Action Energy Announces 2008 Year End Results



    
    /THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO
    ANY UNITED STATES NEWS SERVICE. ANY FAILURE TO COMPLY WITH THIS
    RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS./

    TSX-V Symbol "AEC-V"
    

    CALGARY, April 29 /CNW/ - Action Energy Inc. ("Action" or "the Company")
announces its results for the year ended December 31, 2008. A summary of the
Company's results and highlights are as follows:

    
    -------------------------------------------------------------------------
    Financial and Operating                                     Three Months
     Highlights:                      Year Ended   Three Months     Ended
                        Year Ended     December       Ended        December
    Thousands of         December       31/07        December       31/07
     Dollars Unless       31/08        Audited &      31/08       Unaudited
     Noted                Audited     Restated(1)    Unaudited    Restated(1)
    -------------------------------------------------------------------------
    Total revenue          $36,158       $22,578        $5,854        $8,323
    Funds flow from
     (used in) operations  $10,309        $3,454          ($99)         $680
      Per basic & diluted
       share                 $0.18         $0.10         ($Nil)         $Nil
    Net loss               ($9,813)     ($30,073)      ($3,959)     ($24,505)
      Per basic & diluted
       share                ($0.17)       ($0.89)       ($0.07)       ($0.69)
    -------------------------------------------------------------------------
    Average production rate
      Natural gas (mmcf/d)     3.7           2.9           3.6           3.8
      Heavy oil (bbl/d)        503           667           546           998
      Light oil (bbl/d)        315           217           251           280
      Natural gas liquids
       (bbl/d)                  30            19            29            28
      Total equivalents
       (boed @ 6:1)       1,449         1,393         1,426         1,938
    -------------------------------------------------------------------------
    Average natural gas
     price ($/mcf)           $8.50         $6.18         $7.06         $5.87
    Average heavy oil
     price ($/bbl)          $71.70        $41.29        $39.85        $40.17
    Average light oil
     price ($/bbl)          $92.69        $68.37        $53.65        $80.47
    Average natural gas
     liquids price ($/bbl)  $77.34        $68.55        $52.35        $88.08
    -------------------------------------------------------------------------
    Weighted average price
     ($/boe)                $67.98        $44.39        $44.03        $45.09
    Operating netback
     ($/boe)                $34.74        $18.28        $13.87        $16.73
    -------------------------------------------------------------------------
    Capital expenditures   $24,069       $55,451        $2,204       $25,689
    Corporate Acquisitions       -        $9,608             -             -
    Disposition proceeds  ($15,746)      ($3,050)          ($9)      ($3,050)
    -------------------------------------------------------------------------
    Drilling (Gross (Net)
     Wells)
      Oil                 12 (11.5)     27 (27.0)      1  (0.5)      1  (1.0)
      Gas                  2  (0.7)      6  (6.0)      1  (0.2)      1  (1.0)
      Service                    -       4  (3.8)            -       0  (0.0)
      Dry and
       abandoned(2)        3  (1.2)      7  (5.5)      1  (0.0)      1  (1.0)
                         ----------    ----------    ----------    ----------
      Total               17 (13.4)     44 (42.3)      3  (0.7)      3  (3.0)
    -------------------------------------------------------------------------
    Gross/net success
     rate                   82%/91%       84%/87%      67%/100%       67%/67%
    -------------------------------------------------------------------------
    Working capital
     deficit (000's)       $30,323       $32,439
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) December 31, 2007 balances were restated to reflect the
        capitalization of general and administrative expenses and stock-based
        compensation expenses - for further information see note 3 to the
        consolidated financial statements for the year ended December 31,
        2008.
    (2) Dry and abandoned well in Q4-2008 was a farmout well and,
        accordingly, Action had no net interest in the well.
    

