Breaker Energy Ltd. announces increases in production and cash flow guidance and light oil drilling



    CALGARY, June 16 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company")
(TSX: WAV.A and WAV.B) plans to accelerate development of its numerous light
oil opportunities due to drilling success and low debt levels. Breaker will
now invest an additional $35 million in 2008, focused on new drilling at its
three light oil growth properties, its deep Devonian exploration play in
British Columbia, and a new horizontal multifrac gas resource play at Provost.
    Breaker's 2008 capital budget forecast is now $105 million, increased
from $70 million. Of the $35 million increase, $25 million is allocated to
projects that add production in 2008, with the balance devoted to longer term
projects. This will result in an increased forecast exit rate of 6,900 boe/d,
up from the previous estimate of 6,200 boe/d. Breaker now estimates its 2008
full year average production will be 6,000 boe/d. Cash flow is stronger as a
result of higher commodity prices with forecast 2008 annual cash flow
increasing to $98 million from $66 million. Breaker's bank line is currently
$95 million and management forecasts a conservative level of leverage at
year-end with net debt of $58 million and a net debt to annualized fourth
quarter 2008 cash flow ratio of 0.5. Based on fourth quarter forecast
production and strip pricing as of mid-June 2008, annualized fourth quarter
cash flow could exceed $150 million.

    Irricana

    Breaker has realized and maintained significant light oil production
increases from drilling in the large original oil-in-place pool at Irricana.
Initial rates from new drills have been steadily increasing with time and
experience with horizontal drilling and multi-frac completions, particularly
in areas proximal to historical poor producers. The most recent drills brought
onstream just prior to break-up exceeded rates of 700 boe/d, and are still
producing at levels comparable to historical best producers before Breaker
initiated the multi-frac completions program. The property has maintained
production in excess of 2,800 boe/d for the past three months, an indication
of the strength and stability of the ten new wells.
    As a result of the significant success of the drilling program, Breaker
is increasing the Irricana 2008 budget by $11.4 million to a total of
$45 million. Of this extra capital, $7.5 million will allow Breaker to drill
an additional two horizontal light oil wells and one additional exploratory
Pekisko gas well. The remaining $2.0 million will be used to expand the
production infrastructure. The main oil gathering line to the central battery
will be looped to alleviate rising pipeline pressures caused by increased
production volumes, thus lowering the back pressure on the existing producers
to increase total field production. A waterflood injection pilot will also be
initiated to test the viability of waterflooding, potentially increasing the
oil recovery substantially.
    In total, Breaker plans to drill 6 more light oil horizontals, 2
exploratory Pekisko wells, and conduct one Mannville gas recompletion during
the balance of 2008. This program will capitalize on the success of the
multi-frac horizontal oil wells, and set up potential gas development programs
to take advantage of stronger gas prices. In addition to the expanded drilling
program, the investment in company owned and operated infrastructure will
ensure that the full production potential of the new drills and existing
producers can be realized.

    Girouxville

    At Girouxville, Breaker is doubling the 2008 budget to a total of
$13.6 million, allowing the Company to capitalize on its large inventory of
deep light oil exploratory prospects that qualify for the $1 million maximum
royalty holiday. Four gross (2 net) additional wells with multi-zone targets
supported by joint proprietary 3D seismic will be drilled in the third
quarter. Breaker has recently demonstrated a 100 percent success rate on
similar targets, and should enjoy initial netbacks near $130/bbl based on
current oil prices. Additional operated wells at varying working interests and
increased seismic acquisition are also planned.

    East Prairie

    At East Prairie, performance of the wells drilled during the winter
program has remained strong. Production from the property during the past
three months has remained above 1,200 boe/d net to the Company, of which
325 boe/d is light sweet oil. Subsequent to the ERCB approval for an Enhanced
Recovery Scheme granted on May 2nd, Breaker received a Holding disposition
from the ERCB on May 23rd which allows for 2 wells per quarter section to be
drilled on the lands encompassing the waterflood area of the Viking light oil
pool. Progress on this waterflood project has accelerated with full operation
now expected by the end of September 2008. Independent reserve evaluators
estimate that oil recoveries will double with the implementation of a
waterflood.
    As a result of the downspacing approval and strong performance of the
Viking oil producers, Breaker has expanded its capital program by $1.9 million
for 2 gross (1.5 net) additional wells during the third quarter of 2008. In
total Breaker plans to drill 3 gross (2.25 net) additional wells during the
summer. The Company is well positioned for further infill drilling immediately
after a 3D seismic program planned for the winter of 2008/2009.

