Diamond Tree releases December 31, 2006 reserve and financial information



    /NOT FOR DISTRIBUTION INTO THE UNITED STATES OF AMERICA OR TO
    U.S.NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

    CALGARY, March 14 /CNW/ - Diamond Tree Energy Ltd. (TSX: DT) ("Diamond
Tree" or the "Company") is pleased to announce its financial and operating
results for the fourth quarter and year ended December 31, 2006. A complete
copy of Diamond Tree's 2006 financial statements and management's discussion
and analysis ("MD&A") will be available shortly on www.sedar.com and Diamond
Tree's website at www.diamondtree.ca. Certain information contained in this
release constitutes forward-looking statements. See "Forward-looking
Information."

    
    Selected Annual Information:

    Year ended December 31,                                2006         2005
    (000's except per share amounts and production)

    Production - boe/d                                    1,967        2,337

    Revenue                                         $    33,041  $    50,631

    Revenue ($/boe)                                       46.02        59.36

    Funds flow from continuing operations                20,777       29,069
      per share - basic                                    0.92         1.50
      per share - diluted                                  0.82         1.36

    Net earnings from continuing operations               4,136        9,625
      per share - basic                             $      0.18  $      0.50
      per share - diluted                           $      0.16  $      0.45

    Total assets                                        111,503       75,142
    Total long-term liabilities                          14,861       14,608
    

    Reserves

    Diamond Tree's oil and gas reserves were independently evaluated by AJM
Petroleum Consultants ("AJM"). The evaluation was completed using the reserves
definitions in the Canadian Oil and Gas Evaluation Handbook and National
Instrument 51-101 ("NI 51-101"). Total working interest proved plus probable
reserves as at December 31, 2006 were 6.153 million boe comprised of
1.962 million barrels of oil and natural gas liquids and 25,149 million cubic
feet of natural gas. Total proved plus probable reserves grew 13 percent from
December 31, 2005 to December 31, 2006. The following table summarizes Diamond
Tree' working interest reserves on a gross basis (before deduction for
royalties) as at December 31, 2006 using forecast prices and costs based on
the AJM December 31, 2006 price forecast.

    
                   SUMMARY OF OIL AND GAS RESERVES(1)(2)(3)

    -------------------------------------------------------------------------
    WORKING INTEREST
     RESERVES                  OIL and LIQUIDS              NATURAL GAS
    -------------------------------------------------------------------------
                           2006     2005  Percent     2006     2005  Percent
    RESERVES CATEGORY     (Mbbl)   (Mbbl)  Change    (MMcf)   (MMcf)  Change
    -------------------------------------------------------------------------
    PROVED
      Developed
       Producing          1,202    1,128      +7%    9,721    8,886      +9%
      Developed
       Non-Producing        120        3  +3,900%    4,506      362  +1,145%
      Undeveloped            50      132     -62%    2,449    3,497     -30%
    -------------------------------------------------------------------------
    TOTAL PROVED          1,371    1,263      +9%   16,676   12,745     +31%
    -------------------------------------------------------------------------
    PROBABLE                590      748     -21%    8,474    8,024      +6%
    -------------------------------------------------------------------------
    TOTAL PROVED PLUS
     PROBABLE             1,962    2,010      -2%   25,149   20,769     +21%
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                             2006 BEFORE TAX
    WORKING INTEREST RESERVES                 BOE            PRESENT VALUE(1)
    -------------------------------------------------------------------------
    RESERVES CATEGORY               2006     2005  Percent       5%      10%
                                   (Mbbl)   (Mbbl)  Change  ($000's) ($000's)
    -------------------------------------------------------------------------

    PROVED
      Developed Producing          2,822    2,609      +8%   75,025   63,658
      Developed Non-Producing        871       64  +1,261%   20,088   16,878
      Undeveloped                    458      714     -36%    8,748    7,347
    -------------------------------------------------------------------------
    TOTAL PROVED                   4,151    3,387     +23%  103,861   87,882
    -------------------------------------------------------------------------
    PROBABLE                       2,003    2,085      -4%   44,889   33,367
    -------------------------------------------------------------------------
    TOTAL PROVED PLUS
     PROBABLE                      6,153    5,472     +13%  148,750  121,249
    -------------------------------------------------------------------------

    In addition to the value summarized above, Diamond Tree has access to over
70,000 net undeveloped acres concentrated in its two core areas.
    The following table reconciles the reserve additions from capital spending
and revisions to opening estimates.

