NAL Oil & Gas Trust commences production of coalbed methane at Lacombe, Alberta

    CALGARY, March 8 /CNW/ - NAL Oil & Gas Trust ("NAL" or the "Trust") today
announced that it has commenced production from its Horseshoe Canyon coalbed
methane ("CBM") project in the Lacombe area of Central Alberta. These CBM
interests were acquired as part of the purchase of Addison Energy in February
2005 and build on earlier CBM successes by NAL in the Clive (2006) and Nevis
(2005) areas.
    In 2006, NAL drilled 37 wells at Lacombe and Clive and installed gas
processing and pipeline infrastructure. These wells are being completed and
tied-in during the first quarter of 2007. NAL has an average working interest
of 67 percent in these lands and is the operator. Capital costs for drilling
and facilities construction totaled $20.5 million gross ($13 million net),
primarily spent in 2006. Initial production rates for the first wells in the
Horseshoe Canyon / Edmonton Sands averaged 110 to 120 Mcfd/well, consistent
with industry experience in the area.
    The majority of the wells in Lacombe have the opportunity to commingle
production from the Horseshoe Canyon CBM and Edmonton Sands. Several wells are
currently completed in the Edmonton Sands only and will be additionally
completed in the Horseshoe Canyon at a later date when the Edmonton Sands is
further depleted. Collectively with several existing conventional wells in the
area, production rates in the Lacombe/Clive area are expected to be 5.7 MMcfd
gross (3.8 MMcfd net) by the second quarter of 2007.
    The second phase of CBM development at Lacombe in 2007 includes planned
spending of $14.2 million gross ($10 million net) to drill 25 infill
locations, lay gathering lines, and twin the existing compressor. When
completed, this phase of development is projected to add another 2.7 MMcfd
gross (1.8 MMcfd net) production by year-end for a total of 8.4 MMcfd gross
(5.6 MMcfd net) or nearly 1400 boed gross (940 boed net). In 2008 and beyond,
NAL plans to develop the remaining undrilled sections of its current land
position and evaluate the performance of the existing wells to determine
whether or not further downspacing is appropriate.
    Horseshoe Canyon coals are shallow at approximately 700 metres, can be
produced from vertical wells, and do not require dewatering before gas
production commences. Generally, these coals are characterized by a long
reserve life with low decline rates. Wells are typically drilled on closer
spacing than conventional gas wells and they have a very small footprint. In
the Lacombe area, NAL initially drilled 3-4 wells per section, generally along
existing road allowances to minimize disruption to land owners. To make most
efficient use of oilfield services, these wells were drilled, completed and
placed on production in batches.
    NAL's Horseshoe Canyon CBM project began with the acquisition of Addison
Energy in February 2005. The bulk of Addison's assets were in the Garrington
and Westward Ho areas of Central Alberta, immediately adjacent to NAL's
existing Sylvan Lake and Medicine River properties. Also included in the
acquisition were 28 sections of land near the towns of Lacombe, Clive and
Nevis, which were prospective for coalbed methane in the Horseshoe Canyon
    NAL's initial phase of Horseshoe Canyon CBM development took place at
Nevis in 2005 at a cost of $17.2 million gross ($10 million net). It consisted
of 18 wells at Nevis, several of which also produce from the slightly deeper
Belly River formation. The production from these Nevis wells came on-stream at
approximately 170 Mcfd/well gross versus the 130 Mcfd/well gross that was
expected based on Horseshoe Canyon/Belly River production history in the area.
In the first quarter of 2007, combined production from the Nevis area now
totals 5.3 MMcfd gross (3.0 MMcfd net to the Trust).
    NAL forecasts that by year end 2007, total production from the
Lacombe/Clive/Nevis area will be 13.7 MMcfd gross (8.6 MMcfd net).

    NAL Oil & Gas Trust is an open-end investment trust that generates
distributions through the acquisition, development, production and marketing
of oil, natural gas and natural gas liquids. The Trust owns high quality
assets in Alberta, Saskatchewan and Ontario. Trust units trade on the Toronto
Stock Exchange under the symbol "NAE.UN".

    Forward Looking Statements:
    Certain information regarding NAL Oil & Gas Trust (NAL) set out in this
document, including management's assessment of NAL's future plans and
operations, contains forward-looking statements that involve substantial known
and unknown risks and uncertainties. These forward-looking statements are
subject to various risks and uncertainties, some of which are beyond NAL's
control. This includes the impact of general economic conditions, industry
conditions, volatility of commodity prices, imprecision of reserves estimates,
changes in government regulations, environmental risks, competition from other
producers, as well as other external factors affecting the resource industry.
NAL's actual results, performance, or achievement 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 occur, or if any of them do so, what
benefits NAL will derive therefrom.

For further information:

For further information: Gordon Currie, Manager, Investor Relations,
Telephone: (403) 294-3620, Toll Free: (888) 223-8792, Fax: (403) 515-3407,
Email:, Website:

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