    FINANCIAL

    In 2008, Action generated positive funds flow from operations of $10.3
million ($0.18 per basic and diluted share). The 2008 funds flow figure
represents a $6.9 million increase over the $3.5 million ($0.10 per basic and
diluted share) amount generated for 2007. The increase is primarily the result
of substantially increased average commodity prices for the first three
quarters of 2008 compared to 2007. Action used funds flow in operations for
Q4-2008 of $0.1 million (($Nil) per basic and diluted share) as a result of a
dramatic drop in commodity prices and an increase in operating costs during
the quarter.
    For the year ended 2008, Action's production averaged 1,449 boed (41%
natural gas, 24% light oil and natural gas liquids and 35% heavy oil) compared
to 1,393 boed (35% natural gas and 17% light oil and natural gas liquids and
48% heavy oil) for 2007 which represents a 4% increase year over year. During
the quarter ended Q4-2008, the Company's production averaged 1,426 boed (42%
natural gas, 20% light oil and natural gas liquids and 38% heavy oil). The
Company's December 2008 production rate averaged 1,432 boed which was lower
than the Company's exit guidance of 1,600 boed because of record cold weather
in December which caused approximately 150 boed of production to be frozen up
and shut in. Current production for Action is approximately 1,000 to 1,100
boed (55% natural gas, 25% heavy oil and 20% light oil and NGLs). There is
approximately 200 to 250 boed that is either voluntarily shut-in or awaiting
remedial operations to return to production after spring break-up. With
improving heavy oil price differentials and drier lease access, it is
anticipated that these production volumes will be restored after spring
breakup. The Company also has in excess of 100 boed of natural gas and NGL
from a new discovery well drilled in the Company's Peace River Arch ("PRA")
core area that is expected to be tied in to production facilities by the
fourth quarter of 2009. (See Action Press Release of April 17, 2009 for
further discussion on current production and Q1-2009 operations.).
    The Company generated a net loss in the amount of $9.8 million (($0.17)
per basic and diluted share) for the year ended December 31, 2008, compared to
a net loss of $30.1 million for the year ended December 31, 2007 (($0.89) per
basic and diluted share). This constitutes a year-over-year reduction of $20.3
million in the net loss.
    The 2008 net loss of $9.8 million was substantially smaller than the
$30.1 million net loss incurred in 2007. The decrease of $20.3 million is the
result of the non-recurring goodwill write-down occurring in 2007 and the
higher commodity prices throughout the first three quarters of 2008, although
this was partially offset by higher operating costs, general and
administrative costs and depletion.
    The net loss in Q4-2008 improved compared to Q4-2007 by $20.5 million.
The significant loss in Q4-2007 was primarily the result of the write-down of
goodwill in the amount of $18.7 million. The loss in Q4-2008 was a result of
substantially reduced commodity prices.
    Action generated record average production levels for the 2008 year
reaching 1,449 boed, up 4% or 56 boed from the 2007 average. Record high
commodity prices in the first three quarters of 2008 helped to push Company
revenues up to a record level of $36.2 million compared to $22.6 million in
2007, an increase of 60%. This large gain was tempered by a significant drop
in commodity prices as a result of the global economic downturn that made its
effects known in the oil and gas industry during Q4-2008. In that quarter,
average commodity prices for Action dropped by 46% from an average of
$82.27/boe in Q3-2008 to an average of $44.03/boe in Q4-2008.
    Gross capital expenditures for the three months ended December 31, 2008
totaled $2.2 million bringing the 2008 total to $24.1 million (2007 - $65.1
million including corporate acquisition costs of $9.6 million). Property
disposition proceeds (primarily from proceeds on prospect fees paid by farmin
partners) in the amount of $15.7 million have been deducted to arrive at net
capital expenditures of $8.3 million for the year ended December 31, 2008.
Capital expenditures during 2008 were funded by funds flow from operations,
working capital and bank debt. At December 31, 2008, the Company had a working
capital deficit of $30.3 million (including bank debt of $31.2 million)
compared to a working capital deficiency of $32.4 million (including bank debt
of $22.3 million) at December 31, 2007.

