Kereco Energy Ltd. ("Kereco") - Update on Corporate Repositioning



    (TSX: KCO)

    CALGARY, Dec. 14 /CNW/ - Kereco today announces an update on the
repositioning of the Company that it commenced July 18, 2007. That
repositioning will result in the disposition of the majority of its natural
gas prone assets to industry. As of today, Kereco has signed purchase and sale
agreements for cash consideration totalling $241 million with four separate
companies to dispose of all of its interests in the following areas: Blair
Creek, Fireweed, Noel and Sikanni in northeastern British Columbia and
Camrose, Ferrier, Pembina, Ricinus, Willesden Green, Wilson Creek and Wimborne
in central Alberta. The first of the four dispositions closed on November 30,
2007 and the last and largest disposition is expected to close on or about
January 14, 2008.
    The disposition assets combined are currently producing approximately
5,800 boe/day (23.7 mmcf/day of natural gas and 1,850 bbls/day of crude oil
and NGL's), equating to an average disposition value of $41,550 per flowing
boe of production.
    The combined reserves of these dispositions, as evaluated by GLJ
Petroleum Consultants Ltd. with an effective date of August 1, 2007, were 11.2
mmboe proved and 17.0 mmboe proved plus probable. These dispositions therefore
result in combined disposition metrics, based on NI 51-101 guidelines which
require the inclusion of future development capital, of $25.64 per boe proved
and $18.44 per boe of proved plus probable reserves, including undeveloped
land.
    On a go forward basis, Kereco will be a value driven junior exploration
and production company focused on rate of return projects through exploitation
and optimization of our long-life light oil assets at Sturgeon Lake, value
adding acquisition opportunities and selective exploration. In addition to the
Sturgeon Lake assets, Kereco will also be retaining its assets in the Peace
River Arch. These assets combined have a beginning production base of
approximately 4,200 boe/day (70% light oil and NGLs) and 13.2 mmboe of proved
and 18.2 mmboe of proved plus probable reserves (76% light oil and NGLs).
Current average realized netbacks on these combined assets are approximately
$38.00 per boe. Although details of a final budget for 2008 remain to be
finalized, the preliminary outlook for the Company is to direct approximately
$35 million of capital towards drilling and optimization activities, which is
expected to generate average production of approximately 4,200 boe/d (70%
light oil and NGLs) and cash flow of approximately $60 million (approximately
$1.05 per basic share). Further details with respect to the 2008 budget will
follow early in the new year once our plans are finalized.
    Upon closing of these dispositions, Kereco will have in place an undrawn
$100 million bank facility with our current syndicate of lenders and $70
million of the 4.75% convertible debentures issued in June of 2007. After
transaction and repositioning costs, the Company expects to also have surplus
cash of approximately $80 million.
    We thank you for your patience as we have worked through this process,
and look forward to reporting back to you further details in 2008 regarding
the repositioned Kereco.
    Tristone Capital Inc., BMO Nesbitt Burns and GMP Securities L.P. acted as
Kereco's financial advisors on the repositioning process and associated asset
dispositions.

    Advisory

    Certain information regarding Kereco Energy Ltd. in this news release
including management's assessment of the effect on Kereco of royalty rate
changes in Alberta, future plans and operations, number, type and timing of
wells to be drilled, tested and completed, timing of tie in of wells and
commencement of production from new wells and production therefrom, the plan
and development of certain prospects, and production estimates may constitute
forward-looking statements under applicable securities laws and necessarily
involve risks including, without limitation, risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks, changes
in royalty and tax legislation, competition from other producers, inability to
retain drilling rigs and other services, capital expenditure costs, including
drilling, completion and facilities costs, unexpected decline rates in wells,
surface conditions may delay projects and/or operations, wells not performing
as expected, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information on these
and other factors that could effect Kereco's operations and financial results
are included in reports on file with Canadian securities regulatory
authorities and may be accessed through the SEDAR website (www.sedar.com).
Furthermore, the forward-looking statements contained in this news release are
made as at the date of this news release and Kereco does not undertake any
obligation to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
    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; Or Stephen C.
Nikiforuk, C.A., Vice President, Finance and Chief Financial Officer, Phone
(403) 290-3404

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KERECO ENERGY LTD.

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