Innova Exploration Ltd. Reports Strong Growth in 2006, Announces Management and Proposed Board Changes

    TSX Symbol "IXL"

    CALGARY, March 26 /CNW/ - Innova Exploration Ltd. is pleased to announce
its results for the year ended December 31, 2006. A summary of the Company's
accomplishments in 2006 are:

    -   Increased funds flow from operations by 46% to $43.6 million.
    -   Increased average annual production by 42% to 3,428 boed.
    -   Exited 2006 with approximately 4,000 boed of production weighted 70%
        toward light oil.
    -   Increased proved reserves by 55% to 7.5 mmboe.
    -   Increased proved plus probable reserves by 37% to 12.7 mmboe.
    -   Increased net asset value at NPV 5% by 33% to $8.09 / diluted share
        (NPV 10% - $6.63/diluted share).
    -   Increased undeveloped land by 10% to over 208,000 net acres at an
        average working interest of 57%.

    Financial and Operating             Months Ended   Year Ended  Year Ended
    Highlights:                           December      December     December
                                           31/06         31/06       31/05(2)
    Oil and Natural Gas Sales (000's)    $  19,292    $  69,648    $  50,619
    Funds Flow From Operations (000's)   $  12,031    $  43,648    $  29,840
      Per Basic Share(1)                 $    0.27    $    1.06    $    0.91
      Per Diluted Share(1)               $    0.27    $    1.03    $    0.88
    Net Income (000's)                   $   1,967    $   5,269    $   4,032
      Per Basic Share(1)                 $    0.04    $    0.13    $    0.12
      Per Diluted Share(1)               $    0.04    $    0.12    $    0.12
    Average Production Rate
      Natural Gas (mmcf/d)                     7.1          8.9          8.6
      Oil & Natural Gas Liquids (b/d)        2,552        1,949          982
      Total Equivalents (boed @ 6:1)      3,738        3,428        2,411
    Natural Gas Price ($/mcf)            $    7.17    $    6.83    $    9.43
    Average Oil and Liquids
     Price ($/bbl)                       $   62.17    $   66.80    $   58.89
    Weighted Average Price ($/boe)       $   56.10    $   55.66    $   57.52
    Net Back ($/boe)                     $   40.83    $   40.04    $   38.11
    Capital Expenditures (000's)         $  25,220    $ 101,173    $ 108,653
    Disposition (Proceeds) (000's)            ($39)    ($18,252)    ($19,400)
    Drilling (Gross (Net) Wells)
      Oil                                 25 (10.8)    71 (30.0)    30 (13.7)
      Gas                                   0 (0.0)      6 (2.2)     25 (9.2)
      Standing & Service                    1 (0.5)      7 (4.0)     12 (9.6)
      Dry & Abandoned                       0 (0.0)      6 (4.4)      5 (4.5)
                                         ----------   ----------   ----------
      Total                               26 (11.3)    90 (40.6)    72 (37.0)
    Success Rate                              100%          93%          93%
    Undeveloped Land
     (Gross/Net Acres) (000's)                          366/208      342/190
    Proved Reserves (mboe - 6:1)(3)                       7,509        4,860
    Probable Reserves (mboe - 6:1)(3)                     5,201        4,419
                                                      ----------   ----------
    Total Proved plus Probable
     (mboe - 6:1)(3)                                     12,710        9,279
    Value of Reserves P+P (NPV 10%)
     (millions)(3)                                    $   247.8    $   178.9
    Finding and Development Cost
     (P+P)(4) ($/boe)                                 $   23.35    $   26.03
    Corporate Net Asset Value
     (NPV 5%/NPV 10%)
     ($/diluted share)                              $8.09/$6.63  $6.09/$5.33

    (1) Per share amounts are weighted average shares calculated in
        accordance with generally accepted accounting principles.

    (2) The results of Globex have been included in the consolidated
        financial statements from June 1, 2005. Prior to this date the
        results of Globex have been capitalized in the purchase formula.

    (3) Based on independent evaluations by Sproule Associates at
        December 31, 2006 and by McDaniel & Associates Consultants Ltd. at
        December 31, 2006 and 2005 using forecast prices and costs before
        income tax.

    (4) Finding and development costs are calculated including the change in
        future development costs.

