Sea Dragon Reports Second Quarter Results

/NOT FOR DISTRIBUTION TO U.S NEWSWIRE OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, Aug. 30 /CNW/ -

    
                        Highlights of 2010 Q2 Results

    $000s, except share and per share information

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                                                       Three months ended
                                      Prior                 June 30
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                                    Quarter(1)        2010           2009
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    FINANCIAL
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    Cash, beginning of period            2,092          5,283          5,884
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    Cash, end of period                  5,283         22,469          2,118
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    Working capital/(deficiency)         4,272         24,683         (1,839)
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    Funds from/(used in)
     operations                             28            689         (1,028)
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      per share                              -              -          (0.01)
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    Net loss                            (1,836)        (1,434)        (1,141)
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      per share                          (0.01)         (0.01)         (0.01)
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    Capital expenditures                 1,461         46,965            564
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    Total assets                        35,637         88,004         10,639
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    Shareholders' equity                32,005         85,177         10,237
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    Common shares outstanding      208,429,858    375,704,358    144,509,405
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    Warrants outstanding            32,184,750     30,255,000      9,281,671
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    OPERATIONAL
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    Oil production (bbl/d)                 786          1,032              -
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    Brent oil price (C$/bbl)             79.50          81.58              -
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    Realized oil price (C$/bbl)          76.86          78.04              -
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    Royalties (C$/bbl)                   49.67          41.96              -
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    Operating costs (C$/bbl)              5.62          10.81              -
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    Netback (C$/bbl)                     21.57          25.27              -
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    ----------------------------------------------------------
                                          Six months ended
                                             June 30
    ----------------------------------------------------------
                                       2010           2009
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    FINANCIAL
    ----------------------------------------------------------
    Cash, beginning of period            2,092         16,733
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    Cash, end of period                 22,469          2,118
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    Working capital/(deficiency)        24,683         (1,839)
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    Funds from/(used in)
     operations                            716         (1,864)
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      per share                              -              -
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    Net loss                            (3,270)       (12,805)
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      per share                          (0.01)         (0.09)
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    Capital expenditures                48,425         11,751
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    Total assets                        88,004         10,639
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    Shareholders' equity                85,177         10,237
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    Common shares outstanding      375,704,358    144,509,405
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    Warrants outstanding            30,255,000      9,281,671
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    OPERATIONAL
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    Oil production (bbl/d)                 910             -
    ----------------------------------------------------------

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    Brent oil price (C$/bbl)             80.11             -
    ----------------------------------------------------------
    Realized oil price (C$/bbl)          75.21             -
    ----------------------------------------------------------
    Royalties (C$/bbl)                   43.78             -
    ----------------------------------------------------------
    Operating costs (C$/bbl)              8.41             -
    ----------------------------------------------------------
    Netback (C$/bbl)                     23.02             -
    ----------------------------------------------------------
    (1) Denotes the three months ended March 31, 2010
    

Message to Shareholders

SEA DRAGON'S BUSINESS

In April 2010, Sea Dragon Energy Inc. ("Sea Dragon" or the "Company") concluded the acquisition of a 50% working interest in the Kom Ombo Concession ("Kom Ombo") in Egypt which provides the Company with immediate operating cash flow from existing production as well as a future development potential. Additionally, the asset has exploration potential as Kom Ombo has a large undeveloped acreage position (approximately 11,500 sq. km) with opportunities for additional discoveries.

In May 2010, the Company commenced a development drilling program in Kom Ombo with up to potentially 30 wells over the next three years. The Company has completed the first four wells, and is planning to drill up to six additional wells this fiscal year, subject to joint venture partner and government approval.

The gross proceeds of $57.0 million from the equity raise completed in April 2010, have provided the Company with sufficient working capital to continue the development programs for Kom Ombo and the NW Gemsa Concession ("NW Gemsa"). The Company has no debt at this time.

NW Gemsa continues to make significant discoveries with another well added subsequent to the end of the second quarter 2010. The Al Amir SE No. 6, tested at 4,300 bbl/d and came into production at 1,100 bbl/d (110 bbl/d net). The Company owns a 10% working interest in NW Gemsa. When the Company acquired the interest, total production was approximately 2,250 bbl/d, with current production in excess of 9,000 bbl/d.

