Pegasus Oil & Gas Inc. Announces Financial and Operating Results for the quarter ended March 31, 2009

    (Stock Symbol "POG.A & POG.B" - TSX Venture Exchange)

    CALGARY, May 26 /CNW/ - Pegasus Oil & Gas Inc. ("Pegasus" or the
"Company") advises today that it has filed its unaudited financial statements
and related management's discussion and analysis ("MD&A") for the quarter
ended March 31, 2009 on and Certain
selected financial and operational information for the three months ended
March 31, 2009 and the three months ended March 31, 2008 comparatives are set
out below and should be read in conjunction with Pegasus' unaudited financial
statements and related MD&A.


                                           Three         Three         Three
                                          months        months        months
                                           ended         ended         ended
                                        March 31,     March 31,  December 31,
                                            2009          2008          2008
    Financial ($000s except per share
    Petroleum and natural gas sales        2,233         3,120         2,575
    Funds generated from operations
     (Note 1)                                228         1,485           488
      Per basic share                       0.01          0.04          0.01
      Per diluted share                     0.01          0.04          0.01
    Cash flows generated from
     operating activities                    221         2,220            49
    Net earnings (loss)                   (1,716)         (391)       (1,377)
      Per basic share                      (0.04)        (0.01)        (0.03)
      Per diluted share                    (0.04)        (0.01)        (0.03)
    Capital expenditures                     674         8,495         2,780
    Working capital (deficiency)         (13,640)        2,609       (13,194)
    Shareholders' equity                  56,549        62,130        61,527
    Shares outstanding
      Class A                             34,566        34,485        34,566
      Class B                              1,012         1,012         1,012
      Options                              2,683         2,850         2,728
    Basic and diluted shares
     (weighted) (Note 2)                  44,686        36,049        44,677

    Average daily production
      Natural gas (mcf/d)                  3,493         3,376         3,161
      Crude oil (bbls/d)                       5             3             5
      NGLs (bbls/d)                          116            84           104
      Barrels of oil equivalent
       (boe/d) (Note 3)                      704           650           635
    Average selling price
      Natural gas ($/mcf)                   5.51          8.14          7.11
      Crude oil ($/bbl)                    32.99         78.04         45.99
      NGLs ($/bbl)                         43.61         77.53         50.02
      BOE ($/bbl)                          35.27         52.72         44.04
    Netback per BOE (6:1) ($)
      Petroleum and natural gas sales      35.27         52.72         44.04
      Royalties                            (6.23)        (7.42)        (9.01)
      Operating costs                     (15.23)       (12.55)       (17.40)
      Transportation costs                 (1.00)        (0.96)        (0.95)
      Operating netback                    12.80         31.80         16.68

    Note 1:   Management uses funds generated from operations (comprised of
              cash flow from operating activities before changes in non-cash
              working capital and abandonment expenditures) to analyze
              operating performance and leverage. Funds generated from
              operations as presented does not have any standardized meaning
              prescribed by Canadian GAAP and therefore it may not be
              comparable with the calculation of similar measures for other
    Note 2:   Class B share conversion: March 31, 2009 @ $1.00/share;
              March 31, 2008 @ $1.68/share; December 31, 2008 @
    Note 3:   References in this report to boe refer to barrel of oil
              equivalent whereby natural gas volumes have been converted at a
              rate of 6 thousand cubic feet of natural gas to 1 barrel of


