Cork Exploration Inc. provides second quarter operational update including 2007 guidance revisions and announces management changes



    CALGARY, June 29 /CNW/ - Cork Exploration Inc. (the "Corporation" or
"Cork") (TSX: CRK) today provided an operational update with respect to its
second quarter activities including current production levels and estimated
second quarter 2007 average production. In addition, Cork has revised
downwards its estimated 2007 average and exit production based on current
production levels and related production declines as well as a reduced capital
budget to ensure the Company's expenditures are completely funded by operating
cashflow. Cork today is also announcing certain management changes.

    Second Quarter Operational Update

    As announced on May 14, 2007, Cork's second quarter production was
negatively impacted by higher than expected declines on its second horizontal
well in Carrot Creek and bottom hole pump failures at one well in Pembina and
one well in Brazeau. These pump failures were rectified on May 15th and May
28th, respectively, and, as a result, those wells returned to production. Also
as announced on May 14, 2007, the Corporation lost approximately 150 boe/d of
net production from one well in Carrot Creek where tubing was dropped due to
mechanical rig failure during a workover. The well has since been determined
to be unrecoverable and is expected to be re-drilled in 2007. As discussed in
the Corporation's May 14, 2007 press release, Cork re-entered its second
horizontal well in Carrot Creek on May 28, 2007 to clear out any blockage that
may exist and improve production if possible. No blockage was encountered and
the well was returned to production with no impact on production rates. In
addition to the above, two of the Corporation's wells in West Pembina,
totaling 63 boe/d net to Cork, were shut-in on May 11, 2007, pending approval
of certain regulatory applications which have not occurred as of the date of
this release.
    During the second quarter of 2007, Cork continued to experience
production declines that were higher than previously anticipated in either of
its April 5, 2007 or May 14, 2007 press releases. A significant portion of the
Corporation's production is derived from recently drilled wells with limited
production history, including the Corporation's first two horizontal wells. It
is typical for wells in deep basin tight gas reservoirs to experience
significant decline rates in the initial production months with such decline
rates decreasing over time until stabilization of the decline rate occurs.
Until the decline rate stabilizes, estimating future production rates of wells
is difficult with such estimates requiring significant professional judgment
using the best available information at the time. This is particularly
applicable to future production estimates for the Corporation's first two
horizontal wells where industry currently has limited experience with the long
term deliverability of such well types. Cork has utilized pressure transient
analysis (PTA) as one of the bases to predict long term deliverability rates
of its horizontal wells. However, the Corporation's current production history
has proved such PTA's to be inaccurate for these types of wells in tight gas
reservoirs. Utilization of horizontal drilling applications in Cork's Carrot
Creek area continues to be economic, as Cork's initial two horizontal wells in
the area are stabilizing at rates greater than three times the stabilized
production rates of the offsetting vertical well in the section for less than
two times the drilling and completion cost.
    The protracted spring break-up resulted in limited activity for the
Corporation in the remainder of the second quarter of 2007 with the completion
and tie-in of one gross (0.6 net) well in Cochrane on June 21, 2007 and the
recompletion of one gross (1.0 net) well in Brazeau on June 21, 2007. In June,
the Corporation also successfully completed two gross (0.7 net) wells in
Carrot Creek that had been drilled prior to break-up, with tie-in expected in
July. Cork is currently in the process of drilling 1 gross (0.6 net) well in
Carrot Creek with completion and tie-in expected in July, 2007.

