Stonefire Energy Corp.
TSX VENTURE : SFE.A
TSX VENTURE : SFE.B

Stonefire Energy Corp.

March 07, 2007 08:40 ET

Stonefire Provides 2006 Year End Reserves Summary, Edson Operational Update and 2007 Guidance

CALGARY, ALBERTA--(CCNMatthews - March 7, 2007) - Stonefire Energy Corp. (TSX VENTURE:SFE.A) (TSX VENTURE:SFE.B) ("Stonefire" or the "Company") is pleased to provide our 2006 year end reserves summary, an operational update for the Edson area and a 2007 forecast.

2006 Year End Reserves Summary

Stonefire is pleased to provide a summary of its reserves evaluation as of December 31, 2006 as prepared by GLJ Petroleum Consultants Ltd. ("GLJ"), the Company's independent reserves evaluator. The reserves evaluation follows the first partial year of operations for Stonefire. The Company's annual audit of its financial statements is not yet complete and accordingly all financial amounts referred to in this press release are management's best estimates. Stonefire expects to issue audited financial statements for 2006 in the second half of March.

In this press release "Company Interest before Royalty" is the working interest reserves plus royalty interest reserves before royalty burdens payable are deducted. Stonefire's reserves have been prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") in Canada.

Reserves and production are stated in "barrels of oil equivalent" (BOE) derived by converting gas to an oil equivalency in the ratio of six thousand cubic feet of gas to one barrel of oil. "BOE" may be misleading, particularly if used in isolation. A BOE conversion ratio 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.

The aggregate of the exploration and development costs 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 year.

Highlights of the Reserve Report:

- In the 9 months of operations in 2006 Stonefire added 881,000 BOE on a proved plus probable basis. All reserve additions resulted from exploration drilling with proved reserves accounting for 50% of the total reserves.

- Finding and development costs for 2006 on a proved plus probable basis, excluding undeveloped land costs of $2.46 million, are $12.81/BOE excluding future development capital and $14.30/BOE including future development capital.

- After netting out 2006 production of 13,800 BOE the company's year end reserves stand at 867,000 BOE on a proved plus probable basis.

- The proved plus probable reserve additions for 2006 are comprised of 81% natural gas and 19% condensate and natural gas liquids.

- The Company's total capital spending in 2006 was $13.75 million. The GLJ report contains Future Development Capital of $1.31 million for proved plus probable reserves.

- No proved undeveloped reserves (PUDs) are included in the 2006 GLJ reserves evaluation.

Summary of Oil and Natural Gas Reserves - Company Interest Before Tax and Royalty

The GLJ reserve report contains a high proportion of proved non-producing and probable reserves due to 2006 being the first partial year of operations for the Company with new wells having little or no production history. Over time management expects the relative proportion of proved producing reserves to increase.



December 31, 2006 Company Interest Reserves Summary
---------------------------------------------------------------------------
Reserve Category Natural Gas Natural Gas Liquids Total
(Mmcf) (Mbbls) (Mboe)
---------------------------------------------------------------------------
Proved Producing 439 16 89
---------------------------------------------------------------------------
Proved Developed - Non Producing 1,634 65 338
---------------------------------------------------------------------------
Proved Undeveloped 0 0 0
---------------------------------------------------------------------------
Total Proved 2,073 81 427
---------------------------------------------------------------------------
Total Probable 2,115 88 441
---------------------------------------------------------------------------
Total Proved & Probable 4,188 169 867
---------------------------------------------------------------------------


Net Present Value of Reserves

Below is a table showing the Company's net present value of future net revenue attributable to reserves using forecast prices and costs. The prices used were GLJ Forecast Prices as at January 1, 2007. The estimated future net revenues are presented before deducting future estimated site restoration costs, and are reduced for estimated future abandonment costs and future capital costs associated with non-producing, undeveloped and probable additional reserves. Estimated values disclosed do not necessarily represent fair market value.



