West Energy announces 2009 year-end reserves and operational update


CALGARY, Feb. 12 /CNW/ - West Energy Ltd.("West" or the "Company") (TSX: WTL) is pleased to report that that its light oil strategic acquisition coupled with a resource drilling program undertaken during the last half of the year has substantially increased the reserves and value of the Company. The total proved plus probable reserves increased by 138% to 19.3 MMBoe from 8.1 MMboe in 2008. That success continues in 2010 with West further expanding its Cardium light oil inventory and receipt of regulatory approvals to advance its high impact Nisku exploration program.

    2009 Highlights:

    -  Total Proved plus Probable ("P+P") reserves of 19.3 million BOE, an
       increase of 138 percent over December 2008 reserves of 8.1 million
    -  Present value before tax of 10 percent (PVBT10) of P+P reserves is
       $449 million, an increase of 174 percent over $164 million as at
       December 2008.
    -  Oil and natural gas liquids comprise 84 percent of P+P reserves
    -  Reserves life index increased to 7.0 years from 3.7 years in 2008
    -  Drilling activity provided 4.8 MMboe of P+P reserve additions
    -  90% of the P+P reserves value is associated with West's Pembina light
       oil position
    -  Nisku reserves represent 25% of the 2009 reserve base compared with
       77% in 2008
    -  Per share reserves growth of 136 percent
    -  Proved Developed Producing reserves comprise 47 percent of P+P
    -  Finding and Development Costs, including future development capital is
       $22.91 on a total proved basis and $19.58 on a P+P basis
    -  Net asset value per share growth from $3.19 in 2008 to $5.96 in 2009

GLJ Petroleum Consultants Ltd ("GLJ") has prepared an independent assessment of the Company's reserves dated December 31, 2009, summarized as follows:

    December 31, 2009                                      Present
                                                           Value Before Tax
                        --------------  ----------------- ------------------
    RESERVES CATEGORY    Light                    Oil     Discount  Discount
    Gross Working         Oil    NGL      Gas  Equivalent    10%      15%
    Interest            (Mbbl)  (Mbbl)  (MMcf)   (Mbbl)      (M$)     (M$)
    -----------------   ------  ------  ------ ---------- --------  --------

       Producing         7,038    746    8,074    9,130    220,250   184,687
       Non-Producing       724    198    3,647    1,530     42,588    37,938
      Undeveloped        2,157     37    1,036    2,367     57,424    47,474
                        ------  ------  ------ ---------- --------  --------
    TOTAL PROVED         9,918    982   12,757   13,027    320,261   270,099

    PROBABLE             4,942    409    5,507    6,269    129,024   101,990
                        ------  ------  ------ ---------- --------  --------

     PROBABLE           14,860  1,391   18,264   19,295    449,286   372,089
                        ------  ------  ------ ---------- --------  --------
                        ------  ------  ------ ---------- --------  --------

    1.  The reserves report has been prepared in accordance with the
        definitions, procedures and standards contained in the Canadian Oil
        and Gas Evaluation Handbook and the Canadian Securities
        Administrators National Instrument; NI51-101.
    2.  Barrels of Oil Equivalent ('boe") may be misleading, particularly if
        used in isolation. A boe conversion ratio of 6MCF:1bbl is based on an
        energy equivalency conversion method primarily applicable at the
        burner tip and does not represent a value equivalency at the
    3.  The estimated net present value of future net revenue is based on
        current legislation in place at December 31, 2009.
    4.  The product price, market forecasts and currency exchange rate were
        supplied by GLJ and are effective January 1, 2010. A copy of the
        price forecast used can be found on the GLJ website at www.gljpc.com
    5.  Prices for oil F.O.B. Edmonton are based upon 40 degrees API oil
        having less than 0.4% sulphur. The wellhead oil prices were adjusted
        for quality and transportation based on historical actual prices.
    6.  Prices and volumes for natural gas are based upon a base pressure of
        14.65 pounds per square inch and base temperature of 60 degrees F.
        The natural gas prices were adjusted, where necessary, based on
        historical pricing based on heating values and the differing costs of
        service applied by various purchasers.
    7.  The natural gas liquids prices were adjusted to reflect historical
        average prices received.
    8.  The forecast prices and cost case assumes no legislative or
        regulatory amendments and includes the effects of inflation. The
        estimated future net revenue to be derived from the production of the
        reserves includes an inflation rate of 2.0% per year.

