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Press release from Marketwire

C&C Energia Ltd. Increases Proved Reserves 19% Year-Over-Year and Provides Operational Update

Monday, February 28, 2011

C&C Energia Ltd. Increases Proved Reserves 19% Year-Over-Year and Provides Operational Update08:30 EST Monday, February 28, 2011CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - C&C Energia Ltd. ("C&C Energia" or the "Corporation") (TSX:CZE) is pleased to provide its 2010 year-end reserves and an update on its 2011 operations.2010 Reserves Highlights (All references to $ are to United States dollars unless otherwise noted.)The Corporation completed a successful 2010 drilling campaign delivering significant reserves additions, highlighted by the following key reserve metrics:Total working interest proved oil reserves ("1P"), before royalties, increased 19% to 9.2 million barrels. Total working interest proved plus probable oil reserves ("2P"), before royalties, increased 24% to 14.6 million barrels. Total working interest proved plus probable plus possible oil reserves ("3P"), before royalties, increased 60% to 24.3 million barrels. Production replacement of 170% on proved reserves and 230% on proved plus probable reserves. Production replacement is calculated as reserve additions divided by total year production in barrels. Summary of ReservesThe Corporations independent engineering evaluation, effective December 31, 2010, was prepared by the independent engineering firm of Lonquist & Co. LLC. ("Lonquist") in accordance with the definitions set out under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI-51-101") based on forecast prices and costs.Summary of Reserves – Working Interest(1)and Net After Royalties(2)Oil (barrels)2010 Year-end C&C Energia Working Interest Reserves2010 Year-end C&C Energia Net After Royalty Reserves2009 Year-end C&C Energia Working Interest Reserves2009 Year-end C&C Energia Net After Royalty ReservesReserves Category(mmbbls)(mmbbls)(mmbbls)(mmbbls)ProvedDeveloped producing5.214.453.032.59Developed non-producing1.661.451.561.32Undeveloped2.372.033.152.71Total Proved9.247.937.746.62Total Probable5.404.634.083.48Total Proved plus Probable14.6412.5611.8210.10Total Possible(3)9.648.313.392.94Total Proved plus Probable plus Possible24.2820.8715.2113.04Working interest reserves means C&C Energia's working interest share (operated and non-operated) before deduction of royalties payable to third parties.Net after royalty reserves means C&C Energia's working interest share (operated and non-operated) after deducting royalties payable to third parties.Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.Reconciliation of Working Interest Reserves(1)Oil (barrels)Total Proved (mmbbls)Total Proved plus Probable (mmbbls)Total Proved plus Probable plus Possible (mmbbls)Opening, December 31, 20097.7411.8215.21Technical revisions0.10(0.50)(3.01)Extensions, infill drilling and exploration discoveries3.525.4314.21Production(2.13)(2.13)(2.13)Closing December 31, 20109.2314.6224.28Working interest reserves means C&C Energia's working interest (operated and non-operated) share before deduction of royalties payable to third parties.The increase in all categories of reserves is primarily attributable to the 2010 drilling results. During the year, the Corporation drilled 16 gross wells (11.3 net), appraising existing discoveries on the Cravoviejo,Cachicamo and Morpho blocks. Cravoviejo accounted for 85% of the 1P reserve additions and over 97% of the increase in 3P reserves."C&C Energia had a successful 2010 operational year," said Richard Walls, President & CEO. "We achieved an average production rate of 5,842 barrels of oil per day ("bopd") for the year ended December 31, 2010, a sixty percent increase over the 2009 average daily production, exited the year at approximately 7,300 bopd and increased our proved reserves by 19%. Our 2011 investment program is focused on exploiting our existing production areas in Cravoviejo and Cachicamo and testing our high potential exploration acreage in the Llanos and Putumayo basins."2011 Operational Update C&C has nine blocks (seven operated) in Colombia with a total of 766,514 acres (586,909 net acres). Two of these blocks were awarded to the Corporation at the June 22, 2010 bid round and are subject to finalization and execution of definitive agreements with the Agencia Nacional de Hidrocarburos ("ANH"). The Corporation's lands are located in the Llanos Basin (four blocks), Middle Magdalena Valley (two blocks), and Putumayo Basin (three blocks).The Corporation has approved a capital investment budget for 2011 of between $130 to $145 million. The Corporation plans to invest funds on the following operations: seismic, $5 million; development drilling and completions, approximately $25 million; facilities, workovers and equipping, approximately $40 million; exploratory drilling, approximately $50 to $65 million; $10 million for various other projects. Production for 2011 is