Great Plains Reports 2006 Year-End Reserves, Operational and Financial Results

by NationTalk on April 1, 2007753 Views

News Release

CALGARY, ALBERTA, March 30, 2007 – Great Plains Exploration Inc. (TSX – GPX) (Great Plains) is pleased to announce its year-end reserves, operational review and audited financial results for the year ended December 31, 2006.

The highlights for 2006 are as follows:

• Increased production 17% to a 2006 average of 1,474 boe/d from 1,260 boe/d for the same period in 2005
• Invested $39.9 million ($18.6 million, net of dispositions) in the Company’s capital expenditure program;
�� Drilled 30 wells (8.9 net) comprised of 15 (3.1 net) gas wells, 7 (2.6 net) oil wells, 5 (1.7 net) suspended and 3 (1.5 net) dry and abandoned.
�� Invested in infrastructure and facilities in core areas at Randell and Pembina to help ensure cost effective operations for the long term.
• Highgraded drilling prospect inventory to focus on light oil targets, with greater growth potential
• Oil and gas sales of $27.5 million, a 2% decrease from $28.2 million in 2005, primarily as a result of lower average natural gas prices which have declined by 28% over the last year
• Cash flow of $11.6 million, representing $0.31 per shareReserves (evaluated by GLJ based on forecast prices and costs)
• Total proved reserves of 3.0 mmboe, total proved plus probable reserves of 4.6 mmboe, comprised of 43% oil and NGLs and 57% natural gas
• Net present value of total proved plus probable reserves discounted at 10% before income taxes of $83.0 million
• Year-end net asset value (NAV) less debt, of $2.06 per share based on above with land valued at $15.1 million

• Streamlined operating base and strengthened balance sheet through the disposition of $21.3 million of noncore assets
• One-time write down of previously acquired goodwill of $26.9 million, as a result of reduction in market values
�� Completed $8.0 million bought deal, private placement of flow through common shares at $2.15 per share
• Tax pools of $55.9 million to assist in sheltering income

Subsequent to year-end
• On March 20, 2007 completed oversubscribed $10.0 million flow through financing at $1.50 per share indicating a strong interest in Great Plains and confidence in our team’s ability to execute on our long-term growth strategy

President’s Message

Year End Review
Since inception, Great Plains’ corporate strategy has been comprised of the following elements:
• Growth from corporate mergers and acquisitions
• Value creation through drilling and exploitation
• Operating focus through profitable rationalization
• Maintaining conservative capital structure with a strong balance sheet

The challenges which our industry faced in 2006 required that Great Plains focus on the latter two elements of our strategy at the expense of growth and value creation. The record high activity levels in the industry that were seen in the first half of 2006, prevented us from executing our planned drilling program, while unprecedented increases in service costs combined with weakening commodity prices for the second half of 2006 dictated that we decelerate our capital program and reassess our entire project inventory. We reached a prudent decision to refocus our operations by:

• Reallocating resources to projects and areas which have the highest potential to create value
• Reallocating capital to oil weighted projects
• Reducing our exposure to non-operated projects where we lack meaningful input and budgetary control
• Consolidating the number of areas in which we actively operate
• Rationalizing non-core assets which had reached a logical monetization point
• Reassessing and strengthening our team

In retrospect our decision to sell a combined 170 boe of daily production for aggregate proceeds of $18.3 million was timely given the speed and magnitude of the subsequent downturn in valuations. These transactions were good business and we will continue to take advantage of similar opportunities. Our technical team continues to scrutinize our non-core properties and we anticipate that we will be actively engaged in buying, selling and swapping our various interests throughout the coming year. In addition to the asset dispositions, we will also look at opportunities that will increase our operatorship in various properties thereby improving our ability to control timing and costs on our existing projects. With the successful equity financings undertaken we are well-positioned to take advantage of corporate opportunities which are expected to emerge in the junior market over the coming year.

