Iteration Energy (ITX) announces December 31, 2006 year end results



    (All amounts are in Canadian dollars, unless stated otherwise)

    CALGARY, March 28 /CNW/ - Iteration Energy Ltd. (TSX-ITX) ("Iteration" or
the "Company") announced today its financial and operating results as at and
for the year ended December 31, 2006. The financial statements, together with
Management's Discussion and Analysis (MD&A), have been filed on the Company's
SEDAR profile at www.sedar.com. They are also available on the Company website
at www.iterationenergy.com.

    
    FINANCIAL AND OPERATIONAL HIGHLIGHTS

    The major highlights of the three months ended December 31, 2006 include:

    -   Drilled 6.1 net gas wells and 2.0 net heavy oil wells with a success
        rate of 100%.

    -   Increased quarter over quarter production by 10% to approximately
        5,210 boed, and quarter over quarter exit rate by 18% to 6,050 boed.

    -   The production of 725 boed on the east central Alberta June
        acquisition was increased to 1,200 boed in the 3rd quarter and raised
        to 1,900 boed by year end.

    -   Increased the Company's land base to approximately 314,000 net acres,
        of which 193,200 net acres are undeveloped.

    -   Commenced exploration on lands acquired though a farm-in deal in
        northeast British Columbia whereby the Company will earn a 70%
        interest in 9,500 acres of land.

    -   Average netback realized during the quarter was $20.69 per boe, which
        resulted in funds flow for the quarter of $8.2 million
        ($0.15 per share).

    Major highlights for the year ended December 31, 2006 include:

    -   An 80% increase in Proved plus Probable reserves to 10.9 mmboe

    -   A 51% increase in Total Proved reserves to 7.0 mmboe

    -   A 60% increase in exit production to 6,050 boed

    -   A 49% increase in annual average production to 4,420 boed.(2)

    -   Capital spending of $114 million resulted in replacing production of
        1.6 mmboe by a factor of 4 times on a Proved plus Probable basis.

    -   Drilled 24.8 net gas wells and 7.0 net oil wells with a success rate
        of 90%.

    -   Successfully completed two equity issues, one for gross proceeds of
        $25.1 million, and the second, a flow through issue for gross
        proceeds of $12.1 million.

    The following table provides comparative data for year-end 2005 and 2006.

    -------------------------------------------------------------------------
                                     Dec 31,    Dec 31,   %Change    %Change
                                       2006       2005             per share
    -------------------------------------------------------------------------
    Total Proved Reserves (mboe)      6,982      4,622         51         28
    -------------------------------------------------------------------------
    Proved plus Probable
     Reserves (mboe)                 10,894      6,067         80         53
    -------------------------------------------------------------------------
    NAV PV(10) Proved plus Probable
     Reserves ($Million)(1)             208        149         40         19
    -------------------------------------------------------------------------
    Annual Average Production
     (boed)(2)                        4,420      2,970         49         34
    -------------------------------------------------------------------------
    Exit Production (boed)            6,050      3,770         60         37
    -------------------------------------------------------------------------
    Capital Expenditures ($Million)     114       44.9        154        n/a
    -------------------------------------------------------------------------
    Proved plus Probable F&D costs
     without future Capital           15.00      28.53        (47)       n/a
     ($/boe)
    -------------------------------------------------------------------------
    Proved plus Probable F&D
     costs with future Capital        18.39      30.34        (39)       n/a
     ($/boe)
    -------------------------------------------------------------------------
    Proved plus Probable FD&A costs
     with future Capital              19.92      30.34        (34)       n/a
     ($/boe)
    -------------------------------------------------------------------------
    Shares outstanding (Million)       57.4       48.9         17        n/a
    -------------------------------------------------------------------------
    Land base (thousand net acres)      314        142        121        n/a
    -------------------------------------------------------------------------

    (1) The Company has seen a significant increase in Net Asset Values
        despite the Dec 31, 2006 value being based on the McDaniel Associates
        Consultants Ltd. January 1, 2007 price forecasts which are
        substantially lower than their forecasts a year earlier.
    (2) The 2005 annual production is reported net of production from the
        Lavoy assets sold in the first quarter of 2005.


