Spitfire Energy Ltd.

Spitfire Energy Ltd.

July 21, 2005 18:40 ET

Spitfire Energy Releases Year-End Reserves, Announces 2006 Guidance

CALGARY, ALBERTA--(CCNMatthews - July 21, 2005) - Spitfire Energy Ltd.'s (TSX VENTURE:SEL) successful exploration and development program for the year ended March 31, 2005 resulted in a significant increase in reserves and production. Highlights compared with the year ended March 31, 2004 are as follows:

- Total proved oil and gas reserves are up 322% to 608,000 barrels of oil equivalent (boe) from 143,800 boe.

- Proved plus probable oil and gas reserves are up 314% to 990,000 boe from 239,100 boe at year-end.

- Proved plus probable finding and acquisition costs were $4.27 per boe on proved and probable reserve additions of 750,900 boe and capital costs of $3.21 million.

- Reserve replacement ratio equal to 39 being: reserve additions divided by production in the fiscal year

- Management's estimate of net asset value equals $0.65 per share.

Spitfire's reserves were evaluated effective March 31, 2005 by the independent engineering firm of Gilbert Laustsen Jung Associates Ltd. ("GLJ") The reserves are working interest and gross overriding royalty interests before royalty deductions and are based on the constant price and cost case (crude wellhead price of C$47.96/bbl, gas C$7.80/Mcf). Spitfire's reserve life index for proved producing reserves is 10.6 years and 11 years for proved plus probable reserves.

Management's estimate of Spitfire's net asset value is based on the sum of before tax present value, discounted at 8%, of petroleum and natural gas assets as independently evaluated by GLJ ($12,959,000), the fair market value of undeveloped land estimated by management ($775,000), the fair market value of seismic estimated by an independent consultant ($1,584,400) and fiscal year end working capital (-$307,271), divided by the 23,042,744 common shares outstanding on June 30, 2005.

The focus of Spitfire's exploration and development activity continues to be in south central Alberta and in the Fosterton area of southwest Saskatchewan. The company acquired 2-D and 3-D seismic data that led to the drilling of two 100% wells, one at Alderson and the other at Fosterton. Strategic asset acquisitions in core areas added reserves of 204,000 boe in fiscal 2005. The company has 8,569 net undeveloped acres on which to explore. In addition, the company has entered into an exclusive arrangement that makes available an extensive seismic database over a 10-township area of south central Alberta. An evaluation of these data has led to the identification of several drilling prospects.

Guidance for fiscal 2006 includes the following:

- Spitfire expects to drill up to eight wells over the balance of the fiscal year. The company plans four follow-up wells at Fosterton, four in south central Alberta and four re-completions.

- Current production is 215 barrels of oil equivalent per day (50% gas), an increase of 169% over 80 boe/d at year end March 31, 2005 and an increase of 572% over the 32 boe/d averaged through fiscal 2004.

- Discretionary cash flow for fiscal 2006 is projected to be $1.1 million (4.8 cents per share) and earnings are forecasted to be $0.42 million (two cents per share) using a wellhead gas price forecast of C$7.21 per thousand cubic feet and C$38.17 per barrel of oil.

- Capital expenditures for fiscal 2006 are forecasted to be $ 4.4 million.

Spitfire's complete reserves report for the year ended March 31, 2005 and other oil and gas information required under National Instrument 51-101 will be filed by July 29, 2005 on the System for Electronic Document Analysis and Retrieval at www.sedar.com.

This press release may include forward-looking statements, generally identifiable by terminology such as "plan," "anticipate," "intend, expect," "estimate" or "budget." Factors that could cause actual results to differ materially from our expectations include but are not limited to exploration and development risks, commodity prices and operating hazards.

A barrel of oil equivalent (boe), derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion 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 Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this press release.

Contact Information

  • Spitfire Energy Ltd.
    Keith N. Chase
    President and Chief Executive Officer
    (403) 205-3400 x224
    1610, 311-6 Avenue SW
    Calgary, AB T2P 3H2