                              RECONCILIATION OF
                         COMPANY INTEREST RESERVES BY
                     BARREL OF OIL EQUIVALENT (1)(2)(3)
                   ---------------------------------------
                                                BOE
                   ----------------------------------------
                                                    Proved
                                                     Plus
                     FACTORS              Proved   Probable
                                          (Mboe)    (Mboe)
                   ----------------------------------------
                   December 31, 2005       3,387     5,472

                   Discoveries             1,287     1,989
                   Revisions                 (15)     (825)
                   Recompletions             123       239
                   Transfers                  90        -
                   Production               (722)     (722)
                   ----------------------------------------
                   December 31, 2006       4,151     6,153
                   ----------------------------------------

    (1) It should not be assumed that the present values of estimated future
        net cash flows shown above are representative of the fair market
        value of the reserves. There is no assurance that such price and cost
        assumptions will be attained and variances could be material. The
        recovery and reserves estimates of crude oil, NGL and natural gas
        reserves provided herein are estimates only and there is no guarantee
        that the estimated reserves will be recovered. Actual crude oil,
        natural gas and NGL reserves may be greater than or less than the
        estimates provided herein.
    (2) Totals may not add due to rounding
    (3) Per barrel of oil equivalent ("boe") amounts have been calculated
        using a conversion rate of six thousand cubic feet of natural gas to
        one barrel of oil. BOE's may be misleading, particularly in
        isolation. The boe conversion ration is based on an energy
        equivalency conversion method primarily applicable at the burner tip
        and does not represent a value equivalency at the wellhead.

    Capital Expenditures

    Diamond Tree's 2006 capital spending totaled $53.2 million. Exploration
and development spending during 2006 was as follows:

    -------------------------------------------------------------------------
    $ millions                   Full Year    Q4       Q3       Q2       Q1
                                    2006     2006     2006     2006     2006
    -------------------------------------------------------------------------
    Land and property
     acquisitions                    4.8      0.5      0.5      0.5      3.3
    Seismic and geological and
     geophysical                     3.0      0.0      0.2      1.2      1.6
    Intangible drilling,
     completions and
     re-completions                 35.1      5.9      8.1      6.8     14.3
    Well equipment and facilities    9.5      1.4      3.4      2.2      2.5
    Capitalized general and
     administrative expense          0.7      0.2      0.1      0.2      0.2
    Other                            0.1      0.0      0.0      0.1      0.0
    -------------------------------------------------------------------------
    Capital expenditures before
     capital lease                  53.2      8.0     12.3     11.0     21.9
    

    Drilling, completion and equipping activity accounted for 84% of full
year and 91% of quarterly capital expenditures. During 2006, the Company
drilled 23 (19.1 net) and re-completed 2 (1.5 net) wells for a total of 25
(20.6 net) wells, resulting in 17 (13.5 net) gas wells, 4 (3.6 net) oil wells,
1 (0.5 net) standing well to be evaluated and 3 (3.0 net) abandoned wells. Of
the 21 oil and gas wells, 13 (10.6 net) wells came on-stream during 2006, 4
(3.0 net) wells await further testing, 3 (2.7 net) wells came on-stream in the
first quarter of 2007 and 1 (0.8 net) well is scheduled to come on stream in
the second quarter of 2007. Equipping and tie-in projects in northwest Alberta
totaled $3.8 million in 2006, with the remaining $5.7 million spent in west
central Alberta.
    The Company spent $4.8 million in 2006 to acquire approximately 27,000
acres through land sales in its west central Alberta core area as well as
north west Alberta and north east British Columbia. In the fourth quarter the
Company spent $0.5 million to acquire 7,100 acres of land and continues to
acquire landholdings on prospects in various stages of development to add to
its drilling inventory. At December 31, 2006, the Company had approximately
62,000 acres of undeveloped land and additional acreage under option through
farm-in agreements.

