Canext Announces Second Quarter Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Aug. 25, 2008) - Canext Energy Ltd. ("Canext" or the "Company") (TSX VENTURE:CXZ) is pleased to announce its operating and financial results for the three and six months ended June 30, 2008.

Highlights:

- Cash flow increased to $3,479,000 up 49% from the first quarter of 2008,

- Closed an equity financing for net proceeds of $9,792,000,

- Sold non core properties for net proceeds of $6,024,000,

- Ended the quarter with no bank debt and $6,793,000 of positive working capital,

- Operating costs per boe declined 21% from the first quarter of 2008,

- Operating netback increased 46% from the first quarter of 2008,

- 2008 capital program expanded to $24,000,000.

The following table summarizes some of the key financial results. Complete financial statements with accompanying notes along with management's discussion and analysis have been filed on SEDAR ( www.sedar.com ).

Three Months Six Months
Ended June Ended June
2008 2007 2008 2007
----------------------------------------------------------------------------

Production (boe/d) 1,076 427 1,086 380

Highlights ($000's)
Revenue 6,524 1,804 11,909 3,246
Cash flow (1) 3,479 601 5,821 1,248
Net income/(loss) 376 (556) (408) (805)
Capital spending 1,582 544 4,538 5,475
Acquisitions/(Dispositions) (6,024) 51,703 (6,024) 51,703

Per Common Share
Cash flow (1) 0.05 0.02 0.08 0.04
Net Earnings / (Loss) 0.00 (0.02) (0.01) (0.02)

Balance Sheet at period end (000's)
Property, plant and equipment 52,713 71,879
Working Capital
Surplus/(Deficit) 6,793 (6,494)
Shareholders' equity 58,021 61,122

Wt average shares 000's 77,036 33,236 76,665 30,826

Revenue $/boe 66.65 46.47 60.26 47.25
Royalty $/boe (13.16) (10.72) (12.05) (11.25)
Opcost $/boe (10.82) (10.57) (12.29) (9.91)
Transportation $/boe (0.43) (0.05) (0.41) (0.05)
Operating Netback $/boe 42.24 25.13 35.51 26.04
G&A (5.63) (8.87) (4.91) (8.23)

(1) Cash flow and cash flow netbacks as presented do not have any
standardized meaning prescribed by Canadian GAAP and therefore they may
not be comparable with the calculation of similar measures for other
entities.
Second Quarter Summary

Canext strengthened its balance sheet in the second quarter by closing a bought deal financing of 7,500,000 common shares at $0.80/share and 4,210,600 flow-through common shares at a price of $0.95 per share. In addition, officers, directors, employees, and immediate family members participated in a concurrent non brokered financing of 125,000 common shares at $0.80/share and 422,000 flow-through common shares at a price of $0.95 per share.

To further strengthen its balance sheet and refocus on core opportunities, the Company sold approximately 200 boepd of non core production for net proceeds of $6,024,000. The combined effect of the financings and dispositions eliminated all bank debt and resulted in a working capital surplus of $6,793,000 at the end of the period.

Canext had limited activity in the second quarter as a result of normal spring break. The Company drilled three (2.5 net) wells at Birch resulting in 2 (1.9 net) gas wells and one (0.6 net) dry hole. Completion operations commenced at Pouce Coupe in June. The first recompletion at Pouce Coupe (65% working interest) resulted in a gas well testing at rates up to 3,000 mscf/d. The well was placed on production at 2,000 mscf/d in June (net 215 boepd). This well is expected to replace most of the production sold in June.

Operational Update

Subsequent to the quarter Canext has drilled and cased its first horizontal Montney well (77.5 % working interest). The well showed high gas counts while drilling approximately 1,300 m of horizontal section. Completion operations will include six large frac treatments and are expected to commence shortly. Production is anticipated for late September.

A second non-operated Montney horizontal well (25 % working interest) is currently being drilled and should reach total depth within a few days. The horizontal well was successfully drilled after cutting a window in an existing vertical well and drilling out approximately 1,000 m. Completion operations are expected to commence in September.

The Company has proved up additional Montney and Doig acreage at Pouce Coupe with the testing of gas from a new vertical well and a recompletion of an existing well. Based on these results Canext has commenced drilling operations on an offset vertical well (100 % working interest). The well will be drilled to evaluate potential gas in the Kiskatinaw, Lower Montney, Upper Montney and Doig formations. The Company expects to drill its third horizontal in September.

At Sweeney the Company has drilled and cased a 60 % working interest step-out well. The well encountered a thicker reservoir than the oil discovery well drilled late last year. Canext has started to drill another step-out well. Completion operations will commence following the drilling of the second well with production anticipated for October. The Company is still planning additional step-out drilling at Sweeney in the fourth quarter of this year and the first quarter of next year.

Outlook

Production for the third quarter is expected to be similar to the second quarter. The disposition of 209 boepd effective June 30 representing approximately 20 % of the Company's production will be replaced by new production from a recompletion at Pouce Coupe and new wells at Birch. The Company remains on track to exit the year at 1,400 - 1,500 boepd.

Activity continues to accelerate at Pouce Coupe on the Montney trend. A recent sale of Montney rights netted $1,750,000 per section. Canext has an interest in 11 net sections of Montney rights at Pouce Coupe. A senior producer has licensed three horizontals in one section offsetting Canext acreage. Canext expects to evaluate the majority of its acreage this year with recompletions and vertical step out wells. Ultimately the acreage is expected to be developed with two to four long length horizontals per section.

Canext capital spending for the second half of the year will be $20,000,000 representing about 80% of the budget. Approximately $10,000,000 will be spent at Pouce Coupe focusing on Montney/Doig development and step-out drilling.

The Company is well positioned for future growth balanced between oil at Sweeney and natural gas on the Montney-Doig resource play at Pouce Coupe. In addition, the large undeveloped land base along with the strong inventory of exploration prospects provides a framework for continued growth.

Reader advisory:

The term "BOE" may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for natural gas of 6 mscf: 1 bbl has been used which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Investors are cautioned that the preceding statement of the Company may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Company may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections, in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including natural gas/oil prices, reserve estimates, drilling risks, future production of gas and oil, rates of inflation, changes in future costs and expenses related to the activities involving the exploration, development and production of gas and oil hedging, financing availability and other risks related to financial activities.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Article Source: http://news.everythingoilandgas.com

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