    FINANCIAL SUMMARY

    Year over year comparative results (excluding the Lavoy area, which was
sold during the first quarter of 2005) are as follows:

                              Three Months Ended Dec 31,   Year Ended Dec 31,
    -------------------------------------------------------------------------
                                    2006       2005         2006       2005
    -------------------------------------------------------------------------
    Production (boed)               5,212      3,179        4,418      2,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized commodity price
     ($/boe)                        37.41      69.90        40.03      53.25
    -------------------------------------------------------------------------
    Operating netbacks ($/boe)      20.69      46.49        23.40      34.44
    -------------------------------------------------------------------------
    Production expense ($/boe)       9.23      10.01         7.78       6.29
    -------------------------------------------------------------------------
    General and admin expense
     ($/boe)                         2.61       1.60         2.54       3.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Production revenue before
     royalties ($M)                17,940     20,444       64,539     57,103
    -------------------------------------------------------------------------
    Funds from operations
     ($M)(1)                        8,290     13,681       32,927     32,679
    -------------------------------------------------------------------------
    Funds from operations
     per basic share
     ($)(2)                           .15        .28          .63        .70
    -------------------------------------------------------------------------
    Funds from operations
     per fully diluted share
     ($)(2)                           .15        .28          .63        .70
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net earnings (loss) ($M)       (3,225)    (4,273)      (4,416)     3,072
    -------------------------------------------------------------------------
    Earnings (loss) per
     basic share ($)(2)             (0.06)      0.09        (0.08)      0.06
    -------------------------------------------------------------------------
    Earnings (loss) per
     fully diluted share
     ($)(2)                         (0.06)      0.09        (0.08)      0.06
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net undeveloped land                                      193         86
    -------------------------------------------------------------------------

    (1) Management uses funds from operations and funds from operations per
        share (before changes in non-cash working capital and asset
        retirement expenditures) to analyze operating performance and
        leverage. Funds and funds per share as presented do not have any
        standardized meaning prescribed by Canadian GAAP and therefore they
        may not be comparable with the calculation of similar measures for
        other entities. Funds as presented is not intended to represent
        operating cash flow or operating profits for the period nor should it
        be viewed as an alternative to cash flow from operating activities,
        net earnings or other measures of financial performance calculated in
        accordance with Canadian GAAP. All references to funds and
        funds per share throughout this report are based on cash flow from
        operating activities before changes in non-cash working capital and
        asset retirement expenditures.

    (2) For periods with positive net earnings, per share amounts are based
        on weighted average basic and diluted common shares outstanding for
        the period. For periods with a net loss, per share amounts are based
        on basic common shares outstanding for the period.
    

    Outlook for 2007

    The first quarter capital program of $38 million was expected to result
in average production of approximately 6,100 boed with an exit rate of
approximately 6,900 boed. The production reported in the MD&A for  March 21,
2007 was approximately 5,800 boed with over 1600 boed completed behind pipe
and waiting on tie-in. However, a number of recent construction delays mean
that much of this gas behind pipe will not be tied in until the end of March,
and some will not be tied in until after break up. These delays will bring our
expected average production for the quarter to approximately 5,900 boed, but
we still expect to reach our exit rate of approximately 6,900 boed before
break-up.
    Following the first quarter, the Company expects to continue to focus on
adding new drilling locations and prospective lands in order to grow
production through an ongoing exploitation and exploration program. The
Company is aggressively pursuing acquisition and farm-in opportunities in its
core areas, and will continue to be active at landsales. The Company expects
to spend very little in the second quarter due to restricted surface access,
but has an inventory of prospects in place for the second half of the year to
provide future production growth. The Company will evaluate commodity prices
in the summer months before deciding when to start the next round of drilling.

    Advisory - Forward-Looking Information

    Natural gas is converted to crude oil equivalent at a ratio of
six thousand cubic feet to one barrel. Boe's may be misleading, particularly
if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.

