Kereco Energy Ltd. - Operational Update



    (TSX: KCO)

    CALGARY, April 25 /CNW/ - Kereco is pleased to provide an operational
update on our first quarter 2007 activities.
    Operationally, during the quarter we spent approximately $31 million,
drilling 13 wells and completing 10 of them - 5 gas wells and 5 oil wells. The
productive capacity of these new wells we believe is approximately 1,800 to
2,300 boe/day, all of which we expect to be on production by the end of second
quarter 2007. Kereco also expended approximately $5 million in the quarter,
originally budgeted for second quarter 2007, installing an owned compression
facility and connecting to an underutilized third party gas processing
facility in our key growth area of Willesden Green. This project removed a
production bottleneck that had plagued us since commencing a successful
drilling program in the fourth quarter of 2006 and in first quarter 2007, and
more importantly provides a means to bring gas to market in an area we intend
to aggressively exploit over the next 12 months.
    From a production standpoint, we achieved our Q1 exit expectation of
10,500 boe/day with an additional 500 to 700 boe/day awaiting regulatory
approval for start-up or tie-in. Our quarter's average production of
approximately 8,400 boe/day was impaired by approximately 600 boe/day relative
to our guidance of 9,000 to 9,200 boe/day. This shortfall was due to a greater
than anticipated negative impact of the Pembina sales line hydrate issue
(250 boe/day), third party facility downtime and tie-in delays (150 boe/day)
and poorer than anticipated performance at Sturgeon Lake and Wilson Creek
(200 boe/day).
    For the remainder of 2007, we reiterate that Kereco's capital spending
profile will be dependent upon both commodity prices and service costs as we
continue to focus on projects that provide sound economic returns. We have
started to see some improvements with respect to the cost of services and have
definitely seen improvements in their availability. In addition, we have been
surprised with the recent strengthening of natural gas prices but still do not
expect to see strengthening to significantly higher prices until the second
half of the year. We continue to have hedges in place which will protect
approximately thirty five percent of the remainder of 2007's cash flow.
    We are retaining our previously projected capital expenditure plans of an
additional $99 million ($130 million total for 2007) for the year, and our
expectation of drilling an additional 40 to 50 wells (55 to 65 total) that may
be subject to increase if the environment continues to warrant capital
expansion. Our remaining capital for the year is allocated approximately 65%
towards natural gas and 35% towards light oil with approximately 10% directed
at high impact exploration. We continue to forecast average production for
2007 to be between 10,300 to 10,800 boe/day with an exit rate of 12,000
boe/day (55% natural gas, 45% light oil and liquids). We continue to estimate
this program will generate cash flow between $125 to $130 million ($2.15 to
$2.25 per basic share).
    We are very optimistic about the future growth potential of Kereco and
the opportunities that lie ahead. Our objective is to position Kereco to not
only withstand the current soft investment environment but also to build the
foundation which will allow us to take full advantage of the opportunities we
see emerging later this year and continuing into 2008.

    Advisory

    Certain information set forth in this press release, including
managements' assessment of the future plans and operations of Kereco, contains
forward looking statements. By their nature, forward-looking statements are
subject to numerous risks and uncertainties, some of which are beyond our
control, including the impact of general economic conditions, industry
conditions, changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are interpreted and
enforced, volatility of commodity prices, currency fluctuations, interest rate
volatility, imprecision of reserve estimates, environmental risks, competition
from other industry participants, the lack of availability of qualified
personnel or management, stock market volatility and ability to access
sufficient capital from internal and external sources, market valuations with
respect to announced transactions and the final valuations thereof and
obtaining required approvals of regulatory authorities. Readers are cautioned
that the assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be imprecise
and, as such, undue reliance should not be placed on forward looking
statements. The actual results, performance or achievement of Kereco could
differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be given that
any of the events anticipated by the forward looking statements will transpire
or occur, or if any of them do so, what benefits that Kereco will derive
therefrom. Except as required by law, Kereco disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

    In conformity with Canadian Securities Administrators National Instrument
51-101, natural gas volumes have been converted to equivalent barrels of oil
("boe") using a conversion ratio of six thousand cubic feet ("mcf") to one
boe. This ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Readers are cautioned that boes may be misleading, particularly if
used in isolation.

    %SEDAR: 00021661E




For further information:

For further information: Kereco Energy Ltd., Grant B. Fagerheim,
President and Chief Executive Officer, Phone (403) 290-3401

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KERECO ENERGY LTD.

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