Kootenay Energy Inc. Announces Second Quarter Results

    CALGARY, Aug. 14 /CNW/ - Kootenay Energy Inc ("Kootenay") TSX Venture:
KTY is pleased to report on its unaudited interim financial and operating
results for the six months ended June 30, 2008.
    The Corporation participated in the drilling of one well in the second
quarter. The 10% working interest oil well drilled in May 2008 was brought on
production prior to the end of the quarter at an initial rate of 160 bbls/d
(net 16 bbls/d).
    Gross revenues were $3,347,000 for the period, up 15% over first quarter
of 2008 and up 47% over the same period last year. The increase in oil sales
revenues is due to the increases in oil prices. Hedging losses for the quarter
were $299,485 or $9.48 per barrel of oil.
    Production averaged 351 barrels of oil equivalent per day over the three
months ended June 30, 2008, a decrease of 11% over the same period in 2007. A
decrease in natural gas production is a result in part to shutting in non
operated production for facility reasons. The disruption of the production is
temporary and resume early in the third quarter increasing Kootenay's
production by 15 - 20 boepd. Temporary production losses in certain fields
were a result of scheduled annual plant and facility turnaround and
maintenance programs. The Corporation exited the quarter at 375 boe/d.
    Operating costs for the three and six month period ended June 30, 2008
were $674,667 and $1,485,039. This includes $104,000 in operating costs that
are carried over from non operated operations in the last quarter of 2007.
Also included in the operating costs were one time charges for environmental
clean up and the conversion of propane powered prime movers to electric prime
movers on pump jacks in the Skaro field. When comparing these costs to the
first half in 2007, it would appear that the costs have increased dramatically
however, operating costs were understated for the first half of 2007. These
were a result of one time corrections in underestimating the operating costs
relating to prior periods of non-operated properties acquired in December of
2006. Actual billings for these properties arrived in the second half of 2007.
    Field netbacks for the second quarter were $67.61 per boe up 72% from the
same period last year. The six month period ended June 30 had average netbacks
of $54.90 per boe up 40% from the same period in 2007.
    On July 16, 2008 Kootenay announced that it had entered into a
pre-acquisition agreement with Golden Oil Corporation, a public corporation
located in Seoul Korea, to make a cash offer to the shareholders of Kootenay
as soon as is practicable, but in any event not later than August 5, 2008.
    On August 5, 2008 Kootenay announced that a Take-over Bid Circular of a
subsidiary of Golden Oil Corporation and a Directors' Circular of Kootenay had
been mailed to Kootenay Shareholders in connection with Golden Oil Corporation
previously announced cash offer for the common shares of Kootenay.
    The offer price is $0.66 Cdn. per common share, representing an
approximate 65% premium to the closing trading price of the common shares of
Kootenay on July 15, 2008, the last trading day on which the common shares
traded prior to the announcement of the offer. The offer expires on September
10, 2008. The board of directors of Kootenay is unanimously recommending that
the shareholders accept the offer.
    Golden Oil Corporation has entered into lock-up agreements with certain
shareholders (including all directors and officers of Kootenay) who hold an
aggregated of 16,025,327 common shares(on a fully diluted basis) representing
approximately 70.1% of the outstanding common shares (71.9% on a diluted basis
(excluding out of the money options and conversion of convertible debentures).
The lockup agreements provide that such shareholders have agreed to tender,
and not withdraw, all of their common shares (including any additional common
shares they may acquire on exercise of in the money options) to the offer,
subject to terms and conditions thereof.
    Holders of the convertible debenture have agreed in writing with Golden
Oil Corporation, among other things, that subject to completion of the Offer
the waive, cancel and surrender all conversion rights under the convertible

    Financial Results ($000s, except per share amounts)

                              Three Months Ended       Six Months Ended
                                   June 30                  June 30
                                2008     2007            2008    2007

    Gross Revenue              3,347    2,339    43%    6,242   4,693    33%

    Sales Volumes
    Crude oil and liquids
     bbls/d                      309      334    -7%      316     321    -2%
    Natural gas mcf/d            248      360   -31%      278     441   -37%
    Average boe/d                351      394   -11%      363     394    -8%

    Product Prices
    Crude oil  $/bbl          116.82    64.39    81%   104.88   66.88    57%
    Natural gas liquids
     $/boe                    103.81    52.95    96%    63.37   37.23    70%
    Natural gas $/mcf          13.18     7.73    71%    10.57    7.70    37%

    Net back analysis ($/boe)
    Oil and gas revenue        112.2    60.94    84%    98.63   62.57    58%
    Royalties                  23.46    11.39   106%    21.23   12.21    74%
    Operating Costs            21.13    10.17   108%     22.5   11.16   102%
    Net backs                  67.61    39.38    72%    54.90   39.20    40%

    Per Share
    Income (loss) before
     taxes                       221      (74) -399%      112      12   833%
      Per Share (basic)       $ 0.01   $    -   100%   $ 0.01  $    -   100%
    Funds flow from
     operations                1,430      870    64%    2,276   1,844    23%
      Per Share (basic)       $ 0.06   $ 0.04    50%   $ 0.10  $ 0.08    25%

    Share Data (000s)
    Common Shares
     (weighted average)       22,599   22,402     1%   22,599  22,303     1%
    Options                    2,150    2,210    -3%    2,150   2,210    -3%

    Additional Information
    Interest Expense             189      210   -10%      379     417    -9%
    Depletion, depreciation
     and accretion             1,142      812    41%    2,016   1,604    26%
    Capital expenditures         128      587   -78%    1,858   2,283   -19%
    Total Assets                                       23,524  23,076     2%

    Working capital (deficiency)                      (13,349)(11,718)   14%
    Asset retirement obligation                          1009     872    16%

    The calculations of barrels of oil equivalent ("boe") are based on a
conversion rate of six thousand cubic feet ("mcf") of natural gas to one
barrel of crude oil. Boe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
    The above disclosure contains certain forward-looking statements that
involve substantial known and unknown risks and uncertainties. These
forward-looking statements are subject to numerous risks and uncertainties,
certain of which are beyond the Corporation's control, including: the impact
of general economic conditions in Canada, industry conditions, increased
competition, the lack of available qualified personnel or management,
equipment failures, fluctuations in product prices and in foreign exchange or
interest rates and stock market volatility. The Corporation's actual results,
performance or achievements could differ materially from those expressed in,
or implied by, these forward-looking statements and, accordingly, no
assurances 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 the Corporation will derive there from.


    %SEDAR: 00020600E

For further information:

For further information: Kootenay Energy Inc. - Jack Marsh, President
and Chief Executive Officer, (403) 355-9800

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