Petroflow Energy Ltd.
TSX VENTURE : PEF
AMEX : PED

Petroflow Energy Ltd.

December 12, 2008 09:15 ET

Petroflow Energy Ltd. Announces Q3 2008 Reserves Update

CALGARY, ALBERTA--(Marketwire - Dec. 12, 2008) - Petroflow Energy Ltd. (TSX VENTURE:PEF)(AMEX:PED) ("Petroflow" or the "Company") announces the summary results of an updated reserve report, (the "Report") prepared by Haas Petroleum Engineering Services, Inc. ("Haas") as of September 30, 2008. Highlights of the Report are stated in comparison to the status at June 30, 2008 with all dollar amounts in Canadian dollars unless otherwise stated (using a US dollar exchange rate of $USD 1.00 = $CAD 1.059).

The value of before tax proved and probable (P plus P) reserves (NPV 10%) decreased from $636.6 million to $605.1 million, based on forecast prices, a decrease of 5%. The net change in value is substantially due to using an updated price forecast with lower price projections.

The value of before tax proved reserves (NPV 10%) decreased from $435.5 million to $380.6 million, based on forecast prices, a decrease of 13%. The net change in value is due to the use of a more conservative price projection as mentioned above, as well as a partial reclassification from proved reserves to probable reserves.

All reserve changes during Q3 2008 can be attributed to successful drilling operations in the Company's Hunton Resource Play in Oklahoma.

The Company focused its drilling efforts in the three month period on converting proved and probable undeveloped reserves into proved producing reserves. As a consequence, as of September 30, 2008, P plus P reserves did not increase. Production in the current fiscal quarter of 0.3 million BOEs and a slight downward revision in previously engineered reserves of 0.1 million BOEs accounted for the net change in P plus P reserves during the period.

Petroflow's proved reserves declined in the quarter by 0.7 million BOEs due to a combination of production, reclassification of proved reserves to probable reserves and the previously mentioned downward revision.

Petroflow CEO, John Melton was quoted as saying, "During the course of development of a resource play such as the Hunton, there will always be an ebb and flow to the quantification of engineered reserves. During the three months ended September 30, 2008, we concentrated on drilling wells which had already been included in previous engineering reports. As a consequence, we did not add any specific wells to the pool of locations included in the current engineering report. Even with the modest decline in overall P plus P reserves in the most recent quarter, our overall P plus P reserves have increased by 6.4 million BOEs since December 31, 2007. On expansion of the play into new areas, we expect to add significant new reserves."

The Report also quantified the NPV 10% value of P plus P reserves using September 30, 2008 constant prices at $479.9 million. The NPV 10% value of proved reserves using September 30, 2008 constant price was $305.5 million. Reserve quantities were substantially the same as stated above.

The following tables provide additional information regarding the reserves and applicable net present values.



Summary of Oil and Gas Reserves as at September 30, 2008
Forecast Prices and Costs

Oil & Condensate Natural Gas Liquids Natural Gas
w.i.(1) n.r.i.(2) w.i. n.r.i. w.i. n.r.i.
Reserve Category Mbbl Mbbl Mbbl Mbbl Mmcf Mmcf

Proved Producing 1,577 1,277 3,098 2,478 32,765 26,250
Proved Developed Non
Producing 213 172 405 323 3,507 2,800
Proved Undeveloped 554 448 1,678 1,343 28,921 23,136
------------------------------------------------------
Total Proved 2,344 1,897 5,181 4,144 65,193 52,186

Probable 1,925 1,540 6,252 4,999 35,507 28,404
------------------------------------------------------
Grand Total 4,269 3,437 11,433 9,143 100,700 80,590
------------------------------------------------------
------------------------------------------------------

(1) w.i. refers to working interest reserves
(2) n.r.i. refers to net revenue interest (after royalty) reserves


Net Present Values of Future Net Revenues as at September 30, 2008
Forecast Prices and Costs

Before Income Taxes
At 0% At 5% At 10% At 15%
Reserve Category $000 $000 $000 $000

Proved Producing 469,513 335,126 259,875 212,442
Proved Developed Non Producing 58,681 37,352 27,674 22,100
Proved Undeveloped 231,908 143,259 93,046 62,062
-----------------------------------------
Total Proved 760,102 515,737 380,596 296,601

Probable 610,113 358,954 224,973 146,668
-----------------------------------------
Grand Total 1,370,215 874,691 605,568 443,270
-----------------------------------------
-----------------------------------------