    Innova generated funds flow from operations for Q4-2006 of $12.0 million
($0.27 per basic and diluted share) bringing the year-to-date total to
$43.6 million ($1.06 per basic and $1.03 per diluted share). The 2006 funds
flow figure represents a 46% increase over the $29.8 million ($0.91 per basic
and $0.88 per diluted share) generated for 2005. The increase is primarily the
result of substantially increased production rates and higher net backs.
    During the quarter ended December 31, 2006, the Company produced oil and
natural gas liquids at 2,552 bbl/d and natural gas at an average rate of
7.1 mmcf/d. On an oil equivalency basis, the average production during the
quarter was 3,738 boed. For all of 2006, Innova's oil and liquids production
averaged 1,949 boed and natural gas production averaged 8.9 mmcf/d for an oil
equivalent average volume of 3,428 boed compared to 2,411 boed for 2005, a 42%
increase. The Company's December 2006 production rate averaged 3,963 boed.
    Net income amounted to $5.3 million ($0.13 per share basic share and
$0.12 per diluted share) for the year ended December 31, 2006 compared to
$4.0 million for the year ended December 31, 2005 ($0.12 per share basic and
diluted) an increase of $1.3 million.
    Net income in 2006 increased compared to the full year in 2005 due to
higher sales volumes, higher funds flow from operations and a future income
tax reduction, which was offset by higher unit depletion. Depletion in 2006
was $30.68 per boe compared to $25.70 per boe in 2005, an increase of 19%. The
Company's depletion costs were impacted by a significant decrease in proved
reserves based on an interim evaluation of its British Columbia natural gas
play. The decrease was related to higher than expected production declines
from a number of wells producing from the Gething zone in the area. During
Q4-2006, the Company experienced a significant increase in proved reserves on
the Saskatchewan Bakken play. (Refer to Reserves below)
    Gross capital expenditures for the three months ended December 31, 2006
totaled $25.2 million bringing the 2006 total to $101.2 million (2005 -
$108.7 million). Property disposition proceeds in the amount of $18.3 million
have been deducted to arrive at net capital expenditures of $82.9 million for
the year ended December 31, 2006. Capital expenditures during 2006 were funded
by cash flow from operations, new equity, working capital and bank debt. At
December 31, 2006, the Company had a working capital deficit of $38.5 million
(including bank debt of $23.1 million) compared to a working capital
deficiency of $25.4 million at December 31, 2005. The Company increased its
credit facility to $42.2 million during 2006.
    In Q4-2006, Innova drilled 26 (11.3 net) wells resulting in 25 (10.8 net)
new oil wells, 1 (0.5 net) standing well for a success rate of 100%. For the
year ended December 31, 2006, the Company drilled a record number of wells,
drilling 90 (40.6 net) wells with a 93% success rate. This compares to 72
(37.0 net) (93% success) wells for the year ended December 31, 2005.
    In southeast Saskatchewan, Innova drilled 72 (30.8 net) wells resulting
in 70 (29.8 net) oil wells, and 2 (1.0 net) water disposal wells. The Bakken
play represented the majority of this drilling with sixty three new oil wells
drilled in 2006, with 100% success, including twenty four in Q4-2006. Average
first year productivity for these producing oil wells is estimated to be
approximately 65 boed per well.
    The Company continues to grow its land base, which now stands at 366,000
gross undeveloped acres (208,000 net), with an average working interest of
57%. Innova's two core plays in Saskatchewan and British Columbia constitute
34% (71,500 net acres) and 30% (63,800 net acres) of Innova's undeveloped land
respectively. Innova has budgeted to drill 67 (32 net) wells to be drilled on
its controlled lands in 2007 and has a 2007 capital budget of $72.8 million.
The Company's third party evaluator has assigned a value of $75.3 million to
Innova's unproven acreage at December 31, 2006. This represents an increase of
48% over the prior year valuation of $50.9 million.


    During 2006, Innova increased total proved and probable reserves by 37%
to 12,710 mboe from 9,279 mboe at December 31, 2005 based on forecast prices
and costs. The composition of reserves at December 31, 2006 consists of 70%
light oil, 23% natural gas and 7% natural gas liquids. At December 31, 2005,
reserves consisted of 55% natural gas, 40% light oil and 5% natural gas
    In this press release, "Gross Interest" reserves (being working interest
reserves plus royalty interest reserves before deduction of royalty burdens
payable) are disclosed. The following table summarizes year end proved and
probable reserves for the gross interest case under forecast pricing:

    Summary of Oil and Natural Gas
    Gross and Royalty Interest Reserves
    Forecast Prices and Costs

                                     December 31, 2006                 2005

                                              Natural Gas   Total      Total
                          Natural    Light      Liquids    (mboe -    (mboe -
    Reserves Category    Gas(mmcf)  Oil(mbbl)    (mbbl)      6:1)       6:1)
      Developed Producing  6,621      2,828        183      4,114      3,234
      Non-Producing          824         99         57        294        264
      Undeveloped          1,742      2,494        316      3,101      1,362
    Total Proved           9,187      5,421        556      7,509      4,860
    Probable               7,771      3,512        394      5,201      4,419
    Total Proved Plus
     Probable             16,958      8,933        951     12,710      9,279