    Liquidity and Capital Resources

    Due to the recent global economic downturn, there is uncertainty in
capital markets and as a result, the Company anticipates that it, and other
participants in the oil and gas industry, will have limited access to capital
and an increased cost of capital throughout 2009. Although the business and
assets of the Company have not changed, financial institutions and investors
have increased their risk premiums and their overall lending capacity and
equity investment have diminished. The Company's banker is scheduled to
complete its annual borrowing base review with an effective date of April 30,
2009. The Company continually monitors its financing and funding alternatives
and expects to finance its 2009 capital expenditures program from internally
generated funds from operations, working capital and from proceeds related to
the disposition of non-core assets and farmout opportunities.
    With the dramatic drop in commodity prices in the fourth quarter of 2008
and the continuing weakness in the oil and natural gas commodity market, the
Company's funds flow available for re-investment in capital projects has been
severely diminished. In addition, the Company has limited options for raising
new capital as discussed above. Accordingly, management has adopted a cautious
approach to operational and capital activities and as a result expects
production growth to be relatively flat for much of 2009. Operational and
capital activities are expected to include items that can be completed
inexpensively with a view to maintaining production levels and to limiting
production declines wherever possible, given the financial constraints the
Company is working under. Management anticipates that commodity prices
(particularly for crude oil) will commence recovering during the second half
of 2009. For additional information, see Action's full Management Discussion
and Analysis for the year ended December 31, 2008.

    OPERATIONS

    In Q4-2008, Action drilled 3 (0.7 net) wells resulting in 1 (0.5 net) new
oil well, 1 (0.2 net) new gas well and 1 (0.0 net) dry hole for a success rate
of 67%. For the year ended December 31, 2008, the Company drilled 17 (13.4
net) wells with a 91% success rate. This compares to 44 (42.3 net) (87%
success) wells for the year ended December 31, 2007.

    
    Development Areas
    -----------------
    

    Lloydminster/Lindbergh - Heavy Oil Operating Area

    In the Lloydminster area, the Company converted a shut-in oil well into a
water disposal well in Q1-2008 to reduce operating expenses arising from
trucking produced water volumes. In addition to the cost savings, this
disposal well has become a source of revenue for the Company by attracting
third party water disposal volumes for fees from other operators in the area.
Disposal of produced water volumes commenced in late February 2008. With the
production facility construction completed last year, there is room for
further expansion from additional oil drilling within the existing facilities.
The Company continued to expand in the Lloydminster area with the drilling of
three wells late in Q2-2008. These wells were all brought on production during
the third quarter of 2008. The Company drilled four infill wells for heavy oil
on its Lindbergh property during Q3-2008. At Lloydminster/Lindbergh, the
Company has five sections of 100 percent heavy oil rights and multiple
drilling opportunities.
    As a result of low heavy crude oil prices in December 2008 and because of
extreme cold weather for December, January and February, the Company shut-in a
number of single well batteries at Lloydminster and Lindbergh because the cost
of royalties and operating expenses exceeded revenue from selling production.
With the recent improvement in crude prices and narrowing of heavy oil
differentials, management expects production to be restored on these wells
after spring breakup when trucking can recommence.
    In addition, management has experimented with a technique for removing
sand from horizontal heavy oil well bores. This method has been successful at
restoring a portion of initial production rates on the three wells that have
been cleaned out so far. The Company believes there are up to 23 of these
horizontal well bores that can be cleaned out when pump changes are required.
Management plans to perform a number of these operations after spring break-up
as operating conditions permit. These clean out operations cost between
$25,000 and $50,000 per well and Action has a 100 percent working interest in
the Lloydminster property.

