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. ANY FAILURE TO COMPLY WITH THIS
    RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS/

    TSX-V Symbol "AEC"
    

    CALGARY, Aug. 27 /CNW/ - Action Energy Inc. announces its results for the
three and six months ended June 30, 2009.

    
    -------------------------------------------------------------------------
                                   Three       Three         Six         Six
    Financial and Operating       Months      Months      Months      Months
     Highlights:                   Ended       Ended       Ended       Ended
    (Unaudited)               June 30/09  June 30/08  June 30/09  June 30/08
    -------------------------------------------------------------------------
    Oil and Natural Gas
     Sales (000's)                $3,485     $10,168      $7,217     $19,354
    Funds Flow (Used in) From
     Operations (000's)            ($885)     $3,075     ($1,712)     $6,890
      Per Basic and Diluted
       Share                      ($0.02)      $0.05      ($0.03)      $0.12
    Net Loss (000's)             ($3,766)    ($3,217)    ($8,184)    ($6,305)
      Per Basic and Diluted
       Share                      ($0.07)     ($0.06)     ($0.14)     ($0.11)
    -------------------------------------------------------------------------
    Average Production Rate
      Natural Gas (mmcf/d)           2.9         3.3         3.2         3.8
      Heavy Oil Price (b/d)          256         409         278         465
      Oil & Natural Gas
       Liquids (b/d)                 225         369         245         376
        Total Equivalents
         (boed @ 6:1)             972       1,335       1,060       1,459
    -------------------------------------------------------------------------
    Natural Gas Weighting            50%         42%         51%         43%
    -------------------------------------------------------------------------
    Natural Gas Price ($/mcf)      $3.60       $9.72       $4.53       $9.03
    Average Heavy Oil Price
     ($/bbl)                      $56.98      $90.99      $45.72      $77.00
    Average Light Oil Price
     ($/bbl)                      $60.18     $113.69      $50.92      $99.33
    Weighted Average Price
     ($/boe)                      $39.29      $83.69      $37.21      $72.90
    -------------------------------------------------------------------------
    Field Netback ($/boe)          $2.82      $44.34       $3.86      $40.22
    -------------------------------------------------------------------------
    Capital Expenditures (000's)    $283      $4,843        $657      $8,186
    Disposition (Proceeds)
     Costs (000's)                  ($64)    ($3,487)       ($64)    ($3,487)
    -------------------------------------------------------------------------
    Working Capital Deficiency
     (000's)                           -           -    ($32,881)   ($32,415)
    -------------------------------------------------------------------------
    Drilling (Gross (Net) Wells)
      Oil                              -      4 (4.0)     1 (0.5)     5 (5.0)
      Gas                              -      1 (0.5)          -      2 (1.0)
      Service                          -           -           -      1 (1.0)
      Dry & Abandoned                  -           -           -      1 (1.0)
      Total                            -      5 (4.5)     1 (0.5)     9 (8.0)
    -------------------------------------------------------------------------
    Success Rate                       -        100%        100%         88%
    -------------------------------------------------------------------------
    Undev Land (Gross/Net Acres)
     (000's)                           -           -     185/120     203/150
    -------------------------------------------------------------------------
    

    FINANCIAL

    Q2-2009 RESULTS

    Action used funds flow for operations during Q2-2009 in the amount of
$0.9 million ($0.02 per basic and diluted share). The Q2-2009 funds flow
figure represents a $4.0 million decrease from the $3.1 million ($0.05 per
basic and diluted share) for the corresponding period in 2008, as a result of
decreased production rates and commodity prices.
    During the quarter ended June 30, 2009, the Company sold oil and natural
gas liquids at 481 bbl/d and natural gas at an average rate of 2.9 mmcf/d. On
an oil equivalency basis, the average product sales during the quarter were
972 boed, a decrease of 27% or 363 boed compared to Q2-2008 and a decrease of
178 boed over the previous quarter. The reduction compared to Q1-2009 was a
result of natural declines on all properties, deferred maintenance of heavy
oil wells with no new production brought on stream during the period.
    The weighted average price received by the Company for its production in
Q2-2009 was $39.29/boe (Q2-2008 - $83.69/boe, Q1-2009 $35.39/boe). The field
netback in Q2-2009 was $2.82 per boe compared to $44.34 in Q2-2008 and $4.73
in Q1-2009.
    Operating expenses for Q2-2009 were $2.7 million compared to $2.8 million
for Q2-2008 and $2.6 million for Q1-2009. These amounted to $30.84 per boe,
$23.19 per boe and $25.07 per boe, respectively. Operating expenses are
expected to remain high on a per boe basis due to natural declines and no
additional production coming on stream.
    Gross general and administrative expenses in Q2-2009 were $1.2 million
compared to $1.7 million for Q2-2008 and $1.6 million for Q1-2009. Action
restructured many of its departments and implemented efficiencies during
Q1-2009. There were no provisions for bad debts or other unusual items
recorded in Q2-2009. Net general and administrative expenses in Q2-2009 were
$1.0 million compared to $1.3 million for Q2-2008 and $1.4 million for
Q1-2009. General and administrative expenses are expected to be lower for the
balance of 2009 as a result of further restructuring and efficiencies during
Q3-2009.
    Depletion, depreciation and accretion ("DD&A") expenses for Q2-2009 were
$4.0 million compared to $5.6 million for Q2-2008 and $4.6 million for
Q1-2009. These amounted to $45.67 per boe, $46.11 per boe and $44.03 per boe,
respectively. DD&A decreased in Q2-2009 primarily as a result of lower
production compared to previous periods.
    The net loss for Q2-2009 was $3.8 million ($0.07 per basic and diluted
share) compared to a net loss of $3.2 million ($0.06 per basic and diluted
share) for the same three month period in 2008. The Q2-2009 net loss was
negatively impacted compared to Q2-2008 by substantially lower commodity
prices which lead to much lower field netbacks in Q2-2009. The net loss for
Q2-2009 decreased by $0.7 million compared to Q1-2009 ($0.01 per share) as a
result of higher oil prices and lower general administrative costs, offset by
lower natural gas prices.
    Gross capital expenditures for the three months ended June 30, 2009
totaled $0.3 million (Q2-2008 - $4.8 million). Capital expenditures during the
quarter were funded by funds flow from operations, bank debt and working
capital. At June 30, 2009, the Company had a working capital deficiency of
$32.9 million including bank debt of $31.1 million drawn against its Credit
Facility. At this time, management has planned and budgeted for a conservative
level of capital expenditures for 2009 that will not require any significant
sources of new financing. The current commodity price environment is expected
to improve in 2010 with respect to the Company's internal cash flow estimates
and capital expenditure forecast.
    The Company's Credit Facilities currently provide for borrowing capacity
of $21 million under its revolving demand loan and $11 million under its
non-revolving demand loan. At June 30, 2009, the Company was not in compliance
with its required bank lending covenant, and has notified the bank.
    Action has substantial tax pools and losses carried forward in the amount
totaling $118.2 million which will ensure that Action remains non-taxable for
the foreseeable future.

