Vaquero Energy Ltd.

Vaquero Energy Ltd.

March 16, 2005 11:16 ET

Vaquero Energy Increases Reserves by 50% in 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: VAQUERO ENERGY LTD.

TSX SYMBOL: VAQ

MARCH 16, 2005 - 11:16 ET

Vaquero Energy Increases Reserves by 50% in 2004

CALGARY, ALBERTA--(CCNMatthews - March 16, 2005) - Vaquero Energy Ltd.
(TSX:VAQ) is pleased to announce the results of its year-end reserves
evaluation prepared by Paddock Lindstrom & Associates Ltd. (PLA).
Highlights of the report are:

- Proved plus probable reserves increased by 50% to 10.0 million boe
from 6.7 million boe at year end 2003

- Proved reserves increased by 37% to 6.1 million boe

- Vaquero's average cost of reserve additions for the three year period
2002 through 2004 was:

- $10.21/boe for proved plus probable reserves

- $14.40/boe for proved reserves

The table below summarizes the Company's working interest reserves from
the December 31, 2004 PLA reserve report and provides a comparison with
reserves at December 31, 2003 also as evaluated by PLA. Both evaluations
were run under forecast price and cost assumptions in accordance with
National Instrument 51-101.



December 31 %
2004 2003 Increase

Proved producing oil & NGLs (mbbls) 1,910 1,715 11%
Proved producing natural gas (bcf) 11.6 10.3 13%
-------------------------------
Total proved producing (mboe) 3,845 3,427 12%

Proved oil & NGLs (mbbls) 3,410 2,358 45%
Proved natural gas (bcf) 16.4 12.8 29%
-------------------------------
Total proved (mboe) 6,144 4,485 37%

Probable oil & NGLs (mbbls) 2,207 1,377 60%
Probable natural gas (bcf) 10.2 5.1 99%
-------------------------------
Total probable (mboe) 3,905 2,231 75%

Proved plus probable oil & NGLs (mbbls) 5,618 3,735 50%
Proved plus probable natural gas (bcf) 26.6 17.9 49%
-------------------------------
Total proved plus probable (mboe) 10,049 6,716 50%
-------------------------------


All of Vaquero's reserve growth in 2004 was achieved through exploration
and development drilling, and positive technical revisions to existing
pools. During 2004 Vaquero added 2,754 mboe of proved reserves replacing
2004 production by over 250%. The addition of 4,428 mboe of proved plus
probable reserves in 2004 replaced 2004 production by over 400%.

Based on Vaquero's 2004 year-end production rate of 3,800 boe/d and
year-end proved reserves of 6,144 mboe, the Company's proved reserve
life index (RLI) is approximately 4.4 years. Similarly, the Company's
year-end proved plus probable reserves of 10,049 mboe yields a reserve
life index of 7.2 years.



Vaquero's 2004 Reserves Reconciliation

------------------------------------------------------------------------
Oil
Oil & NGLs Natural Gas Equivalent
Proved Producing (mbbls) (bcf) (mboe)
---------------------------------------------------
WI Net WI Net WI Net
December 31, 2003 1,715 1,275 10.3 6.9 3,427 2,418

Discoveries &
Extensions 515 390 4.5 3.3 1,264 933
Technical Revisions 272 161 (0.1) 0.2 249 199
Acquisitions - - - - - -
Dispositions - - - - - -
Production 593 416 3.0 2.1 1,095 769

December 31, 2004 1,910 1,411 11.6 8.2 3,845 2,780
------------------------------------------------------------------------


------------------------------------------------------------------------
Oil
Oil & NGLs Natural Gas Equivalent
Total Proved (mbbls) (bcf) (mboe)
---------------------------------------------------
WI Net WI Net WI Net
December 31, 2003 2,358 1,751 12.8 8.9 4,485 3,228

Discoveries
& Extensions 1,424 1,099 8.5 6.1 2,839 2,123
Technical Revisions 221 131 (1.8) (1.2) (85) (76)
Acquisitions - - - - - -
Dispositions - - - - - -
Production 593 416 3.0 2.1 1,095 769

December 31, 2004 3,410 2,564 16.4 11.6 6,144 4,505
------------------------------------------------------------------------


------------------------------------------------------------------------
Oil
Total Proved Oil & NGLs Natural Gas Equivalent
Plus Probable (mbbls) (bcf) (mboe)
---------------------------------------------------
WI Net WI Net WI Net
December 31, 2003 3,735 2,800 17.9 12.5 6,716 4,883

