West Energy Ltd. Provides Operations Update, 2007 Yearend Reserves Summary and Strategic Initiative


    CALGARY, March 12 /CNW/ - West Energy Ltd. ("West" or the "Company")
(TSX: "WTL") provides an operational update for its shareholders, detailing
production and operations activities during the fourth quarter of 2007 and
first quarter of 2008, a summary of the company reserves at the end of 2007
and announces a strategic initiative.

    Operations Update


    West exited 2007 with a daily production rate of 5,760 BOEPD. Production
for the month of December 2007 was 5,335 BOEPD and the daily production for
the fourth quarter averaged 4,962 BOEPD (4063 BOPD and 5397 MCFD of sales
gas). The efforts undertaken by the operations team during the latter part of
the year came to fruition with improved well performance and management of our
gas production to third party gas plants.
    With the successful drilling of a Nisku OOO pool extension at Crossfire
11-3-50-6W5, West was able to increase the production from 13-2-50-6W5, the
producing well in the pool, to 2000 BOEPD. Although West's total current
production exceeds 5500 BOEPD, production is still subject to potential third
party facility curtailments which have not been as dramatic during 2008 as
they were in Q4 of 2007.
    Strong production and commodity prices have generated high cash flows in
recent months. In January, West's average operating netback was $59 per BOE on
of 4938 BOEPD of production and resulted in cash flow after administration
expenses of $8.5 million for the month. Both production and product prices in
February and March are ahead of January numbers. The company has virtually no
debt, $30 million of Asset Backed Commercial Paper (ABCP) and cash flow in Q1
2008 is expected to exceed capital expenditures.


    The exploration efforts of 2007 were concentrated in four areas
Crossfire, Paddy Creek, Puskwa and a new exploration area.
    Due to licensing issues at Crossfire, West drilled only two wells of a
planned eight well program. The first well drilled at 11-3-50-6W5 established
a down dip extension to the Nisku OOO pool and resulted in a doubling of the
pool reserves assigned by GLJ Petroleum Consultants Ltd. (GLJ). West also
drilled a new Nisku oil well at 11-12-51-5W5, the most northeastern commercial
extension of the Nisku reef tends. The 11-12 well was completed early in
January 2008, flowing clean oil at rates up to 1200 BOPD. This well is
significant in that it pushes the commercial Nisku play trend another
16 kilometres up dip, through lands held by the Company that are already
evaluated by 3D seismic. Nisku development has been hampered by isolated
stakeholder objections which West is working through the Energy Resources
Conservation Board (ERCB) process. With the Crossfire facilities now in
operation, the Company anticipates that it can bring new Nisku discoveries in
the area on stream in a timely manner.
    In the Paddy Creek area during Q4 2007, West drilled two successful Nisku
oil tests: A new Nisku pool at 02/14-18-48-9W5 and a Lodgepole pool infill
well located at 02/06-06-48-9W5. Both wells will be tied into the Paddy Creek
infrastructure during 2008.
    West completed drilling the third well in its Puskwa Beaverhill Lake
(BHL) trend at the end of 2007. The well located at 10-27-68-2W6 was drilled
as a basement test with multiple objectives including Gilwood/Granite Wash,
BHL and up hole gas horizons. The first two wells encountered the Beaverhill
Lake sand but upon completion failed to establish new oil pools. All wells
were drilled on prospects generated from the recently shot 3D seismic and
West's geophysical interpretation matched other operators' discoveries in the
area. The results of a specific seismic data log (VSP) in the third well
confirmed that the 3D anomaly in the BHL formation did not match the geology.
The Company is actively working to reprocess and reinterpret the seismic data
to resolve the conflict with the BHL formation. Two of the wells encountered
up-hole gas potential with further work on the gas potential planned for 2008.
    West drilled in a third core area to complement its activities in the
Pembina Nisku and Puskwa Beaverhill Lake projects. West (40% BPO and 26% APO)
through an industry partner drilled a PreCambrian test in British Columbia. By
participating in the well, the Company was able to option multiple sections of
land along a large structure, offsetting proven producing Montney gas wells
within the recognized Montney fairway. The well encountered multiple zones
which had significant gas and petrophysical shows. The well is currently being
completed in the deeper horizons before testing the Montney. West recently
acquired an additional 14 sections of land (W.I. 60% to 100%) and is shooting
a 3D seismic program offsetting the new well.

