Petrobank Energy and Resources Ltd.

Petrobank Energy and Resources Ltd.

February 24, 2005 16:27 ET

Petrobank Announces Canadian Reserve Additions Replacing 421% of 2004 Production


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: PETROBANK ENERGY AND RESOURCES LTD.

TSX SYMBOL: PBG
TSX SYMBOL: PBG.NT.A

FEBRUARY 24, 2005 - 16:27 ET

Petrobank Announces Canadian Reserve Additions
Replacing 421% of 2004 Production

CALGARY, ALBERTA--(CCNMatthews - Feb. 24, 2005) - Petrobank Energy and
Resources Ltd. (TSX:PBG) (TSX:PBG.NT.A) ("Petrobank" or the "Company")
is pleased to announce that our Canadian reserve engineers, Sproule
Associates Limited ("Sproule"), have completed their evaluation of our
Canadian reserves as at December 31, 2004. These reserves are net of our
fourth quarter 2004 dispositions that realized proceeds of approximately
$100 million. The results of the Sproule report are highlighted as
follows:



- Total proved reserves of 5.0 million boe
- Proved plus probable (P+P) reserves of 9.2 million boe
- Proved plus probable reserve additions of 6.8 million boe
- Proved plus probable production replacement 421%
- Proved plus probable reserve life index of 12.4 years(1)
- Proved, probable and possible (3P) reserves of 14.5 million boe
- NPV 10% (before taxes) of $108.4 million (P+P), $135.2 million (3P)

(1) Based on annualized fourth quarter 2004 production excluding
production from properties disposed of in December 2004.


Reserve Reconciliation - Forecast Prices (mboe)
Total Proved +
Proved Probable
------------------------------------------------------------------------
December 31, 2003 reserves(2) 7,468 11,305
2004 dispositions (4,642) (7,364)
2004 production (1,622) (1,622)
Net additions 3,748 6,832
------------------
December 31, 2004 reserves 4,952 9,151

(2) Excludes reserves associated with our Wapella property that was
disposed in January 2004 and reflected as a pro-forma disposition
at December 31, 2003.


Working Interest Reserves(3)
Forecast Prices(4)
Natural Light and
Gas Medium Oil NGL Total
(mmcf) (mbbl) (mbbl) (mboe)
------------------------------------------------------------------------
Developed Producing 13,676 182 13 2,474
Total Proved 28,276 182 57 4,952
Proved + Probable 52,413 326 89 9,151
Proved + Probable + Possible 83,548 415 127 14,466

(3) Company working interest reserves excluding royalty interest
reserves and before deduction of royalties payable.
(4) Based on the Sproule Associates Limited price forecast effective
December 31, 2004.


Working Interest Reserves
Constant Prices
Natural Light and
Gas Medium Oil NGL Total
(mmcf) (mbbl) (mbbl) (mboe)
------------------------------------------------------------------------
Developed Producing 13,735 193 13 2,495
Total Proved 28,335 193 57 4,972
Proved + Probable 52,536 345 90 9,190
Proved + Probable + Possible 83,652 440 127 14,509


Net Present Value - Before Tax ($ millions)
Forecast Prices
As at December 31, 2004
0% 5% 10% 15%
------------------------------------
Developed Producing 55.5 49.1 44.3 40.4
Total Proved 91.6 79.5 70.1 62.6
Proved + Probable 161.3 130.4 108.4 92.0
Proved + Probable + Possible 240.9 175.6 135.2 108.1


Net Present Value - Before Tax ($ millions)
Constant Prices
As at December 31, 2004
0% 5% 10% 15%
------------------------------------
Developed Producing 60.9 53.0 47.0 42.4
Total Proved 105.3 89.7 78.0 68.7
Proved + Probable 197.2 156.7 128.4 107.6
Proved + Probable + Possible 303.7 218.9 166.7 131.9


Canadian Operational Update

Based on field estimates, Petrobank's Canadian production averaged 4,397
boepd during the fourth quarter of 2004. After accounting for properties
that were sold during the fourth quarter, the Company's production from
our retained assets averaged 2,028 boepd. Petrobank realized gross
proceeds totaling approximately $100 million on these fourth quarter
dispositions, a portion of which were used to eliminate bank debt and
repurchase $14 million of our outstanding subordinated notes.

Looking ahead for 2005, the Company has approved a Canadian Business
Unit capital budget of $40 million that includes an 80 well (62 net)
drilling program and a major infrastructure expansion. This budget will
focus on significant production additions from our existing producing
assets, as well as testing a number of internally generated prospects on
our substantial undeveloped land base. With moderate success, this
program is anticipated to more than double current production by
year-end.

