Upper Lake Oil and Gas Ltd. announces financial, reserves and operating results for 2007


    CALGARY, March 28 /CNW/ - Upper Lake Oil and Gas Ltd. (TSX:UP) ("Upper
Lake") is pleased to announce its financial, reserves and operating results
for the year ended December 31, 2007.
    Upper Lake also announces today that it has filed on SEDAR its Annual
Information Form for the period ended December 31, 2007, which includes Form
51-101F1: Statement of Reserves Data and Other Oil and Gas Information, Form
51-101F2: Report of Independent Qualified Reserves Evaluator and Form
51-101F3: Report of Management and Directors under National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities. Copies of the filings can
be obtained electronically through SEDAR at www.sedar.com.

    Year-End Financial and Operating Results

    The following table provides a summary of Upper Lake's financial and
operating results for the period from October 12, 2007 to December 31, 2007.
Upper Lake's financial statements and management's discussion and analysis for
the period ended December 31, 2007 have been filed on SEDAR.

    Selected Period Information

    Period ended December 31, 2007
    (000's except per share amounts and production)

    Production - barrels of oil equivalent per day (boe/d) ..........    731

    Revenue ......................................................... $2,811
    Revenue ($/boe) .................................................  48.10

    Funds flow from operations(1) ...................................    924
      $ per share - basic and diluted ...............................   0.04
    Net (loss) ......................................................   (905)
      $ per share - basic and diluted ...............................  (0.04)

    Capital expenditures ............................................  2,431

    Bank debt and working capital deficiency ........................  1,728

    (1) Funds flow from operations is a "Non-GAAP" measure. See "Non GAAP
        Financial Measures".


    -   Achieved average daily production of 731 boe/d for the period
        October 12 to December 31, 2007
    -   Realized funds flow from operations of $924 thousand ($0.04 per
    -   Limited net debt to $1.7 million at December 31, 2007
    -   Achieved a net asset value before tax of $1.19 per basic share (using
        a 10% discount rate)
    -   Drilled two (1.48 net) wells, resulting in one oil well and one dual
        zone gas well.

    Upper Lake's assets consist of exploration plays, producing properties,
related tangibles and undeveloped lands that were acquired by Upper Lake from
Diamond Tree Energy Ltd. on October 12, 2007 pursuant to an arrangement
involving Diamond Tree, Crocotta Energy Inc. and Upper Lake.

    Operations Summary

    At the time of the arrangement with Crocotta, the assets transferred to
Upper Lake were producing approximately 620 boe/d. Upper Lake took steps to
increase production during the period ended December 31, 2007 to average
731 boe/d. Production as at December 31, 2007 was approximately 850 boe/d.
Current production is approximately 900 boe/d.
    Total sales revenue for the period ended December 31, 2007 was
$2.8 million and funds flow from operations for the period was $924 thousand.
Royalties for the period ended December 31, 2007 totaled $624 thousand and
royalties as a percentage of sales averaged 22.2%. Operating expenses for the
period ended December 31, 2007 totaled $694 thousand or $11.89 per boe. A net
loss of $905 thousand was incurred for the period. The depletion, amortization
and accretion provision for the period ended December 31, 2007 was
$1.9 million. According to Canadian GAAP, the depletion rate must reflect a
portion of the full cost pool of the assets coming from Diamond Tree. The
commencement of operations late in the year and one-time start-up costs
affected general and administrative costs.

    Reserves Summary

    Upper Lake's gas reserves, as assessed by GLJ Petroleum Consultants Ltd.
("GLJ") in its report dated effective December 31, 2007 ("the GLJ Report") and
prepared in accordance with National Instrument 51-101 Standards of Disclosure
for Oil and Gas Activities presents the following summary of Upper Lake's
reserves, before the deduction of royalties, using forecast prices and costs.
A full disclosure of Upper Lake's reserves can be found in the Annual
Information Form on SEDAR.

