerless' ability to access external sources of debt and equity capital, Peerless' ability to enter into or renew leases, imprecision in estimating the timing, costs and levels of production and drilling, the results of exploration, development and drilling, imprecision in estimates of future production capacity, Peerless' ability to secure adequate product transportation, uncertainty in the amounts and timing of royalty payments, imprecision in estimates of product sales, changes in environmental and other regulations or the interpretation of such regulations, the ability to obtain necessary regulatory approvals, weather and general economic, political and business conditions.

Although Peerless 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 Peerless can give no assurance that such expectations will prove to be correct.

The forward-looking statements or information contained in this news release are made as of the date hereof and Peerless undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Peerless Energy Inc.
    Wade Becker
    President and Chief Executive Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    or
    Peerless Energy Inc.
    Dan Toews
    Vice President, Finance and Chief Financial Officer
    (403) 263-1590
    (403) 263-1591 (FAX)
    Website: www.peerlessenergyinc.com