    Revision to 2007 Guidance

    At June 27, 2007, the Corporation's production was approximately
2,400 boe/d, reflecting these higher than anticipated declines described
above. Cork estimates that its average second quarter 2007 production will be
approximately 2,700 boe/d, compared to its previously announced second quarter
2007 average production guidance of 2,850 boe/d. The Corporation estimates
that its net debt at June 30, 2007 will be approximately $45.5 million.
    Cork has completed a detailed re-evaluation of all of its wells and
related production declines using current production rates, production history
and analogue wells and has revised its future production estimates
accordingly. Further, the Corporation has applied such production rates and
decline analysis to expected future production from new drilling activity.
Based on employing such analysis which includes steeper declines on production
from existing and new wells, Cork is more confident of meeting its new
production guidance as set forth below.
    As a result of the impact on the Corporation's expected 2007 cash flow
from lower production, Cork has reduced its capital budget to $13 million for
the remainder of 2007. Under this revised capital budget, which will be
completely funded by the Corporation's operating cashflow, Cork plans to drill
7 gross (5.1 net) wells, including 2 gross (1.4 net) horizontal wells in the
remainder of 2007, and expects to meet its CEE obligations from its November
20, 2006 flow-through share issuance.
    As a result of the higher than anticipated production declines on
existing production and lower drilling activity, Cork has reduced its 2007
average production guidance to approximately 2,600 boe/d from previous 2007
average production guidance of between 3,000 boe/d and 3,200 boe/d. Further,
the Corporation has reduced its 2007 exit production guidance to approximately
3,000 boe/d from previous 2007 average production guidance of between
3,500 boe/d and 4,000 boe/d.

    Update of Reserve Report

    Cork has initiated a third party engineering review of its reserves as at
June 30, 2007. The updated report is expected to be completed by mid July and
the results thereof will be disclosed at such time.

    Changes in Management

    Cork today also announced, effective immediately, changes in management
of the Corporation. Mr. Raymond Smith has been appointed, on an interim basis,
to the position of President and Chief Executive Officer in addition to his
current duties as Chairman of the Corporation's Board of Directors. Mr. Ving
Woo has been appointed, on an interim basis, to the position of Executive
Vice-President and Chief Operating Officer in addition to his current duties
as a director of the Corporation. Mr. Philip Collins, formerly President and
Chief Executive Officer, will continue with the Corporation in the position of
Vice-President Exploration, but has tendered his resignation from the
Corporation's Board of Directors.
    Cork Exploration Inc. is a Canadian junior oil and gas company engaged in
the exploration, development and production of natural gas in the Western
Canadian Sedimentary Basin. The Corporation currently has 51.1 million shares
common shares outstanding and 9.8 million stock options and performance
warrants outstanding.

    CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

    Certain statements in this news release may constitute "forward-looking
information" or "forward-looking statements" which involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Corporation, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking information. When used in this
news release, such information uses such words as "estimates", "expects",
"anticipates" and other similar terminology. This information reflects the
Corporation's current expectations regarding future events and operating
performance and speaks only as of the date of this news release.
Forward-looking information involves significant risks and uncertainties,
should not be read as a guarantee of future performance or results, and will
not necessarily be an accurate indication of whether or not such results will
be achieved. A number of factors could cause actual results to differ
materially from the results discussed in the forward-looking information,
including, but not limited to, the factors discussed below. Although the
forward-looking information contained in this news release is based upon what
management of the Corporation believes are reasonable assumptions, the
Corporation cannot assure investors that actual results will be consistent
with this forward-looking information. This forward-looking information is
provided as of the date of this news release, and, subject to applicable
securities laws, the Corporation assumes no obligation to update or revise
such information to reflect new events or circumstances.
    In particular, this news release contains forward-looking information
pertaining to the following: management's assessment of the Corporation's
future plans and operations, including expected production rates, net debt
levels, capital spending and drilling activities.

    %SEDAR: 00023712E




For further information:

For further information: Cork Exploration Inc., 380, 435 - 4th Avenue
S.W., Calgary, Alberta, T2P 3A8, Raymond Smith, Interim President, CEO and
Chairman of the Board; Or Geoffrey D. Krause, Vice-President Finance and CFO,
Telephone: (403) 531-1695, Fax: (403) 531-1696, Website:
www.corkexploration.com

Organization Profile

CORK EXPLORATION INC.

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