Action Posts 424% Production Gain and Record Funds Flow


    TSX-V Symbol "AEC"

    CALGARY, Nov. 29 /CNW/ - Action Energy Inc. ("Action" or the "Company")
is pleased to announce its results for the third quarter ended September 30,


                                      Three        Nine      Three      Nine
                                     Months      Months     Months    Months
    Financial and Operating           Ended       Ended      Ended     Ended
    Highlights:                   September   September  September September
    (Unaudited)                       30/07       30/07      30/06     30/06
    Oil and natural gas
     sales (000's)                 $  5,292   $ 14,255   $  1,213   $  1,885
    Funds flow from
     operations (000's)            $  1,040   $  2,306   $    366  ($    100)
      Per basic & diluted share    $   0.03   $   0.08   $   0.02  ($   0.00)
    Net loss (000's)              ($  2,298) ($  5,708) ($  2,397) ($  4,446)
      Per basic & diluted share   ($   0.06) ($   0.19) ($   0.11) ($   0.20)
    Average production rate
      Natural gas (mmcf/d)              2.8        2.7        0.8        0.7
      Heavy oil (bbl/d)                 645        556          -          -
      Light oil (bbl/d)                 189        196        118         40
      Natural gas liquids (bbl/d)        15         16          -          -
      Total equivalents
       (boed @ 6:1)                1,311      1,210        250        150
    Average natural gas
     price ($/mcf)                 $   5.22   $   5.99   $   5.29   $   5.88
    Average heavy oil
     price ($/bbl)                 $  44.55   $  41.98          -          -
    Average light oil
     price ($/bbl)                 $  71.37   $  61.82   $  57.51   $  52.14
    Average natural gas liquids
     price ($/bbl)                 $  59.89   $  55.68          -          -
    Weighted average price ($/boe) $  43.87   $  43.15   $  52.86   $  46.19
    Operating netback ($/boe)      $  21.52   $  19.10   $  28.70   $  18.99
    Capital expenditures
     (000's)(1)                    $ 29,002   $ 53,668   $  3,259   $  7,974
    Disposition (proceeds)
     costs (000's)                 $      -  ($  3,150)         -          -
    Drilling (Gross (Net) Wells)
      Oil                          10 (10.0)  26 (26.0)    1 (0.3)    2 (0.6)
      Gas                            1 (0.7)    5 (3.5)         -     4 (3.2)
      Service and standing           1 (1.0)    5 (4.8)    2 (1.8)   11 (9.4)
      Dry and abandoned              1 (0.5)    1 (0.5)         -     1 (0.8)
                                   ---------  ---------   --------  ---------
      Total                         13(12.2)  37 (34.8)    3 (2.1)  18 (14.0)
    Success rate                        92%        97%       100%        94%
    Working capital deficit (000's)           $ 38,681              $ 19,787

    1. Includes $10.0 million paid as partial consideration for Rolling
       Thunder Exploration Ltd. in Q3-2007.

    Funds flow from operations for Q3-2007 was $1.0 million ($0.03 per basic
and diluted share) bringing the year to date total to $2.3 million ($0.08 per
basic and diluted share) compared to a loss of $0.1 million ($nil per basic
and diluted share) for the first nine months of 2006. The Q3-2007 funds flow
figure represents a 184 percent increase over the $0.4 million ($0.02 per
basic and diluted share) for the corresponding period in 2006. The increase in
funds flow from operations is primarily a result of increased production
    During the quarter ended September 30, 2007, the Company produced oil and
natural gas liquids at an average rate of 849 bbls per day and natural gas at
an average rate of 2.8 mmcf per day. On an oil equivalency basis, the average
production during the quarter was 1,311 boe per day, an increase of 424
percent or 1,061 boe per day compared to Q3-2006. The Company's average
production during the quarter was weighted 49 percent toward heavy oil,
36 percent toward natural gas and 15 percent toward light oil and natural gas
    The Company incurred a net loss of $5.7 million (($0.19) per basic and
diluted share) compared to a net loss of $4.4 million (($0.20) per basic and
diluted share) for the same nine months in 2006. The Company incurred a loss
of $2.3 million for Q3-2007 primarily due to higher depletion, operating and
general and administrative expenses.
    Gross capital expenditures for the three months ended September 30, 2007
totaled $29.0 million (Q3-2006 - $3.3 million). Q3 capital expenditures
include $10.0 million paid as partial consideration for Rolling Thunder
Exploration Ltd. Capital expenditures during the quarter were funded by
working capital, cash flow from operations and bank debt. At September 30,
2007, the Company had a working capital deficiency of $38.6 million.