Operations Review
Operationally, 2006 was marked by a combination of successes and disappointments. Altares and Athabasca consumed a combined 33 percent of our capital expenditure budget for the year with results that did not match initial expectations. Altares was subsequently sold while our plans for Athabasca have been substantively scaled back given the apparent reserve size and weakness in natural gas pricing. Randell accounted for 27 percent of 2006 spending including $5.7 million for facilities, land and seismic which did not provide any production additions for the past year but have allowed our 2007 winter program to be accelerated with a total of ten exploratory wells drilled this season. Six wells have been cased and are being placed on production; three wells are considered either marginal or dry holes and one well was drilled as an earning well to acquire 11 sections of new land. Net production additions for this project are estimated at 300 boe/d of light crude which is subject to a one-year royalty holiday. This is expected to bring total corporate production to approximately 1,500 boe/d heading into Q2 2007. These additional production volumes, along with extensive optimization work on older wells, will play a significant role in reducing operating costs on a go forward basis. Approximately 70 percent of our operating expense at Randell is fixed which results in high leverage on per barrel costs depending upon production volumes and facility utilization. Operating costs at Pembina and Spirit River were similarly affected by reduced volumes against fixed costs and are expected to show improvement in 2007 with new volumes coming on in both areas.

In terms of new exploration initiatives for 2007 and 2008, we are very excited about our expanding operations at Crossfire which is the newest extension of the highly prolific Pembina Nisku oil play. Earlier this year, Great Plains and its joint venture partner completed a large proprietary three dimensional seismic survey which has revealed some of the best seismic anomalies along the entire Nisku trend. With subsequent land sale success and various farm-in agreements in place, our land position at Crossfire now includes interests in 30 sections of land with working interests up to 40 percent. We expect to participate in the drilling of six to eight wells in the Pembina/Crossfire area over 2007 with the potential for one to three mmbbl pool sizes per discovery. Early indications are that well licensing at Crossfire should be a more expedited process based upon a much lower sour gas content than previously seen in the early Nisku fairway.

Great Plains is in the midst of fine tuning its capital expenditure plans for the balance of 2007. Subject to adjustments for timing and capital availability, we expect to spend approximately $25 million in 2007 with 40 percent allocated for Pembina/Crossfire. Randell will likely account for 30 percent of capital spending for the year, with various projects at Puskwa and Morinville accounting for the balance. Expenditures to date for 2007 are estimated at approximately $13.5 million which includes $3.5 million for land and seismic at Crossfire.

Beyond our new exploration initiatives, we are very optimistic about the prospects for renewed growth based on both near and long term industry trends. Natural gas inventories, while still high, have been reduced and drilling activity has dropped, suggesting strengthening prices for 2008. Service costs have started to respond to reduced demand, land costs are lower and farm-in deals are now generally available on more reasonable terms. Perhaps most importantly merger and acquisition ideas are now surfacing with metrics that offer the opportunity for profitable returns. We are actively evaluating opportunities for expansion in current core areas as well as new projects which could provide an exploitation balance to our exploration weighted capital expenditure program. We are also excited about surfacing new opportunities where we can take advantage of the skills and experience of our newly revamped team. Our geological and geophysical team which is now comprised of six seasoned professionals, has specific expertise in deeper high impact Devonian plays as well as shallower Cretaceous plays in West Central Alberta and the Peace River Arch where we have chosen to focus our efforts. The energy levels and enthusiasm which our new people have brought to Great Plains is much appreciated.

In closing I would like to acknowledge the support of our shareholders and the contribution of all our employees and Board of Directors for the wealth of talent and commitment they bring to our company. In addition I would like to acknowledge Mr. Jules Poscente, our director and founder who passed away in December 2006. Jules provided great insight helping to found and guide Great Plains and his expertise, integrity and sense of humor is deeply missed.

Although our plans for Great Plains continue to evolve, our corporate objectives remain unchanged – to balance our growth, acquire wisely and drill and explore. We are optimistic that the changes we have made coupled with a solid financial base will allow us to take advantage of the improving opportunities in our business. Our refocused exploration program has the potential for high impact discoveries which could add significantly to our production and reserve base. This in turn would improve all financial aspects of our operations, from operating expense to netbacks to bottom line performance. We are confident that our balanced approach to the business along with an improvement in market conditions will ultimately generate the sort of returns expected by both management and shareholders.

On behalf of the Board of Directors,
(Signed) “Stephen P. Gibson”
Stephen P. Gibson
President and CEO
March 30, 2007

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