                       Summary of Oil and Gas Reserves
                         (Forecast Prices and Costs)

                       and Medium      Natural     Natural Gas
                           Oil           Gas         Liquids         BOE
    Reserves          Gross   Net   Gross   Net   Gross   Net   Gross   Net
     Category         (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboe) (Mboe)
    ---------------   ------ ------ ------ ------ ------ ------ ------ ------
       Producing         75     58  2,719  2,217    107     82    636    509
       Non-Producing    137    104    605    451     25     18    263    196
      Undeveloped         0      0      0      0      0      0      0      0
    TOTAL PROVED        213    162  3,324  2,667    132     99    900    706

    PROBABLE            106     81  1,538  1,232     54     40    416    326
                     ------- ------------- ------------- ------------- ------

     PLUS PROBABLE      318    243  4,862  3,899    186    139  1,316  1,032
                     ------- ------------- ------------- ------------- ------
                     ------- ------------- ------------- ------------- ------

    Reserves Values

    The estimated net present values of future net revenue before income taxes
associated with Upper Lake's reserves as set out in the GLJ Report, based on
forecast costs and prices, are summarized in the following table:

                   Net Present Values of Future Net Revenue
                         (Forecast Prices and Costs)

                              Before Income Taxes Discounted at (%/Year)
    Reserves                0          5          10         15         20
     Category              (M$)       (M$)       (M$)       (M$)       (M$)
    ------------------  ---------  ---------  ---------  ---------  ---------
       Producing          16,863     15,638     14,621     13,760     13,021
       Non-Producing       8,464      7,579      6,860      6,267      5,772
      Undeveloped              0          0          0          0          0
    TOTAL PROVED          25,327     23,216     21,480     20,027     18,793
    PROBABLE              11,224      9,083      7,556      6,427      5,567
                        ---------  ---------  ---------  ---------  ---------
     TOTAL PROBABLE       36,550     32,299     29,036     26,454     24,360
                        ---------  ---------  ---------  ---------  ---------
                        ---------  ---------  ---------  ---------  ---------

    Price Forecast

    The GLJ price forecast used in the GLJ Report for the next five years is
as follows:

               Light and Medium     Natural      Gas     Inflation  Exchange
                  Crude Oil           Gas      Liquids      Rate      Rate
           ----------------------- ---------- ---------- ---------- ---------
               WTI      Par Price              Edmonton
             Cushing   40 degrees   AECO Gas   Pentanes
            Oklahoma       API       Price       Plus
            ($US/bbl)  ($Cdn/bbl)  ($Cdn/Mcf) ($Cdn/bbl)   %/year   $US/$Cdn
           ----------- ----------- ---------- ---------- ---------- ---------
    2008      92.00       91.10       6.75       92.92       2.0       1.000
    2009      88.00       87.10       7.55       88.84       2.0       1.000
    2010      84.00       83.10       7.60       84.76       2.0       1.000
    2011      82.00       81.10       7.60       82.72       2.0       1.000
    2012      82.00       81.10       7.60       82.72       2.0       1.000

    Net Asset Value

    Upper Lake's net asset value ("NAV") as at December 31, 2007, based on
    GLJ's price forecast, is as follows:

    (000's except per share amounts)

    Net present values of future net revenue (before income tax)
     of proved & probable reserves discounted at 10% ................ 29,036
    Undeveloped land (18,837 net acres)(1) ..........................  2,957
    Bank debt and working capital deficiency ........................ (1,728)

    Net asset value ................................................. 30,265

    Shares outstanding (basic) ...................................... 25,337
    Net asset value per share .......................................   1.19

    (1) Land value has been calculated at cost - $157/acre.

    GLJ prepared a sensitivity analysis on the effect on the net present
value of Upper Lakes reserves as set out in the GJL report under the new
royalty framework as proposed by the Alberta Government. The analysis shows
that the net present value would be negatively affected by less than 5%.

    Tupper-Triassic Montney Play

    Upper Lake has now assembled 11,300 (3,374 net) acres of land on the
Tupper-Triassic Montney resource play in northeast British Columbia. Upper
Lake recently re-entered a vertical well and testing of the Montney is
underway. Although very preliminary, results to date have been promising. This
play is expected to be developed using vertical delineation wellbores and
horizontal producing wells. Current area development utilizes four horizontal
wells per section.

    Upper Lake is a Calgary-based corporation engaged in the exploration,
development and production of oil and natural gas in western Canada. Upper
Lake was incorporated on August 1, 2007 to participate in the arrangement
(completed on October 12, 2007) involving Diamond Tree Energy Ltd., Crocotta
Energy Ltd. and Upper Lake, whereby all the securities of Diamond Tree were
acquired by Crocotta and certain of the oil and gas assets of Diamond Tree
were sold to the Corporation. Pursuant to the arrangement, Upper Lake acquired
from Diamond Tree certain oil and gas assets at a purchase price of
$30 million, which was paid by the issuance of a non-interest bearing
promissory note to Diamond Tree. These oil and gas assets constituted
substantially all of the assets of Upper Lake on October 12, 2007. Additional
information concerning Upper Lake is available on its website at 
www.upperlake.ca or on SEDAR at www.sedar.com.

