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

Redcliffe Exploration Inc.

April 01, 2010 09:15 ET

Redcliffe Provides Operational Update

CALGARY, ALBERTA--(Marketwire - April 1, 2010) -

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

Redcliffe Exploration Inc. ("Redcliffe" or the "Company") (TSX VENTURE:RXP.A) (TSX VENTURE:RXP.B) is pleased to provide the following operational update, which updates the Company's news release of February 12, 2010.

Drilling Results

Over the winter drilling season, the Company successfully drilled 5 (2.95 net) wells. On its core Gold Creek and Karr properties, the Company drilled 4 (2.70 net) wells, resulting in 4 (2.70 net) potential natural gas wells. In the Pembina Cardium play, the Company farmed out its 50% interest in a horizontal test well while retaining an unencumbered 25% interest at first production.

As previously reported, the Cardium horizontal well at 8-3 was placed on production in January 2010 and is currently being produced by the operator at approximately 125 bbl/d of light sweet Cardium oil. With the success of this well, the Company expects to drill a second horizontal well on this section in Q2 or Q3 2010. Redcliffe has 12 (7.7 net) sections of land with Cardium rights and is actively developing a strategy to either monetize or develop this oil potential based upon offsetting industry activity. In addition, the Company will be focusing on additional oil opportunities in other west central Alberta properties.

At Gold Creek and Karr, Redcliffe operated the drilling of two wells and participated in the drilling of two other wells with Progress Energy Resources Corp. ("Progress") and Delphi Energy Corp. ("Delphi"). All four wells were successful. The Progress operated well at 12-13 (WI 50%) identified two primary natural gas bearing horizons but will not be completed until the second quarter of this year due to scheduling and warm weather conditions. This well, like the Redcliffe operated well at 11-32 (WI 100%) and the Delphi operated well at 13-30 (WI 33.33%), all had as their primary target the Nikanassin Formation. The 13-30 well is currently undergoing completion operations that include the testing of other potential natural gas bearing horizons. Both the 12-13 and 13-30 wells are located within a short tie-in distance to existing plants and facilities. The Redcliffe operated 11-32 well was completed in the Nikanassin zones and confirmed our technical analysis of this play.

The Nikanassin Formation represents a resource-style play that offers upside with the predictable nature of a large gas deposit development utilizing horizontal drilling and multi-staged stimulation techniques. Natural gas liquid content of the gas varies between 30 and 40 bbls/mmcf. Vertical wells drilled to the north and utilizing optimized fracture completion techniques have achieved initial rates in the 3 to 5 mmcf/d range and other operators in the area have recently drilled horizontal Nikanassin wells. Redcliffe estimates that it has exposure to Nikanassin potential in approximately 88 sections in its Gold Creek and Karr core areas at an average controlled working interest of 65%.

Also during Q1 2010, Redcliffe drilled and cased a vertical well (87.14% WI) at Karr targeting the Montney Formation. This strategic well was drilled to establish Montney gas and liquid potential on the southern portion of the Company's Karr lands. The well has been extensively sidewall-cored for reservoir optimization purposes and was tested throughout the gross 200 meter Montney Formation. While the preliminary test results remain confidential, the Montney exhibited characteristics consistent with 3-D seismic data and the extensive horizontal development being undertaken by Paramount Resources Ltd. one mile to the north. Initial production rates for these horizontal wells have been reported at over 5,000 mcf/d with 40 bbls/mmcf of natural gas liquids. Redcliffe plans to drill its first horizontal well at Karr late in the second quarter. The Company maintains an approximate 91% working interest in the 15 sections of land over the Karr gas pool and 94 sections (average 73% WI) of prospective lands over the general upper Montney Siltstone deposit in the Gold Creek / Elmworth area.

Redcliffe has an extensive inventory of follow-up drilling locations in the Gold Creek-Elmworth-Wapiti-Karr areas targeting both high impact vertical drilling and the two "resource style" plays discussed above. The recent drop in North American natural gas prices has impacted the economics of these opportunities, but recent decisions by the Alberta government to maintain or improve its drilling incentives and royalty framework has provided some positive incentives and helped to reduce front-end capital exposure. While the liquids rich nature of the natural gas deposits in the Gold Creek area offers a distinct economic advantage, the current depressed outlook for natural gas may affect the pace at which the Company executes its future capital program. We believe current gas prices will result in a pullback in drilling activity and that demand levels for natural gas will increase. The timing and extent to which this occurs is not certain.

Other Operational and Financial Updates

Redcliffe's current production is averaging approximately 850 boe/d (69% natural gas). The Company does not expect to see any potential increases in production from the winter drilling program until late Q2 2010. Although natural gas prices have recently weakened, the Company has forward sold 3,000 GJ/d, representing the majority of the Company's natural gas production, at an average price of $5.70/mcf ($5.41/GJ) for the period from April 1, 2010 to October 31, 2010. As a result, the Company expects to be significantly hedged against natural gas price weakness over this period.

The Company's net debt at December 31, 2009 is estimated at $6.4 million, against existing bank lines of $14.1 million. These bank lines are currently under annual review by the Company's lender. Redcliffe expects to release its 2009 audited financial results and NI 51-101 reserves disclosures in late April 2010.

Redcliffe is a Calgary based company exploring for oil and gas in Alberta. The Company has a significant land base of 118 (77 net) sections in the Peace River Arch south of Grande Prairie, as well as additional lands in and around Pembina, including 12 (7.7 net) sections with Cardium oil potential. Production is focused in the Gold Creek/Wapiti area of northwestern Alberta and the Pembina area of central Alberta.

Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking statements, including but not limited to, management's assessment of future plans and operations, capital expenditures and the timing thereof and expected timing and results from operations, that involve substantial known and unknown risks, uncertainties and assumptions, certain of which are beyond the Company's control. Such risks, uncertainties and assumptions include, without limitation, those associated with oil and gas exploration, development, exploitation, production, marketing, processing 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 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 affect the Company's operations and financial results are included in reports, including the Company's annual information form for the financial year ended December 31, 2008, 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts 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)
    dconnolly@redcliffe.ca
    or
    Redcliffe Exploration Inc.
    George Gramatke
    Vice President, Finance & CFO
    (403) 539-8442
    (403) 539-8433 (FAX)
    ggramatke@redcliffe.ca