Summary of Oil and Gas Reserves as at September 30, 2008
Constant Prices and Costs

Oil & Condensate Natural Gas Liquids Natural Gas
w.i. n.r.i. w.i. n.r.i. w.i. n.r.i.
Reserve Category Mbbl Mbbl Mbbl Mbbl Mmcf Mmcf

Proved Producing 1,534 1,241 3,092 2,473 32,282 25,864
Proved Developed
Non Producing 213 172 403 322 3,495 2,790
Proved Undeveloped 554 447 1,676 1,340 28,866 23,093
-----------------------------------------------------
Total Proved 2,301 1,860 5,171 4,135 64,643 51,747

Probable 1,925 1,540 6,251 4,999 35,506 28,402
-----------------------------------------------------
Grand Total 4,226 3,400 11,422 9,134 100,149 80,149
-----------------------------------------------------
-----------------------------------------------------

(1) w.i. refers to working interest reserves
(2) n.r.i. refers to net revenue interest (after royalty) reserves


Net Present Values of Future Net Revenues as at September 30, 2008
Constant Prices and Costs

Before Income Taxes
At 0% At 5% At 10% At 15%
Reserve Category $000 $000 $000 $000

Proved Producing 370,255 276,779 220,535 183,365
Proved Developed Non Producing 44,528 30,391 23,312 18,960
Proved Undeveloped 154,915 96,412 61,657 39,566
-----------------------------------------
Total Proved 569,700 403,582 305,504 241,891

Probable 460,140 276,548 174,443 113,106
-----------------------------------------
Grand Total 1,029,840 680,130 479,947 354,997
-----------------------------------------
-----------------------------------------


The properties evaluated in the Report are located in Oklahoma, Texas and Alberta. The Report was prepared for the purpose of evaluating the Company's Petroleum and Natural Gas Reserves according to the Canadian Oil and Gas Evaluation Handbook (COGEH) with reserve definitions consistent with National Instrument 51-101 Standards of Disclosure for Oil & Gas Activities ("NI 51-101"). In preparing the Report, Haas utilized the October 1, 2008 Summary of Price Forecasts as prepared by McDaniel & Associates Consultants Ltd., an excerpt of which is included below.



Summary of Pricing Assumptions
As of October 1, 2008

WTI Natural Gas Natural Gas
Cushing Henry Hub Liquids
($CDN/bbl) (SCDN/monthly) ($CDN/gas)
----------------------------------------------------------------------------
October 1, 2008 Forecast Prices 105.97 8.74 1.51

October 1, 2008 Constant Prices 106.67 7.60 1.52


Forward-Looking Statements

This news release contains statements about oil and gas production and operating activities that may constitute "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation as they involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions.

Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by Petroflow and described in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, adverse general economic conditions, operating hazards, drilling risks, inherent uncertainties in interpreting engineering and geologic data, competition, reduced availability of drilling and other well services, fluctuations in oil and gas prices and prices for drilling and other well services, government regulation and foreign political risks, fluctuations in the exchange rate between Canadian and US dollars and other currencies, as well as other risks commonly associated with the exploration and development of oil and gas properties. Additional information on these and other factors, which could affect Petroflow's operations or financial results, are included in Petroflow's reports on file with Canadian securities regulatory authorities. We assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change unless otherwise required under securities law.

Note Regarding Reserves Data and Other Oil and Gas Information

NI 51-101 imposes oil and gas disclosure standards for Canadian public companies engaged in oil and gas activities. We have provided the reserves data and other oil and gas information included in this news release in accordance with NI 51-101 and may differ from the corresponding information prepared in accordance with U.S. disclosure requirements. Further information about the differences between the U.S. requirements and the NI 51-101 requirements is set forth under the heading "Note Regarding Reserves Data and Other Oil and Gas Information" in the Company's Form 40-F filed with the SEC on June 16, 2008.

BOEs derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf: 1 bbl). BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Macam Investor Relations
    Cameron MacDonald
    President & CEO
    (403) 695-1006 or Toll Free 1-866-264-0743
    or
    Investor Awareness, Inc.
    Tony Schor
    (847) 945-2222
    or
    Investor Awareness, Inc.
    James Foy
    (847) 945-2222
    Website: www.investorawareness.com
    or
    Petroflow Energy Ltd.
    John Melton
    President & CEO
    (504) 453-2926
    or
    Petroflow Energy Ltd.
    Duncan Moodie
    CFO
    (403) 539-4311