    Key events and achievements in the three months ended September 30, 2007:

    -   Six high-impact wells drilled:
        -   11-24 light oil (41 degree API) pool discovery at Sylvan Lake;
        -   Two light oil pool discoveries at McLeans Creek, bringing
            drilling on Action's Peace River Arch farm-in lands to three of
            the five required commitment wells;
        -   Development successes in drilling the 16-16 well and the
            recompletion on the 12-30 well at Red Willow/Galahad; and
        -   Participation in a 48 percent working interest Beaverhill Lake
            oil well in the Karr area that did not result in economic
    -   100 percent drilling success in Phase 2 horizontal heavy oil well
        program at Lloydminster, with nine new wells brought on-stream
        adding initial production of approximately 450 bbls per day;
    -   Production start-up of five shallow natural gas wells at Shackleton
        in Action's Southwest Saskatchewan area;
    -   Overall 23 percent reduction in corporate nine-month average
        operating costs to $14.96 per boe;
    -   Cost reductions helped drive corporate average Q3-2007 netback to
        $21.53 per boe;
    -   Average production of 1,311 boe per day, an increase of 424 percent
        over Q3-2006;
    -   Cash flow of $1.0 million ($0.03 per share), an increase of 184
        percent over Q3-2006 and 9 percent from Q2-2007; and
    -   Closing on August 30 of Action's $55 million acquisition of Rolling
        Thunder Exploration Ltd. The acquisition added numerous drilling and
        optimization opportunities plus production of 655 boe per day for
        September 2007, slightly less than originally announced due to
        mechanical issues at a third party facility and the commencement of
        workover operations on a number of wells. The acquisition was
        announced in late June and described in detail in Action's Q2 report
        and various press releases.

    Q3 2007 drilling and operations

    It was a highly active quarter across our entire asset base and included
drilling of 13 (12.2 net wells). Four (Sylvan Lake, two McLeans Creek and
Karr) of these were high-impact exploratory wells; two were successful and
were on production by the middle of Q4. Action's exploration business unit now
has five pool discoveries to its credit, including the two previous
discoveries at Sylvan Lake.

    Sylvan Lake - In July, Action completed the 11-24-38-4W5 well, making its
third consecutive Leduc pinnacle reef discovery in the area. The well
commenced drilling late in Q2, encountering 65 feet of oil column, and in
October was brought on production at 75 bbls per day of light (41 degree API)
oil. The well's production is restricted pending upgrading of area
infrastructure by third parties. Action has 100 percent working interest
before pay-out and 65 percent after pay-out. Recent 3D seismic shows a
sizeable reef complex in the area with as many as six follow-up locations

    McLeans Creek - Drilling on the 25-section farm-in in Action's Peace
River Arch core area in Q3 yielded two light oil discoveries drilled on 2D
seismic. The 6-26-73-21W5 Gilwood test encountered 35 degree API oil in
35 feet of oil column. Two miles northeast, the 16-36-73-21W5 well encountered
30 feet of oil column. Completion operations on both wells were conducted
following the end of Q3 with the 6-26 well on production by mid-October with
initial production rates of 200 bbls per day of light oil (current production
averaging 125 bbls per day). Completion of the 16-36 well is still ongoing and
being evaluated. These pools are more than single-well accumulations and have
generated at least four to six lower-risk follow-up locations. Using the
limited available 2D seismic Action has mapped 20 structural closures, of
which two have now been drilled. To date, Action has drilled three of its five
farm-in commitment wells. The fourth is planned for Q4 while the fifth has
been deferred (with partner agreement) in order to take advantage of new 3D
seismic to be shot late in Q4.

