Action Energy Releases Q2 Results and Updates Operations



    /THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO
    ANY UNITED STATES NEWS SERVICE/

    TSX-V Symbol "AEC"

    CALGARY, Aug. 29 /CNW/ - Action Energy Inc. is pleased to announce its
results for the three and six months ended June 30, 2008. Some of Action's
accomplishments during the three and six month periods and subsequent are:

    
    -   Drilled 6 (5.0 net) wells in Q2-2008 with a success rate of 100%
    -   Increased Q2-2008 funds flow from operations to $3.1 million which is
        178% greater Q2-2007
    -   Increased six month funds flow from operations to $6.9 million which
        is 340% greater than the same period 2007
    -   Has achieved ownership of a total of 32 (26 net) sections of Bakken
        mineral rights in southeast Saskatchewan.
    -   Generated prospect fees of $5.2 million on the farmout of certain
        exploration plays to industry partners.

    -------------------------------------------------------------------------
                                        Three     Three      Six       Six
                                        Months    Months    Months    Months
    Financial and Operating             Ended     Ended     Ended     Ended
     Highlights:                       June 30/  June 30/  June 30/  June 30/
    (Unaudited)                          08        07        08        07
    -------------------------------------------------------------------------
    Oil and Natural Gas Sales (000's)  $10,168    $5,103   $19,354    $8,963
    Funds Flow From Operations (000's)  $3,075    $1,106    $6,890    $1,567
      Per Basic and Diluted Share        $0.05     $0.04     $0.12     $0.06

    Net Loss (000's)                   ($3,217)  ($1,823)  ($6,305)  ($3,185)
      Per Basic and Diluted Share       ($0.06)   ($0.07)   ($0.11)   ($0.12)
    -------------------------------------------------------------------------
    Average Production Rate
      Natural Gas (mmcf/d)                 3.3       2.1       3.8       2.6
      Heavy Oil (b/d)                      409       765       465       510
      Oil & Natural Gas Liquids (b/d)      369       184       376       217
      Total Equivalents (boed at 6:1)    1,335     1,305     1,459     1,159
    -------------------------------------------------------------------------
    Oil Weighting                          58%       73%       57%       63%
    -------------------------------------------------------------------------
    Natural Gas Price ($/mcf)            $9.72     $6.69     $9.03     $6.41
    Average Heavy Oil Price ($/bbl)     $90.99    $39.99    $77.00    $40.30
    Average Light Oil Price ($/bbl)    $113.69    $61.01    $99.33    $57.22
    Weighted Average Price ($/boe)      $83.69    $42.95    $72.90    $42.74
    -------------------------------------------------------------------------
    Field Netback ($/boe)               $44.34    $18.51    $40.22    $17.85
    -------------------------------------------------------------------------
    Capital Expenditures (000's)        $4,843    $8,210    $8,186   $24,967
    Disposition (Proceeds) Costs
     (000's)                           ($3,487)  ($3,150)  ($3,487)  ($3,150)
    -------------------------------------------------------------------------
    Working Capital Deficiency (000's)       -         -  ($32,415) ($10,258)
    -------------------------------------------------------------------------
    Drilling (Gross (Net) Wells)
      Oil                               4 (4.0)   0 (0.0)   5 (5.0) 16 (16.0)
      Gas                               1 (0.5)   3 (2.0)   2 (1.0)   4 (2.8)
      Service                                -    3 (2.8)   1 (1.0)   4 (3.8)
      Dry & Abandoned                        -         -    1 (1.0)        -
                                      --------- --------- --------- ---------
      Total                             5 (4.5)   6 (4.8)   9 (8.0) 24 (22.6)
    -------------------------------------------------------------------------
    Success Rate                           100%      100%       88%      100%
    -------------------------------------------------------------------------
    Undev Land (Gross/Net Acres)
     (000's)                                 -         -   203/150       N/A
    -------------------------------------------------------------------------
    

