Richards Oil & Gas Limited Announces 2008 Second Quarter Results and Provides an Operational Update



    CALGARY, Aug. 20 /CNW/ - Richards Oil & Gas Limited (the "Company"), (TSX
Venture: RIX) is pleased to report that it has filed on SEDAR (www.sedar.com)
its financial statements and related Management's Discussion and Analysis
("MD&A") of the results of operations and financial condition for the three
and six month periods ended June 30, 2008. As part of this release, the
Company is also providing an update of its 2008 operations to date and an
outlook for the rest of the year.

    SECOND QUARTER 2008 AND RECENT OPERATIONAL HIGHLIGHTS

    
    -   Increased funds from operations from 2007 by $640,575 and $1,252,728
        for the three month and six month periods ending June 30, 2008
        respectively. This increase was due to improved natural gas pricing,
        operational cost management, production stability and continued
        reduction of general and administrative costs.
    -   Increased average quarterly production volumes 79% to 204 boe per day
        up from 114 boe per day in the second quarter of 2007.
    -   Achieved record high operating netbacks of $37.25 per boe in Q2 2008,
        a 126% increase from the $16.51 per boe operating netback achieved in
        Q2 2007 due to reduced operating costs and improved pricing.
    -   Recompleted one well in the Morningside property adding approximately
        200 mcf per day (net) of gas production in August 2008 from dry
        Horseshoe Canyon ("HSC") sand zones.
    -   Maintained financial strength with working capital of $2.5 million
        and increasing positive funds from operations.
    -   Expanded the Company's financial flexibility by arranging a credit
        facility with the National Bank of Canada. This new credit facility
        will provide the Company up to $4.0 million to accelerate the
        development of the Company's HSC Coalbed Methane ("CBM") properties
        and to execute on other opportunities.


    SELECTED SECOND QUARTER 2008 FINANCIAL INFORMATION

    $ Amount except
     for per unit     Three months  Three months    Six months    Six months
     amounts            ended June    ended June    ended June    ended June
    -------------------------------------------------------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------
    Production
     revenues            1,143,569       441,256     2,092,713     1,183,878
    Funds from
     operations            121,164      (519,411)      135,657    (1,117,071)
    Net loss              (479,992)   (2,254,893)   (1,031,190)   (3,208,036)
    Net loss per share      (0.007)        (0.06)        (0.01)        (0.08)
    Property and
     equipment
     additions             245,261       565,233     1,740,338     1,360,528
    Total assets        20,605,769    24,502,829    20,605,769    24,502,829
    Total liabilities    7,080,395     7,651,879     7,080,395     7,651,879
    Common shares
     outstanding
     - basic            72,661,602    41,411,602    72,661,602    41,411,602
    Common shares
     outstanding
     - diluted          97,851,003    45,366,602    97,851,003    45,366,602
    -------------------------------------------------------------------------



    SELECTED SECOND QUARTER 2008 OPERATIONAL INFORMATION

                      Three months  Three months    Six months    Six months
                        ended June    ended June    ended June    ended June
    -------------------------------------------------------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------
    Natural gas
     (mcf/day)               1,174           609         1,203           835
    Oil and natural
     gas liquids
     (bbl/day)                   8            12            10            13
    Total (boe/day)            204           114           210           153
    Total boe               18,541        10,391        38,241        27,768
    Exit rate (boe/day)        215            82           215            82
    Natural gas price
     ($/mcf)                $10.03         $7.10         $8.94         $7.12
    Oil price ($/bbl)      $100.38        $40.60        $78.40        $40.82
    Royalties ($/boe)        $6.35         $4.43         $6.98         $9.14
    Operating expenses
     ($/boe)                $18.08        $21.53        $18.03        $15.93
    Operating netback
     ($/boe)                $37.25        $16.51        $29.71        $17.57
    -------------------------------------------------------------------------
    

    UPDATE

    Thorsby
    -------
    The Company drilled and completed five (3.0 net) wells in December 2007
and drilled six wells (5.6 net) in March 2008. The six wells drilled in 2008
have all been logged and evaluated for productive zones. Three of these six
wells have been perforated in the Belly River formation with fracture
stimulation and production testing to be completed in late August 2008.
Production testing in the Thorsby area to date indicates that estimated
production from the Company's wells will be between 80 mcf per day and
150 mcf per day with an approximate average of 125 mcf per day.
    To date the Company has earned and acquired 14 sections of land with a
72% average working interest and a 30% interest in a gas sales pipeline in the
Thorsby area. The Company has an option to earn an additional nine sections of
land contiguous to its current lands. To ensure these lands are earned prior
to expiry the Company has initiated drilling program to be completed before
the end of 2008. With the successful completion of the drilling program in
Thorsby, the Company will have earned and acquired 23 sections of land with an
83% average working interest.
    Planning activities associated with the compression and gathering
facilities have been completed and construction activities will commence in
late September 2008. This planning activity has been a major focus for the
Company in 2008. The planned facilities include high efficiency central
compression which will allow for low cost additions of future in-fill drilling
and will result in significantly lower operating costs than with decentralized
compression. Given the long Reserve Life Index of over 20 years for this
production there is substantial value in establishing low cost gas gathering
and compression facilities in this new core area for the Company.

    Morningside & Lacombe
    ---------------------
    In Morningside, the Company has recompleted one existing well in the HSC
sands providing an estimated addition of 200 mcf per day of net production in
August 2008. Production from the 15 wells in the area currently averages
110 mcf per day (gross) per well and total net production is approximately
1,000 mcf per day or 165 boe per day. Lacombe has 16 non-operated wells on
production delivering approximately 320 mcf per day (net) or 53 boe per day.