    Blue Mountain

    On July 16, 2006, Diamond Tree entered into a Pre-acquisition Agreement
with Blue Mountain Energy Ltd. In the Pre-acquisition Agreement, Diamond Tree
agreed to make an offer to purchase all of the outstanding common shares of
Blue Mountain on the basis of 0.9 of a common share of Diamond Tree for each
Blue Mountain share. On August 4, 2006, Diamond Tree mailed an offer and
accompanying takeover bid circular to the holders of outstanding common shares
of Blue Mountain (and to holders of options and warrants to purchase common
shares of Blue Mountain). The offer was scheduled to terminate (unless
withdrawn or extended) on September 11, 2006. Under the terms of the
Pre-acquisition Agreement, Blue Mountain was entitled to engage in discussions
or negotiations with any third party. On August 29, 2006, Blue Mountain
advised Diamond Tree that it was in receipt of a proposal for the acquisition
of the outstanding common shares of Blue Mountain from Trilogy Energy (which
the directors of Blue Mountain determined to be a Superior Proposal) and Blue
Mountain proposed to further negotiate such proposal with Trilogy Energy.
During the evening of September 1, 2006, Blue Mountain provided notice to
Diamond Tree that the Board of Directors of Blue Mountain proposed to enter
into an acquisition agreement with Trilogy Energy. Under the terms of the
Pre-acquisition Agreement, Diamond Tree had 48 hours from receipt of the Blue
Mountain notice to negotiate amendments to its offer to match the Trilogy
Energy proposal. The Board of Directors of Diamond Tree determined that it was
not in the best interests of Diamond Tree to amend its offer to Blue Mountain
shareholders to increase the consideration payable for Blue Mountain shares
and on September 1, 2006, advised representatives of Blue Mountain that it
would not be seeking to negotiate adjustments to the Pre-acquisition
Agreement. On September 2, 2006, Diamond Tree formally waived the obligation
of Blue Mountain to wait 48 hours prior to approving the Trilogy Energy
proposal, against immediate delivery of the non-completion fee owing to
Diamond Tree under the terms of the Pre-acquisition Agreement. Diamond Tree
received a cheque from Blue Mountain in the amount of $5 million, representing
the non-completion fee payable to Diamond Tree under the Pre-acquisition.

    Operations

    2006 was a challenging year for Diamond Tree as it was for most E & P
companies operating in Canada. Falling natural gas and crude oil prices,
escalating service costs coupled with delays due to labour and equipment
availability, regulatory backlogs, and inexperienced field crews limited
growth. Diamond Tree entered the year with high expectations after
experiencing some significant and promising drilling success in 2005. However,
commodity prices ended up falling from a high of $78.00 US WTI to $59.00 US
WTI and natural gas from in excess of $9.00 CDN/GJ at the beginning of the
year to a low of approximately $4.40 CDN/GJ in September.
    In the fourth quarter of 2006, Diamond Tree drilled 4 (3.8 net) wells
with 100% success resulting in 4 (3.8 net) gas wells.
    Fourth quarter average production was 1,969 boe/day, a 25% increase over
the previous quarter but a 34% decrease from the fourth quarter of 2005.
    Over the last three years, the Company has added to average daily
production exclusively through drilling activity. In 2006, however, delays
were experienced in getting new wells on-stream due to lengthy EUB approval
processes, capacity constraints in third party gathering systems and weather.
This resulted in a buildup of behind-pipe production which eased somewhat in
late 2006 and early 2007. These delays, combined with the EUB's January 1,
2006 reinstatement of the Maximum Rate Limitation, which restricted production
from the Niton field, led to a decline in second half 2006 production. After
this reinstatement, production from the Niton pool was restricted to
350 boe/day from a high of 1,300 boe/day. This excess production accounts for
the major difference between 2005 and 2006 both in the fourth quarter and on
an annual basis.
    Diamond Tree is in the process of completing an enhanced recovery scheme
for the Niton Rock Creek "W" pool. Regulatory approval and implementation of
this scheme would result in Good Production Practice (GPP) for the pool.
Increased production rates are expected when the injection scheme is approved.