    FINANCIAL

    Q2-2008 RESULTS

    Action generated funds flow from operations for Q2-2008 of $3.1 million
($0.05 per basic and diluted share). The Q2-2008 funds flow figure represents
a 178% increase over the $1.1 million ($0.04 per basic and diluted share) for
the corresponding period in 2007, as a result of increased production rates
and much higher netbacks.
    During the quarter ended June 30, 2008, the Company sold oil and natural
gas liquids at 778 bbl/d and natural gas at an average rate of 3.3 mmcf/d. On
an oil equivalency basis, the average product sales during the quarter was
1,335 boed, an increase of 3% or 35 boed compared to Q2-2007 and a decrease of
249 boed over the previous quarter. The reduction compared to Q1-2008 was a
result of very little new production being brought on stream during the second
quarter because of a late winter and an extended spring break up which
prevented Action from commencing drilling operations until late in June. In
addition, a number of natural gas properties were shut in for extended periods
because of unplanned third party gas plant maintenance. Accordingly most of
Action's properties were subject to lengthy shut-in periods and production
declines during the period.
    Net loss for Q2-2008 was ($3.2) million (($0.06) per basic and diluted
share) compared to a net loss of ($1.8) million (($0.07) per basic and diluted
share) for the same three month period in 2007. This brings the year to date
loss for Action to ($6.3) million (($0.11) per basic and diluted share) which
compares to a six month loss of ($3.2) million (($0.12) per basic and diluted
share) at the end of Q2-2007. The 2008 first half net loss was negatively
impacted by the recognition of an realized and unrealized losses of
$3.6 million on commodity contracts due to soaring oil and natural gas prices
that exceed commodity contract ceiling values. Financial results were
positively impacted by higher production volumes and higher netbacks.
    Gross capital expenditures for the three months ended June 30, 2008
totaled $4.8 million (Q2-2007 - $8.2 million). In Q2-2008, Action drilled 6
(5.0 net) wells resulting in 4 (4.0 net) new oil wells and 2 (1.0 net) new gas
wells for a success rate of 100%. Capital expenditures during the quarter were
funded by funds flow from operations, bank debt and working capital. At
June 30, 2008, the Company had a working capital deficiency of $32.4 million
including bank debt of $24.6 million drawn against a total facility of
$34.0 million. Management has planned and budgeted for a level of capital
expenditures for 2008 that will not require any significant sources of new
financing. The Company is undertaking a minor property disposition program to
fund on-going capital projects. The current commodity price environment is
very favourable with respect to the Company's internal cash flow estimates and
capital expenditure forecast.
    Action continues to acquire land in core areas. At June 30, 2008, the
Company's total undeveloped land holdings stands at 203,000 gross (150,000
net) undeveloped acres, with an average working interest of 74%. Action has 8
(5.3 net) wells remaining to be drilled on its lands in 2008 and has increased
its total 2008 risked capital budget from $20.6 million to $27.3 million.

    OPERATIONS

    Southeast Saskatchewan - Bakken Formation

    At Lake Alma, the Company has farmed out a 50% working interest in its
Bakken mineral rights to an industry partner and has received a prospect fee
of $2.2 million. In late July, the Company commenced drilling the first Bakken
exploratory well on this property and completion operations are currently
under way. At Lake Alma, Action has six sections of Bakken mineral rights at a
50% working interest.
    During July, in a different area of southeast Saskatchewan the Company
farmed out a 50% working interest in six sections of land and received a
prospect fee of $2.0 million from an industry partner. Action drilled its
first Bakken test well on these lands. The initial results on this well are
encouraging and production testing is on-going. After a recent Crown land
sale, Action has approximately five sections of 100% working interest crown
land, fourteen sections of 50% working interest crown land, and five sections
of 100% freehold land that are all prospective for Bakken production.
    In all, Action has a total of 30 gross (20 net) sections of Bakken
mineral rights in two areas each with contiguous land positions.

    Southeast Saskatchewan - Midale Formation

    In February 2008, the Company drilled a 100% working interest vertical
exploration well at Lake Alma in southeast Saskatchewan and the well started
producing in late February 2008 at a rate of 40 bbls per day. Based on
interpretation of 3-D seismic, in Q2-2008, the Company drilled a step out
horizontal 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 in early July at rates of 100 - 120 BBL/d. With these initial
positive results, additional horizontal wells are being planned for this area
in the latter part of 2008. At Lake Alma, Action has six sections of Midale
mineral rights at a 100% working interest.

