Kereco Energy Ltd. - Impact of Alberta New Royalty Framework

    (TSX: KCO)

    CALGARY, Oct. 31 /CNW/ - On October 25, 2007, the Government of Alberta
released the core of its proposed New Royalty Framework ("NRF") and has since,
almost daily, provided further clarification of important components that the
core of the NRF did not specifically address. The NRF was the government's
response to a report commissioned by them and issued September 18, 2007 by the
Alberta Royalty Review Panel ("ARRP"). The intended goal of the ARRP report
was to communicate the results of their recent review of the province's
royalty system, wherein they attempted to conclude whether Albertans were
receiving their "Fair Share" from the resources being explored for, and
developed, by the oil and gas industry.
    Management's, as well as GLJ Petroleum Consultants' ("GLJ"), assessment
of the impact of the proposed changes to the royalties in Alberta is based
upon the publicly released information to date and the actual impact will be
determined based on the actual legislation enacted as well as production
rates, drilling depths, commodity prices, product mix and the percentage of
production from Alberta after January 1, 2009.
    We have had our August 1, 2007 reserves, as evaluated by GLJ, updated to
determine the impact on our reserve values. As a result of that re-run, the
net present value of our reserves using a 10% discounted, before tax, analysis
is estimated to decrease less than 5% from the $536 million that we had
previously communicated on September 4, 2007, prior to the release of either
the NRF or ARRP report.
    Based on the information we have to date regarding the impact of NRF on
future cash flow, we believe that, solely as a result of the changes proposed
in the NRF, that our estimated cash flow in 2009 will be negatively impaired
by less than 5%.
    The impact to cash flow and reserve values communicated above is an
evaluation of the future of Kereco from the perspective of what is currently
encapsulated in our reserve report. Kereco's future activities will depend on
the economic impact that future prospects have on Kereco, our ability to
access those prospects and our inextricably linked ability to attract
sufficient capital to capitalize on those opportunities - all of which have
been made more uncertain with the release of the NRF.
    We will continue to monitor the effect of the NRF as it moves from a
government proposal (its current state) to ultimately being passed as
legislation, and report back further if necessary.


    Certain information regarding Kereco Energy Ltd. in this news release
including management's assessment of the effect on Kereco of royalty rate
changes in Alberta, future plans and operations, number, type and timing of
wells to be drilled, tested and completed, timing of tie in of wells and
commencement of production from new wells and production therefrom, the plan
and development of certain prospects, and production estimates may constitute
forward-looking statements under applicable securities laws and necessarily
involve risks including, without limitation, risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks, changes
in royalty and tax legislation, competition from other producers, inability to
retain drilling rigs and other services, capital expenditure costs, including
drilling, completion and facilities costs, unexpected decline rates in wells,
surface conditions may delay projects and/or operations, wells not performing
as expected, delays resulting from or inability to obtain required regulatory
approvals and ability to access sufficient capital from internal and external
sources. As a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information on these
and other factors that could effect Kereco's operations and financial results
are included in reports on file with Canadian securities regulatory
authorities and may be accessed through the SEDAR website (
Furthermore, the forward-looking statements contained in this news release are
made as at the date of this news release and Kereco does not undertake any
obligation to update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events or
otherwise, except as may be required by applicable securities laws.
    In conformity with Canadian Securities Administrators National Instrument
51-101, natural gas volumes have been converted to equivalent barrels of oil
("boe") using a conversion ratio of six thousand cubic feet ("mcf") to one
boe. This ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Readers are cautioned that boes may be misleading, particularly if
used in isolation.

    %SEDAR: 00021661E

For further information:

For further information: Kereco Energy Ltd., Grant B. Fagerheim,
President and Chief Executive Officer, Phone (403) 290-3401

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