    Reserves Reconciliation

                                                         Working Interest
                                                        Gross    Proved plus
                                                        Proved     Probable
    Category                                            (Mboe)     (Mboe)
    ---------------------------------------------     --------   -----------

    January 1, 2009                                     4,496       8,125
    Extensions and Improved Recovery                    2,891       5,454
    Technical Revisions                                   262        (843)
    Discoveries                                           786       1,047
    Acquisitions                                        6,083       7,003
    Dispositions                                            -           -
    Economic Factors                                        -           -
    Production                                         (1,491)     (1,491)
                                                      --------   -----------
    December 31, 2009                                  13,027      19,295

Reserves by Area

The company was able to significantly reduce its reliance for growth on its traditional Nisku reserve base as a result of the acquisition of the Warburg properties and the Cardium drilling program undertaken in 2009. The Warburg and Cardium P+P reserves now comprise 60 percent of the total Company reserves while the Nisku reserves represent only 25 percent of the total Corporate reserves compared to 77 percent in the prior year. A summary of the reserves by geographic location is provided below.

     - BY AREA                             2009                  2008
    Company Interest - Including     (Mboe)    Percent     (Mboe)    Percent
     royalty interests

    Warburg - Belly River and
     Cardium Units                    7,203         37%         -          0%
    Pembina - Cardium Resource Play   4,409         23%         -          0%
    Crossfire - Nisku and Ellerslie   3,592         19%     1,969         24%
    Pembina - Paddy Creek and Other   2,134         11%     4,493         55%
    Other                             2,009         10%     1,674         21%
    Total                            19,347        100%     8,136        100%

Total proven reserves include 17 gross (13.1 net) proved undeveloped locations with future development capital obligations of $51.1 million. The proved plus probable reserves contain 41 gross (30.1 net) future drilling locations with future development capital obligations of $92.4 million.

Finding and Development Costs

    Finding Development & Acquisition
     Cost - Summary information            2009                  2008
                                                Proved                Proved
                                     Total       plus      Total       plus
                                     Proved    Probable    Proved    Probable
    Exploration and Development
     Expenditures                    50,922     50,922     50,573     50,573
    Acquisition (Disposition)
     Expenditures                   147,733    147,733     (3,902)    (3,902)
    Change in Future Development
     Costs                           34,334     52,327     (6,863)     6,928
    Total Capital Invested          232,989    250,982     39,808     53,599

    Finding & Development Costs
     (Excluding Acquisitions)      $  21.05   $  17.88   $  17.96   $  18.94
    Finding & Development Costs
     (Including Acquisitions)      $  22.91   $  19.58   $  19.56   $  20.22

For the 2010 year, using a WTI oil price of US$78 per barrel, natural gas at $5.75 per mcf and an exchange rate of 0.95, the expected corporate netback is $38.61, resulting in a recycle ratio of 1.97 on a P+P basis. The 2010 operating netback incorporates the impacts of lower royalty rates associated with the Warburg and Cardium assets which are expected to bring the overall corporate royalty rate down to approximately 25 percent.

2009 versus 2008 Comparatives

    Reserves at December 31 (Working interest)   2009       2008      Change
    Proved Developed Producing (Mboe)            9,130      2,546        259%
    Total Proved (Mboe)                         13,027      4,496        190%
    Proved plus Probable (Mboe)                 19,295      8,125        137%

    Net Present Value of Reserves, before tax,
     discounted at 10%
    Proved Developed Producing ($M)            220,250     58,929        274%
    Total Proved ($M)                          320,261     96,070        233%
    Proved plus Probable ($M)                  449,286    163,798        174%

    Undeveloped land (Net acres)               125,221     88,134         42%
    Undeveloped land ($M)                      133,760     12,200        996%

    Cash (Net Debt) (bank plus working
     capital deficiency)                       (93,929)    70,391       -233%

    Number of shares issued and outstanding     82,271     81,551          1%

    Net Asset Value Proved plus Probable PV10
     (per share)                              $   5.96   $   3.19         87%
    Certain financial information included in this press release for the year
    ended December 31, 2009 such as finding and development costs, production
    information and net asset value calculations are based on estimated
    unaudited financial results for the year ended December 31, 2009 and are
    subject to the same limitations as discussed under forward-looking
    statements outlined at the end of this release. These estimated amounts
    may change upon completions of the audited financial statements for the
    year ended December 31, 2009 and those changes may be material.

Operational Update

Pembina Cardium Project

The Company is one of the most active horizontal drillers in the Cardium light oil resource play in Alberta. At east Pembina, West successfully drilled 9 gross (6.8 net) multi-fractured horizontal Cardium wells in 2009. Four wells (2.6 net) were producing in January with another five (4.2 net) wells coming on production over the next week. Early results suggest that the average well first month production is approximately 196 boe per day (86 % oil). GLJ estimates that the average Cardium reserves per horizontal well are 125 Mboes on a proven basis and 150 Mboes on a P+P basis. West continues to optimize its drilling and completions program to reduce costs and improve well performance.

So far in Q1, 2010 the company has drilled 3 gross (2.8 net) Cardium Hz wells. One well has been multi-fracture stimulated and is currently flowing back load fluid and the others are expected to be completed by the end of February. West has plans to drill another 3 gross (1.6 net) horizontal Cardium wells prior to spring break up.

