Innova Generates Record Six Month Production Volumes, Funds Flow & Earnings



    TSX Symbol "IXL"

    CALGARY, Aug. 15 /CNW/ - Innova Exploration Ltd. is pleased to announce
its results for the three and six months ended June 30, 2007. In the first six
months of 2007 Innova:

    
    -   Drilled 39 (15.6 net) wells with a success rate of 95%
    -   Initiated a pilot program for an improved Bakken well fracturing
        technique
    -   Increased our bank credit facility borrowing limit to $60 million,
        which will allow for financing of our $73 million capital program
        without additional equity financing and without exceeding a debt to
        cash flow ratio of one to one
    -   Increased second quarter funds flow from operations to $13.1 million
        which is 29% greater than the second quarter in 2006
    -   Increased six month funds flow from operations to $26.4 million which
        is 32% greater than the same period 2006

    -------------------------------------------------------------------------
                              Three        Three          Six          Six
    Financial and Operating  Months       Months       Months       Months
     Highlights:              Ended        Ended        Ended        Ended
    (Unaudited)            June 30/07   June 30/06   June 30/07   June 30/06
    -------------------------------------------------------------------------
    Oil and Natural Gas
     Sales (000's)         $   20,636   $   15,967   $   40,520   $   32,379
    Funds Flow From
     Operations (000's)    $   13,080   $   10,154   $   26,356   $   19,916
      Per Basic/Diluted
       Share(1)           $0.29/$0.29  $0.26/$0.25  $0.59/$0.58  $0.51/$0.49

    Net Earnings (000's)   $    2,608   $    3,402   $    5,175   $    3,582
      Per Basic/Diluted
       Share(1)           $0.06/$0.06  $0.09/$0.08  $0.12/$0.11  $0.09/$0.09
    -------------------------------------------------------------------------
    Average Production Rate
      Natural Gas (mmcf/d)        8.0          9.5          7.6         10.3
      Oil & Natural Gas
       Liquids (b/d)            2,381        1,630        2,465        1,598
      Total Equivalents
       (boed at 6:1)            3,707        3,212        3,727        3,316
    -------------------------------------------------------------------------
    Oil Weighting                 64%          51%          66%          48%
    -------------------------------------------------------------------------
    Natural Gas
     Price ($/mcf)         $     7.47   $     6.06   $     7.58   $     7.06
    Average Oil
     Price ($/bbl)         $    71.46   $    72.76   $    68.60   $    66.74
    Weighted Average
     Price ($/boe)         $    61.17   $    54.63   $    60.06   $    53.95
    -------------------------------------------------------------------------
    Field Netback ($/boe)  $    44.68   $    41.34   $    44.18   $    38.25
    -------------------------------------------------------------------------
    Capital Expenditures
     (000's)               $   10,752   $   18,472   $   24,049   $   50,429
    Disposition (Proceeds)
     Costs (000's)               ($54)     ($8,774)  $      438      ($8,776)
    -------------------------------------------------------------------------
    Working Capital
     Deficiency (000's)             -            -     ($36,408)    ($46,916)
    -------------------------------------------------------------------------
    Drilling (Gross (Net)
     Wells)
      Oil                      15(5.9)       9(3.7)     35(13.9)     29(12.2)
      Gas                           -        3(0.9)       2(0.9)       4(1.4)
      Service                       -    (2(1.0))(2)          -        6(4.5)
      Dry & Abandoned               -        2(0.6)       2(0.8)       5(2.9)
                           -----------  -----------  -----------  -----------
      Total                    15(5.9)      12(4.2)     39(15.6)     44(21.0)
    -------------------------------------------------------------------------
    Success Rate                 100%          83%          95%          89%
    -------------------------------------------------------------------------
    Undev Land (Gross/Net
     Acres) (000's)                 -            -      362/205      363/210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    FINANCIAL