    Lloydminster - The second batch of low-risk horizontal heavy oil wells,
drilled in late Q2 and Q3 with 100 percent success (nine producers, one water
injection well), was brought on-stream in Q3 below budget and with average
initial production rates of 65 bbls per day per well. Phase 2 brings Action's
track record at this low-risk, repeatable conventional heavy oil asset to 26
consecutive successful wells. Action's innovative approach of multi-well pads,
on-site natural gas-fired power generation and centralized facilities has
delivered highly competitive operating costs averaging below $9 per barrel of
production, generating strong heavy oil netbacks averaging $25 per barrel
during Q3. With 26 wells drilled to date, there is substantial opportunity for
further drilling in this area with prospectivity in the Lloydminster and
Sparky zones and the possibility of up to 64 wells in each zone per section
over two 100 percent working interest sections and prospectivity for 63
additional Sparky wells in another full 100 percent working interest section.
We continue to be pleased at the performance of this reliable, low-risk asset.

    Red Willow/Galahad - This was a very high-cost asset when acquired by
Action in November 2006. Since then, the Company has begun harvesting
"low-hanging fruit" in the form of opportunities to cut operating costs or to
recomplete wells into overlooked productive zones. Action has shut-in a number
of extremely high-cost wells, improved the water disposal system and
consolidated its holdings through a small acquisition in lieu of a joint
interest receivable. Additionally in Q3 the Company had two drilling
successes. The 70 percent 16-16 well was an Ellerslie gas pool discovery and
was brought on-production at 550 mcf per day. The 12-30 well was a
recompletion to exploit a previously overlooked Glauconitic natural gas pool,
and has come on-production at 850 mcf per day.

    Southwest Saskatchewan - Action commenced production at Shackleton with
the tie-in of its first five shallow natural gas wells. These are currently
producing at reduced rates due to partner constraints. As previously
discussed, Action is proceeding slowly at Shackleton under current natural gas
pricing economics.

    Other areas - Action drilled three wells at two new interest areas. At
Karr, a new farm-in in our Peace River Arch core area, a high-impact
exploration well targeting natural gas and condensate in the Beaverhill Lake
Formation was dry, but earned four sections of land offsetting a prolific pool
discovery by our farm-in partner. At Jensen, Action's strategic 27.75 section
farm-in in southern Alberta, Action earned a 50 percent working interest in
all petroleum and natural gas rights below the base of the Bow Island by
drilling two Mississippian test wells. The lands are freehold, subject to a
20 percent gross overriding royalty. Action targeted Glauconitic channels in
the Mannville Group with potential for both oil and natural gas. The two
commitment wells were drilled after the quarter in early October resulting in
one dry hole and one well awaiting completion in Q1 2008. The first well has
earned Action a 50 percent working interest in 13.75 sections and results of
the second well will determine Action's earning status in early 2008.

    Operating costs - Action made progress in its ongoing program to drive
down operating costs, particularly on acquired assets in need of improved
efficiency. In Q3 Action reduced the corporate nine-month average operating
cost per unit of production by 23 percent. This was thanks to a range of
measures throughout the asset base, including increased overall production,
activation of operating strategies at Lloydminster and measures at Red
Willow/Galahad detailed above.

    Presently, Action's daily production is approximately 2,400 boed. The
Company expects that its corporate exit production rate will be 2,400 to 2,450
boe per day weighted approximately 21 percent toward light oil, 36 percent
toward heavy oil and 43 percent toward natural gas.

    Action has continued to achieve positive results throughout its asset
portfolio. Key events in Q4 to date:

    -   Strengthening of Action's executive team through the hiring,
        effective November 1, of Kelly Kerr as Vice President Finance and
        Chief Financial Officer, and of Mark Lenko as Vice President,
        Operations. Both gentlemen bring longstanding experience and
        capability to Action. Mr. Kerr has direct experience in his appointed
        roles with two previous successful oil and natural gas companies that
        were listed on the TSX and subsequently monetized. Mr. Lenko has
        wide-ranging operational experience spanning more than 20 years, most
        recently specializing in the Mississippian in southeast Saskatchewan,
        where Action is now active. Action is delighted to have Kelly and
        Mark join the team;
    -   Commencement of production from the third quarter discoveries at
        Sylvan Lake and McLeans Creek. The first McLeans Creek well is on
        production at 125 bbls per day, 100 percent to Action, with an on-
        site oil battery. The second McLeans Creek well completion is still
        being evaluated. The third Sylvan Lake well is producing at a
        restricted rate until installation of a line loop in an area oil
        pipeline, expected to be completed in late Q4-2007;
    -   Continued diversification of Action's asset base in geography, risk
        profile and commodity focus, according to the portfolio management
        principles of Action's business plan. This includes 25+ low-risk
        follow-up light oil opportunities spanning much of our asset base.
        The three recent oil discoveries alone have generated 11 of these
        follow-up locations so far; and
    -   Pending results from exploration drilling on the Jensen farm-in in
        southern Alberta with one dry hole and one standing natural gas well
        awaiting completion in Q1-2008.