The company continues to capture and enhance its Cardium inventory. The GLJ yearend evaluation has included 30 gross (21.8 net) probable horizontal locations. The Company has an unbooked Cardium horizontal drilling inventory for which no reserves have been assigned of 106 gross (73.8 net) wells assuming a maximum well spacing of three wells per section.

The Company is actively working on two other light oil resource projects. At Warburg, West plans to drill horizontal multi fractured wells into the Belly River formation to develop the known oil resource. Recently other operators in the area have had success drilling horizontal wells into the Belly River zone. In addition the extensive Warburg lands have unbooked upper Belly River gas reserves that the previous owner had booked as probable reserves.

The second developing light oil resource play at Two Rivers in British Columbia, the Company plans to follow-up its recent horizontal multi fractured oil well into the Montney formation. Production testing results from the well remain confidential.

Crossfire Development

In 2009 the Company had excellent success drilling Nisku and Ellerslie exploration prospects in the Crossfire area. A drilling license for a Nisku location at 16-31-49-6W5 (W.I. 100%) was received on February 5 with drilling results expected by the first week of March. Two additional Nisku licenses are expected in Q1 2010.

The final regulatory approvals to construct a 6 inch pipeline from two standing Nisku oil wells at 11-12-51-5W6 (W.I. 60%) and 15-33-50-5W5 (W.I. 60%) was received on February 5 2010. Construction has commenced and the project is scheduled to be on production in April.

The Q4 2009 Nisku discovery well located at 03-03-50-6W5 (W.I. 100%) has been dually completed as both a water injector and producing Nisku well. The well configuration is similar to an existing Nisku oil well located at 9-1-50-6W5 where West has been operating since August 2009. West can produce the 3-3 well (but not inject) prior to receiving an EOR approval for the pool.

In early January 2010, the company drilled and completed another successful delineation well at 8-4-50-6W5 (W.I. 75%) in the previously announced discovery of Ellerslie E6E pool. A drilling license for the next Ellerslie location has been received and this well is expected to be spud next week. The 8-4 well will come on stream after the drilling of the next well in the pool. The results to date continue to show the E6E pool to be an excellent candidate for an Enhanced Oil Recovery scheme (waterflood) and the Company is preparing the required regulatory applications. In addition, the Company expects to drill a second Ellerslie prospect before the end of Q1.


Current production is approximately 5400 BOED of which 81% is light oil and NGL. The current production includes 2.6 net new Cardium wells. The new Crossfire Nisku well at 3-3-50-6W5 is tied-in and capable of producing and will be production tested over the next month. The 3-3 well will maintain the Company's existing Nisku production base.

The repair of the Crossfire Battery sales oil line was not completed until January 16. The loss of production is not expected to impact average production rates for the year however the lost revenue has increased current debt levels to approximately $95 million.

West will adjust its 2010 capital program to account for the Nisku drilling. With a Nisku well drilling and at least two more Nisku licenses expected in Q1 2010 the company may expand its capital program in the latter half of the year. With the finalization of the 2009 reserves evaluation, the Company anticipates an increase in its corporate borrowing base and as a result, an expansion of its bank credit facilities. West anticipates releasing its audited annual financial statements for the year ended December 31, 2009 on or about March 25, 2010.

West is pleased to announce that Mr. David Cronkhite P. Eng. has joined the Company as Vice President - Production. David has extensive senior management, production and engineering experience in growing public Canadian companies. He is a welcomed addition to the West team.

The 2009 reserves evaluation and large 2010 light oil drilling program confirms that West has successfully transformed itself into a light oil oriented energy company with a diversified portfolio of resource drilling in the Cardium, Belly River and Montney plays and an exciting inventory of exploration opportunities.

Reader's Advisory:

Certain information regarding West Energy Ltd. in this news release including the reserve estimates, the projected levels of production, revenues, royalties and operating expenses used to determine operating net-backs and recycle ratios, the value attributed by the Company to its assets including an internal estimate of the value of undeveloped lands, as well as the Company's future plans and operations and their timing 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, changes to royalty regimes, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, 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 were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information and that could cause actual results to differ materially from those anticipated in the forward-looking statements are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Company's website (www.westenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release and the Company 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.

Disclosure provided herein in respect of barrel(s) of oil equivalent (Boe) may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 mcf:1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. There is no certainty that it will be commercially viable to produce any portion of the resources that are discovered resources. There is no certainty that any portion of the resources that are undiscovered resources will be discovered and, if discovered, there is no certainty that it will be commercially viable to produce any portion of such resources.


For further information: For further information: Ken McCagherty, President and Chief Executive Officer, Email: mccagherty@westenergy.ca, Direct Phone: (403) 716-3458; Scott Bridge, Vice President Finance and Chief Financial Officer, Email: sbridge@westenergy.ca, Direct Phone: (403) 716-3457

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