    Crossfield
    ----------
    There are currently 2 standing wells completed in HSC coals and sands
that have flow tested at over 100 mcf per day and the Company has been
evaluating tie-in and further development options. There are 18 gross
additional HSC CBM drilling locations. The Company has all mineral rights and
3D siesmic on this property and is evaluating conventional gas and oil targets
in addition to the CBM development.

    Ardley
    ------
    In July the Company cleaned out and flow tested the multi-lateral
horizontal well drilled into the Ardley coals on its Ansel property. This
multi-lateral well continues to show no appreciable gas flow and therefore
does not justify a tie-in and a long-term flow test at this time.
    While not yet commercial based on initial flow rates, drilling cost and
estimated production costs, the activity to date does demonstrate the
existence of "dry" coal (no produced water), permeability and gas flow. The
Company will continue to work to resolve the technical requirements of
economically drilling the Ardley coals and will also complete a comprehensive
analysis and model using data gathered from the 10 vertical and 2 horizontal
wells drilled to date in the Ardley coals. Richards Oil & Gas Limited's land
position prospective for Ardley CBM is 35 sections (23 net) earned.

    Corporate
    ---------
    Subsequent to June 30, 2008, the Company terminated its previous
$1,500,000 financing commitment with a Canadian chartered bank and replaced it
with a $4,000,000 credit facility with the National Bank of Canada. The
primary credit facility now in place for Richards Oil & Gas Limited consists
of a $2,000,000 revolving operating demand loan. The Company has also
established a second credit facility consisting of a $2,000,000 non-revolving
acquisition/development demand loan. Together these facilities will allow the
Company to accelerate the development of its Horseshoe Canyon CBM properties
and to execute on other opportunities.
    Mr. John Morgan has resigned as a Director of the Company effective
August 31, 2008 due to additional time commitments required for his position
with Infinito Gold Ltd. The Board of Directors have elected to not replace
this Director position at this time and would like to thank John for his
guidance and assistance to the Company over the past year.

    OUTLOOK

    The Company will utilize its current working capital, credit facilities
and its expected operational cash flow to continue to increase production
volumes and earn lands. This use of capital will increase production volumes
and allow the Company to earn an additional nine sections of land by the end
of 2008. The Company has over 130 potential Horseshoe Canyon CBM drilling
locations which can provide considerable production and reserve growth beyond
2008.
    In addition to CBM, the Company has identified a number of conventional
gas and oil opportunities on existing properties and will be evaluating self
funded or farm-in activities to drill, test and tie-in these opportunities.
    The increased production from 2008 drilling and tie-in activities along
with improved net backs and reduced general and administrative costs will
continue to increase the Company's positive cash flow which will be reinvested
in future production and revenue growth.
    In addition to growth from existing development opportunities the Company
continues to review the market for acquisition and merger opportunities to
accelerate its growth and economies of scale. All opportunities are evaluated
in detail to ensure they are not only strategically beneficial but also
accretive.

    Richards Oil & Gas Limited (www.richardsoilandgas.com) is a Calgary-based
exploration company, involved in the development of crude oil and natural gas,
with an emphasis on the exploitation of coal bed methane ("CBM"). The
Company's strategy is use its significant land base and industry-leading
experience in the development of CBM and conventional projects to capitalize
on opportunities that create both short-term cash flow and long-term value for
its shareholders by balancing higher risk exploitation with lower risk
development opportunities and earning additional land positions wherever
possible.

    Coalbed Methane ("CBM") or natural gas from coal is technically defined
as gas produced naturally by coalification, and found within coal natural gas
reservoirs consisting predominately of methane, with smaller amounts of higher
hydrocarbons, water vapor, nitrogen, carbon dioxide, or other
non-hydrocarbons. The majority of gas is usually physically sorbed within the
microporosity and mesoporosity within the organic matrix. The Company's
management has extensive experience in the development of CBM projects, which
it is using to exploit the Company's land base and to add and sustain
significant value for its shareholders.

    ADVISORY

    BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf:1bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

    Statements in this news release contain forward-looking information
including expectations of future production, procurement of drilling permits,
plans for and results of exploration and development activities and other
operational developments. The reader is cautioned that assumptions used in the
preparation of such information may prove to be incorrect. Events or
circumstances may cause actual results to differ materially from those
predicted, as a result of numerous known and unknown risks, uncertainties, and
other factors, many of which are beyond the control of the Company. These
risks include, but are not limited to; the risks associated with the oil and
gas industry, commodity prices, and exchange rate changes. Industry related
risks include, but are not limited to; operational risks in exploration,
development and production, availability of skilled personnel and services,
failure to obtain industry partner, regulatory and other third party consents
and approvals, delays or changes in plans, risks associated with the
uncertainty of reserve estimates, health and safety risks and the uncertainty
of estimates and projections of reserves, production, costs and expenses. The
reader is cautioned not to place undue reliance on this forward-looking
information. The forward-looking statements contained herein are subject to
change. Except as required by applicable securities laws, the Company assumes
no obligation to update or revise any forward-looking statements should
circumstances or management's opinions or estimates change.

    
    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this news release.
    

    %SEDAR: 00021365E




For further information:

For further information: Brad Turner, President & CEO, Richards Oil &
Gas Limited, Tel: (403) 265-8444, E-Mail: bturner@richardsoilandgas.com; Lonn
Bate, CFO, Richards Oil & Gas Limited, Tel: (403) 265-8444, E-Mail:
lbate@richardsoilandgas.com

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Richards Oil & Gas Limited

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