    Non-GAAP Financial Measures

    This press release includes information concerning "funds flow from
operations", which is a non-GAAP financial measures that do not have any
standardized meaning prescribed by Canadian Generally Accepted Accounting
Principles ("GAAP") and are therefore unlikely to be comparable to similar
measures presented by other issuers. Management and the directors of Upper
Lake believe that "funds flow from continuing operations", "funds flow from
operations" and "field netback" provide useful information to investors and
management since they are an indicator of the Company's ability to fund future
capital expenditures, which drives growth, and to repay debt. Funds flow from
continuing operations and funds flow from operations are calculated before
changes in non-cash working capital. See the "Reconciliation of Non-GAAP
Financial Measures" section of the MD&A for the period ended December 31, 2007
for a reconciliation of funds flow from operations to net earnings from
continuing operations, the most comparable measure calculated in accordance
with GAAP. Other financial data has been prepared in accordance with GAAP.


    All calculations converting natural gas to a crude oil equivalent have
been made using a ratio of six mcf of natural gas to one barrel of crude oil
equivalent. A boe may be misleading, particularly if used in isolation. A boe
conversion ratio of six mcf of natural gas to one barrel of crude oil
equivalent is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the

    Forward Looking Statements

    This press release contains certain forward-looking statements and
forward-looking information (collectively referred to herein as
"forward-looking statements") within the meaning of Canadian securities laws.
All statements other than statements of historical fact are forward-looking
statements. Forward-looking information typically contains statements with
words such as "anticipate", "believe", "plan", "continuous", "estimate",
"expect", "may", "will", "project", "should", or similar words suggesting
future outcomes. This press release contains forward-looking statements
pertaining to the following: forecast capital expenditures, future exploration
and development plans, forecast operating costs, general and administration
expenses and anticipated production rates and production mix, royalty rates,
funds flow from operations and reserves. Statements relating to "reserves" are
forward-looking statements, as they involve the implied assessment, based on
certain estimates and assumptions that the reserves described exist in the
quantities predicted or estimated and can profitably be produced in the
    The forward-looking statements are based on the Upper Lake's current
beliefs as well as assumptions made by, and information currently available
to, the Upper Lake. Forecast capital expenditures are based on Upper Lake's
current budgets and development plans which are subject to change based on
commodity prices, market conditions, drilling success, potential timing delays
and changes in royalty rates. Additionally, forecast capital expenditures do
not include capital required to pursue future acquisitions. Anticipated
production and product mix have been estimated based on the proposed drilling
program with a success rate based upon historical drilling success and an
evaluation of the particular wells to be drilled. Operating costs and general
and administration expenses have been projected based on historical
information and anticipated increases in the cost of equipment and services.
Funds flow from operations are based on the Upper Lake's current budget and
development plans. Although management considers these assumptions to be
reasonable based on information currently available to it, they may prove to
be incorrect.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties (both general and specific) and risks that forward-looking
statements will not be achieved. Undue reliance should not be placed on
forward-looking statements, as a number of important factors could cause the
actual results to differ materially from the beliefs, plans, objectives,
expectations and anticipations, estimates and intentions expressed in the
forward-looking statements. These factors may be found under the heading "Risk
Factors" in the Annual Information Form for the year ended December 31, 2007.
Readers are cautioned that the foregoing list of factors that may affect
future results is not exhaustive.
    The forward-looking statements contained in this press release are made
as of the date hereof and the Upper Lake's does not undertake any obligation
to update publicly or to revise any of the included forward-looking
statements, except as required by applicable law. The forward-looking
statements contained herein are expressly qualified by this cautionary

For further information:

For further information: Kelly J. Ogle, President and Chief Executive
Officer, kogle@upperlake.ca, Upper Lake Oil and Gas Ltd., 1200, 111 - 5th
Avenue SW, Calgary, AB, T2P 3Y6, Phone: (403) 237-9141, Fax: (403) 237-9140,

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