Sierra Vista Energy Ltd.

Sierra Vista Energy Ltd.

April 18, 2007 09:01 ET

Sierra Vista Announces Significant Reserve Growth

CALGARY, ALBERTA--(CCNMatthews - April 18, 2007) -


Sierra Vista Energy Ltd. ("Sierra Vista" or "the Company") (TSX VENTURE:SVR.A) (TSX VENTURE:SVR.B) announces significant reserves growth during its first full year of operations. During 2006 Sierra Vista had a very active and successful drilling year. The Company increased its proved reserves base by 249% after replacing 2006 production volumes and increased its proved plus probable reserves by 178%. At December 31, 2006 Sierra Vista's proved reserves were 1,102 mboe, compared to 316 mboe at December 31, 2005 while proved plus probable reserves were 1,636 mboe, compared to 588 mboe at December 31, 2005. Based on the Company's 2006 exit rate of 505 boepd this represents a reserve life index of 5.9 years for proved reserves and 8.9 years for proved plus probable reserves.

Throughout 2006, Sierra Vista focused its activities on the core property of Ante Creek. As a result of the Company's ability to execute on a number of significant farm-in agreements with industry partners in the area, it was necessary to increase the 2006 capital budget. Sierra Vista drilled 7 successful wells in the Ante Creek area in 2006 allowing the Company to earn an average working interest of 84% in 11,920 gross acres of land. Three of these wells were part of the ARC Resources farm-in commitment and one was the last of six development wells drilled as part of the northern farm-in program with Tristar Oil & Gas Ltd. The remaining three wells were part of the Company's ongoing exploration efforts in the southern Ante Creek lands. Two of the three wells were completed in the Montney zone and continue to extend the productive limits of this play to the south while the third well was completed in an uphole horizon.

After a full year of production, the finding and development costs for the six original Tristar earning wells are $13.44 per boe of proved plus probable reserves. On a straight up, non promoted basis this equates to $9.41 per boe of proved plus probable reserves. The Company has the opportunity to downspace these lands and drill six non promoted wells on 40 acre spacing, similar to what offsetting operators are doing in analogous Montney reservoirs.

The three successful ARC farm-in wells have also extended the limits of this portion of the Montney pool. As part of its ongoing program to optimize the development of these lands the Company initiated its multi-well pad drilling plan for the area. Two of the wells were drilled from a common surface lease. The first wellbore was drilled vertically while the second wellbore was drilled directionally. Not only were the cost savings realized with this development quite significant, additional areas were identified that will provide the opportunity for further cost reductions. These first three ARC earning wells alone will provide the Company with an inventory of up to 15 non promoted wells on 80 acre spacing and 35 wells on 40 acre spacing.

For the year ended December 31, 2006 the Company incurred capital expenditures of approximately $30.6 million. This resulted in proved plus probable finding and development costs of $30.57/boe including future development capital and $27.67/boe excluding future development capital. In the Company's core area of Ante Creek the proved plus probable finding and development costs were $22.34/boe including future development capital and $18.93/boe excluding future development capital. On a non-promoted basis the F&D's for these Ante Creek wells would be $19.27/boe and $16.33/boe with and without future development capital. Three of these seven wells were exploratory wells drilled in the southern lands. Two of the wells have uphole zones which have not been tested yet and in the zones that were tested the production histories were limited due to insufficient pipeline and plant infrastructure.

For the calendar year of 2006 the Company's field netbacks at Ante Creek were $32.73/boe. This included significant trucking costs for volumes produced from the southern lands due to the lack of infrastructure. Based on the F&D's of $19.27/boe for a non-promoted well (including future development capital) this equates to a recycle ratio of 1.70. On an overall corporate basis the Company's field netbacks were $33.17 per boe which equate to recycle ratios of 1.1 and 1.2 with and without future development capital.

During 2006 the Company expended approximately $3.0 million on a 100% owned and operated compressor station at its Kaybob property. The facility has been designed to initially handle up to 1.5 mmcfd of inlet gas but is easily expandable to 2.0 mmcfd. The first Kaybob well was brought on production at 1.1 mmcfd gross, and has stabilized at approximately 425 mcfd gross. The second well experienced completion problems due to a poor cement job during drilling. Remedial work on this second well and additional drilling through downspacing is scheduled on these lands during the second half of 2007. Ownership of the compressor station allows the Company to be more aggressive pursuing additional opportunities in the area.

The Company's capital budget for 2007 will be approximately $15 million. The majority of the 2007 capital budget will be allocated to completion of the ARC farm-in program and fulfilling our remaining 2007 flow-through commitment of approximately $3.8 million. At Ante Creek south the Company will initiate construction of an oil battery and gas compression facility to handle volumes from the southern exploration wells, and to facilitate a development program on these lands in early 2008. The Company has a drilling inventory of 15 to 30 wells on the southern lands.

Sierra Vista continues to be very excited about the future potential of the Ante Creek, Montney light oil resource play. The land base which the Company is earning will provide for a multi-year inventory of low risk, development drilling. The Company's optimization efforts to date have resulted in significantly reduced capital costs, and the productivity of the wells continue to meet and/or exceed expectations. With the completion of the earning phase of the drilling program, and the construction of the first phase of a facility to service the southern lands, the Company will be well positioned to begin exploiting the significant upside of this resource play.

Sierra Vista is a junior oil and gas company engaged in the exploration for, and development and production of, crude oil and natural gas focusing in the Peace River Arch and South Central regions of Alberta. The Corporation's shares trade on the TSX Venture Exchange under the symbols "SVR.A" and "SVR.B".


Some of the statements contained herein including, without limitation, financial and business prospects, financial outlooks, and production forecasts may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. In particular, this news release contains forward-looking statements pertaining to the quality of reserves, oil and natural gas production levels, capital expenditure programs, projections of market prices and costs, supply and demand for oil and natural gas; and expectations regarding the Company's ability to raise capital and to continually add to reserves through acquisitions and development.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and elsewhere in this news release including uncertainty of reserve estimates, volatility in market prices for oil and natural gas, liabilities and risks inherent in oil and natural gas operations, uncertainties associated with estimating reserves, competition for, among other things, capital, acquisitions or reserves, undeveloped lands and skilled personnel, geological, technical, drilling and processing problems.

Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", continue" and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current expectations and are based on uncertainties. Although the forward-looking statements contained within this news release are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances unless required under applicable securities laws.

Where amounts are expressed on a barrel of oil equivalent ("BOE") basis, natural gas volumes have been converted to BOE using a ratio of 6,000 cubic feet of natural gas to one barrel of oil equivalent. This conversion ratio is based upon energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOE figures may be misleading, particularly if used in isolation.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.

Contact Information

  • Sierra Vista Energy Ltd.
    Mr. Mark Malouin
    President & CEO
    (403) 265-9393 ext 201
    (403) 265-9224 (FAX)
    Sierra Vista Energy Ltd.
    Mr. Bruce Stewart
    Chief Financial Officer
    (403) 265-9393 ext 205
    (403) 265-9224 (FAX)
    Sierra Vista Energy Ltd.
    Suite 850, 101 - 6th Avenue SW
    Calgary, Alberta T2P 3P4