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

Stonefire Energy Corp.

March 04, 2009 16:05 ET

Stonefire Provides 2008 Year End Reserves Summary

CALGARY, ALBERTA--(Marketwire - March 4, 2009) - Stonefire Energy Corp. ("Stonefire" or the "Company") (TSX VENTURE:SFE.A) (TSX VENTURE:SFE.B) is pleased to provide a summary of its reserves evaluation as of December 31, 2008 as prepared by GLJ Petroleum Consultants Ltd. ("GLJ"), the Company's independent reserves evaluator. The reserves evaluation has been prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook reserves definitions.

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 2008 in early April 2009.

In this press release "Company Interest before Royalty" is the working interest reserves before royalty burdens payable are deducted. 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:

- Year end 2008 proved plus probable (P+P) reserves total 5.742 million boe an increase of 145% over year end 2007 reserves of 2.346 million boe.

- Proven reserves at year end 2008 totaled 2.991 million boe a 181% increase over year end 2007 proven reserves of 1.064 million boe.

- During 2008 total reserve additions were 3.709 million boe of P+P reserves and 2.24 million boe of proven reserves. P+P reserve additions replaced production 11.8 times and proven reserve additions replaced production 7.2 times.

- Estimated total capital spent in 2008 was $21.115 million resulting in all-in finding and development costs (F&Ds) including future development capital (FDC) of $8.42 per boe for P+P reserve additions and $13.08 per boe for proven reserve additions.

- Based on the GLJ 2009 P+P forecast Stonefire's reserve life index (RLI) is 9.4 years.

- Since the start of operations in March 2006 Stonefire has added proven and P+P reserves including production of 3.378 million boe and 6.129 million boe, respectively. Over 99% of reserve additions have resulted from drilling with no significant acquisitions. The resulting 3 year F&D costs including all FDC are $11.41 per boe for P+P reserves and $18.43 per boe for proven reserves.

- Stonefire achieved a P+P recycle ratio in 2008 of 3.6 based on a 2008 funds flow netback of $30.13 per boe and a P+P recycle ratio of 4.3 based on a 2008 operating netback of $36.01 per boe.



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

December 31, 2008 Company Interest Reserves Summary Before Tax and Royalty
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Light Oil Natural Gas Natural Gas Total
Reserve Category (Mbbl) (Mmcf) Liquids (Mbbl) (Mboe)
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Proved Producing 295 8,530 303 2,019
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Proved Developed -
Non Producing 0 45 2 10
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Proved Undeveloped 0 4,795 163 962
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Total Proved 295 13,369 468 2,991
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Total Probable 216 12,573 440 2,751
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Total Proved plus
Probable 510 25,942 908 5,742
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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, 2009. 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, 2008
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$ (000's)
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Discounted at: 0% 5% 10% 15%
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Total Proved: 97,451 70,925 55,840 46,251
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Total Probable: 112,684 61,475 40,357 29,315
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Total Proved plus Probable 210,136 132,400 96,197 75,567
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Finding and Development Costs

The table below summarizes F&D costs for 2008 as well as for the past 3 years. All cases include FDC. Total capital spent in 2008 was $21.115 million and average production was 856 boe per day.



Summary of Finding and Development Costs
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Proven plus
Proven Probable (P+P)
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2008 All-in F&D Costs
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2008 Total Reserve Additions (Mboe): 2,240 3,709
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2008 Capital plus change in FDC ($MM): $29.309 $31.238
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2008 All-in F&D Costs ($/boe): $13.08 $8.42
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3 Year All-in F&D Costs (since Inception)
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Total Reserve Additions (Mboe): 3,378 6,129
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Total 3 year Capital plus FDC ($MM): $62.244 $69.913
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3 Year All-in F&D Costs ($/boe): $18.43 $11.41
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2009 Outlook

In 2009 Stonefire will direct the majority of its $11.5 million capital budget to drilling and completions with plans to drill 6 gross (4.5 net) operated wells in the Edson and McLeod areas. The 2009 budget is expected to be funded primarily through cash flow. The Company has bank lines of $30 million which were reviewed and approved in early Q1, 2009 and which are well in excess of the current net debt and working capital deficiency of approximately $20 million. Average 2009 production is forecast to be in the 1,500 to 1,600 boe per day range with approximately 35% light oil and natural gas liquids in the production mix.

The first well of the 2009 drilling program is a 100 percent working interest multi-zone gas well drilled to a total vertical depth of 2,357 meters in the Edson field in February 2009. In addition to multiple gas zones the well encountered significant oil filled fractures within a 45 meter gross interval of the Second White Specks zone. Completion operations are currently underway on up to 6 potential gas zones. The well is close to Stonefire's 100 percent working interest Edson gas gathering and processing facilities and is expected to commence production April 1st, 2009 and will qualify for the Alberta government New Well Royalty Reduction program.

In addition to achieving low finding and development costs Stonefire is also a low cost producer with estimated Q4 2008 operating costs of $3.91 per boe. The Company is forecasting 2009 operating costs to average $4.50 per boe plus $1.70 per boe transportation costs. Stonefire's production base is high quality Deep Basin production with long reserve life and no free water. Stonefire operates 98% of its production and will continue to operate 100% of its capital projects which includes a drilling inventory of over 45 gross (35 net) operated wells.

With significant unused bank lines, a growing production base and control of all its capital projects, Stonefire has financial flexibility and is well positioned to react to changing market conditions. With its low cost structure and quality drilling inventory Stonefire is also well positioned to show continued growth and added value in 2009 even in a low commodity price environment.

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 18,265,000 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.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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