Profound Energy Inc.
TSX : PFX

Profound Energy Inc.

May 01, 2008 17:08 ET

Profound Energy Inc. Announces Agreements to Sell Brazeau and Majeau Assets and Provides Update of First Quarter 2008 Operations

CALGARY, ALBERTA--(Marketwire - May 1, 2008) - Profound Energy Inc. ("Profound" or the "Company") (TSX:PFX) is pleased to report that it has reached agreements to sell all of its interest in its Brazeau, Alberta and Majeau, Alberta operating areas and provide a first quarter 2008 operations update.

ASSET SALES

Brazeau

Profound has entered into an agreement to sell all its interest in the Brazeau area of Alberta for $11.4 million subject to customary adjustments. The transaction is expected to close on or about May 15, 2008 and will be effective as at April 1, 2008. The disposition of these assets is subject to customary due diligence and other conditions typical of transactions of this nature. Production from this area, net to Profound, is approximately 255 boed comprised of 1.14 mmcf/day of natural gas and 65 bbls/day of oil and natural gas liquids.

The Company's independent reserve evaluators, GLJ Petroleum Consultants in their report dated January 1, 2008, estimate that the Brazeau area represented approximately 392,000 boes of proved developed producing reserves, 143,000 boes of proved undeveloped reserves and 874,000 boes of proved plus probable reserves net to Profound's interest. The estimated future development cost required to establish these reserves is estimated to be $2.6 million. Included in the sale is undeveloped land of approximately 664 hectares.

Majeau

Another agreement has been reached to sell Profound's interests in the Majeau area of Alberta for a total purchase price of $2.7 million subject to customary adjustments. This transaction is also expected to close on or about May 15, 2008 and will also be effective as at April 1, 2008, subject to typical due diligence and other conditions. Profound produces approximately 240 mcf/d or 40 boed from the Majeau area.

An independent assessment prepared by Sproule Associates Limited dated January 1, 2008, estimated that Profound holds approximately 63,000 boes of proved developed producing reserves, nil boes of proved undeveloped reserves and 207,000 boes of proved plus probable reserves in the Majeau area. The estimated future development cost to establish these reserves is $0.5 million. Included in the sale is approximately 896 hectares of undeveloped land.

The sale of these assets is consistent with Profound's strategy of concentrating assets and operations within key areas to achieve economic efficiency. In addition to the operating efficiencies expected, the sales serve to strengthen Profound's financial position providing the flexibility if it so determines, to expand its 2008 capital program when drilling results or economic conditions warrant or reduce its bank debt.

OPERATIONS UPDATE

Production

After the sale of the Brazeau and Majeau assets, Profound estimates its production will be approximately 3,100 boe/d made up of 13.5 mmcf/day of natural gas and 845 bbls/day of oil and natural gas liquids.

The Company is adding compression as well as additional pipeline capacity at Carrot Creek Alberta. This work, scheduled to be completed by the end of June 2008, will serve to eliminate restrictions on adding new production in this area. It is anticipated that approximately 300 boe/d net to Profound will be realized from wells which have already been drilled, tested and equipped for production and will come on stream once this work is completed.

2008 Q1 Drilling Update

Carrot Creek

Profound drilled a (0.50 net) horizontal Rock Creek well, and participated in 3 (1.7 net) vertical wells. Three horizontal (2.0 net) Rock Creek wells are planned for the remainder of 2008. In addition to the horizontal multi-stage completion wells, Profound intends to drill 5 (2.9 net) vertical wells to further exploit the discoveries made to date in the Ostracod zone. A well (0.37 net) drilled in Q1 2008 tested the Ostracod formation at a rate in excess of 1,250 boed.

Profound is working on installing additional compression and pipelines to bring on new production volumes which will be unable to flow until late June 2008 when this work is scheduled for completion. The amount of production estimated to be currently restricted until this work is completed is approximately 300 boed. Profound estimates that it currently has a drilling inventory in excess of 10 horizontal wells and 15 vertical wells at Carrot Creek.

Pembina

One vertical oil well (1.0 net) and 3 re-completions (2.7 net) were undertaken in the Pembina, Alberta area.

Test rates of between 300 mcf/d and 3000 mcf/d were obtained in the re-completion operations where Profound holds a 60% working interest. Plans are underway to exploit this seismically defined natural gas accumulation with horizontal wells using multi-stage fracture stimulations. Profound expects to spud its first horizontal well (0.6 net) in this area in July 2008 when the drill site should be accessible. Production performance will be carefully evaluated to determine the optimum well spacing and stimulation density required to maximize reserves recovery. If successful, Profound has an inventory of 10 additional horizontal locations.

West Pembina

Exploration at West Pembina is continuing, with capital being allocated to follow up a successful Belly River oil re-completion (0.8 net) with a vertical well (0.8 net) directly offsetting the discovery. Profound was also successful at Crown land sales and acquired an additional 4 sections of land at 100% working interest. The Company now has 15 contiguous sections of land at an average working interest of 75%.

Peace River Arch

As a result of the acquisition of Defiant Resources Corporation, a second core area has been added in the Peace River Arch area of Alberta. Three wells (2.4) net are budgeted for the remainder of 2008 to further exploit existing discoveries. Profound plans to continue to diversify its asset base in the area, with an emphasis on growing the Karr and Gold Creek areas.

Outlook

In total, Profound has assembled an inventory of over 100 gross exploration and development locations on land it has acquired over the last 12 months. Of these locations, 25 are horizontal wells which will incorporate multi-stage fracture stimulations. This represents almost 50% of the proposed future capital expenditures. These horizontal wells target formations with existing gas accumulations, and represent a low risk exploitation program over the next 2-3 years.

ABOUT PROFOUND

Profound explores for and produces oil and natural gas in Alberta, Canada. It was formed on November 19, 2007 through the amalgamation of Profound Energy Ltd., a private oil and gas exploration and production company, and Cork Exploration Inc. a public oil and gas exploration and production company. On April 1, 2008 Profound acquired Defiant Resources Ltd. a public oil and gas company operating in Alberta.

The Company operates in central Alberta west of the fifth meridian and in the Peace River Arch area of Alberta.

DISCLAIMER

Certain information regarding Profound in this news release including management's assessment of future plans, asset dispositions, production, drilling program and operations and the effect on Profound may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, risks associated with sour hydrocarbons, changes to the proposed royalty regime prior to implementation and thereafter, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, delays in projects and/or operations resulting from surface conditions, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could effect Profound'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). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Profound does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Boes may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one 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.

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