SignalEnergy Inc.

March 31, 2005 23:59 ET

SignalEnergy Inc. releases 2004 year-end results, year-end reserves, and operations update

CALGARY--(CCNMatthews - March 31) - SignalEnergy Inc. ("Signal" or the
"Company") is pleased to release its 2004 financial results for the year ended
December 31, 2004, its year-end reserves report and an operations update for the
first year of operation as an oil and gas company. The Company did not have oil
and gas operations in the year ended December 31, 2003 therefore year-over-
year comparative operational data is not applicable.

The results below indicate that the Company has established a solid foundation
and technical expertise to acquire, develop, and exploit oil and natural gas
reserves in western Canada. Approximately 97% of Signal production and reserves
are weighted toward natural gas.

2004 Highlights

- Completed four property and one corporate acquisition and announced the
acquisition of Predator Exploration Ltd. ("Predator) and Privateco;

- Deployed a capital budget of $22.5 million;

- Drilled 23 wells (22 net wells) with a success rate of 87%;

- Established year-production of 1,100 boe/d (pro-forma the acquisitions);

- Acquired an undeveloped land inventory of 47,276 net acres (pro-forma the

2005 Activity

- Closed the acquisition of Predator and Privateco;

- Completed five wells which were drilled in 2004;

- Conducted a total of seven re-completions on wells from the acquisitions of
Predator and Privateco;

- Drilled and cased a multi-zone potential gas/oil well in Grizzly;

- Drilled a Viking and CBM test in Twining;

- Established first quarter production capability of 1,600 boe/d;

- Entered into an agreement to sell its interests in the Twining area for a
purchase price of $13.25 million;

- Added 3,358 mboe of Total Proved and 4,698 mboe Total Proved Plus Probable
reserves with an estimated reserve life index of 10.5 years;

- Demonstrated finding and development costs of $12.95 per boe proven and $10.10
per boe proven and probable (including future capital);

- Established pre tax net asset value of $1.45 per share.

Production for the first two months of 2005 has averaged 1,050 boe/d and current
production is 1,400 boe/d as Signal brings on-stream wells drilled in 2004 and
subsequently completed and tied-in during the first quarter 2005. The Company
has tested 250 boe/d of additional production which currently stands behind pipe
or is constrained by existing plant and gathering capacity. Signal plans on
upgrading production facilities following spring breakup and improving daily

Twining Sale

The Company has entered into an agreement to sell all of its interest in the
Twining area for a purchase price of $13.25 million. The production from the
area averaged 111 boe/d in 2004 and is currently producing 170 boe/d. An
evaluation (the "GLJ Report") completed by Gilbert Lausten Jung Associates Ltd.
("GLJ") effective December 31, 2004 assigns 364 mboe proven and 650 mboe proven
and probable reserves to the area.

Signal entered the area in order to develop a resource style play focused on
shallow gas in the Edmonton sands and Horseshoe canyon coals. During 2004 the
Company acquired 17,840 gross acres (17,200 net acres) of land, drilled 18 wells
of which 11 were placed on stream, developed an extensive low pressure gathering
system consisting of 31 km of gas gathering system and five low pressure booster
compressor stations, and applied for regulatory approval with the Alberta Energy
and Utilities Board ("AEUB") to allow commingling of Edmonton sand and Horseshoe
canyon coals in the area. During this time the Company witnessed a significant
increase in industry competition making the successful deployment of the cheap-
deep resource style play more difficult. In this regard, the Company has elected
to dispose of its interests and use the cash resources to develop other resource
style plays in more favorable areas.

Carrot Creek - Kaybob - Grizzly

The Carrot Creek-Kaybob-Grizzly region is Signal's largest producing
conventional core area with current production of 550 boe/d. Completion
operations on the Company's first deep test in Carrot, in which it owns a 100%
working interest, have been completed with commercial test rates from two
horizons. The Rock Creek formation was evaluated over a four day flow test at
rates of 2.3 Mmcf/d plus liquids at expected operating pressure of the gathering
system. On an equivalent basis the test rate from the Rock Creek represents a
total test rate of 525 boe/d.

