WEST ENERGY LTD. Provides Operational Update, Organization Changes and Comments to Alberta Royalty Announcement


    CALGARY, Oct. 30 /CNW/ - West Energy Ltd. ("West" or the "Company") (TSX:
"WTL") provides an operational update for its shareholders, detailing current
production, drilling activity, organizational changes, and banking issues
since our last operating update included in our second quarter press on August
13, 2007. The press release also provides shareholders with some initial
comments to the recently announced changes to Alberta royalty regime for
conventional oil exploration.
    On October 16, the Company received approval from the Alberta Energy and
Utilities Board to commence production through its new Crossfire Nisku oil
battery and gas transportation facilities. The 13-2-50-6W5 well is currently
producing 1420 BOEPD (1250 BOPD 38 API oil and 1.1 MMCFD of raw gas with an
H2S content of 3.5%). The total cost of the facilities (battery and gas
transmission lines) was $8.9 million. The Crossfire facilities were initially
designed to handle over 2500 BOPD with associated gas and can be readily
expanded for future exploration success in the area. It is the only battery in
the area capable of processing Nisku production and is tied into an
underutilized sour gas processing plant.
    With the Crossfire startup, the total corporate production target is over
5000 BOEPD with a fourth quarter production guidance of over 4200 BOEPD. Total
production will continue to be affected by on going operational issues with
third party sour gas processing facilities (related to the Paddy Creek
battery) and potential on going production issues with operating the high
deliverability wells. In the third quarter production was curtailed to average
2900 BOEPD (2300 BOPD and 3.6 MMCFD of sales gas) because of a major gas plant
turnaround during the month of August.


    In 2007, the Company has drilled 5 Nisku wells along the Pembina Nisku
trend. A Nisku reef was encountered in four of the five wells but with smaller
oil columns than expected. West is currently completing the new wells to
understand the success of the program. Unfortunately, due to land owner
objections, West has not been able to license and drill a well in the
Crossfire area during the year. The Company is actively licensing 7 wells at
Crossfire which represent key Nisku prospects in our exploration portfolio.
West expects to receive a Crossfire drilling license in the next few weeks and
may be able to drill up to three wells in Crossfire before year end. Details
of the Crossfire development plan can be found on the Company website at
    West Energy has drilled and completed two Beaverhill Lake oil wells
defining two new sand trends in the new play fairway located at Puskwa. The
wells were swabbed and shut-in for an extended buildup to assess the
appropriate stimulation technique and reservoir characteristics. West and an
industry partner have just spudded a third well to test another sand fairway.
The company anticipates drilling a fourth well in the area by year end.
    The company is pursuing a third core area to complement its activities in
the Pembina Nisku and Puskwa Beaverhill Lake projects. Recently, West through
an industry partner spudded the first well in a gas prone area of the basin.
More activity is planned in the area by yearend.

    Organization Changes

    West Energy has added to its management team to facilitate growth and
expand its ability to generate new ideas. The recent senior personnel
additions include:
    K. P. (Pat) Welsh, P. Eng.: SR Vice President and COO - Pat has 25 years
of experience in Engineering and Operational roles implementing Oil and Gas
developments in the WCSB. The last five years he was leading one of EnCana's
Business Unit's in Central Alberta developing Coal Bed Methane resource plays
as well as managing conventional Oil and Gas developments resulting in
consistent year over year profitable production growth.
    Scott Bridge, CA, MBA: Vice President Finance and CFO - Scott has over 27
years covering corporate finance, tax, accounting, regulatory and
administrative functions in senior positions in the energy business. Rick
Jaggard, who was our CFO, is now on long term disability.
    Moe Mangat, P. Eng.: Production Manager - Moe has 7 years of experience
in exploitation and operations. Mr. Mangat has held positions of increasing
responsibility with both major and intermediate oil and gas firms and was most
recently manager of operations for an intermediate size trust.
    Greg Weild, P. Eng.: Exploitation Manager - Greg has 25 years of
diversified petroleum industry experience in operations, production and
exploitation engineering in numerous oil and gas fields throughout
Saskatchewan, Alberta and NE British Columbia.

    Alberta Royalty Announcement

    The Alberta government recently announced changes to the royalties
payable on all crown mineral rights owned by the province. If enacted as
stated on January 1, 2009, the crown royalty payable on conventional oil
production will rise from approximately 30% to 50% for wells which produce
above 60 BOPD at today's oil prices. Based on the interpretation of publicly
available information, West estimates that the new royalty would reduce cash
flow by 25% to 40%, depending on average well monthly production rates used
and an oil price range of between US$70 and US$90 WTI per barrel. Other
factors which will affect the calculation include the actual legislation
enacted, the individual well production rates, commodity prices, foreign
exchange rates, product mix, and the percentage of production from Alberta
after January 1, 2009. The Company is still working to enact certain
reductions to the conventional oil royalty based on the depth of well, which
is similar to the proposed rules for deep gas wells.
    West strongly agrees with other Alberta exploration companies that the
royalty changes are discriminatory for companies engaged in high-risk oil
exploration such as the Company's Pembina Nisku and Puskwa Beaverhill Lake
programs. West has a number of prospects that are still very profitable under
the new royalty system. The new royalties do not however, strike a balance
between risk and reward of the complete drilling program. The Company will
have to adjust its drilling program by lowering risk to find that new balance.
The Company may make further adjustments to its capital program as more
details become known.


    With the recent senior personnel additions, an unutilized bank line of
$75 million being finalized, and cash flow from new production, West is in a
good position to weather the royalty changes and take advantage of the
opportunities which will surface during these challenging times. The Company
may be required by the securities regulator to include an impairment for its
exposure to the ABCP market in the third quarter financial statements. West
expects a resolution to the ABCP before the end of the year.

    Reader's Advisory:

    Certain information regarding West Energy Ltd. in this news release
including management's assessment of the future plans and operations and their
timing, the effect on West and its cash flow from changes to royalty rates in
Alberta and production estimates may constitute forwarding-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 the proposed royalty regime prior to implementation and thereafter, 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 exhausted. 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 Corporation's website (www.westenergy.ca).
Furthermore, the forward-looking statements contained in this news release are
made as the date of this news release and the Corporation 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.
    The news release contains the term cash flow which is commonly used in
the oil and gas industry. This term is not defined by GAAP and should not be
considered an alternative to, or more meaningful than, cash provided by
operating activities as determined in accordance with Canadian GAAP as an
indicator of West's performance. Management believes that cash flow is a
useful financial measurement which assists in demonstrating the Corporation's
ability to fund capital expenditures necessary for future growth or to repay
debt. West's determination of cash flow may not be comparable to that reported
by other companies. All references to cash flow throughout this news release
are based on cash flow from operating activities before changes in non-cash
working capital and abandonment expenditures.
    Disclosure provided herein in respect of barrels of oil equivalent (BOE)
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

For further information:

For further information: West Energy Ltd., 600, 333 5th Avenue S.W.,
Calgary, Alberta, T2P 3B6, Main Phone: (403) 265-5202, Facsimile: (403)
263-7007, Attention: Ken McCagherty, President and Chief Executive Officer,
Email: McCagherty@westenergy.ca, Direct Phone: (403) 716-3458

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