    Capital Expenditures

    Capital expenditures in the Q4, 2007 were $25.3 million. Expenditures
were higher than forecast because of a cost overrun during drilling of the
last well at Puskwa, and higher than anticipated facility costs at Crossfire.
West incurred drilling expenses of $14.4 million in Q4 on drilling wells at
Crossfire, Economy Creek, and in British Columbia. Also West redirected
$3.2 million to a 3D seismic acquisition program because of the well licensing
issues at Crossfire.
    Total capital expenditures in 2007 were $74.8 million which was on the
lower end of the range for the 2007 capital budget due to sour well licensing
restrictions. The first half of the year was dominated by land and seismic
expenditures at Crossfire and Puskwa and the second half was to be focused on
drilling. West was not able to execute the forecast drilling program at
Crossfire which greatly affected its finding and development costs for the
year. Approximately $17 million of the 2007 expenditures was forecast by GLJ
in the 2006 engineering report. Facility cost overruns continued to be an
issue in 2007 and Company is working to better define, estimate and manage

    (before capitalized G&A)

                            Land    Seismic  Drill/Comp  Facilities    Total

    Crossfire                2.7        6.1        3.5       11.0       23.3
    Paddy Creek              0.3        1.4       14.6       14.0       30.3
    Puskwa                   3.0        3.4        5.7          -       12.1
    Other                    0.5        0.8        3.4        0.1        4.8
    Total                    6.5       11.7       27.2       25.1       70.5

    Breakdown                9.2%      16.6%      38.6%      35.6%     100.0%

    As at December 31, 2007, the Company had fulfilled its 2006 flow-through
    West plans to spend over $10 million in Q1 2008 to complete the Crossfire
Enhanced Oil Recovery (EOR) scheme, completing Q4 2007 drilling and acquiring
additional lands. The new well at Crossfire 11-3 has been completed as a water
injection well and a previously drilled Nisku dry hole at 10-7 was completed
as a Wabamun water source well. An EOR application was submitted to the ERCB
in the middle of February and West expects to receive approval before the pool
pressure drops below the minimum operating pressure projected sometime in
    West has made significant investments in 3D seismic, land and sour
facility infrastructure along the Pembina Nisku trend and has a large
inventory of undrilled prospects. In the absence of well licenses the Company
has yet to realize a return on that investment which is reflected in the very
high finding and development costs for the year. At current commodity prices,
the Nisku drilling inventory remains a very large value generator for the

    Other Matters

    West is actively engaged in individual and group representations to the
Alberta Government relating to unintended consequences to its exploration
programs (deep sour oil and gas drilling) arising from the proposed new
royalty framework. The government has announced its intentions to make
adjustments to the new royalty framework for these unintended consequences but
as yet no specific changes have been announced.
    West continues to closely monitor the evolving events surrounding the
$30 million of ABCP held and a proposed resolution as released on December 23,
2007 by the Pan-Canadian Investors Committee. Limited details of the
settlement released to date suggest the Company will have to take a further
write down to the value of its ABCP holdings. Once a global resolution to the
ABCP problem is in place, West will then be in a position to deal with its
specific resolution with its lender regarding its purchase of the ABCP. No
resolution is foreseen in the short term however West remains confident that a
resolution will be found on this matter during 2008. The Company has
sufficient capital generated from cash flow and, if needed, bank lines to fund
its on-going capital programs.