The Company is pursuing a number of development opportunities in Egypt as well as other countries both in Africa and the Middle East. Currently, the Company has an alliance agreement (the "Agreement") with Tanmia Petroleum Company, a company owned 100 percent by the Egyptian General Petroleum Corporation. The Agreement gives Sea Dragon the exclusive right to acquire, appraise, develop and produce hydrocarbons from certain undeveloped and under-developed oil and gas opportunities.

The Company's reported operating results are from NW Gemsa and Kom Ombo with current production of approximately 1,300 bbl/d net to the Company. The Company is revising the 2010 exit rate from 2,500 bbl/d to 2,000 - 2,200 bbl/d due to delays in obtaining government approvals for commissioning and mobilizing a second rig, drilling of additional wells, and starting a fracturing campaign. The reduction in exit guidance does not decrease the potential of Kom Ombo. The Company remains excited about the numerous opportunities within the concession and are looking forward to drilling the first exploration well within the next few months.

Second Quarter highlights:

    
    -   Issued 142,500,000 common shares at a price of $0.40 per share for
        gross proceeds of $57.0 million in April 2010;

    -   Exited the second quarter 2010 with $24.7 million in working capital,
        including cash of $22.5 million;

    -   Acquired a 50% participating interest in Kom Ombo for total
        consideration of approximately $45.7 million;

    -   Increased average production to 1,032 bbl/d from 786 bbl/d from the
        Prior Quarter;

    -   Successfully drilled Al Baraka No. 6;

    -   Successfully drilled Al Amir SE No. 6 to a total depth of 13,900
        feet;

    -   Commenced a 475 km 2D seismic program in Kom Ombo to further
        delineate previously identified leads and prospects with the view of
        drilling an exploratory well outside of Al Baraka development lease
        before year-end;

    -   Appointed Mr. A.D (Tony) Anton to the position of President and Chief
        Operating Officer and Olivier Serra as Chief Financial Officer
    

Subsequent to Second Quarter highlights:

    
    -   Placed Al Amir SE No. 6 on production at gross production of
        1,100 bbl/d (110 bbl/d net) in NW Gemsa;

    -   Spud the exploration well Al Ola 1X in NW Gemsa;

    -   Drilled Al Baraka No. 7 in Kom Ombo;

    -   Completed seismic acquisition on the Memphis prospect in Kom Ombo,
        currently undergoing interpretation;

    -   Ordered second rig for workover and completions, in order to
        accelerate operations in Kom Ombo;

    -   Ordered fracturing equipment and completing studies for a fracturing
        campaign starting in October;

    -   Hired Ryan Ellson as VP Finance and Roger Sakatch as Engineering
        Manager.
    

FINANCIAL REVIEW

The Company incurred a net loss during the second quarter 2010 of $1.4 million and generated funds from operations of $0.7 million. The Company exited the second quarter 2010 with no debt and working capital of $24.7 million including $22.5 million of cash. The Company expects to have sufficient funds to execute the remaining 2010 capital program from funds from operations and cash on hand.

OPERATIONS REVIEW

Kom Ombo (Co-operated, 50% working interest)

Production

Current production from Kom Ombo is approximately 700 bbl/d gross (350 bbl/d net) of light sweet oil with an average API of 37 degrees.

Al Baraka No. 6

The Al Baraka No. 6 well was drilled to a total depth of 5,035 feet in the Six Hills Formation. An extensive coring and logging program was carried out on this well as it was the first of the Company's ten well program for 2010. A total of nine cores (600 feet) were cut and analyzed for geological and engineering data to help in the design of a fracturing program of existing producers and future wells in the Al Baraka Field.

Al Baraka No. 5

The Al Baraka No. 5 well was completed in the Six Hills "E" Formation in the interval 4352-4391 (39 feet). The well was put on test and came into production at 300 bbl/d (150 bbl/d net) and is now producing at 130 bbl/d (65 bbl/d net).

Al Baraka No. 7

The Al Baraka No. 7 well was drilled, logged, cased and completed in 12 days showing a significant improvement in rig performance. Log analysis showed a net pay thickness in the Abu Ballas Formation of 28 feet.