Discoveries
& Extensions 2,095 1,612 12.2 8.9 4,135 3,097
Technical Revisions 380 244 (0.5) (0.3) 293 186
Acquisitions - - - - - -
Dispositions - - - - - -
Production 593 416 3.0 2.1 1,095 769

December 31, 2004 5,618 4,241 26.6 18.9 10,049 7,397
------------------------------------------------------------------------


Vaquero's Cost of Reserve Additions

The tables below summarize the cost of reserve additions for the Company
in 2004 and for the three-year period 2002 through 2004. The analysis
includes reserve additions and revisions, net capital expenditures
(including capitalized G&A) and estimated incremental future capital
expenditures based on the PLA reserve reports. An unaudited estimate of
2004 capital costs of $60,383,000 was used.



Vaquero's Cost of 2004 Reserve Additions

------------------------------------------------------------------------
Proved
Proved Plus Probable
2004 Capital Expenditures ($000) 60,383 60,383
Incremental Future Capital ($000) 665 4,418

Total Capital ($000) 61,048 64,801

Reserve additions (mboe) 2,754 4,428

Cost of reserve additions ($/boe) 22.17 14.63
------------------------------------------------------------------------


In 2004 Vaquero spent over $18 million on seismic and undeveloped lands
identifying and capturing exploration opportunities to fuel future
growth in west central Alberta. In addition the Company spent over $14
million constructing pipelines and facilities to provide capacity for
production growth in its core areas. Although nearly 50% of the total
expenditures on seismic and land in 2004 were made late in the year and
did not impact reserve or production additions in 2004 they did,
however, dramatically increase the Company's inventory of exploration
and development opportunities for 2005 and beyond.



Vaquero's Cost of Three - Year Reserve Additions
(fiscal 2002 through 2004)
------------------------------------------------------------------------
Proved
Proved Plus Probable
2002 through 2004 Capital Expenditures ($000) 102,731 102,731
Incremental Future Capital ($000) 3,773 8,120

Total Capital ($000) 106,504 110,851

Reserve additions (mboe) 7,398 10,856

Cost of reserve additions ($/boe) 14.40 10.21
------------------------------------------------------------------------


In this press release:

- the Company's working interest reserves are reserves determined before
deduction of royalties. Company net interest reserves are Company
working interest reserves minus royalties payable.

- where reserves and production are stated in a barrel of oil equivalent
(boe) basis, gas volumes have been converted to barrel of oil equivalent
(boe) at a ratio of 6,000 cubic feet of gas to a barrel of oil
equivalent. This conversion ratio is based upon an energy equivalent
conversion method primarily applicable at the burner tip and does not
represent value equivalence at the wellhead. Boes may be misleading,
particularly if used in isolation.

- probable reserves at December 31, 2003 and December 31, 2004 are
reported on a risked basis under NI 51-101. Probable reserves at
December 31, 2001, not evaluated under NI 51-101, have been assigned a
50% risk factor to make more appropriate comparisons of probable and
proved plus probable reserves.

- costs of reserve additions include the future incremental capital to
bring the proved undeveloped and probable reserves on to production.

Vaquero Energy Ltd. is a Canadian company engaged in the exploration,
development and production of oil and natural gas. Vaquero's common
shares are listed on the Toronto Stock Exchange under the trading symbol
"VAQ". Vaquero's news releases can be accessed electronically through
its website at www.vaquero.ca.

Forward Looking Statements

This press release may contain forward-looking statements including
expectations of future production, cash flow and earnings. These
statements are based on current expectations that involve a number of
risks and uncertainties, which could cause actual results to differ from
those anticipated. These risks include, but are not limited to: the
risks associated with the oil and gas industry (e.g. operational risks
in development, exploration and production; delays or changes in plans
with respect to exploration or development projects or capital
expenditures; the uncertainty of reserve estimates; the uncertainty of
estimates and projections relating to production, costs and expenses,
and health, safety and environmental risks), commodity price, price and
exchange rate fluctuation and uncertainties resulting from the 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 Vaquero's operations or financial
results are included in Vaquero's reports on file with Canadian
securities regulatory authorities.


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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Vaquero Energy Ltd.
    Mr. Robb Waldner
    President and Chief Executive Officer
    (403) 537-2031
    Website: www.vaquero.ca