    In spite of an extended spring breakup during April and May 2007, Innova
was able to achieve excellent returns for shareholders. Funds flow from
operations for the quarter was $0.29 per share, which was a 12% improvement
over the second quarter in 2006. For the year to date funds flow per share was
$0.59, which was a 16% improvement over the same period in 2006.
    Due to Innova's focus on high quality oil assets in Saskatchewan, the
Company was able to generate Company wide netbacks of $44.68/boe ($54.15/boe
for Saskatchewan alone). This is one of the top netbacks in the industry for
the periods reported thus far in 2007. The Company's high netbacks allow for a
higher level of reinvestment and gives Innova the option to grow production
and reserves without additional equity financing.
    Net income for Q2-2007 was $2.6 million ($0.06 per basic and diluted
share) compared to net income of $3.4 million ($0.09 per basic and $0.08 per
diluted share) for the same three month period in 2006. The reason for the
unfavorable comparison to 2006 is that the income tax recovery booked on
future income tax rate reductions was $2.1 million in 2006 and only
$0.3 million in 2007. On a before tax basis the Company had income of
$3.4 million in Q2-2007 compared to $1.4 million in Q2-2006 - a 146% increase.
    Innova's balance sheet is one of the strongest of the junior peer group.
The Company is able to finance its $73 million 2007 capital program internally
using the recently increased credit facility limit of $60 million, and funds
flow from operations. Throughout 2007 Innova expects that its debt to funds
flow ratio will remain less than one to one.
    Innova has $169 million of tax pools available, which should allow funds
flow to be fully reinvested into the Company's operations for the next several
years.

    OPERATIONS

    Gross capital expenditures for the three months ended June 30, 2007
totaled $10.8 million (Q2-2006 - $18.5 million). Capital expenditures during
the quarter were funded by cash flow from operations and working capital. At
June 30, 2007 the Company had a working capital deficiency of $36.4 million
including bank debt of $28.9 million. The unused portion of Innova's credit
facility is $31.1 million.
    In Q2-2007, Innova drilled 15 (5.9 net) successful oil wells on the
Bakken play with 100% success. For the six months ended June 30, 2007 the
Company has drilled 39 (15.6 net) wells with a 95% success rate.
    During the quarter ended June 30, 2007 the Company produced 3,707 boed
(36% natural gas), bringing the six month average to 3,727 boed (34% natural
gas). This year's quarterly and six month production represents a 15% and 12%
increase respectively over the same periods in 2006.

    Saskatchewan

    Drilling on the southeast Saskatchewan Bakken play continues to be the
largest component of Innova's drilling with thirty five wells drilled year to
date at 95% success. Our plan is to drill a further fifty two Bakken wells in
2007, bringing the total for the year to 87 (34.8 net) Bakken wells. The
Company and its partners plan to have between four and five rigs deployed in
the area for the balance of the year.
    Technology for fracture stimulating Bakken wells is evolving as more
competitors join into exploring the Bakken play. In July and August, Innova
and its partners are evaluating the Packers Plus frac technique which was
recently pioneered on the Bakken, with good results. This technique has the
potential to increase initial flow rates and increase the recoverability on
more than 850 potential future frac operations. Our early experience with
these fracs has shown that initial well productivity was substantially
increased and we have expanded the evaluation program to include a further
five wells, bringing the total to eleven. The Company had an inventory of 57
Bakken wells which are available to be fraced at June 30, plus the 52 wells we
plan on drilling during the balance of the year.
    The results of our Bakken water flood pilot project should be available
by Q4-2007. Water flooding has the potential to significantly increase
percentage of oil recovered from the Bakken play.
    Enbridge pipeline apportionment continues to be an issue for producers in
southeast Saskatchewan. The Company is monitoring the situation and has the
ability to increase or decrease the number of Bakken well fracs to ensure that
shipping opportunities are exploited and to ensure that not too much
productive capacity is shut in. The Enbridge pipeline expansion is scheduled
to be completed in the spring of 2008.

    British Columbia

    The Company drilled a successful natural gas well at Cameron River - the
well tested at rates between 1.0 and 1.8 mmcfd over a period of ten days. The
Company plans on drilling two follow up wells to further explore the
prospectivity of a large seismic anomaly on this portion of its northeast
British Columbia lands. We are encouraged by this result because it is the
Company's first well drilled on the Cameron block which was purchased in the
fall of 2005 and evaluated with 3D seismic during the spring/summer of 2006.
The timing of drilling these wells is contingent on partner participation and
on the recovery of natural gas prices.

