CALVALLEY PETROLEUM INC. ANNOUNCES SIGNIFICANT RESERVES GROWTH IN YEMEN

Calvalley Petroleum Inc. (TSX: CVI.A)

CALGARY, Feb. 22 /CNW/ - Calvalley Petroleum Inc. (Calvalley), is pleased to announce that its Board of Directors has accepted the 2010 Year End Reserves Report (Report), prepared by McDaniel and Associates Consultants Ltd. (McDaniel), that evaluated Calvalley's oil and gas reserves at December 31, 2010.

Calvalley is an international oil and gas company, with offices in Calgary, Alberta, Canada, that operates its 50% working interest in Block 9 of the Masila Basin, in The Republic of Yemen. Calvalley also operates its 100% working interest in the Gimbi and Metema Blocks of the Blue Nile Basin, in The Republic of Ethiopia.  McDaniel is an independent petroleum reservoir engineering consultant firm, with offices in Calgary, Alberta, Canada.

2010 YEAREND  RESERVES

  • Proved Reserves (1P) - Calvalley's 1P reserves increased 31%, to 15.6 million barrels of oil (MMBbl), over the quantities estimated by McDaniel at December 31, 2009. This increase in 1P reserves represents a production replacement of 544 percent.
  • Proved plus Probable Reserves (2P) - Calvalley's 2P reserves increased 20%, to 31.8 MMbbl of oil, over the quantities estimated by McDaniel at December 31, 2009. This increase in 2P reserves represents a production replacement of 740 percent.
  • Proved and Probable plus Possible Reserves (3P) - Calvalley's 3P reserves increased 21%, to 47.6 MMbbl of oil, over the quantities estimated by McDaniel at December 31, 2009. This increase in 3P reserves represents a production replacement of 1,082 percent.

Contributing factors in the reserves increases were the test results of the Ras Nowmah-2 well and an improved recovery factor as a results of recently implemented water and gas injection for the Hiswah Field. Other contributors were additional successful development wells at the Hiswah and Al Roidhat Fields. 

CAPITAL EFFICIENCIES

Calvalley continues to achieve one of the best capital efficiency performances in the E&P sector. In 2010, the company drilled five (5) development wells in the Hiswah Field, one (1) development well in the Al Roidhat Field, and one (1) appraisal well at Ras Nowmah. Calvalley also commenced drilling of the Qarn Qaymah-3 appraisal well which is expected to be reach target depth within the next week. Finding and Development (F&D) costs have been as follows:

  • In 2010, F&D costs were $3.22 (1P) and $0.64 (2P).
  • On a three year average basis, F&D costs were $5.14 (1P) and $2.20 (2P).

Based on McDaniel's Report forecast, Calvalley's share of future development costs for Block 9 will be as follow:

$MM (US Dollars)
  2009 2010
1P         51.6         47.7
2P        99.3        84.9
3P      159.0      147.7

ESTIMATED NET PRESENT VALUES OF FUTURE NET REVENUES

All estimates of net cash flow are stated after current and estimated costs of Calvalley's  technical team, after all general and administrative costs in Yemen and after Yemen Government's share of production including royalties and profit oil.

The estimated future net present values at 2010 Year End, presented below, are calculated using McDaniel's forecast of future Brent Crude prices, at December 31, 2010.

Summary of Calvalley Share of Net Present Values Before Income Taxes    
         $MM (US Dollars)    
Reserves Category 0.0% 5.0% 8.0% 10.0% 12.0% 15.0% 20.0%
Total Proved 116.7 103.5 97.1 93.2 89.7 85.0 78.2
Proved Developed 140.6 125.2 117.6 113.1 108.9 103.3 95.3
Proved Undeveloped 298.8 236.6 208.7 193.1 179.3 161.5 137.9
Total Proved 439.4 361.8 326.3 306.1 288.2 264.8 233.1
Probable 490.0 361.4 307.1 277.5 252.1 220.2 179.5
Proved + Probable 929.4 723.2 633.4 583.6 540.2 484.9 412.6
Possible 542.9 359.8 290.7 255.1 225.8 190.6 148.2
Proved + Probable + Possible 1,472.3 1,083.0 924.1 838.7 766.0 675.5 560.8
               
Summary of Calvalley Share of Net Present Values After Income Taxes    
        $MM (US Dollars)    
Reserves Category 0.0% 5.0% 8.0% 10.0% 12.0% 15.0% 20.0%
Total Proved 92.7 83.3 78.5 75.7 73.1 69.6 64.4
Proved Developed 108.3 97.6 92.3 89.1 86.2 82.2 76.4
Proved Undeveloped 193.7 153.5 135.5 125.3 116.4 104.9 89.6
Total Proved 301.9 251.1 227.8 214.4 202.6 187.1 166.0
Probable 319.0 235.0 199.6 180.2 163.7 142.9 116.3
Proved + Probable 620.9 486.1 427.3 394.7 366.2 329.9 282.3
Possible 352.5 233.3 188.2 165.0 145.9 122.9 95.2
Proved + Probable + Possible 973.4 719.4 615.5 559.7 512.1 452.8 377.5

McDaniel's Brent Crude Price Forecast at December 31, 2010

$/Barrel (US Dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
85.00 87.20 89.50 92.30 95.20 98.30 100.30 102.30 104.20 106.40

Details of McDaniel's Report will be included in the Annual Information Form ("AIF") which will be available on the Company's website at www.calvalleypetroleum.com and at www.sedar.com before the end of March.

THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

This press release may contain forward-looking statements including, without limitation, financial and business prospects and financial outlooks, and such statements may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof.

Forward-looking statements and other information contained herein concerning the oil and gas industry and Calvalley's general expectations concerning this industry are based on estimates prepared by management using data from publicly available industry sources as well as from reserve reports, market research and industry analysis and on assumptions based on data and knowledge of this industry which Calvalley believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While Calvalley is not aware of any misstatements regarding any industry data presented herein, the industry involves risks and uncertainties and is subject to change based on various factors.

SOURCE Calvalley Petroleum Inc.

For further information:

investorrelations@calvalleypetroleum.com

Edmund Shimoon, Chairman and CEO
Memet Kont, President and COO
Zacharie Magnan, Acting CFO
+1 (403) 297-0490

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Calvalley Petroleum Inc.

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