expected to range between 6,800 and 7,300 bopd from the Cravoviejo (100% working interest) and Cachicamo (30% working interest) blocks. Management of the Corporation expects that the Corporation's balance sheet and cash flow from existing operations will provide it with sufficient resources to fund its ongoing programs.The Corporation has been actively pursuing its 2011 operational program, including the construction and preparation of civil works for its 2011 drilling program, drilling of two wells at Cravoviejo, testing of the Morpho-1 and Baco-1 exploration wells, procurement and installation work on the centralized production facilities at the Carrizales field on the Cravoviejo block and the shooting of a 220 kilometer 2D seismic program on the Andaquies block (90% working interest). Llanos Basin All of the Corporation's current production is in the Llanos basin on the Cravoviejo block and Cachicamo block. The Corporation's production to date in 2011 has been impacted by three factors: 1) a shortage of tanker trucks for transporting crude oil to pipeline terminals; 2) increasing cycle times for trucks due to delays at most of the loading terminals; and 3) a nationwide work stoppage by approximately 180,000 truck drivers in early February. As a result of these events, the Corporation was forced to shut-in approximately 29% of its production (approximately 2,000 bopd) in January due to high inventories in the field. January's production averaged 5,215 bopd. With increasing production levels in Colombia as a whole, and the Llanos basin in particular, production disruptions have been routinely encountered by many producers due to a lack of tanker trucks to transport product. In addition, some producers have exercised their priority rights at the offloading terminals forcing those companies with lower priority positions (including in some instances C&C Energia) to haul longer distances, increasing cycle times, and, in some cases, companies have been unable to offload oil due to terminal capacity constraints. This has recently resulted in general reductions in production levels. The situation has been further impacted by the Association of Colombian Truckers' ("ACC") call for a nationwide trucking stoppage, including oil tankers, on February 2, 2011 to protest the Colombian government's removal of a year-long policy of setting minimum freight prices for trucking. The ACC subsequently agreed to talks with the government and ended the trucking stoppages. C&C Energia is currently in negotiations to enter into long-term trucking contracts to provide a dedicated truck tanker fleet to minimize any future production disruptions. In addition, the Corporation's oil storage facilities on the Carrizales field are being expanded from 10,500 barrels to 30,000 barrels. These facilities will be commissioned by mid-year 2011, which the Corporation expects will allow it to better manage delivery of its production. While the Corporation expects that these disruptions will not have a lasting impact on the Corporation's production, there can be no assurance that further trucking availability issues and union issues will not continue to affect the Corporation's production in 2011 and thereafter.The Corporation plans at least 11 wells at Cravoviejo and seven wells (2.1 net) at Cachicamo in 2011. These are comprised of eight development locations, nine exploration tests and one water injector. Primary oil targets are the C-5, C-7, Gacheta, Ubaque, Mirador and Guadalupe formations. Also, in the central Llanos, the Corporation has identified seven or eight structural prospects on 3D seismic, mostly acquired in 2010, on the Pajaro Pinto (50% working interest) and Llanos 19 (100% working interest) blocks. These prospects will begin to be evaluated in 2011 where three exploration tests are planned.The Corporation has drilled two wells at Cravoviejo during the first 2 months of 2011. Carrizales-14 was a southern step-out well on the down-dip flank of the Carrizales field and both the Gacheta and Ubaque sands tested water and the well was abandoned. The Bastidas South-3 development well encountered poor reservoir quality in the primary target (C5 formation) and was plugged back and sidetracked to a new bottom hole location. The well has been logged and cased and will be completed and tested in two potential oil bearing reservoirs in early March. C&C is currently constructing centralized production facilities at its Carrizales field with start-up anticipated to be mid-year 2011. Construction has commenced and approximately 45% of the contracts, by value, have been awarded, including the procurement of power generator units and disposal pumps. Tank construction for the central storage tanks also began, which will ultimately provide for approximately 30,000 barrels of storage capacity. Middle Magdalena Valley On the Morpho block (50% working interest), the Corporation re-entered the Morpho-1 well (originally drilled and tested in 2009) and completed three shallow