    Alberta

    In Q1-2007, Innova drilled a successful natural gas well at Windfall -
which is currently producing at 4.6 mmcfd (1.8 mmcfd net). The Company plans
to drill two follow up wells at Windfall and two exploration wells on other
properties before the end of the year.

    New Brunswick

    Innova owns a large land block adjacent to the McCully gas field.
Innova's lease has seven years remaining before expiry. Corridor Resources
(the operator of the McCully field and the Company's partner) has announced a
number of successful wells and has recently brought its newly constructed gas
gathering and processing infrastructure on line at a rate of 25 mmcfd. The
Company is monitoring the results on the McCully field, but does not plan on
drilling a well this year.

    OUTLOOK

    Innova's business plan is to explore for, develop and produce light oil
and natural gas reserves in western Canada. Innova's strategy has shifted to
maximize oil production on its Bakken light oil play in southeast Saskatchewan
in an effort to take advantage of the currently high oil prices and at the
same time to prepare our prospects for a stronger natural gas price market.
Our capital program will be employed approximately 86% to Bakken light oil
exploration targets in Saskatchewan and approximately 14% to natural gas
exploration in Alberta and British Columbia. Innova is in an enviable position
to have a light oil play and a sweet natural gas play both with large
undeveloped land positions. Innova has the ability to maximize returns to
shareholders by allocating capital to projects with the highest netback
returns and success rates.
    Innova has developed a balanced portfolio of oil and gas prospects, with
core area activities in southeastern Saskatchewan and northeastern British
Columbia. Innova has a portfolio of producing properties in all three western
provinces that generate substantial funds flow for reinvestment in the
Company's major project areas. As a result, Innova expects Q4-2007 production
to be weighted 74% to light oil and is positioned to expand gas production
timed to the expected stronger market for gas prices late in 2007 or early
2008.
    The mid-point of the 2007 production guidance range of 3,800 - 4,100 boed
provides a year-over-year increase of 15% compared to 3,428 boed achieved in
2006 for average production. The range of production guidance is related to
the uncertainty surrounding the impact of pipeline apportionment in southeast
Saskatchewan by Enbridge Inc. as disclosed previously. The Company expects
that the Enbridge apportionment will continue until the spring of 2008. Innova
has the ability to accelerate production through increasing the number of
Bakken frac operations should the Enbridge apportionment prove to be less
restrictive than anticipated.

    CORPORATE

    On June 28, 2007, the Corporation held its annual meeting and the
shareholders elected a new board of directors. In addition to the re-elected
directors (George deBoon, Robert Hobbs, Gabor Jellinek, and Charles Vickers)
two directors representing the Company's largest shareholders (Oliver Grace
and Boris Jordan) were elected. The board has elected Robert Hobbs as its
Chairman and appointed board standing committees as follows:

    
    Corporate Governance
     and Human
     Resources:        Charles Vickers (Chair), Oliver Grace, Gabor Jellinek

    Audit:             Robert Hobbs (Chair), George deBoon, Gabor Jellinek

    Reserves:          George deBoon (Chair), Robert Hobbs, Boris Jordan
    

    At June 30, 2007, the Company had 44,656,947 common shares outstanding
and 3,355,433 options outstanding at an average exercise price of $5.04.

    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 southeastern Saskatchewan, central and southern
Alberta and northeastern British Columbia.

    FORWARD LOOKING STATEMENTS

    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.

    For additional information, the full 2006 Annual Report to Shareholders
and Annual Information Form have been posted on the Company's website:
www.innovaexploration.com or, alternatively, can be viewed at www.sedar.com.

    THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
    RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.





For further information:

For further information: Kelly D. Kerr, Vice-President, Finance, Innova
Exploration Ltd., Telephone: (403) 699-8484

Organization Profile

INNOVA EXPLORATION LTD.

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