The second zone completed in the well-bore has resulted in a new pool discovery
in the Ostracod formation which tested at rates of 0.3 Mmcf/d plus 52 degrees
API light sweet crude oil at a rate of 75 boe/d. On an equivalent basis the
Ostracod test rate represents 125 boe/d. This well has been placed on stream and
is producing at a restricted rate of 1.5 Mmcf/d and 110 boe/d of natural gas
liquids from the lower Rock Creek formation. Following spring break-up Signal
will review potential options to improve production by minimizing the impact of
downstream restrictions. Since the initial acquisition of Carrot Creek in
January 2004, the Company has significantly increased reserves and increased
production by over 400%.

Signal has one offsetting section to this location and has recently executed a
Joint Venture agreement with another Company operating in the Carrot Creek area.
The Company has plans to drill six wells in the Carrot creek area during 2005.

In Grizzly, the Company has cased a multi-zone well (70% working interest) and
will commence completion operations shortly. The well encountered potential pay
zones in the Montney, Notikewan and Dunvegan formations. Signal holds a drilling
option on the offsetting section and plans to drill a follow-up well during the
summer. Optimization efforts at Kaybob are well underway including optimization
of producing well-bores and installation of SCADA which will significantly lower
operating costs.

Buick Creek

During the first quarter, Signal focused on improving the reliability and
production from this asset acquired as part of the Predator acquisition. A new
dehydration unit has been installed at the Company's 100% owned compressor
station which will improve efficiency and lower operating costs.

Production has increased over 60% to 180 boe/d from the pre-acquisition rate of
110 boe/d from a combination of well-bore and compressor optimization and a
successful work-over on a previously suspended well where Signal has 100%
working interest. Signal has completed two additional work-overs which have
added production capability of an additional 50 boe/d which will be placed on
stream in the second quarter of 2005. In addition, Signal acquired three
sections of land at the January land-sale adjacent to the Company's
infrastructure. Plans for the summer include two potential drilling locations
targeting Dunlevy and Baldonnel gas targets.


Signal has filed its year-end reserves reports with the regulatory authorities,
as part of its Annual Information form which can be found on the Sedar website
at The pro-forma consolidated 2004 year-end reserves of Signal,
Predator and Privateco. estimated by GLJ effective December 31, 2004 are
summarized as follows:

Light/Medium Oil Natural Gas NGL
--------------- --------------- ---------------
Gross Net Gross Net Gross Net
------- ------- ------- ------- ------- -------
Developed Producing 14 13 10,292 8,168 245 174
Developed Non-Producing 60 53 4,019 3,161 301 210
------- ------- ------- ------- ------- -------
Undeveloped 0 0 2,101 1,775 0 0
------- ------- ------- ------- ------- -------
Total Proved 74 66 16,412 13,103 546 385
------- ------- ------- ------- ------- -------
Probable 21 19 6,565 5,298 224 159
------- ------- ------- ------- ------- -------
Total Proved plus Probable 95 85 22,976 18,401 770 544
------- ------- ------- ------- ------- -------
1. The above table includes natural gas reserves assigned to the
Twining area of 2,136 Mmcf Total Proved and 3,838 Mmcf of Total
Proved plus Probable gross reserves.

Share of Present Worth Values
Before Income Tax
Discounted At
0% 5% 10% 15% 20%
(M$) (M$) (M$) (M$) (M$)
Developed Producing 38,763 31,678 27,173 24,025 21,679
Developed Non-Producing 25,621 21,470 18,489 16,260 14,536
Undeveloped 4,739 3,839 3,219 2,561 2,100
Total Proved 69,123 56,986 48,791 42,846 38,315
Probable 27,082 18,465 13,558 10,480 8,406
Total Proved plus Probable 96,205 75,452 62,349 53,326 46,720

1. The table included Present Worth Value of reserves assigned to the
Twining area of $3.1 million Total Proved and $5.1 million Total
Proved and Probable using a 10% discount rate.

Finding and Development Costs

Finding and development costs are calculated by dividing the exploration and
development costs incurred during the fiscal year, including the acquisition
cost of Predator and Privateco, (with and without of future capital as estimated
by GLJ) divided by the Total Proved and Total Proved plus Probable Reserves
added during that period including the effect of the Twining disposition. The
following table indicates the calculations of finding and development costs.

