Richards Oil & Gas Limited reports 2008 operating results highlighting growth in production and reserves



    CALGARY, April 8 /CNW/ - Richards Oil & Gas Limited (the "Company"), (TSX
Venture: RIX) has released its 2008 year-end financial and operating results.
The results include the Company's audited financial statements, related
Management's Discussion and Analysis ("MD&A") and a summary and evaluation of
reserves that have been independently assessed by Sproule Unconventional
Limited in accordance with the standards specified by National Instrument
51-101. These filings are available on SEDAR (www.sedar.com) and on the
Company's website.

    2008 HIGHLIGHTS

    
    -   Increased average annual production volumes 35% to 201 BOE per day up
        from 149 BOE per day in 2007. Exit rate production also increased 25%
        to 213 BOE per day from 171 BOE per day in December 2007.
    -   The Company's total proved plus probable reserves increased by 28% to
        2,308 MBOE up from 1,805 MBOE in 2007. Total proved reserves
        increased by 15% to 1,329 MBOE. The Company's reserve life index
        based on fourth quarter 2008 production levels is estimated at 12.5
        years total proved and 20.6 for total proved plus probable reserves.
    -   Commenced natural gas production from the Company's Thorsby property
        in December 2008.
    -   The Company's 2008 drilling program recorded 100 percent success
        during the year with activity focused primarily on the Company's
        Thorsby property. In 2008 the Company drilled 13 wells (12.0 net) of
        which 12 wells (11.6 net) were drilled at Thorsby. The remaining non-
        operated well was drilled at Lacombe. All of the wells drilled in
        2008 targeted the highly predictable Horseshoe Canyon coals.

    SELECTED FINANCIAL INFORMATION
    $ Amount except for per share
     information                                      Year ended December 31
    -------------------------------------------------------------------------
                                              2008         2007       Change
    -------------------------------------------------------------------------
    Production revenues                  3,653,752    2,102,333          74%
    Net loss                            (2,553,207) (15,556,641)        (84%)
    Net loss per share                      (0.035)       (0.29)        (88%)
    Property and equipment additions     7,090,204    9,761,919         (27%)
    Total assets                        25,161,592   24,964,985           1%
    Total liabilities                   13,099,601   10,581,701          24%
    Common shares outstanding
     - basic                            72,661,602   72,661,602         nil%
    Common shares outstanding
     - diluted                          96,648,038   97,429,336          (1%)
    -------------------------------------------------------------------------



    SELECTED OPERATIONAL INFORMATION
                                                      Year ended December 31
    -------------------------------------------------------------------------
                                              2008         2007       Change
    -------------------------------------------------------------------------
    Natural gas (mcf/day)                    1,144          818          40%
    Crude oil (bbl/day)                          8           12         (33%)
    Total (BOE/day)                            201          149          35%
    Exit rate (BOE/day)                        213          171          25%
    Natural gas price ($/mcf)                $8.07        $6.34          27%
    Oil price ($/bbl)                       $76.40       $43.01          77%
    Royalties ($/BOE)                        $6.81        $7.20          (5%)
    Operating expenses ($/BOE)              $20.04       $18.36           9%
    Operating netback ($/BOE)               $22.88       $13.00          76%
    -------------------------------------------------------------------------
    

