Galleon reports record 2008 reserves and production growth

Monday, March 02, 2009 6:00 AM

CALGARY, March 2 /CNW/ - Galleon Energy Inc. ("Galleon" or the "Corporation") announces record additions to corporate reserves and production in 2008.

Galleon's large increase in reserves and production in 2008 is primarily as a result of the Eastern and Central Montney projects. During 2008, horizontal drilling with multi-stage fracture technology was applied successfully in the Eastern Montney project. This technology was the key to unlocking a significant resource base. Also in 2008, through seismic data interpretation and through horizontal drilling with multi-staged fracture technology, Galleon discovered two major Central Montney resource bases.

Both the Eastern and Central Montney resource projects have lengthened the life of the Corporation's reserves. The production base has become more predictable and lower decline rates have been realized.

The 2009 capital program will be focused on the Montney projects and is expected to be funded by available cash flow with no incremental debt. Galleon expects to maintain or modestly increase production levels in 2009 depending upon commodity price levels and the resulting cash flow.

2008 Performance
-   Gross proved plus probable reserves grew to 80.4 million BOE, an
    increase of 35% from 2007;
-   Gross proved reserves grew to 49.3 million BOE, an increase of 45%
    from 2007;
-   Gross proved producing reserves grew to 23.6 million BOE, an increase
    of 53% from 2007;
-   Gross proved plus probable reserves per share increased to 1.06 BOE
    per share, an increase of 13% from 2007;
-   The reserve life index was 11.9 years based on gross proved plus
    probable reserves and average Q4 2008 production;
-   2008 average production was replaced 4.3 times based on gross proved
    plus probable reserves;
-   107 gross wells were drilled resulting in 56 (53.2 net) natural gas
    wells, 35 (32.0 net) light oil wells, 3 (3.0 net) heavy oil wells and
    1 (1.0 net) injection well; a success rate of 89%;
-   2008 daily production averaged 17,216 BOE: natural gas - 59.0 Mmcf
    and crude oil and NGLs - 7,386 Bbl, an increase of 28% from 2007;
    with an operating netback of $39.65/BOE;
-   Average Q4 2008 production of 18,453 BOE/d (61% natural gas)
    increased by 26% from Q4 2007 average production of 14,695 BOE/d (56%
    natural gas);
-   Average production per share increased by 8% to 250 BOE/million
    shares in Q4 2008 compared to Q4 2007;
-   Undeveloped landholdings at December 31, 2008 were 771,918 net acres
    with an estimated value of $97.1 million based on an independent
    third party evaluation;
-   At December 31, 2008, an amount of $249.0 million was drawn under the
    Corporation's available credit facilities of $310 million. At
    February 27, 2009, approximately $254.0 million has been drawn on the
    available credit facilities.
Highlights:
-------------------------------------------------------------------------
                             Three months ended     Twelve months ended
                                 December 31             December 31
-------------------------------------------------------------------------
                            2008    2007  Change    2008    2007  Change
-------------------------------------------------------------------------
Average production
-------------------------------------------------------------------------
Oil & NGLs (Bbl/d)         7,141   6,448     11%   7,386   5,813     27%
-------------------------------------------------------------------------
Gas (Mmcf/d)                67.9    49.5     37%    59.0    45.7     29%
-------------------------------------------------------------------------
Total (BOE/d)             18,453  14,695     26%  17,216  13,429     28%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Production per million
 shares (BOE/d)              250     232      8%     242     224      8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Drilling Activity
Total gross wells drilled     33      22     50%     107      93     15%
-------------------------------------------------------------------------
Total gross wells cased       28      19     47%      95      83     14%
-------------------------------------------------------------------------
Net wells cased             26.4    18.0     47%    89.2    74.8     19%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
                                         Twelve months ended December 31
-------------------------------------------------------------------------
                                                  2008     2007   Change
-------------------------------------------------------------------------
Gross proved plus probable reserves
-------------------------------------------------------------------------
Oil & NGLs (MBbls)                              38,100   34,218      11%
-------------------------------------------------------------------------
Natural gas (Mmcf)                             254,036  151,537      68%
-------------------------------------------------------------------------
Combined (MBOE)                                 80,440   59,474      35%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Finding, development & acquisition cost(1)
-------------------------------------------------------------------------
Gross proved reserves ($/BOE)                   $23.98   $25.83      (7%)
-------------------------------------------------------------------------
Gross proved plus probable reserves ($/BOE)     $20.49   $22.81     (10%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Recycle ratio(1)(gross proved plus probable
 reserves)                                         1.9      1.3      52%
-------------------------------------------------------------------------
(1) FD&A cost, recycle ratio and net asset value relating to 2008 have
    been calculated using unaudited financial information.

Reserves

The reserves information is based upon an independent reserve assessment and evaluation prepared by DeGolyer and MacNaughton Canada Limited effective December 31, 2008 ("DeGolyer Report"). The following presentation summarizes the Corporation's crude oil, natural gas and natural gas liquids reserves and net present values before income taxes of future net revenues for the Corporation's reserves using forecast prices and costs based on the DeGolyer Report. The DeGolyer Report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101.

The DeGolyer Report has been approved by the Board of Directors of Galleon.

Gross reserves are the total of the Corporation's working interest share before deduction of royalties owned by others.

Related Stories