Zapata Energy Corporation
TSX VENTURE : ZCO

Zapata Energy Corporation

August 25, 2006 10:54 ET

Zapata Production Increasing in Second Quarter 2006

CALGARY, ALBERTA--(CCNMatthews - Aug. 25, 2006) - Zapata Energy Corporation (TSX VENTURE:ZCO) announced its financial and operating results today for the three-month and six-month period ended June 30, 2006.



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Three months ended June 30 Six months ended June 30
------------------------------------------------------------------------
(Thousands
unless
otherwise
noted) 2006 2005(1) Change 2006 2005(1) Change
------------------------------------------------------------------------

FINANCIAL
Gross revenue $ 14,659 $ 14,099 4% $ 27,730 $ 26,983 3%
Cash flow from
operations 6,865 6,821 1% 12,545 12,940 (3%)
Per share
(basic) 0.41 0.42 (1%) 0.76 0.80 (5%)
Per share
(diluted) 0.40 0.40 1% 0.74 0.76 (3%)
Net income 2,979 1,973 51% 4,083 4,058 1%
Per share
(basic) 0.18 0.12 50% 0.25 0.25 0%
Per share
(diluted) 0.17 0.12 42% 0.24 0.24 0%
Capital
expenditures 10,157 4,893 108% 21,926 8,903 146%
Bank debt 36,200 23,940 51% 36,200 23,940 51%
Working
capital
deficiency
(excluding
bank debt) 3,853 3,368 14% 3,853 3,368 14%
Shares
outstanding
(weighted
average)
Basic 16,580 16,201 2% 16,545 16,154 2%
Diluted 17,073 16,948 1% 17,062 16,963 1%

OPERATIONAL
Natural gas
sales (mcf/d) 9,323 8,635 8% 9,128 8,977 2%
Average sales
price ($/mcf) 5.95 8.09 (26%) 6.88 7.47 (8%)
Field netback
($/mcf) 2.69 4.33 (38%) 3.32 3.96 (16%)
------------------------------------------------------------------------
Oil sales
(bbls/d) 1,474 1,385 6% 1,501 1,437 4%
Average sales
price ($/bbl) 66.39 55.34 20% 55.88 51.47 9%
Field netback
($/bbl) 40.49 29.35 38% 31.43 26.96 17%
------------------------------------------------------------------------
NGL sales
(bbls/d) 156 163 (4%) 149 167 (11%)
Average sales
price ($/bbl) 49.32 52.13 (5%) 43.70 48.25 (9%)
Field netback
($/bbl) 28.58 32.72 (13%) 25.94 32.71 (21%)
------------------------------------------------------------------------
Total sales
(boe/d 6:1) 3,184 2,988 7% 3,171 3,101 2%
Average sales
price ($/boe) 50.59 51.85 (2%) 48.31 48.07 0%
Field netback
($/boe) 28.03 27.90 0% 25.65 25.71 0%
------------------------------------------------------------------------
(1) All comparative share numbers and per share amounts have been
restated to reflect the 2 for 1 stock split June 23, 2006.


Highlights:

- $14.7 million in gross sales revenue

- $6.9 million in cash flow from operations

- $3.0 million net income

- 3,184 barrels of oil equivalent per day (boe/d) average production

- Drilled 10 (9.25 net) wells, resulting in 5 (4.75 net) oil wells and 5 (4.5 net) gas wells

- 2 for 1 stock split to improve share liquidity

- Subsequent to the quarter Zapata raised $8,006,250 from the sale of 875,000 flow-thorough shares.

Recent News and Outlook

In addition to the 2 for 1 stock split completed in June, and as part of the Corporation's ongoing efforts to improve share liquidity, Zapata closed a financing on August 3, 2006 in which 875,000 flow-through shares, including the exercise of an over-allotment option, were issued at a price of $9.15 per flow-through share for total gross proceeds of $8,006,250. In the short term, these funds have reduced the Corporation's bank debt to it's present level of approximately $30.0 million. These funds will be used for exploratory purposes and must be fully expended by December 31, 2007.

Zapata achieved increases in both revenue (to $14.7 million) and cash flow (to $6.9 million) as a result of higher sales volumes. Production sales increased to 3184 boe/d during the second quarter in spite of delays due to wet weather and plant turnarounds. Meanwhile the Company's balance of oil and gas production allowed the higher crude prices to offset the 26% drop in natural gas prices. Production sales for the 6 months was 3171 boe/d resulting in revenue of $27.7 million and cash flow totaling $12.5 million.

Successful drilling of 10 (9.25 net) wells resulted in 5 (4.75 net) gas wells and 5 (4.5 net) oil wells.

Currently Zapata is continuing to bring wells on production while maintaining it's drilling program. It is anticipated that gas prices will recover by year end and oil prices will remain strong. This boost in production and strong commodity pricing are expected to bode well for Zapata's financial results in the third and fourth quarters.

Zapata is a junior oil and gas production company operating in western Canada and trades on the TSX Venture Exchange under the symbol "ZCO".

This press release may include forward-looking statements which are statements other than of historical fact, such as information regarding drilling potential and production forecasts. Factors that could cause actual results to differ materially from our expectations include 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 has neither approved nor disapproved of the information contained herein.

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