    OPERATIONS

    Oil and gas production revenues increased to $3,653,752 in 2008 from
$2,102,333 in 2007. This increase is primarily a result of higher natural gas
production and higher natural gas prices received. Natural gas production
increased as a result of additional well completions and a full year of
production from the Company's Morningside area. The Company did experience
decrease in oil production primarily due to natural declines and the shutting
in of one well in late 2007 that was no longer producing economically.
    Net production for 2008 was 201 BOE per day compared with 149 BOE per day
for 2007. Exit rates for the months of December 2008, and 2007, were 213 and
171 BOE per day respectively. Subsequent to the end of 2008, production rates
have risen to approximately 220 BOE per day.
    Current production levels are considerably lower than expected primarily
as a result of operational issues experienced at the Company's Thorsby
property. Production from the Company's wells that targeted the Edmonton sand
intervals have formation water entering the wellbores and therefore have
inhibited gas flow. The Company is currently evaluating production
alternatives to remove this water from the wellbores and re-configuring the
gathering system to allow for the production of water in association with the
natural gas.
    The Company spent $7,090,204 on capital expenditures during the year
ended December 31, 2008. $557,204 was spent on completion and test work on the
Company's Ardley CBM prospective lands. The remainder of the 2008 capital
expenditures were primarily spent on drilling and completion of 13 gross (12.0
net) Horseshoe Canyon CBM wells, and the construction of the gas processing
facility at the Company's Thorsby area. Of the wells drilled and completed in
2008, seven gross wells, (7.0 net) were awaiting tie-in at December 31, 2008.
    Richards Oil & Gas Limited has a significant land position with rights to
the Ardley coals. From 2005 to early 2007 the Company committed capital of
approximately $13,540,000 and its technical expertise in an attempt to
commercialize this resource. To date, the Company has not been successful in
its attempt to commercialize this resource. Due to the higher costs and higher
risk associated with the Ardley CBM resource, the Company has focused on
developing the more profitable and predictable Horseshoe Canyon CBM resource.
The Company will continue to hold these Ardley lands, subject to expiries, and
will reactivate its investigation of this CBM resource if economic conditions
and technical advances warrant further capital investments.

    RESERVES

    The increase in the Company's total proved plus probable reserves of 28%
to 2,308 MBOE is primarily a result of the 2008 drilling and completion work
on the Company's Thorsby property. As a result of the additional 12 gross
wells drilled in 2008 at Thorsby, the lateral extent of the Horseshoe Canyon
CBM formation on Company lands was substantiated and some additional reserves
were also attributed to the various Edmonton sand intervals encountered. At
December 31, 2008, 92 percent of the Company's reserves are attributable to
the Horseshoe Canyon CBM. The remaining reserves are conventional in nature
with 89 percent of those reserves now producing from the same wellbores as the
Horseshoe Canyon CBM reserves.
    Reserve information is based on an independent reserve evaluation report
prepared by Sproule Unconventional Limited dated March 19, 2009, with an
effective date of December 31, 2008. The report was prepared in accordance
with the COGE Handbook and National Instrument 51-101 standards of disclosure
for oil and gas activities. Complete NI 51-101 reserve disclosure will be
filed on SEDAR in conjunction with the filing of the Company's 2008 audited
financial statements and related MD&A.

    OUTLOOK

    Production challenges experienced on start-up at the Company's Thorsby
property has resulted lower than expected initial production volumes
negatively impacting the initial cash-flows from this property. These
production challenges require additional and unexpected capital spending to
rectify. The Company is addressing these production challenges in a very
prudent and cost effective manner as significant capital outlays at Thorsby
may not be economic given the current commodity price environment and
therefore will not be considered until current and future natural gas prices
recover significantly.
    Recent market events, including disruptions in credit markets and other
financial systems and the deterioration of global economic conditions have
resulted in significant declines in commodity prices. As a result of the
current commodity price and credit environment management has restricted
capital and administrative spending and continues to monitor financing
opportunities to fund its future prospects and commitments. Management is also
considering farming out interests in its oil and gas properties, asset
dispositions and strategic alternatives in an effort to continue operations.

    About Richards Oil & Gas Limited

    Richards Oil & Gas Limited is a Calgary-based exploration company,
involved in the development of crude oil and natural gas, with an emphasis on
the exploitation of shallow natural gas resources including coal bed methane
(CBM). With a significant land base and experience in the development of CBM
and conventional natural gas projects, the Company is able to capitalize on
opportunities that create both short-term cash flow and long-term value for
its shareholders.
    Coalbed Methane ("CBM") or Natural Gas from Coal ("NGC") 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.

    ADVISORIES

    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, estimates of proven and probable
reserves, 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.
    





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, Corporate website address:
http://www.richardsoilandgas.com

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Richards Oil & Gas Limited

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