    2007 Yearend Reserves

    The reserves data set forth below is based upon an evaluation by GLJ with
an effective date of December 31, 2007. The Reserves Data summarizes the crude
oil, NGLs and natural gas reserves of West and the net present values of
future net revenue for these reserves using January 2008 GLJ forecast prices
and costs. The GLJ Report has been prepared in accordance with the standards
contained in the COGE Handbook and the reserve definitions contained in NI
51-101. GLJ was engaged to provide an evaluation of proved and proved plus
probable reserves and no attempt was made to evaluate possible reserves
associated with the Company's exploration prospect inventory or the wells that
had not been completed (Puskwa and new exploration area) by December 31, 2007.
All of West's reserves as of December 31, 2007 were in Canada and,
specifically, in the province of Alberta. The present values are based on the
Alberta royalties that are currently in effect and do not account for any
proposed royalty changes scheduled to take effect January 1, 2009.
    Gross proven and probable reserves at December 31, 2007 were 7.8 million
BOE compared to 8.6 million BOE as at January 1, 2007. The Company did not
replace its production in 2007. The lack of drilling at Crossfire and the
failure of our Beaverhill Lake program at Puskwa were the largest contributing
factors. Only two wells were drilled at Crossfire and they added the great
majority of the reserves found through discoveries and extensions in 2007. The
reserves also reflect moderate drilling results at Paddy Creek that can only
be established upon the tie-in and production of the wells. The reserves
reconciliation show a downward revision of the reserves associated with the
Violet Grove Nisku SS pool as the production performance indicates the gas cap
and oil pool may be smaller than originally mapped.
    A detailed review of the Company's reserves will be disclosed in the
Annual Information Form (AIF) which will be filed on SEDAR at www.sedar.com on
or before March 30, 2008.

                                                   Before Tax Present  After
    COMPANY WORKING INTEREST (Gross)                Values (millions)   Tax
                       Oil    Gas    NGL    BOE     5%    10%    15%    10%
                      (Mbbl) (MMcf) (Mbbl) (Mbbl)
     Producing        2,263  3,981    227  3,154  109.1   99.1   91.3   99.1
     Non-Producing      686  1,189     67    952   39.3   37.6   36.1   34.2
    Undeveloped         447    404     18    532   11.2    9.3    7.9    7.1
                      --------------------------- -------------------- ------

    TOTAL PROVED      3,396  5,574    312  4,638  159.6  146.0  135.3  140.4

    PROBABLE          2,450  3,331    162  3,167  109.7   93.4   81.4   70.5

                      --------------------------- -------------------- ------
     PLUS PROBABLE    5,846  8,905    474  7,805  269.3  239.4  216.7  210.9


                                             Oil      Gas      NGL      BOE
                                            (Mbbl)   (MMcf)   (Mbbl)   (Mbbl)

    31-Dec-06                               6,162   11,278      587    8,629
    Extensions & Infill                       630      655       32      771
    Improved recovery                           -        -        -        -
    Technical Revisions                      (165)  (1,881)     (74)    (553)
    Discoveries                               107      322       34      195
    Acquisitions                                -        -        -        -
    Dispositions                                -        -        -        -
    Economic Factors                            -        -        -        -
    Production                               (888)  (1,469)    (104)  (1,237)
    31-Dec-07                               5,846    8,905      475    7,805

    Overall the Company's reserve value for proven and probable reserves (at
10% before tax discount rate) increased from the prior year by 25% to
$239 million. Assuming that the Alberta government adopts the new royalty
framework without making changes for unintended consequences lowers the
present value to $190 million and has no material effect on the reserves base.
If West applied a current NYMEX strip price (2008 WTI price $102.90 US per
barrel) for both oil and gas, the proven plus probable reserves value before
tax at 10% discount rate would escalate the value to $295.5 million. The
Company does not foresee a ceiling test write-down for the fiscal year ended

    Strategic Initiative

    West is actively increasing its efforts outside its traditional Nisku oil
play as a result of operational pressures, particularly the timeframes
involved in obtaining drilling, facility and pipeline approvals through an
onerous and inconsistent regulatory process. Further, implications of the
Alberta New Royalty Framework are very much uncertain at this point and West
plans to further high grade its Nisku prospect inventory once final details of
the new royalties are in place.
    West will expand its pursuit and development of the Montney play in 2008
because of its year round access, ease of licensing and the known royalty
framework. Currently the Company has over 30 sections of lands owned or under
option in three separate proven Montney trends and has plans to greatly expand
that position in 2008.
    With current oil prices and production rates at record highs, a strong
balance sheet and a large and more diverse exploration prospect inventory, the
Company is unique amongst its peer group. The Board of Directors of West
believes that the current cash flow and balance sheet must be used in 2008 to
maximize shareholder value. As such the Company has retained CIBC World
Markets Inc. and GMP Securities L.P. as financial advisors to consider
strategic alternatives.

    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 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 Corporation'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 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; Attention:
Scott Bridge, Vice President Finance and Chief Financial Officer, Email:
sbridge@westenergy.ca, Direct Phone: (403) 716-3457

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