Summary of Future Net Revenue Before Income Taxes - At December 31, 2006
---------------------------------------------------------------------------
$(000's)
---------------------------------------------------------------------------
Discounted at: 0% 5% 10%
---------------------------------------------------------------------------
Total Proved 10,234 8,210 6,838
---------------------------------------------------------------------------
Total Probable 13,293 7,277 4,840
---------------------------------------------------------------------------
Total Proved & Probable 23,527 15,486 11,678
---------------------------------------------------------------------------


2006 Finding and Development Costs

The table below summarizes finding and development costs for 2006 for proved and proved plus probable reserves. Capital spending on undeveloped land was a significant component of the 2006 capital program and was required in order to generate an inventory of drilling prospects and future growth for the company. Finding and development costs below are presented with and without undeveloped land capital and also with and without changes in Future Development Capital (FDC).



Summary of Finding and Development Costs

Excluding Undeveloped Land Including Undeveloped Land
---------------------------------------------------------------------------
Excluding Including Excluding Including
FDC FDC FDC FDC
---------------------------------------------------------------------------
Total 2006 Capital ($000) 13,748 13,748 13,748 13,748
---------------------------------------------------------------------------
Less Undev. Land ($000) (2,459) (2,459) - -
---------------------------------------------------------------------------
Change in FDC - Total
Proven ($000) - 958 - 958
---------------------------------------------------------------------------
Change in FDC - Total
Proved + Prob. ($000) - 1,308 - 1,308
---------------------------------------------------------------------------
Total Proved Reserve
Additions (Mboe) 441 441 441 441
---------------------------------------------------------------------------
Total Proved + Prob
Reserve Additions (Mboe) 881 881 881 881
---------------------------------------------------------------------------
Proved Finding Cost ($/boe) 25.60 27.77 31.17 33.35
---------------------------------------------------------------------------
Proved & Probable Finding
Cost ($/boe) 12.81 14.30 15.60 17.09
---------------------------------------------------------------------------


Edson Operational Update

Of the 9 gross wells drilled in 2006, 5 are capable of production and are new pool discoveries. Stonefire's current net production of 90 to 100 BOEPD (80% natural gas) result from 3 of these 5 wells currently on production. The remaining 2 wells are awaiting tie-in and are expected to produce at a combined net rate to Stonefire of 300 BOEPD commencing in mid Q3 of 2007.

Year to date activity for 2007 has been focused on the completion and testing of wells drilled in late 2006 as well as making preparations for the 2007 exploratory drilling program. At the time of this press release the Company has spud the first exploration well for 2007 and is currently drilling.

2007 Outlook

Stonefire's 2007 budget calls for $14 million to $16 million of capital to be spent in 2007. The Company plans to drill 7 - 10 gross (5.5 net) exploration and development wells in its core Edson exploration area with a production forecast of 330 boe/d average for the year and a 2007 exit rate of 600 - 700 boe/d. Cash flow generated for 2007 is forecast to be $2.3 million based on $7.00/GJ AECO natural gas price and a $60 US/bbl WTI oil price. The Company currently has no debt and an undrawn Line of Credit of $3 million with the National Bank.

Stonefire Energy Corp. is an Alberta-based company formed to participate in oil and gas exploration, development and acquisitions focusing in the West Central region of Alberta. The Company's shares trade on the TSX Venture exchange under the symbols SFE.A and SFE.B. The Company currently has 11,850,000 Class A shares and 1,012,000 Class B shares outstanding. Additional information regarding Stonefire Energy Corp. is available on Stonefire's website www.stonefire-energy.com and Stonefire's SEDAR profile at www.sedar.com.

Reader Advisory

This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond Stonefire's control. Such risks and uncertainties include, 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, 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. Stonefire'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, including the amount of proceeds, that Stonefire will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Stonefire 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 Stonefire 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 TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.

Contact Information

  • Stonefire Energy Corp.
    Mr. Richard Dahl
    President & Chief Executive Officer
    (403) 262-9885 ext 222
    (403) 262-9887 (FAX)
    or
    Stonefire Energy Corp.
    Mr. Ronald Williams
    Vice President Finance and CFO
    (403) 262-9885 ext 228
    (403) 262-9887 (FAX)
    or
    Stonefire Energy Corp.
    Suite 320, 333 - 5th Avenue SW
    Calgary, Alberta T2P 3B6
    Website: www.stonefire-energy.com