    The Company issued revised guidance on November 2. Action announced that
it had expanded the Company's 2007 capital budget by $12.6 million to a
planned total of $48.6 million, funding a wide range of additional activities
and bringing drilling to a planned 41 (37.3 net) wells for 2007. Average 2007
production guidance was increased to 1,500 boe per day (from 1,400 boe per day
under the previous estimate) and the exit rate guidance was revised to
2,400 boe per day (compared to previous guidance of 1,700 boe per day),
weighted 57 percent to crude oil. Estimated cash flow based on forward
annualized exit production was increased by 37 percent to $13.8 million ($0.32
per share) from $10.1 million ($0.34 per share) previously, under new working
commodity price assumptions of Cdn$72.00 per bbl of WTI crude oil, $41.85 per
bbl of Lloyd blend heavy oil and $7.00 per mmbtu of natural gas at AECO.
    Action's business plan is to explore for, develop and produce oil and
natural gas reserves in western Canada. Action is in an enviable position to
have a balanced portfolio of light oil, heavy oil and natural gas
opportunities each with large undeveloped land positions. Action has the
ability to maximize returns to shareholders by allocating capital to projects
with the highest netback returns and success rates. On lands presently owned,
Action has a three to five year drilling inventory including 25+ higher impact
opportunities derived from recent exploratory drilling success.
    While developing a new light oil focus area in Saskatchewan, Action
management has also prepared the Company for when natural gas prices recover.
With evidence of sustained natural gas price strength, the Company is ready to
activate a shallow natural gas drilling program on its 190 sections of mostly
contiguous land in the Shackleton area of southwest Saskatchewan. On this
play, the majority of adjacent land owned by others has been down-spaced to
eight wells per section while Action Energy's drilling density is less than
one well per section.
    For the balance of the year and into early 2008, the Company's activities
will be primarily focused on light oil opportunities drilling at McLeans Creek
and shooting 3D seismic at West Calais, both on the Peace River Arch farm-in
    Action's initial guidance for 2008 capital expenditures, production and
cash flow is planned to be released in early January 2008.


    This press release may contain forward-looking statements including
expectations of future production, funds flow and earnings. These statements
are based on current expectations that involve a number of risks and
uncertainties, which could cause actual results to differ from those
anticipated. These risks include, but are not limited to: the risks associated
with the oil and natural gas industry (e.g., the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other industry participants, the lack of availability of
qualified personnel or management, stock market volatility, ability to access
sufficient capital from internal and external sources, operational risks in
development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of estimates and projections relating to production, costs and
expenses, and health, safety and environmental risks. Additional information
on these and other factors that could affect Action's operations or financial
results are included in Action's reports on file with Canadian securities
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
Innova 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 Action will derive
therefrom. Action disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.

    Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 bbl is based on a deemed energy equivalency
conversion method primarily applicable at the burner tip and is not intended
to represent a value equivalency at the wellhead.

    For further information, the full 2006 Annual Report to Shareholders and
Annual Information Form have been posted on the Company's website: or, alternatively, can be viewed at
    At September 30, 2007 and at the date of this press release, the Company
had 43,256,785 common shares outstanding and 4,961,800 options outstanding at
an average exercise price of $3.65.

    Action Energy Inc. is a publicly traded Calgary, Alberta based junior oil
and natural gas exploration and production company with operations
concentrated in core areas in central Alberta, southern Alberta and southern

For further information:

For further information: R.D. (Bob) Bowman, President and COO, Action
Energy Inc,. Telephone: (403) 264-2986; Kelly D. Kerr, Vice-President, Finance
and CFO, Action Energy Inc., Telephone: (403) 723-4454; ACTION ENERGY INC,
Suite 800, 350 - 7TH Avenue S.W., Calgary, Alberta, T2P 3Y3, Phone:(403)
264-1112, Fax: (403) 264-1116, Website:

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