2D Seismic

The 400 km 2D Seismic program to delineate and firm up eight prospects and leads was completed in July. Processing commenced with the view of potentially drilling an exploratory well before year-end. Acquisition has also started on an additional 75 km seismic program in the unexplored NW Basin.

NW Gemsa (Non-operated, 10% working interest)

Production

Production averaged 8,870 bbl/d (887 bbl/d net) of light sweet oil with an average API of 42 degrees.

Al Amir SE No. 6

The Al Amir SE No. 6 well was completed in the Kareem Shagar formation in the interval 9,805 ft to 9,835 ft. A flow test followed with a peak production of 4,630 bbl/d (460 bbl/d net) and 3.9 mmscf/d (0.4 mmscf/d net) was recorded on a 48/64" choke. The well was shut in for a pressure build up and later placed on production at approximately 1,100 bbl/d (110 bbl/d net).

Ola No. 1 exploratory well

The Al Ola No. 1 well spud on July 15 and is currently drilling at 10,500 ft. This well is being drilled as an exploratory well outside of the southern boundary of the Al Amir SE Development Lease. It is intended to capture a southern extension to the Al Amir SE oil field.

CORPORATE

The Company continued to strengthen its management team and develop a foundation to grow Sea Dragon into an international intermediate oil and gas Company.

On June 1, the Company announced that Mr. A.D. (Tony) Anton, P. Eng, would become the President and Chief Operating Officer of the Company effective immediately. Mr. Anton joined Sea Dragon in 2009 as Senior Vice President Acquisitions and Engineering with over 40 years experience in the oil & gas industry. Formerly he was Senior Vice President of Centurion Energy International Inc. and Chief Operating Officer in charge of operations in Egypt and Tunisia. Prior to that Mr. Anton held Key technical and managerial positions in the Canadian oil and gas sector, including BP Canada, Suncor Inc., Agip/ENI and Husky Oil.

In addition, the Company announced that Mr. Olivier Serra, was appointed as Chief Financial Officer. Mr. Serra has 17 years of investment banking experience previously heading the Europe, Middle East and Africa Oil and Gas Department of BNP Paribas. He has extensive experience in the financing and advising of international oil companies to support their growth strategy.

Sea Dragon's second quarter 2010 financial statements and management's discussion and analysis are available on Sea Dragon's website at www.seadragonenergy.com and will be available on SEDAR at www.sedar.com within 24 hours.

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the development of the Al Baraka field and exploration of the Kom Ombo Concession and events or projections referenced or implied herein should be viewed as forward-looking statements.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements". Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and production development; political, social and other risks inherent in carrying on business in a foreign jurisdiction, the effects of a recessionary economy and such other business risks as discussed herein and other publicly filed disclosure documents. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.

This news release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. When used herein, words such as "intended" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions by and information available to the Company. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Actual results may differ materially from those currently anticipated. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Non-GAAP Measures. This press release contains the terms "funds from operations", and "netbacks" which are not recognized measures under Canadian GAAP. The Company uses these measures to help evaluate its performance.

Funds from operations. Funds from operations is a non-GAAP measure that represents funds generated from operating activities before changes in non-cash working capital. Funds from operations should not be considered an alternative to, or more meaningful than, cash flow from operating activities. Management uses funds from operations to analyze performance and considers it an indication of the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Sea Dragon's determination of funds from operations may not be comparable to that reported by other companies 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.

Netback. Netback is a non-GAAP measure that represents sales net of all operating expenses and government royalties. Management believes that netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses. Management considers netbacks an important measure as it demonstrates the Company's profitability relative to current commodity prices. Netback may not be comparable to similar measures used by other companies.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE

The TSX.V Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

%SEDAR: 00026905E

SOURCE Sea Dragon Energy Inc.

For further information: For further information: Said Arrata, CEO and Chairman, (403) 457-5035; Tony Anton, President and COO, (403) 457-5035; Scott Koyich, President, Brisco Capital Partners, (403) 262-9888, skoyich@briscocapital.com; Graeme Dick, Brisco Capital Partners, (403) 561-8989, graeme@briscocapital.com

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Sea Dragon Energy Inc.

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