    Alberta - Peace River Arch

    During Q2-2008, Action farmed out a portion of its interest to an
industry partner at West Calais in the Peace River Arch exploration area and
received a $1.0 million prospect fee and now retains a 20% working interest in
16 contiguous sections of crown mineral rights. The Company commenced drilling
a vertical exploration test on the property near the end of drilling
operations, the Company encountered significant natural gas and natural gas
liquid flows from multiple potential pay zones into the well bore. This gas
and liquid flow caused drilling difficulties which resulted in the drill pipe
becoming stuck in the hole and the well was subsequently abandoned in July
2008. A second follow up well immediately adjacent to the abandoned well is
planned at West Calais as soon as possible. Based on 3-D seismic analysis, the
Company has identified approximately ten additional drillable prospects on
this land. Additional drilling is planned at West Calais for late Q3-2008 or
early Q4-2008.
    During Q2-2008, the Company drilled a step-out Gething gas well on the
Company's Mcleod property. Typical successful wells in the area contain
significant quantities of natural gas and natural gas liquids. The well has
been completed, production tested and is awaiting tie-in to area facilities.
The well tested at rates ranging from 3.3 mmcf/d to 5.9 mmcf/d and the Company
anticipates that it will be brought on stream at approximately 2.0 mmcf/d.
Action has a 50% operated working interest in 6 sections of crown land in the
Mcleod area and is currently formulating plans for additional drilling in the
area.

    Alberta - Lloydminster/Lindbergh - Heavy Oil Area

    With the production facility construction completed in 2007, there is
room for further expansion within the existing facilities at Lloydminster. The
Company continued to expand in the area with the drilling of three wells late
in Q2-2008. These wells have all been brought on production at a combined rate
of 140 bbl/d during July of 2008. The Company plans to drill a minimum of four
infill wells for heavy oil on its Lindbergh property during Q3-2008. At
Lloydminster/Lindbergh, the Company has 6 (5.3 net) sections of 100% heavy oil
rights containing multiple drilling opportunities.

    OUTLOOK

    Action's business plan is to explore for, develop and produce light oil,
heavy oil and natural gas reserves in western Canada. Action's strategy has
shifted to explore for oil production on its Midale medium gravity (32 degree)
oil play and its Bakken light oil play in southeast Saskatchewan and its heavy
oil property at Lloydminster/Lindbergh in an effort to take advantage of the
current high oil prices and at the same time to explore for high impact
natural gas production in its Peace River Arch core area. Action is in an
enviable position to have attractive light oil exploration plays, low risk
heavy oil development plays and high impact potential natural gas plays all
with significant undeveloped land positions and potential follow-up drilling
locations. Action plans to maximize returns to shareholders by allocating
available capital to projects with the highest netback returns and success
rates. Action's production is projected to be weighted to commodities as
follows for the fourth quarter of 2008:

    
        Natural Gas                                    35%
        Light Oil and Natural Gas Liquids              30%
        Heavy Oil                                      35%
    

    For the balance of the year and into 2009, the Company's activities will
be primarily focused as follows: On light oil projects drilling horizontal
wells on key high impact Midale oil and Bakken oil properties in southeast
Saskatchewan; on drilling 3-D seismic defined medium depth Granite Wash wells
in an effort to further evaluate the Company's 16 (3.2 net) sections of
mineral rights; and Action is preparing to drill the first of four 100%
working interest infill General Petroleum zone wells on its
Lloydminster/Lindbergh heavy oil play.

    GUIDANCE

    As a result of delayed capital projects because of a long spring break up
and the cancellation of certain non-core, non-operated projects by partners,
Action has revised its guidance as follows:

    
                                            Old Target        New Target
                                            ----------        ----------
        2008 Average Production             1,700 boed        1,500 boed
        2008 Exit Production                1,800 boed        1,650 boed
        Capital Expenditures             $20.6 million     $27.2 million
    

    CORPORATE

    At June 30, 2007, the Company had 57,256,792 common shares outstanding
and 5,075,225 options outstanding at an average exercise price of $3.03.
    Action Energy Inc. is a publicly traded Calgary, Alberta based junior oil
and natural gas exploration and production company with operations
concentrated in core areas in southern Saskatchewan and central and southern
Alberta.

    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 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 Action's operations
or financial results are included in Action's reports on file with Canadian
securities regulatory authorities.
    Production information is commonly reported in units of barrels of oil
equivalent or boe. A boe conversion ratio of six thousand cubic feet per
barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based upon
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency for the individual products at the
wellhead. Such disclosure of boe's may be misleading, particularly if used in
isolation.
    For further information, the full 2007 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.

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

    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.
    





For further information:

For further information: Kelly D. Kerr, Vice-President, Finance and
Chief Financial Officer, Action Energy Inc.; ACTION ENERGY INC., 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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