    
    Exploration Areas
    -----------------
    

    Southeast Saskatchewan - Light Oil Operating Area

    In February 2008, the Company drilled a 100 percent working interest
exploration well resulting in a new discovery at Lake Alma in southeast
Saskatchewan. The well was drilled vertically and encountered approximately 42
meters of oil column in the Midale formation. Completion and equipping were
done in February and the well started producing in late February 2008 at a
rate of 40 bbls per day. Based on interpretation of 3-D seismic, the Company
drilled a step out horizontal development well immediately adjacent to the
initial vertical well. The horizontal well was completed and tied in during
the month of June. It came on production during Q3-2008 at an initial rate of
130 - 140 bbl/d. Results from the first two wells are positive and additional
horizontal wells have been planned for this area. At Lake Alma, Action has six
sections of Midale mineral rights at a 100 percent working interest. The
Company has mapped fourteen additional potential locations on this property
that are prospective for Midale production.
    Also, at Lake Alma, the Company farmed out a 50% working interest in its
deeper Bakken mineral rights to an industry partner and received a prospect
fee of $2.2 million. During Q3-2008, the Company drilled and completed the
first Bakken exploratory well on this property and production from the well
has been approximately 10 boed. At Lake Alma, Action has six sections of
Bakken mineral rights at a 50% working interest. With future drilling success
and higher oil prices, there are an additional 23 potential drilling locations
in the Bakken formation.
    During Q2-2008 the Company farmed out a 50% working interest in six
sections of land in the Bienfait area of southeast Saskatchewan and received a
prospect fee of $2.0 million from an industry partner. In July Action drilled
its first exploratory Bakken test well on these lands which encouraged the
Company and its partners to pursue additional drilling in the area. At
present, the Company has approximately twelve sections of 50% working interest
crown land and 14 sections of 50 percent freehold land that are prospective
for Bakken production. With full successful development, Action has the
potential for an additional 104 (52 net) wells that could be drilled on these
lands. In August 2008, the Company purchased 3.25 net sections of undeveloped
Crown land in southeast Saskatchewan for $6.4 million and subsequently sold
the land for $10 million at the end of September.
    During Q4-2008 the farmee drilled the second of two earning wells under
its farmout agreement in the Bienfait area. This well resulted in a low rate
Bakken producer. In Q1-2009, the farmee drilled the third and final commitment
well under the farmout agreement. This well will be completed and evaluated
after spring break up.
    The Company has deferred 2009 drilling plans in these areas until oil
prices recover.

    Alberta - Light Oil and Natural Gas Operating Areas

    In January 2008, the Company drilled a 100 percent working interest
exploration dry hole at McLeans Creek in the Peace River Arch ("PRA") area.
The well was drilled to target depth.
    During Q3-2008, the Company completed a step-out Gething gas well on the
Company's McLeod property. The well was tied in to processing facilities and
production commenced in early September 2008 at rates of 1.0 to 1.5 mmcf/d
(0.5 - 0.75 mmcf/d net). Action has a 50 percent operated working interest in
6 sections of crown land in the McLeod area and has formulated plans for
additional drilling in the area when natural gas prices improve.
    After receiving a $1.0 million prospect fee on its PRA property in
Q2-2008, Action farmed out this property to an industry partner and now
retains a 20 percent working interest in 16 contiguous sections of crown
lands. During early Q3-2008, the Company completed drilling an exploration
test on the Company's PRA property. During drilling operations, the Company
encountered significant natural gas and natural gas liquid flows into the well
bore from multiple potential pay zones. Drilling difficulties resulted in the
well being abandoned in July 2008.
    In Q4-2008, the Company and its partners re-drilled the PRA well from a
step-out location. The new well was successfully completed and production
tested. The well was drilled into the Granite Wash formation and production
tested at 840 boed consisting of 3.25 mmcf of gas per day plus 297 barrels of
condensate per day and 2.8 barrels of water per day during a six day
production test. It is anticipated that the well will be tied in during Q4 of
2009. Action has a 20% working interest in 16 contiguous sections of land in
this portion of its PRA core area. The Company has complete 3D seismic
coverage over this 16 section block and interpretation of the seismic shows
seven separate anomalies each with multiple potential drilling locations. The
Company is currently evaluating future drilling and tie-in plans with its
partners.

    UNDEVELOPED LAND

    At December 31, 2008, the Company's undeveloped land base was 209,000
gross undeveloped acres (145,000 net), with an average working interest of
69%. Action has significant undeveloped acreage in all of its exploration
areas allowing room for growth with further successful drilling operations.