    During 2006, Innova had proved plus probable reserve additions of
approximately 5.4 mmboe, replacing production by 434%. At December 31, 2006,
Innova's total proved gross interest reserves were 7.5 mmboe, an increase of
55% compared to 4.9 mmboe at December 31, 2005.
    The reconciliation of proved plus probable reserves from December 31,
2005 to December 31, 2006 is as follows:

    Factor                         Light and   Natural   Natural Gas
                                  Medium Oil      Gas      Liquids   Combined
                                      (Mbbl)    (MMcf)      (Mbbl)     (Mboe)
    Reserves @ Dec 31, 2005        3,661     31,010        451      9,280
    Extensions & Discoveries          5,844      3,206        640      7,019
    Technical Revisions(1)              599    (12,927)       (79)    (1,635)
    Dispositions(2)                    (500)    (1,061)       (23)      (703)
    Production                         (670)    (3,269)       (39)    (1,251)
    Reserves @ Dec 31, 2006        8,933     16,959        951     12,710

    (1) The positive technical revisions for oil are primarily due to
        increased oil reserves related to performance for Bakken wells in
        southeast Saskatchewan. The negative technical revisions for natural
        gas and natural gas liquids are primarily due to reduced reserve
        assignments related to performance for wells producing from the
        Gething zone in northeast British Columbia.
    (2) The dispositions are from the sale of non-core minor interest
        properties in Alberta and Saskatchewan.


    During 2006, the Company added proved plus probable reserves at a finding
and development (F & D) cost of $18.76/boe excluding the change in future
capital and $23.35/boe including the change in future capital. The increase in
future capital required to bring proved plus probable reserves on production
is estimated to be $24.7 million. These amounts have been calculated in
accordance with the requirements of National Instrument 51-101. Included in
both of these F & D costs are amounts allocated for undeveloped land
($1.72/boe) and seismic on undeveloped land ($1.24/ boe).


    The forecast prices used in the reserve reports were Sproule Associates'
("Sproule") Forecast Prices as at December 31, 2006. The constant prices used
were Sproule's Constant Price Schedules as at December 31, 2006. The increase
in future net revenue is primarily the result of increased volumes related to
new drilling and increased forecast product prices compared to the prior year.
    The estimated future net revenues are presented before deducting future
estimated site restoration costs and are reduced for: estimated future
abandonment costs, the Saskatchewan Capital Tax Surcharge and estimated future
capital for future development associated with non-producing, undeveloped and
probable additional reserves.
    The Company's Statement of Reserves Data and Other Oil and Gas
Information as required under NI 51-101, including the presentation of oil and
natural gas net interest reserves and future net revenue after income taxes,
both prepared using both forecast prices and costs and constant prices and
costs will be included in the Company's Annual Information Form which will be
filed on SEDAR before March 31, 2007.

    Summary of Net Present Values of Future Net Revenue
    Forecast Prices and Costs
    Before Income Taxes, discounted at (%/year)

                                 December 31, 2006         December 31, 2005
    Reserves Category         0%         5%        10%         0%        10%
      Developed Producing    157        130        113        109         89
      Non-Producing            5          3          2          6          5
      Undeveloped             87         62         45         24         15
    Total Proved             249        195        160        139        109
    Probable                 196        123         88        117         70
    Total Proved Plus
     Probable                445        318        248        256        179

    The net present value before tax of the future cash flow from these
reserves at a 10% discount (based on forecast prices and costs) increased by
39% to $248 million compared to $179 million at the end of 2005.


    Innova's reserve life index ("RLI") based on fourth quarter annualized
production at forecast pricing has increased in 2006 compared to 2005 for both
proved and proved plus probable gross interest reserves. The RLI is calculated
by dividing reserves as at the effective date of the report (December 31, 2006
and December 31, 2005) by the production during the applicable period. The RLI
represents a measure of the amount of time to produce the remaining reserves
at the annualized production rate for the most recently completed period.

                                       2006                     2005
    Reserve Life Index                   Proved Plus              Proved Plus
     (Forecast Pricing)         Proved     Probable      Proved     Probable
    Twelve Month Average
     Production (years)           6.0         10.2          5.5         10.5

    Annualized Fourth Quarter
     Production (years)           5.5          9.2          4.3          8.2


    ($ millions)                   NPV 5% Before            NPV 10% Before
                                     Income Tax                Income Tax
                                 2006         2005         2006         2005
    Reserves - Proved plus
     Probable                   317.3        210.7        247.8        178.9
    Net undeveloped land         75.3         50.9         75.3         50.9
    Seismic                      15.7          9.1         15.7          9.1
    Other assets                  0.5          0.5          0.5          0.5
    Working capital (deficit)   (38.5)       (25.2)       (38.5)       (25.2)
    Proceeds from stock options  14.8         11.1         14.8         11.1
    Estimated net asset value   385.1        257.1        315.6        225.3