    Tupper Area

    Diamond Tree acquired the Tupper option lands in late 2005 by drilling an
initial well at a location designated by the farmor followed by the commitment
to drill three additional wells on locations of Diamond Tree's choosing. Time
commitments for operations were negotiated and dictated that two of the three
commitment wells be drilled in the second half of 2006.
    In the first half of 2006 Diamond Tree shot an extensive 83 sq.km.
proprietary 3D seismic survey program at a net cost of $2.7 million. After
processing and interpreting the data during the summer of 2006, numerous
prospects were developed. Diamond Tree's technical team believes that the
highest impact opportunities on these lands are to be found in the Triassic
interval.
    The option lands did not include all the prospective Triassic horizons,
as some of the deeper rights were still held by the BC Crown. The Company then
proceeded to post and acquire substantially all of the lands covering these
deeper targets, with the final land purchases completed in December 2006.
    While the land acquisition program was in progress, two wells were
drilled targeting the shallower Paddy formation which enabled the company to
satisfy its earning commitments. One of these wells was cased and completed in
both the Dunvegan and the Bluesky zones at marginally commercial rates. The
second well was D&A. The Diamond Tree technical team believes that these
results do not reduce the chance of success from the deeper targets.
Management of the Company believes that a number of high quality Triassic
exploration opportunities still exist in the area.
    Diamond Tree is currently in the process of licensing a Triassic Halfway
test on the Tupper lands which it expects to drill in the third quarter of
this 2007. This well will complete the Company's initial commitment on the
farm-in lands.

    Outlook

    Management is encouraged by the results, opportunities and momentum that
the Company has pursued in the early part of 2007.
    New wells in Willesden Green and Garrington, several recompletions in the
Whitford area and partial relief from infrastructure constraints in the
Sinclair area have increased production. February production is estimated to
be approximately 2,350 boepd.
    Presently, two new wells are being tied in and may be tied in prior to
spring break-up. In addition there are two wells awaiting completion and three
wells drilling, two operated and one non-operated.
    Diamond tree is also experiencing softening service costs and services
appear to be more readily available, which we anticipate will have a positive
impact on capital efficiencies.

    Forward-Looking Statements

    This release contains forward-looking information. Forward-looking
statements are often, but not always, identified by the use of words such as
"seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will",
"project", "potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions. Forward-looking statements are based on the
opinions and estimates of management at the date the statements are made and,
in some cases, information provided or disseminated by third parties, and such
forward-looking statements are subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements. These
factors include, but are not limited to such things as volatility of oil and
gas prices, commodity supply and demand, fluctuations in currency and interest
rates, inherent risks associated with the exploration and development of oil
and gas properties, ultimate recoverability of reserves, timing, results and
costs of drilling activities and pipeline construction, availability of
financing, new regulations and legislation, reinstatement or rescission of the
Maximum Rate Limitation and availability of capital. Certain information
regarding the Corporation in this release including forecast future
exploration and development plans and production constitute forward-looking
statements under applicable securities laws. Anticipated production has been
estimated based on the proposed drilling program with a success rate based
upon historical drilling success and an evaluation of the particular wells to
be drilled. Anticipated exploration and development plans relating to the
Corporation's properties are subject to change. Although Diamond Tree believes
that the expectations represented by these forward-looking statements are
reasonable, there can be no assurance that such expectations will prove to be
correct. The Corporation assumes no obligation to update or revise
forward-looking statements to reflect new events or circumstances, except as
required by law. The reader is cautioned not to place undue reliance on
forward-looking statements. For a detailed description of the risks and
uncertainties facing Diamond Tree, refer to Diamond Tree's Annual Information
Form for the year ended December 31, 2005 as filed on SEDAR at www.sedar.com.

    Not for distribution to United States news wire services or for
dissemination in the United States of America. The common shares of Diamond
Tree have not been and will not be registered under the United States
Securities Act of 1933, as amended, and may not be offered and sold in the
United States absent registration or an applicable exemption from registration
requirements.





For further information:

For further information: Kelly J. Ogle, President, kogle@diamondtree.ca;
or Don D. Copeland, Chief Executive Officer, dcopeland@diamondtree.ca; Diamond
Tree Energy Ltd., 1200, 111 - 5th Avenue SW, Calgary, AB, Phone: (403)
237-9175, Fax: (403) 237-9140, www.diamondtree.ca

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