    RESERVES

    Certain details of the Company's reserves and their values were press
released earlier. See Action press release dated March 16, 2009 for further
information.
    Note the Company's full National Instrument 51-101 Reserves Disclosure
dated March 4, 2009 and effective December 31, 2008 as prepared by AJM
Petroleum Consultants is included in the Annual Information Form which is
available on the Company's website: www.action-energy.com or, alternatively,
can be viewed at www.sedar.com.

    2009 BUDGET

    Management plans a prudent and commodity price-driven capital program in
2009. The Company's board has approved a capital and operations plan for the
first half of 2009 in the amount of $1.7 million which is expected to be
funded from funds flow from operations and working capital.
    The capital expenditures are focused on low risk, long life and low cost
production enhancement and remediation opportunities to restore shut-in
production volumes and to offset natural field production declines. The plan
calls for the replacement of 14 bottom hole pumps and 11 sand clean-outs at
Lloydminster/Lindbergh, installation of field booster compression and
installation of artificial lift at Teepee Creek and Galahad/Red Willow as well
as several other upgrade operations in various areas during the first half of
2009. Capital involved for these operations amounts to $1.7 million and is
divided as to $1.0 million for expenditures of a capital nature and as to $0.7
million for expenses of an operating nature.
    The Company will evaluate commodity markets for the second half of the
year and determine what capital plans are warranted at that time.

    GENERAL

    Action has been successful in growing its production and land base since
its formation as a private Company with no production in 2001 and, as
financial and market conditions permit, is expected to continue with future
growth through development of its core assets and new exploration on the
Company's inventory of geological prospects. Action will continue to examine
potential business combinations and acquisitions where the Company may achieve
beneficial and accretive outcomes. Action will continue to review and
rationalize its operations with a view to disposing of non-core, minor
interest properties. Currently, Action's producing properties are located in
southern and west central Alberta and southern Saskatchewan.
    At December 31, 2008, the Company had 57,256,792 common shares
outstanding and 4,891,083 options outstanding at an average exercise price of
$3.02. At April 28, 2009, the Company had 57,256,792 common shares outstanding
and 4,642,750 options outstanding at an average exercise price of $3.01.
    Action Energy Inc. is a Canadian junior oil and gas company engaged in
the exploration, development and production of oil and natural gas reserves in
the provinces of Alberta and Saskatchewan.
    For further information, the full 2008 Audited Financial Statements,
Management Discussion and Analysis and the Annual Information Form have been
posted on the Company's website: www.action-energy.com or, alternatively, can
be viewed at www.sedar.com.

    FORWARD LOOKING STATEMENTS

    This press release may contain forward-looking statements including
expectations of future production, funds 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 natural gas industry (e.g., the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other industry participants, the lack of availability of
qualified personnel or management, stock market volatility, ability to access
sufficient capital from internal and external sources, 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 estimates and projections relating to production, costs and
expenses, and health, safety and environmental risks.) Additional information
on these and other factors that could affect Action's operations or financial
results are included in Action's reports on file with Canadian securities
regulatory authorities.
    Readers are cautioned that the assumptions used in the preparation of
such information, although considered reasonable at the time of preparation,
may prove to be imprecise and, as such, undue reliance should not be placed on
forward-looking statements. The actual results, performance or achievement of
Action could differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance 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 that Action will derive
therefrom. Action disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
    Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 bbl is based on a deemed energy equivalency
conversion method primarily applicable at the burner tip and is not intended
to represent a value equivalency at the wellhead.

    
    NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THE
    TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS
    RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
    





For further information:

For further information: ACTION ENERGY INC. Kelly D. Kerr, Vice
President Finance & Chief Financial Officer, Suite 800, 350 - 7th Avenue S.W.,
Calgary, Alberta, T2P 3N9, Phone: (403) 264-1112, Fax: (403) 264-1116, E-mail:
info@action-energy.com, Website: www.action-energy.com

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