Upper Lake Oil and Gas Ltd. (TSX:UP) announced that its Board of Directors has finalized the Company's budget for 2008. In addition, Upper Lake announced that it has exercised an option to acquire certain oil and gas assets in central Alberta and northeast British Columbia from Crocotta Energy Inc. for $3.2 million.
Certain information included in this News Release constitutes forward-looking information, including information concerning Upper Lake's plans to finance the acquisition of assets from Crocotta Energy Inc., the timing of closing of that acquisition and anticipated average production for 2008. Readers should review the cautionary statement that appears at the end of this News Release.
Operational update
Upper Lake estimates that its year-end exit production for 2007, based on field estimates, was approximately 820 barrels of oil equivalent per day (70% natural gas), exceeding the Company's year-end exit production guidance of 700 to 800 boe/d. In the fourth quarter, Upper Lake drilled two (1.48 net) wells, with a success rate of 100%, including a new pool discovery. The Company's current production, based on available field reports, is estimated at 1,000 boe/d, which includes flush production from the previously announced 15-04-43-28 w4 oil well in Ferrybank, Alberta and a gas well drilled in a newly discovered pool in the Ferrybank area.
Asset acquisition
Upper Lake also advises that it has exercised rights available to it under an agreement with Crocotta Energy Inc. to acquire certain oil and gas assets in central Alberta and northeast British Columbia for $3.2 million in cash, before closing adjustments. The assets include one (16.67% net) producing well at Tupper in northeast British Columbia, five (3.2 net) cased and tested wells awaiting tie-in in Alberta, and varying working interests in 16,000 acres of land in Alberta and British Columbia, including a one-third working interest in the Tupper area. The Tupper lands are in the vicinity of a developing Montney resource play. Upper Lake expects to finance the acquisition through its existing credit facilities. Closing of the acquisition is expected to occur by the end of February 2008, subject to the satisfaction of certain customary conditions.
Capex budget for 2008
On November 2, 2007, the Board of Directors of Upper Lake approved a preliminary 2008 capital program of between $9 and $12 million. That preliminary budget has been revised to a "cash flow" budget of $7 million plus the above noted $3.2 million acquisition of assets from Crocotta Energy Inc. The 2008 capital program assumes the drilling of eight (5.78 net) wells, and is based on an average natural gas price of $6.00 per gigajoule at AECO and $80 WTI per barrel for oil and liquids. Any significant variations from these assumed commodity prices may result in decreased or increased activity by the Company and the budget is subject to adjustment as circumstances dictate. Upper Lake believes the wells selected for drilling in connection with the 2008 capital program are consistent with management's medium-risk philosophy. -- www.cnxmarketlink.com
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