Pilot Energy Ltd.
TSX VENTURE : PGY

Pilot Energy Ltd.

March 21, 2006 08:00 ET

Pilot Energy Ltd Announces 2005 Reserves

CALGARY, ALBERTA--(CCNMatthews - March 21, 2006) - Pilot Energy Ltd. ("Pilot" or the "Company") (TSX VENTURE:PGY) is pleased to announce the results of its independent reserve evaluation for the year ended December 31, 2005 as evaluated by Paddock, Lindstrom & Associates Ltd. ("PLA") in accordance with the rules provided by National Instrument 51-101.

Highlights:

- The Company's proved reserves increased in 2005 by 168% from 622 MBoes to 1.7 MMBoes.

- The Company's proved plus probable reserves increased in 2005 by 125% from 1.1 to 2.4 MMBoes.

- Reserves per share increased 81% over 2004, based on 20.2 million diluted shares outstanding on December 31, 2005.

- Reserve additions, including revisions, replaced 2005 production 7.0x on a proved plus probable basis.

- Pilot's proved plus probable reserve life index ("RLI"), based on 2005 fourth quarter average production is 9.4 years.

- The net present value of Pilot's estimated future net revenue from proved plus probable reserves, discounted at 10% is $44.5 million, an increase of 245% over the previous year.

- The Company's undeveloped land increased in 2005 by 102% from 5,650 net acres to 11,400 net acres. As of December 31, 2005 Pilot's undeveloped land is valued at $3.3 million (as appraised by an independent third party).

Oil and Gas Reserves:

Pilot's December 31, 2005 reserves were prepared and evaluated by PLA under the guidelines of NI 51-101.

During 2005, Pilot increased its total proved reserves, based on forecast prices and costs, by 168% to 1,664 Mboe from 622 Mboe at December 31, 2004. The composition of reserves at December 31, 2005 consists of 92% oil and natural gas liquids and 8% natural gas.

Pilot increased its total proved plus probable reserves by 125% to 2,411 Mboe from 1,071 Mboe at December 31, 2004. Reserve additions of 1,562 Mboe represent a production replacement of 7.0x. The future capital required to bring non-producing and undeveloped proved reserves and probable reserves on production is estimated at $4.6 million.

The following table provides summary information presented in the PLA report. Additional reserve information will be presented in the Company's fourth quarter and year-end financial results and in the Statement of Reserve Data and Other Oil and Gas Information scheduled to be released prior to April 28, 2006. It should not be assumed that the estimates of future net revenue presented in the table below represents the fair market value of the reserves. There is no assurance that the price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserve will be recovered. Actual crude oil, natural gas and natural gas liquid reserves may be greater than or less than the estimates provided herein.



SUMMARY OF OIL AND GAS RESERVES
FORECAST PRICES AND COSTS

GROSS RESERVES
--------------

---------------------------------------------------------------------
December
December 31, 2005 31, 2004
------------------------------------------------------ --------------
Oil Natural Total Barrels Total Barrels
Light and Oil Natural Gas of oil of oil
Medium Heavy Gas Liquids Equivalent Equivalent
--------- ----- ------- ------- ------------- --------------

RESERVES
CATEGORY (MStb)(MStb) (MMcf) (MStb) (MBoe) (MBoe)
--------- ----- ------- ------- ------------- --------------

PROVED:
Developed
Producing 961.6 323.5 451.8 - 1360.5 532.0
Developed
Non-
Producing 57.2 - 335.0 1.2 114.2 54.0
Undeveloped 186.6 - 17.7 - 189.5 36.2
--------- ----- ------- ------- ------------- --------------

TOTAL
PROVED 1205.4 323.5 804.6 1.2 1664.2 622.2

PROBABLE 530.2 156.5 358.6 0.6 747.0 448.4
--------- ----- ------- ------- ------------- --------------

TOTAL
PROVED
PLUS
PROBABLE 1735.6 480.0 1163.2 1.7 2411.1 1070.7
--------- ----- ------- ------- ------------- --------------
--------- ----- ------- ------- ------------- --------------


Notes:

1) "Gross" reserves means, Pilot's working interest (operating and non-operating) share before deduction of royalties and without including any royalty interests of Pilot.

2) "Barrel of oil equivalent" has been calculated using the conversion factor of 6 mcf of natural gas being equivalent to one bbl of oil.

3) Numbers may not add due to rounding.

Net Present Value and Future Net Revenue:

The forecast prices used in the reserve report were PLA's Forecast Prices as at December 31, 2005. The increase in future net revenue is primarily the result of increased volumes related to new drilling, acquisitions, and increased product prices compared to the prior year.

The estimated future net revenues are presented before deducting future estimated site restoration costs, but include the Alberta Royalty Tax Credit, and are reduced for: estimated future abandonment costs, the Saskatchewan Capital Tax Surcharge and estimated future capital for development associated with non-producing, undeveloped and probable reserve additions.



SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE
FORECAST PRICES AND COSTS
Before Income Taxes Discounted at (%/year)


December 31, 2005 December 31, 2004
--------------------------------------- ------------------
RESERVES 0 5 8 10 5 10
CATEGORY (M$) (M$) (M$) (M$) (M$) (M$)
---------- --------- --------- --------- --------- -------- ---------

PROVED:
Developed 38,697.0 32,500.4 29,820.1 28,321.9 8,801.9 7,783.6
Producing
Developed
Non-
Producing 4,655.8 3,950.4 3,627.9 3,443.2 778.2 668.1
Undeveloped 4,736.1 3,670.7 3,183.5 2,905.5 537.9 447.3
--------- --------- --------- --------- -------- ---------
TOTAL
PROVED 48,088.8 40,121.4 36,631.4 34,670.5 10,118.0 8,899.1

PROBABLE 20,613.2 13,553.8 11,065.0 9,811.6 5,536.9 3,986.0
--------- --------- --------- --------- -------- ---------

TOTAL
PROVED
PLUS
PROBABLE 68,702.0 53,675.2 47,696.4 44,482.2 15,654.9 12,885.0
--------- --------- --------- --------- -------- ---------
--------- --------- --------- --------- -------- ---------


Notes:

1) The estimated future net revenues are stated before deducting future estimated site restoration costs, but include the Alberta Royalty Tax Credit, and are reduced for estimated future abandonment costs and estimated capital for future development associated with the reserves.

2) Numbers may not add due to rounding.

Net Asset Value (NAV) per Fully Diluted Share (unaudited):

Net Asset Value (NAV) per fully diluted share has been calculated utilizing forecasted pricing and costs. Results are shown at 10% BIT (Before Income Tax) and 5% BIT.



SUMMARY OF NET ASSET VALUE
FORECAST PRICES AND COSTS
Before Income Taxes Discounted at (%/year)


10% BIT 5% BIT
--------------- -----------------
PV PV
(M$) $/Share (M$) $/Share
------------------------------ ------- ------- ------- ---------
Total Proved plus Probable
Reserve
Value 44,482 2.20 53,675 2.66
Undeveloped Land 3,322 0.16 3,322 0.16
Year-End Debt (9,000) (0.45) (9,000) (0.45)

Total Net Assets 38,804 1.92 47,997 2.38


Notes:

1) Based on 20.2 million outstanding shares on a fully diluted basis.

2) Numbers may not add due to rounding.

3) Based on an undeveloped land evaluation prepared by an independent third party evaluator.

4) Does not include acquisitions, drilling and workovers completed in Q1, 2006.

5) Year end debt is the Company's estimate of total debt, including working capital.

Operations Update:

Pilot has realized significant growth in 2005 in reserves, production, and cash flow. The Company has developed a solid base of production, while continuing to build an inventory of drilling opportunities. The properties assembled by Pilot provide the Company with an excellent opportunity in 2006 to continue to grow reserves and production through further exploitation, development, and exploration drilling. Pilot intends to also pursue complementary acquisitions in each of our existing core areas similar to the one completed in the Chauvin area in first quarter of 2006, as well as adding new areas where exploitation opportunities exist. Pilot is currently on track to meet its previously stated production target of 825 boepd for the first quarter of 2006.

Southeast Saskatchewan continues to be the Company's most significant area of operation as production of light oil and natural gas from this area is approximately 525 boe per day. Pilot is currently licensing several horizontal development wells, and Pilot currently plans to drill a deep exploration test in an area where the Company recently completed a 3-D seismic shoot. Drilling is expected to occur in the second and third quarters of 2006. In addition, in the summer of 2006, Pilot will evaluate the acreage it has accumulated over the Viewfield Bakken trend. If successful, the Company will have up to thirty locations on its lands for the Bakken zone, based on 160 acre spacing.

In Alberta, Pilot is currently drilling a gas well to evaluate several shallow gas zones to determine the potential for a future drilling program.

Pilot is an oil weighted, Canadian junior energy Company engaged in the exploration and development of oil and natural gas in Alberta and Saskatchewan.

Disclosure provided herein in respect of barrels of oil equivalent 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.

Certain statements in this press release are forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by Pilot 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, many of which are beyond the control of Pilot. There is no representation by Pilot that actual results achieved during the forecast period will be the same, in whole or in part, as forecast.

Issued and Outstanding Common Shares: 19,670,212

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

Contact Information

  • Pilot Energy Ltd.
    Todd Lemieux
    President
    (403) 514-8115 ext. 226
    or
    Pilot Energy Ltd.
    Doug Smith
    Chief Financial Officer
    (403) 514-8115 ext. 232