Jumpbush

At Jumpbush, we have a 70% interest in approximately 55,000 acres of
contiguous land, 54 producing gas wells and 13 producing oil wells, and
current production of 1,050 boepd (working interest) including 6 mmcfpd
of gas production. The majority of the Company's 2004 reserve additions
were realized on the Jumpbush property, which is still in the very early
stages of development. Our Jumpbush gas production is coming almost
exclusively from 8 high deliverability wells brought on-stream late in
2004, which have backed out the remaining wells due to high line
pressures. As the initial step in our 2005 facility expansion program,
we will be installing additional compression over the next few weeks to
immediately increase our net gas production to over 7.5 mmcfpd.

In 2005, the Company will implement the primary stage of a multi-year
drilling program, which anticipates a total of 250 additional wells
ultimately being drilled on this property. This first stage includes the
drilling of 50 new wells targeting natural gas in the Medicine Hat
sands, the Belly River sands, and the Belly River coals. In addition, we
will be assessing the reserve and production capability of the Edmonton
Sand formation and the Horseshoe Canyon coals. Our 2005 plan also
includes a significant enhancement of the Jumpbush infrastructure to
increase productive capacity to 25 mmcfpd gross (70% W.I.), including a
major plant expansion and construction of a large gathering system to
handle anticipated increases in gas production. Our 2005 drilling
program is scheduled to commence immediately following spring breakup
and our facility expansions are expected to be completed by the start of
the third quarter of 2005.

Red Willow

At Red Willow, the Company owns 26,000 acres of land (primarily 100%)
and currently produces approximately 500 boepd through Company operated
oil batteries and a gas plant. Our 2005 Red Willow program includes
drilling or re-completing at least 15 wells (14 net). The Red Willow
area has significant opportunities for high deliverability gas and oil
wells in the Mannville zones with further upside in the Viking zone.
Based on our success to-date, we continue to evaluate further
alternatives for enhancing value at Red Willow.

Princeton

At Princeton (60% W.I.), we are conducting initial completion operations
on our first natural gas from coals (NGC) evaluation test well, which
encountered approximately 130 feet of coal in two horizons, in
conjunction with associated gas indications, during drilling operations
this past November. The ongoing laboratory assessment of the cores and
samples from the well reaffirms our analysis concerning the significant
gas content of the coals. Our current independent resource assessment
indicates that there are approximately 500 bcf of natural gas in place
contained in the coals under our acreage. The ultimate recoverability
and/or commerciality of this natural gas resource remains to be
determined. With further positive results from these completion
operations, we are planning to drill additional wells and to commence a
pilot testing program in the second half of 2005.

Exploration

Petrobank has an undeveloped land inventory totaling more than 365,000
net acres (including 154,000 acres of non-expiring fee simple land where
we own the mineral rights). We have plans to drill at least 10 wells in
2005 on this land base, where we will initially be focusing on follow-up
drilling to our recent successes at Badger and Little Bow in Alberta. At
our Macklin property in Saskatchewan, we completed an 18 square
kilometer 3D seismic survey in the fourth quarter of 2004 and our
initial 2005 plan includes 5 drilling locations (100% W.I.).

Outlook

The Sproule reserve report highlights the potential of our existing
Canadian producing assets, particularly at Jumpbush, where we are just
beginning to develop the ultimate reserve potential of this core
property. Our goals in the Canadian Business Unit over the next few
months are to further unlock the potential embedded within these
producing assets, and to develop new growth opportunities on our
extensive undeveloped land base.

Natural gas volumes have been converted to barrels of oil equivalent
("boe") so that six thousand cubic feet ("mcf") of natural gas equals
one barrel based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency
at the well head. Boes may be misleading, particularly if used in
isolation.

Certain statements in this release are "forward-looking statements"
within the meaning of the United States Private Securities Litigation
Reform Act of 1995. Specifically, this release contains forward-looking
statements relating to prospects and the expected amount and timing of
capital projects. The reader is cautioned that assumptions used in the
preparation of such information, although considered reasonable at the
time of preparation, may prove to be incorrect. Actual results achieved
during the forecast period will vary from the information provided
herein as a result of numerous known and unknown risks and uncertainties
and other factors. Such factors include, but are not limited to: general
economic, market and business conditions; fluctuations in oil and gas
prices; the results of exploration and development of drilling and
related activities; fluctuation in foreign currency exchange rates; the
uncertainty of reserve estimates; changes in environmental and other
regulations; risks associated with oil and gas operations; and other
factors, many of which are beyond the control of the Company. There is
no representation by Petrobank that actual results achieved during the
forecast period will be the same in whole or in part as those forecast.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Petrobank Energy and Resources Ltd.
    John D. Wright
    President and CEO,
    (403) 750-4400
    or
    Petrobank Energy and Resources Ltd.
    Chris J. Bloomer
    Vice-President Heavy Oil and CFO
    (403) 750-4400
    or
    Petrobank Energy and Resources Ltd.
    Corey C. Ruttan
    Director Corporate Finance and Investor Relations
    (403) 750-4400
    (403) 266-5794 (FAX)
    Email: ir@petrobank.com
    Website: www.petrobank.com