Petro-Reef Resources Ltd.
Janurary 10, 2008
TSX: PER
Petro-Reef
Resources Ltd. Announces 2008 Capital Expenditures Budget
Calgary,
Alberta, January 10, 2008 -
Petro-Reef Resources Ltd. ("Petro-Reef") is pleased to announce its Board of Directors
has approved its 2008 capital expenditures budget. Petro-Reef is forecasting to
spend $13.5 million in capital expenditures in 2008 broken down as follows:
Drilling / Work-overs - $5.5 million
Completions - $2.5 million
Facilities - $3.5 million
Undeveloped Land
/ Seismic / Other - $2.0 million
Petro-Reef's
proposed capital expenditures budget does not include any major acquisitions
which may occur in 2008. Petro-Reef seeks Board of Directors approval for
acquisitions as they may arise.
For 2008,
Petro-Reef is forecasting to drill / work-over approximately 10.0 net wells. As
a result of drilling successes in 2007, a majority of Petro-Reef's drilling
activity will be focused on development locations offsetting exploration
discoveries in 2007. While predominantly focusing on development drilling
locations, Petro-Reef intends to maintain an active exploration drilling
program in 2008. Using proprietary 3-D seismic, Petro-Reef has identified
structural anomalies on lands immediately adjacent to Petro-Reef's existing
producing assets in Alexander. These structural anomalies are similar to ones
successfully drilled by Petro-Reef in 2007. Petro-Reef intends to drill
exploration wells targeting these structures in 2008 focusing on sections of
land where Petro-Reef has a 94% working interest. Petro-Reef intends to shoot a
3-D seismic program over recently acquired Crown and freehold lands which is
expected to generate drilling opportunities later in 2008 and into early 2009.
Petro-Reef's
core area of Alexander provides both crude oil and natural gas development and
exploration drilling opportunities. To take advantage of the high crude oil
prices and to diversify Petro-Reef's production mix, development drilling
locations will be focused on light sweet crude oil.
2008 Forecast
Based on
conservative price and production forecasts, Petro-Reef estimates generating
cash flow from operations of $7.5 million in 2008, representing an
approximately 50% increase in cash flow as compared to 2007. In preparing the
cash flow estimate, Petro-Reef utilized a natural gas price forecast of $6.00
per thousand cubic foot which is lower than current market prices. Petro-Reef's
cash flow is sensitive to movements in natural gas prices. A $1.00 increase in
realized natural gas prices in 2008 will result in an approximate $2.0 million
increase in cash flow from operations.
Petro-Reef
entered 2008 with a strong balance sheet with zero debt. Based on forecasted
capital expenditures and cash flow from operations, Petro-Reef's debt to cash
flow is not expected to exceed 1.0x, providing financial flexibility throughout
2008. Petro-Reef believes maintaining a strong balance sheet will create
opportunities to either increase drilling later in the year or acquire strong
assets with significant upside from companies who are required to sell assets
due to weakened balance sheets.
Petro-Reef
is forecasting average production in 2008 of approximately 1,200 boe/d,
representing an increase in year over year average production of approximately
90%.
Petro-Reef
Resources Ltd. is a Calgary based junior oil and
natural gas company focused on petroleum and natural gas lease acquisition and
exploration, and development of crude oil and natural gas properties in Alberta,
Canada.
Forward-Looking Statements:
All
statements, other than statements of historical fact, set forth in this news
release, including without limitation, assumptions and statements regarding
reservoirs, resources and reserves, future production rates, exploration and
development results, financial results, and future plans, operations and
objectives of the Corporation are forward-looking statements that involve
substantial known and unknown risks and uncertainties. Some of these risks and
uncertainties are beyond management's control, including but not limited to,
the impact of general economic conditions, industry conditions, fluctuation of
commodity prices, fluctuation of foreign exchange rates, environmental risks,
industry competition, availability of qualified personnel and management, availability
of materials, equipment and third party services, stock market volatility,
timely and cost effective access to sufficient capital from internal and
external sources. The reader is cautioned that assumptions used in the
preparation of such information, although considered reasonable by the
Corporation at the time of preparation, may prove to be incorrect. There can be
no assurance that such statements will prove to be accurate and actual results
and future events could differ materially from those anticipated in such
statements.
Reference is
made to barrels of oil equivalent (boe). Barrels of oil equivalent may be
misleading, particularly if used in isolation. In accordance with National
Instrument 51-101, a boe conversion ratio for natural gas of 6 Mcf: 1 bbl has
been used, which 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 does not accept responsibility for the adequacy or accuracy of
this news release.
For further
information, please contact:
Joseph Werner
President and CEO
or
John Pantazopoulos
Vice-President Finance and CFO
Petro-Reef Resources Ltd.
970, 10655
Southport Road S.W.
Calgary,
Alberta T2W 4Y1
Telephone
(403) 265-6444
Facsimile:
(403) 264-1348
E-mail: info@petro-reef.ca
Web Site: www.petro-reef.ca
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