    Southeast Alberta

    With the increase in natural gas prices, as well as the continued strong
oil price, Breaker plans to be very active in the area for the remainder of
2008. The capital budget has been expanded by $8.0 million to a total of
$21.4 million, with approximately $20 million of that remaining to be spent.
With a sizeable land base and large inventory of low risk drilling locations,
Breaker is well positioned in the area to further capitalize on the strong
commodity prices.
    At Medicine Hat, Breaker has commenced drilling a 4 well program to
further delineate a regionally extensive gas charged sand. The Company has a
drilling inventory of more than 50 defined locations in the area.
    At Provost, Breaker has commenced water injection into its sizeable
medium gravity oil pool and is nearing commencement on its innovative enhanced
recovery scheme at its large heavy oil pool. The summer drilling program will
include seventeen wells, with an equal split between oil and natural gas
targets. The Company plans to apply the multifrac technology being used in
Irricana to its first horizontal well in the Viking sand. If successful, this
technology could offer a very attractive means of recovering the large gas and
oil in place in the regionally extensive Viking sand. Breaker will also
recomplete 6 gross wells and tie in 8 gross standing gas wells.

    Monias
    ------
    Breaker has completed processing and interpretation of its newly-shot
20 square mile proprietary 3D seismic program at Monias, British Columbia,
where the company is pursuing a deep Devonian reef play with a potential
target size of 1 TCF (unrisked). Breaker is now budgeting a 100 percent
working interest operation to re-enter the original well and drill
directionally to a new target defined by the seismic program. Subject to
weather, licensing and rig availability, the company is planning this drilling
activity for fall or early winter of this year, with no production scheduled
in the current outlook.

    Upward Revision to 2008 Guidance

    Breaker plans its most active year ever in 2008 with total capital
investment of $105 million. Four drilling rigs are currently working on
Breaker properties; two at Irricana, one at Girouxville and one at Medicine
Hat. Breaker's revised 2008 guidance is as follows:

    
              Average Production Rate           6,000 boe/d
              Exit Production Rate              6,900 boe/d
              Cash flow                         $98 million
              Cash flow per A share             $2.70
              Field Net Back                    $48.39/boe
              Capital Program                   $105 million
              Year-End Debt                     $58 million
              Authorized Bank Line              $95 million
              Unused Bank Line Capacity         $37 million
              Q4 Annualized Debt to Cash Flow   0.5 times

    The above guidance assumes US$105.00/Bbl WTI, CDN$9.50/mcf AECO and
    US$/CDN$1.00 for 2008.

    The capital program will be allocated by area as follows:

    -------------------------------------------------------------------------
    Area                        Gross Wells     Net Wells    Net Capital ($)
    -------------------------------------------------------------------------
    Irricana                             15          15.0              45.0
    -------------------------------------------------------------------------
    Girouxville                           9           4.1              13.6
    -------------------------------------------------------------------------
    East Prairie                          7           5.8               6.5
    -------------------------------------------------------------------------
    SE AB                                22          20.5              21.4
    -------------------------------------------------------------------------
    Monias/Widewater                      1           1.0               4.5
    -------------------------------------------------------------------------
    Other                                 -             -              14.0
    -------------------------------------------------------------------------
    Total                                54          46.4             105.0
    -------------------------------------------------------------------------
    

    Breaker Energy Ltd. is a junior oil and gas company focused on creating
shareholder value by growing per share production and reserves through
acquisitions and a focused exploration, development and exploitation plan.
    Breaker has 36,414,737 Class A shares and 900,000 Class B shares
outstanding.
    Breaker Energy trades on the TSX under the symbols WAV.A and WAV.B.

    Forward-Looking Statements
    --------------------------
    This press release contains forward-looking statements concerning the
Company's expectations of future production, cash flow, earnings and expansion
of its oil and gas property interests and concerning the Company's exploration
and development drilling, seismic operations, regulatory applications, payout
estimates, capital expenditures, number of drilling locations, seismic
acquisitions and facility upgrades. 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), acquisitions, commodity price, price
and exchange rate fluctuation and uncertainties resulting from competition
from other producers and ability to access sufficient capital from internal
and external sources. Additional information on these and other risk factors
that could affect the Company's operations and/or financial results are
included in the Company's reports on file with Canadian securities regulatory
authorities.
    The forward-looking statements or information contained in this news
release are made as of the date hereof and the Company undertakes no
obligation to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise, unless so required by applicable securities laws.

    Oil and Gas Advisory
    --------------------
    This press release contains disclosure expressed as "boe/d". Boe means
barrel of oil equivalent and boe/d means boe per day. All oil and natural gas
equivalency volumes have been derived using the ratio of 6,000 cubic feet of
natural gas to 1 barrel of oil. Boe equivalency measures may be misleading,
particularly if used in isolation. A conversion ratio of 6,000 cubic feet of
natural gas to 1 barrel of oil is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the well head.
    In this press release: (i) mmboe means million boe; (ii) boe/d means boe
per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic
feet; (v) mmcf means million cubic feet; (vi) mcf/d means thousand cubic feet
per day; and (vii) mmcf/d means million cubic feet per day.

    The TSX does not accept responsibility for the adequacy or accuracy of
    this release.

    %SEDAR: 00021180E




For further information:

For further information: Dan O'Neil, President & Chief Executive
Officer, (403) 215-5264; or Max Lof, Vice President, Finance & Chief Financial
Officer, (403) 215-5264, info@breakerenergy.com, www.breakerenergy.com

Organization Profile

BREAKER ENERGY LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890