    During the first quarter of 2009, Pegasus executed on two well operations
in Redland, Alberta fulfilling the farm-in agreement for that area. No other
major capital expenditures were undertaken during the quarter. In total,
approximately $674,000 was spent on capital expenditures during the period.
    At Redland, the Pekisko carbonate formation was completed and flow tested
on a standing wellbore as part of the farm-in agreement. The well flow tested
at gross rates of 800 mcf/d (50% WI) upon completion. The well was
subsequently tied-in and placed on production in May 2009. Current net
production from the well is approximately 50 boe/d.
    The second wellbore operation in Redland was the recompletion of an
existing well for Pekisko oil. After completion, the well flow tested at gross
rates of 15-25 boe/d (100% WI). The well is currently standing as a potential
oil producer and capital estimates of $150,000 are required to equip and
tie-in this well to existing infrastructure in the area.
    The Company has re-negotiated the Strathmore farm-in agreement and the
two remaining commitment wells have been waived as part of the original
agreement. Further capital expenditures are not anticipated in the Strathmore
area unless commodity prices recover and economics substantiate further
capital deployment.
    Sales volumes for the first quarter averaged 704 boe/d representing an
11% increase over the fourth quarter of 2008. First quarter volumes included
2008 adjustments of approximately 38 boe/d from the Crossfield property. In
2009, the Balzac gas plant operator re-ran the gas plant volume allocations
for the November 2008 to December 2008 period. A gas plant audit has also been
completed and Pegasus is currently awaiting the final report to determine if
further adjustments are necessary. At this time, Pegasus does not know what,
if any further adjustments will be made to its prior period gas sales volumes.


    The bank has agreed to extend the normal annual review date of the
Company's credit facility to July 1, 2009 but it is likely to be reduced in
light of current commodity prices. In this regard Pegasus has eliminated any
further capital commitments and has decreased its planned 2009 capital
expenditures program to minimum capital commitments. With the elimination of
the last two Pekisko commitment wells, Pegasus does not currently plan any
further capital expenditures at Strathmore, Alberta. Additional capital
expenditures will be evaluated if, and when commodity prices improve. During
this period of low commodity pricing and limited access to equity capital, the
Company is reviewing and considering all strategic alternatives and options.


    Pegasus' Annual Meeting is scheduled for 10:00 am on Friday, May 29, 2009
in the Viking Room at the Calgary Petroleum Club, 319 5th Avenue SW, Calgary,
    As referred to above, to view Pegasus' audited financial statements and
related MD&A for the three months ended March 31, 2009 please visit our web
site at or To the extent investors do not
have access to the internet, copies of the audited financials and related MD&A
can be obtained on request without charge by contacting Pegasus at
(403)521-5282 or at 101 10th Street NW Calgary, Alberta, T2N1V4.
    The Company currently has 34.566 million Class A and 1.012 million Class
B Shares outstanding.

    Forward-looking statements - This document contains forward-looking
statements. More particularly, this document contains statements concerning
the Company's planned exploration and development activities, planned capital
expenditures and anticipated rates of production.
    The forward-looking statements are based on certain key expectations and
assumptions made by Pegasus, including expectations and assumptions concerning
prevailing commodity prices and exchange rates, availability and cost of
labour and services, the timing of receipt of regulatory approvals, the
performance of existing wells, the success obtained in drilling new wells, the
performance of new wells and the sufficiency of budgeted capital expenditures
in carrying out the Company's planned activities.
    Although Pegasus believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because Pegasus can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and gas
industry in general (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 and exchange rate fluctuations and uncertainties resulting
from potential delays or changes in plans with respect to exploration or
development projects or capital expenditures. These risks are set out in more
detail in the Company's Annual Information Form which has been filed on SEDAR
and can be accessed at
    The forward-looking statements contained in this press release are made
as of the date hereof and Pegasus undertakes no obligation to update publicly
or revise any forward-looking statements or information, whether as a result
of new information, future events or otherwise, unless so required by
applicable securities laws.

    Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. Boe's may be misleading, particularly if used in
isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas
is based on an energy equivalency conversion method primarily applicable at
the burner.

    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release."

    %SEDAR: 00005637E

For further information:

For further information: Patrick Mills, President and Chief Executive
Officer, (403) 521-6307; Darcy Anderson, Chief Financial Officer, (403)
521-6302; Kevin Angus, Executive Vice President, (403) 521-6306

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Pegasus Oil & Gas Inc.

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