Sabretooth Energy Ltd.

Sabretooth Energy Ltd.

May 08, 2008 09:00 ET

Sabretooth Energy Ltd. Announces New Strategic Direction

Sabretooth Energy Provides Operational and Financial Update; Intent to Focus on Montney Exploration and Development

CALGARY, ALBERTA--(Marketwire - May 8, 2008) - Sabretooth Energy Ltd. ("Sabretooth" or the "Company") (TSX:SAB) is pleased to provide an operational and financial update on first quarter 2008 production and drilling success as well as details regarding Sabretooth's new strategic direction and intent to become a Montney-focused exploration and development company.

Operations & Production Update

Sabretooth drilled seven gross (5.4 net) wells in the first quarter of 2008. Drilling was focused mainly in Alberta on the Peace River Arch for the first quarter, before a focus shift into British Columbia for the balance of 2008 to mitigate the effects of the Alberta new royalty framework.

Five wells drilled on the Peace River Arch (four in Alberta) resulted in two oil discoveries (1.8 net) one gas discovery (1 net) and two dry holes (1.6 net). One well (0.5 net) was drilled in central Alberta resulting in an oil discovery. One well (0.5 net) was drilled at Fireweed, British Columbia, resulting in a gas discovery. Subsequent to the quarter end, the first well in a four well (1 net) program, at Gunnell, spudded targeting the Jean Marie.

Work is ongoing on the approximately 785 boe/d tested and awaiting tie-in from nine projects in the Peace River Arch area of Alberta and British Columbia. First production from behind pipe is anticipated to be onstream from the Mica discovery at 250 boe/d by month end. As well, the first of a 4 well infill horizontal drilling program in the Gunnell area is currently drilling and is anticipated to be on-stream by month-end. The initial Gunnell well is projected to add 70 boe/d, after flush volumes, and the project is estimated to add 200 boe/d, after flush volumes, by the end of June. Current production is approximately 2,700 boe/d with additional existing production impacted by break-up conditions. Production in the first quarter of 2008 was adversely affected by the loss of production from three wells at George.

Strategic Direction & Asset Rationalization

The Board of Directors of Sabretooth have unanimously determined that a new, more focused strategic direction for the Company will provide shareholders with the highest possible exposure to near term value creation and unlock the undervalued potential that management and the Board of Directors see reflected in the current share price.

Sabretooth has engaged Tristone Capital Inc. to explore alternatives to sell all or materially all of the Company's conventional asset production and land base, which would enable Sabretooth to focus on, and accelerate exploitation of its significant Montney land spread and harvest the material production and reserve volumes associated with the play.

Montney Asset Base & Impact Drilling Inventory

Sabretooth was recently successful in acquiring 5,280 net acres to further consolidate the Company's strategic asset base at Red Creek, a highly prospective landholding that Sabretooth controls at 100% working interest. Current Sabretooth undeveloped land holdings in the core Montney Fairway of British Columbia total over 35,000 net acres.

Montney technical expertise within the Company dates back to drilling initial successful wells in the Montney in 1996. The Sabretooth technical team has been evaluating Montney opportunities since Company inception and interprets potential recoverable reserves from existing Company lands range from 250 BCF to 500 BCF. This strategic decision allows the Company to focus exclusively on Montney exploitation in the near term.

Licensing is underway on multiple long reach horizontal wells planned for the second and third quarters targeting the Montney Formation in the Red Creek and Oak areas of NEBC. The first Red Creek well will spud in June. Sabretooth now has 8 sections with 100% working interest at Red Creek where offset logs indicate significant pay sections (exceeding 70 meters in thickness) within the Upper Montney. As well, the Company acquired a 10 section 3-D seismic suite over the Red Creek acreage which supports consistent reservoir quality and displays structural elements that have been associated with superior production performance. The initial well location is 100 meters from tie-in to the Spectra McMahon Facility which currently has significant unutilized capacity. In the Oak area Sabretooth has drilled and completed 2 Montney vertical wells and achieved initial rates of 500 mcf\d and 1 mmcf\d. A third well was drilled, cored and cased in the Montney to enable a horizontal leg to be drilled. Core results compared favourably to cored wells in established producing areas of the Montney fairway.

Conventional targets in British Columbia, including follow ups to two oil discoveries, are also being licensed for late Q2 / Q3 drilling. Our updated capital forecast projects spending of $30 million for the balance of 2008 and anticipates drilling 10 wells by the end of Q3 2008.

Bank Line and Working Capital

At March 31 bank debt was $55.5 million (including $24.1MM of Asset Based Commercial Paper) on a line of $78.0 million. Subsequent to quarter end the bank line has increased to $81 million. Working capital deficit is $65.1 million including a $7.1 million mark to market adjustment for the company's commodity contracts. Excluded from working capital is the company's $24.1 million Asset Backed Commercial Paper which is recorded as a non-current asset and recorded with a fair value of $18 and accrued interest from the ABCP which is approximately $0.7 million.

About Sabretooth Energy

Sabretooth Energy Ltd. is a public oil and gas exploration and development company, located in Calgary, Alberta and carrying out operations in Western Canada. Sabretooth trades on the Toronto Stock Exchange (TSX) under the symbol "SAB".

This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future, or statements regarding the outlook for petroleum prices, estimated amounts and timing of capital expenditures, the timing, location and extent of future drilling operations anticipated timing and results of construction projects and project tie-ins, estimates of future production, the ability to realize the timing, on investments in ABCP, the terms of loans to be received from National Bank of Canada, if any, operating costs or other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance. Statements regarding reserves are also forward-looking statements, as they reflect estimates as to the expectation that the deposits can be economically exploited in the future.

These statements are based on certain factors and assumptions regarding expected growth, results of operations, performance, business prospects and opportunities and the ability of the Company to realize on its investments in ABCP. While we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.

By their nature, forward-looking statements involve numerous risk and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, 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, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals, the ability to realize on investments in ABCP and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Sabretooth believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new 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.

The term barrels of oil equivalent or boe may be misleading, particularly if used in isolation. A conversion ratio for gas of 6 mcf : 1 boe 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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