Redcliffe Exploration Inc.
TSX VENTURE : RXI.A
TSX VENTURE : RXI.B

Redcliffe Exploration Inc.

August 28, 2007 09:15 ET

Redcliffe Announces Second Quarter 2007 Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2007) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO U.S. PERSONS.

Redcliffe Exploration Inc. (TSX VENTURE:RXI.A) (TSX VENTURE:RXI.B) ("RXI" or the "Company") is pleased to announce its financial results as of June 30, 2007. The Company has filed its interim consolidated financial statements for the three and six months ended June 30, 2007, and the accompanying Management's Discussion and Analysis with Canadian securities regulatory authorities. These filings are available for review at www.sedar.com.

Second Quarter 2007 Highlights:

- The second quarter represented the first full quarter of production after the February 27, 2007 business combination between Redcliffe Exploration Ltd. and Stallion Energy Ltd. to form Redcliffe Exploration Inc. The Company produced an average of 503 boe/d (79% natural gas) for the three months ended June 30, 2007. At June 30, 2007, approximately 300 boe/d of behind-pipe production was awaiting tie-in to third party facilities from 5 wells. RXI's current production is approximately 550 boe/d with the remaining behind-pipe production from 4 wells of approximately 250 boe/d scheduled to be tied in by the end of September 2007.

- Revenues for the quarter totaled $2.10 million, resulting in operating cash flows before changes in working capital of $0.73 million.

- The Company re-entered 1 (1 net) well during the quarter, which resulted in a successful light oil well that has subsequently commenced production at approximately 40 bbl/d net. The Company further made substantial progress in tying in existing wells and has also increased its land holdings to 14,500 net acres of undeveloped land in Alberta at June 30, 2007. Capital expenditures totaled approximately $2.71 million for the quarter, of which $0.38 million was spent on land, G&G and seismic, $2.22 million on drilling, completion, equipping and tie-ins, and $0.11 million on capitalized G&A.

- The Company raised $7.05 million of equity during the second quarter by issuing approximately 7.8 million Class A shares on a flow-through basis at $0.90 per share. As a result, the Company's net debt at June 30, 2007 was $1.6 million.

- The Company concluded a significant farm-in and option agreement with a major independent Canadian oil & gas producer in its core area of Pembina, which offsets a number of the Company's exploration discoveries. The agreement provides the Company with access to an existing 110 square mile 3D seismic survey covering approximately 122 sections of land. The farm-in lands include 67 sections of 100% working interest lands, or approximately 43,000 net undeveloped acres, with excellent earning terms.

- Subsequent to June 30, 2007 the Company signed a letter of intent, subject to certain conditions, to acquire Redcliffe Energy Ltd. ("REL"), a related private company, in a share exchange transaction. The acquisition is expected to add current and behind-pipe production of approximately 300 boe/d from REL. Upon closing of the acquisition, RXI is expected to have production in excess of 1,000 boe/d (approximately 80% gas weighted), assuming the successful tie-in of behind pipe production in both companies. RXI will have also increased its working interests in its existing properties and its exploration inventory as a result of the common ownership of such assets.



Financial Summary:

Three months ended Six months ended
(in dollars, except as noted) June 30, 2007 June 30, 2007
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Crude oil and natural gas sales
revenues 2,095,144 2,761,873
Net earnings (loss) and other
comprehensive income (loss) (1,242,203) 1,327,728
Net earnings (loss) per basic and
diluted Class A share (0.03) 0.04
Net debt 1,602,454 1,602,454
Total assets 37,041,221 37,041,221
Capital expenditures 2,713,827 5,667,299
Crude oil and natural gas liquids
sales ($/bbl) 45.09 45.93
Natural gas sales ($/mcf) 7.65 7.72
Average royalty rate (%) 26.6% 26.5%
Operating expenses ($/boe) 3.37 3.74
Transportation costs ($/boe) 1.33 1.77
Operating netback ($/boe) 28.21 28.14
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Outlook:

RXI continues to focus on the growth of exploration and development prospects in the Pembina and Peace River regions of Alberta. We remain committed to the search for liquids rich natural gas reserves in these multi-zoned basins at depths of 1800 - 2500 meters. While recent trends in North American natural gas prices have not rewarded this strategy, we remain confident in the ultimate increase in natural gas prices with reduced drilling, smaller incremental discoveries and the increasing costs of competitive fuels. Currently we have a prospect inventory of over 40 wells, many of which have significant reserve potential, particularly those surrounding the significant 2006 Gold Creek discoveries.

We had previously announced a capital program for 2007 in the $15-20 million range involving the drilling of up to 25 wells. Market and cash flow considerations may reduce that activity. Delays in bringing on production wells drilled in late 2006 and lower gas prices have impacted our 2007 revenue base. We will pursue our major exploration and development drilling projects in Gold Creek and the recently announced major farm-in in Pembina. As such, the drilling of the first of three wells in Gold Creek and the first of four wells in Pembina are expected to commence in 2007. Some of our other drilling prospects following up prior successes will be delayed but are not expected to impact our anticipated 2007 exit rate of approximately 1,000 boepd. We are fortunate in controlling our acreage and prospect inventory such that many of our opportunities have developed without the restriction of time sensitive capital expenditure obligations. Our flexibility to react to opportunities and success should ensure the optimum development of our production and cash flow base throughout 2007 and beyond.

Forward-Looking Statements: This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, 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, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect the Company'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). All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE may be misleading, particularly if used in isolation. A BOE conversion 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

  • Redcliffe Exploration Inc.
    Daryl H. Connolly
    President & CEO
    (403) 539-8440
    (403) 539-8433 (FAX)
    Email: dconnolly@redcliffe.ca
    or
    Redcliffe Exploration Inc.
    George Gramatke
    Vice President, Finance & CFO
    (403) 539-8442
    (403) 539-8433 (FAX)
    Email: ggramatke@redcliffe.ca