With Future Without Future
Capital Capital
Net capital expenditures $40,554,000 $36,830,000
Proven reserves added (boe) 2,993,000 2,993,000
Proven & probable reserves added (boe) 4,044,000 4,044,000
2004 Production (boe) 138,700 138,700
Cost per boe Total Proved $12.95 $11.76
Cost per boe Total Proved plus Probable $10.10 $8.80

1. The aggregate of the exploration and development cost incurred in
the most recent financial year and the change during that year in
estimated future development costs generally will not reflect total
finding and development costs related to reserve additions for that
2. The Company commenced oil and gas operations in 2004 therefore
comparative data to 2003 is not applicable.
3. For the purpose of calculating finding and development costs, on a
proven plus probable basis, with future capital, an additional
$1,686 million of future capital is included.

Net Asset Value

Based on the GLJ Report after giving effect to the Predator acquisition, the
Private Co. acquisition and the sale of the Corporation's interest in Twining,
as at December 31, 2004, the pre-tax net asset value is calculated as follows:

Present value of Proved and Probable reserves at 10% DCF $57.2
Value of undeveloped land 7.7
Working capital net of Long Term Debt 4.8
Net Asset Value $69.7
Basic number of shares outstanding 47.6
Pre-tax Net Asset Value per share $1.47

1. Based on the GLJ Report excluding $5.1 million of Proved and
Probable Present Worth using a 10% DCF, attributed to reserves in
the Twining area.
2. An independent evaluation of Signal, Predator and Privateco
undeveloped acreage was conducted by Total Petroleum Land Services
Ltd., effective March 1, 2005. The estimated value of undeveloped
is $9,420,524. The estimated value attributed to undeveloped land
in the Twining area is $1,672,000.
3. The basic number of shares outstanding after giving effect to the
acquisitions of Predator and Privateco is 47.6 million Common and
Class A Non-Voting Shares.

Reserve Life Index

Based on average January production of 1,050 boe/d Signal's reserve life index
is 7.8 years on a Total Proved basis and 10.5 years on a Total Proved plus
Probable basis after giving effect to the Predator and Privateco acquisitions
and the Twining disposition.

Financial Information

The financial information that follows is summary derived from the audited
financial statements of Signal for the period ended December 31, 2004. The
summary financial information does not reflect the Predator and Privateco
acquisitions and the Twining disposition. The complete financial statements
along with Management Discussion and Analysis and comprehensive notes thereto
have been filed with regulatory authorities, which can be found on Sedar website


Quarters Ended Mar 31 Jun 30 Sep 30 Dec 31 Total
Sales volumes:
Natural gas (mcf/day) 976 1,667 1,762 1,901 1,578
Oil and NGL's (bbls/day) 108 132 123 105 117
Total (boe/day) 271 410 417 421 380

Petroleum and natural gas sales 954 1,671 1,586 1,708 5,919
Net earnings (loss) (113) 93 (500) (548) (1068)
per share - basic and diluted (0.02) (0.02) (0.04)
Cash flow from operations 298 775 521 486 2,080
Capital expenditures (net) 10,285 5,980 5,637 645 22,547
Working capital 4,216
Total assets 35,076

Shareholders' equity
Common shares outstanding
Weighted - basic 29,591
Weighted - diluted 29,675
Year end - basic 35,907
Year end - diluted 38,319

Per unit information:
Natural gas ($/mcf) 6.52 7.46 6.50 6.94 6.90
Oil and NGL's ($/bbl) 38.10 44.64 46.58 50.04 44.87
Barrels of oil equivalent ($/boe) 38.70 44.73 41.30 43.18 42.53
Operating netback ($/boe) 24.68 30.05 22.87 27.49 26.4

Wells drilled
Gross 5 8 8 2 23
Net 5 8 8 1 22
Success Rate 92% 80% 87%

All calculations converting natural gas to crude oil equivalent in this
report have been made using an industry accepted ratio of six thousand cubic
feet of natural gas to one barrel of crude oil.