    This press release was prepared on March 26, 2007 and is management's
assessment of Iteration's historical financial and operating results. The
reader should be aware that historical results are not necessarily indicative
of future performance. This discussion and analysis contains forward-looking
statements relating to future events or future performance. In some cases,
forward-looking statements can be identified by terminology such as "may",
"will", "should"," expects", "projects", "plans", "anticipates" and similar
expressions. These statements represent management's expectations or beliefs
concerning, among other things, future operating results and various
components thereof affecting the economic performance of Iteration. Undue
reliance should not be placed on these forward-looking statements which are
based upon management's assumptions and are subject to known and unknown risks
and uncertainties, including the business risks discussed below, which may
cause actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Accordingly, readers are cautioned
that events or circumstances could cause results to differ materially from
those predicted. The Company undertakes no obligation, except as required by
applicable securities legislation, to update publicly or to revise any of the
included forward looking statements, whether as a result of new information,
future events or otherwise.

    The forward looking statements contained herein are expressly qualified
by this cautionary statement. Readers are cautioned that the following list of
risk factors is not exhaustive.

    
     In particular, this press release contains forward-looking statements and
information pertaining to the following:

    -   The quantity and recoverability of our reserves;
    -   The timing and amount of future production;
    -   Prices for natural gas produced;
    -   Operating and other costs;
    -   Business strategies and plans of Management;
    -   Supply and demand of natural gas;
    -   Expectations regarding our ability to raise capital and to add to our
        reserves through acquisitions as well as exploration and development;
    -   The focus of capital expenditures on development activity rather than
        exploration;
    -   The sale, farming in, farming out or development of certain
        exploration properties using third party resources;
    -   The use of development activity and acquisitions to replace and add
        to reserves;
    -   The impact of changes in natural gas prices on cash flow after
        hedging;
    -   Drilling plans;
    -   The existence, operations and strategy of the commodity price risk
        management program;
    -   The approximate and maximum amount of forward sales and hedging to be
        employed;
    -   The Company's acquisition strategy, and the criteria to be considered
        and the benefits to be derived;
    -   The impact of Canadian federal and provincial governmental regulation
        on the Company relative to other issuers of similar size;
    -   Our treatment under governmental regulatory regimes;
    -   The goal to sustain or grow production and reserves through prudent
        management and acquisition;
    -   The emergence of accretive growth opportunities; and
    -   The Company's ability to benefit from the combination of growth
        opportunities and the means to grow through the capital markets.

    Iteration's actual results could differ materially from those anticipated
in our forward-looking statements as a result of the risk factors set forth
below and elsewhere in this press release which include but are not limited
to:
    -   Volatility in market prices for natural gas;
    -   Risks inherent in our operations;
    -   Uncertainties associated with estimating reserves;
    -   Competition for, among other things: capital, acquisitions of
        reserves, undeveloped lands and skilled personnel;
    -   Incorrect assessments of the value of acquisitions;
    -   Geological, technical, drilling and process problems;
    -   General economic conditions including fluctuations in the price of
        natural gas;
    -   Royalties payable in respect of Iteration's production;
    -   Governmental regulation of the oil and gas industry, including
        environmental regulation;
    -   Fluctuation in foreign exchange or interest rates;
    -   Unanticipated operational events that can reduce production or cause
        production to be shut-in or delayed;
    -   Stock market volatility and market valuations;
    -   The need to obtain required approvals from regulatory authorities;
    -   Environmental risks;
    -   Insurance limitations risks;
    -   Risks inherent in replacing  reserves;
    -   Reliance on operators and key employees;
    -   Access to funding and issuance of debt;
    -   Aboriginal claims; and
    -   Availability of drilling equipment, access restrictions and cost
        inflation.
    

    Many of these risk factors and uncertainties are discussed in further
detail in the Management's Discussion and Analysis and the Annual Information
Form for the year ended December 31, 2006.

    The TSX has not reviewed this press release and does not accept
    responsibility for the accuracy of any of the data presented here-in.

    %SEDAR: 00002576E




For further information:

For further information: Mr. Brian Illing, President and CEO, or Mr.
Sean Johnson, CFO at (403) 261-6883

Organization Profile

ITERATION ENERGY LTD.

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