    
    2009 OPERATING PLANS

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

    Southeast Saskatchewan - Light Oil Operating Area
    

    During Q2-2008, the Company farmed out a 50 percent working interest in
the Bienfait area of southeast Saskatchewan. In Q1-2009, the farmee, at its
sole cost, drilled the third and final commitment well under the farmout
agreement. This well was completed and is currently being tested and
evaluated. At Bienfait, the Company has approximately twenty sections of 50
percent working interest land that are prospective for Bakken production. With
full successful Bakken development, there is the potential for an additional
80 (40 net) wells that could be drilled on these lands.
    In 2008, at Lake Alma, the Company farmed out a 50 percent working
interest in its deeper Bakken mineral rights to an industry partner. During
Q3-2008, the Company drilled and completed the first Bakken exploratory well
on this property. At Lake Alma, Action has six sections of Bakken mineral
rights at a 50 percent working interest. With future drilling success, there
are an additional 24 potential drilling locations in the Bakken formation.

    Alberta - Light Oil and Natural Gas Operating Areas

    Following the drilling and testing of the previously announced Granite
Wash well at West Calais/Kluskun, the Company has retained a 20 percent
working interest in 16 contiguous sections of land in this portion of its
Peace River Arch 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.
    During Q2-2009 a partner drilled a horizontal test well into the Doig
formation at Teepee Creek. The Company did not require any capital for this
well and retains 35 percent of the production. This well is currently being
evaluated.

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

    Lloydminster/Lindbergh - Heavy Oil Operating Area
    

    During Q1-2009 the Company elected to defer maintenance on certain wells
at Lloydminster and Lindbergh due to extreme cold weather and because of the
low commodity price environment. In Q2-2009 the Company started bringing these
wells back onto production.
    Infill drilling by an industry competitor, offsetting immediately to the
West of Action's most productive heavy oil acreage in the Lloydminster area,
has demonstrated the potential to down-space Action's acreage and to
reconfigure drilling design. This area is low risk for heavy oil development
and the Company believes there are approximately 30 to 40 infill wells to
drill in this section.

    Southeast Saskatchewan - Light Oil Operating Area

    Action owns a 100 percent working interest in the up-hole Midale on its
six sections of land at Lake Alma. Action has existing production from two
Midale wells drilled in 2008 and there is seismically defined potential for an
additional five Midale horizontal development wells with two additional
untested prospects remaining on this acreage.

    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 develop and enhance heavy oil production. Action is in a position
to have attractive light oil exploration plays, low risk heavy oil development
plays and a high impact potential natural gas play all with significant
undeveloped land positions and potential follow-up drilling locations.
    For the first half of 2009, the Company's activities were primarily
focused on low cost enhancement and maintenance of existing production.
Drilling and development plans for the remainder of 2009 will be reviewed at a
later date when the Company has more certainty regarding commodity prices and
resulting funds flow available to finance such programs.
    On May 20, 2009, the Company announced that its Board of Directors has
appointed a special committee comprised of independent directors with a
mandate to undertake a process to evaluate the various strategic alternatives
available to Action with the goal of maximizing shareholder value. These
alternatives may include a sale, merger or other business combination
involving Action or the sale of some or all of the assets of the Company.
Action has retained an independent investment banking firm to act as its
exclusive financial advisor to assist in the review process.

    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 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.
    As at June 30, 2009, the Company had 57,256,792 common shares outstanding
and 4,451,083 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.

    
    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: Maria M. Elliott, 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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