    Common shares (000's)      44,315       39,321       44,315       39,321
    Stock options (000's)       3,307        2,918        3,307        2,918
    Diluted shares             47,622       42,239       47,622       42,239
    Net asset value per
     diluted share ($/share)     8.09         6.09         6.63         5.33


    Innova is optimistic about its future prospects and the environment in
which it operates. The Company has been successful in growing its production
and land base since its formation as a private Company with no production in
November 2000 and is expected to continue with future growth through
development of its core assets and new exploration on the Company's inventory
of geological prospects. Innova will continue to examine potential business
combinations and acquisitions where the Company may utilize its financial
strength to achieve beneficial and accretive outcomes. Innova will continue to
review and rationalize its operations with a view to disposing of non-core,
minor interest properties. Currently, Innova's producing properties are
located in southeast Saskatchewan, northeast British Columbia, and southern
and west central Alberta.
    In February 2007, Innova released its 2007 capital budget and guidance
and the Company anticipates that 2007 average production will be approximately
3,800 to 4,100 boed, approximately 75% weighted toward light oil. Current
production is approximately 4,000 to 4,100 boed. Innova believes world and
domestic market supply and demand factors, combined with political instability
in major oil producing countries will result in continued strong prices for
crude oil and natural gas during 2007.
    In 2007, the Company anticipates spending up to $72.8 million on oil and
gas exploration and development activities. These activities will be primarily
focused on continuing the Company's successful development of properties in
southeast Saskatchewan drilling horizontal wells in search of light oil from
the Bakken formation.
    Innova's business plan is to explore for, develop and produce
conventional light oil and natural gas reserves in western Canada. The
Company's capital is currently employed approximately 85% to light oil
exploration and approximately 15% to natural gas exploration targets. A
corporate objective is, where possible, to increase working interests in core
areas and to operate a greater percentage of the Company's producing
properties. In addition, Innova will continue to acquire undeveloped acreage
in an effort to expand the core activity areas and to provide further drilling
opportunities for 2007 and beyond. A prime corporate objective is to maintain
a strong financial position.


    Mr. Kevin J. Gibson, founder, President and Chief Executive Officer of
Innova, has announced his retirement effective after the Company's Annual and
Special Meeting of the shareholders on May 11, 2007. The board of directors
has commenced a search for Mr. Gibson's replacement. The board of directors of
the Company wishes to express their thanks and appreciation to Mr. Gibson for
his years of hard work, dedication and successful guidance of Innova.
    Mr. Daryl Fridhandler, Chairman of the board of directors, Mr. Kevin
Gibson and Mr. Edward Sampson have announced their intention to retire and not
stand for re-election to the board of directors. Messers George de Boon,
Robert Hobbs, Gabor Jellinek and Charles Vickers have agreed to stand for
re-election to Innova's board. It is anticipated that two individuals
representing the Company's largest shareholder group, the Sputnik Group
Limited, will be nominated to the board of directors of Innova Exploration
Ltd. The Sputnik Group Limited owns or controls approximately 19.7% of the
outstanding shares of the Company.
    At December 31, 2006, the Company had 44,315,277 common shares
outstanding and 3,306,600 options outstanding at an average exercise price of
$4.47. At March 22, 2007, the Company had 44,373,496 common shares outstanding
and 3,064,800 options outstanding at an average exercise price of $4.47.

    Innova Exploration Ltd. is a publicly traded Calgary, Alberta based
junior oil and natural gas exploration and production company with operations
concentrated in core areas in southeast Saskatchewan, northeast British
Columbia and southern and west central Alberta.


    This press release may contain forward-looking statements including
expectations of future production, cash 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 gas industry (e.g., 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 reserve estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
commodity price, price and exchange rate fluctuation and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. Additional
information on these and other factors that could affect Innova's operations
or financial results are included in Innova's reports on file with Canadian
securities regulatory authorities.
    Production information is commonly reported in units of barrels of oil
equivalent or boe. A boe conversion ratio of six thousand cubic feet per
barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based upon
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency for the individual products at the
wellhead. Such disclosure of boe's may be misleading, particularly if used in
    For further information, the full 2006 Consolidated Financial Statements,
Management's Discussion and Analysis and Annual Information Form will be
posted on the Company's website: or, alternatively


For further information:

For further information: Kevin J. Gibson, President & CEO, Innova
Exploration Ltd., Telephone: (403) 699-8475; Kelly D. Kerr, Vice-President,
Finance & CFO, Innova Exploration Ltd., Telephone: (403) 699-8484

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