As at December 31 2004 2003
(in thousands) $ $

Cash and cash equivalents 2,718 13,424
Accounts receivable 4,143 50
Prepaid expenses 191 2
7,052 13,476

Goodwill 4,548 -

Deferred acquisition costs 546 -

Property and equipment 22,930 1,081
35,076 14,557

Accounts payable and accrued liabilities 2,836 683
Income taxes payable - 22
2,836 705

Asset retirement obligation 1,633 -


Shareholders' equity
Share capital 97,914 80,268
Contributed surplus 309 132
Deficit (67,616) (66,548)
30,607 13,852
35,076 14,557


Year ended December 31 2004 2003
(in thousands, except per share amounts) $ $

Petroleum and natural gas sales 5,919 -
Royalties (net of ARTC) (1,290) -
4,629 -

Interest income 184 164
4,813 164

Operating 959 -
General and administrative 1,798 1,635
Stock-based compensation 172 5
Foreign exchange (gain) loss (4) 186
Depletion and depreciation 2,898 -
Accretion expense 117 -
5,940 1,826

Loss before income taxes and results from
discontinued operations (1,127) (1,662)
Income tax expense (recovery) (59) 22
Loss from continuing operations (1,068) (1,684)
Loss from discontinued operations - (25)
Net loss for the year (1,068) (1,709)
Deficit, beginning of year (66,548) (64,839)
Deficit, end of year (67,616) (66,548)

Per share amounts
Basic and diluted loss from continued operations (0.04) (0.13)
Basic and diluted loss from discontinued operations - -
Diluted from continuing operations (0.04) (0.13)


Year ended December 31 2004 2003
(in thousands) $ $

Loss from continuing operations (1,068) (1,684)
Items not affecting cash flow:
Stock-based compensation 172 5
Non-cash general and administrative costs (39) -
Depletion, depreciation and accretion 3,015 -
2,080 (1,679)
Change in non cash working capital related to
operating activities 227 739
Cash provided (used) by operating activities 2,307 (940)

Issue of common shares, net of issue costs 7,124 6,701
Issue of preferred shares - 1,508
Issue of flow through common shares 3,553 -
Deferred acquisition costs (546) -
Cash provided by financing activities 10,131 8,209

Expenditures on property and equipment (15,688) (106)
Expenditures on property acquisitions (8,359) (975)
Disposition of property and equipment 1,500 258
Net cash acquired upon acquisition 1,776 -
Change in non-cash working capital related to
investing activities (2,373) -
Acquisition of temporary investments - (431)
Disposition of temporary investments - 4,751
Cash flow from discontinued operations - 141
Cash provided (used) in investing activities (23,144) 3,638
Net change in cash and cash equivalents (10,706) 10,907

Cash and cash equivalents - beginning of year 13,424 2,517
Cash position - end of year 2,718 13,424

Caution to Reader

This report contains forward-looking statements and the reader is cautioned not
to place undue reliance on these statements, as there can be no assurance that
the plans, intentions or expectations upon which they are based will occur. By
their nature, forward-looking statements involve numerous assumptions, known and
known risks and uncertainties, both general and specific, that contribute to the
possibility that the predictions, forecasts, projections and other forward-
looking statements will not occur. Although Signal believes that the
expectations represented by such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct. These
statements are based on current expectations that involve a number of risks and
uncertainties including but not limited to: the risks associated with the oil
and gas industry (e.g., operational risks in development, exploration, and
production; the uncertainty of reserve estimations; the uncertainty of estimates
and projections relating to production, costs and expenses, and health, safety,
and environmental risks), commodity price and exchange rate fluctuations and
uncertainties resulting from potential delays or changes in plans with respect
to exploration or development projects or capital expenditures. Additional
information on these and other factors that could affect Signal's operations or
financial results are included in Signal's reports on file with regulatory
authorities. The Company cautions that events or circumstances could cause
actual results to differ materially from those projected.


Conversion boe's are derived by converting natural gas to oil in the ratio of 6
mcf to 1 bbl. Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf to 1 bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent an
equivalency at the wellhead.

Contact Information