oil bearing reservoirs in the Colorado formation at intervals of 4,940 feet to 4,950 feet, 5,560 feet to 5,570 feet and 6,520 feet to 6,530 feet. All three zones were recently fracture stimulated and placed on extended clean-up and testing. The fourth Colorado sand between 4,600 feet and 4,617 feet has also been re-opened and commingled with the other three zones. Recently the Corporation installed production facilities and the well is currently on an extended production test. The Baco-1 well was drilled and cased to 12,664 feet during the third quarter 2010. The Corporation completed two sand intervals, one at 12,125 feet that is approximately 60 feet thick and another at 10,215 feet that is approximately 50 feet thick. Both zones were recently fracture stimulated and placed on clean-up and testing. Both the Morpho-1 and Baco-1 wells will be tested over an extended period to determine sustainable production levels, which will be incorporated into the Corporation's longer-term strategy for the block. These tests represent C&C Energia's first attempt at unlocking the oil potential in low permeability reservoirs within a large structure on the Morpho block. It has not yet been determined as to whether commercial development on this block will proceed. Putumayo Basin In January, the Corporation commenced a 220 kilometer 2D seismic program on the Andaquies block. Approximately 70% of the program has been shot with expected completion by early March. Preliminary results indicate the presence of two structures, approximately 1,500 and 2,750 acres in size, in the northern portion of the block with well-defined structural closure and potential drilling locations. The Corporation plans to drill its first exploration well on the Andaquies block in the fourth quarter of 2011. The Corporation, through its subsidiary Grupo C&C Energia (Barbados) Ltd., is engaged in the exploration for, the development and production of, oil resources in Colombia. Its strategy is to develop producing oil assets by appraising and developing existing discoveries and exploring in areas assessed by management to be of low to moderate risk. Now with a total of nine blocks (seven operated) and over 586,000 net acres in Colombia, the Corporation has considerable upside for future production and reserve growth. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATIONThis press release contains forward-looking information within the meaning of applicable Canadian securities laws that involves known and unknown risks and uncertainties. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", "will", "plans" or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation's securities to not place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by C&C Energia.Forward-looking information in this press release includes, but is not limited to, information concerning the expectations of the Corporation with respect to the completion of definitive contracts with the ANH regarding the VMM 21 block and the Putumayo Block 8, expectations of the Corporation's future production growth, estimates of oil and gas reserves; the Corporation's expectations for average annual production to in 2011, the Corporation's capital program for 2011, the availability of capital to fund the Corporation's exploration and development program, plans for the construction of production facilities, the Corporation's drilling plans, plans for obtaining seismic data, and the Corporation's expectations regarding the resolution of certain production and delivery issues affecting its operations in the Llanos Basin. These forward-looking statements are subject to assumptions regarding the Corporation's operations and the operating environment in Colombia. In particular, the expected timing of the finalization of definitive E&P Contracts for the VMM 21 block and the Putumayo Block 8 is based on assumptions regarding the conduct of negotiating such agreements being similar to those for prior similar agreements. Increases in production and the expected changes in the Corporation's operating costs are based on the assumptions that the Corporation's plans will be completed without any undue difficulty and that other costs will not rise. The Corporation's capital program and drilling and seismic plans are subject to change if circumstances change or if management of the Corporation determines that other business plans are more appropriate. The Corporation's expectations regarding the resolution of production issues in the Llanos Basin are subject to changes in circumstance or new developments that the Corporation cannot foresee. Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by C&C Energia including, but not limited to, general risks associated with the oil and gas industry (e.g. operational risks in exploration; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; the uncertainty of estimates and projections in relation to costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with the negotiating with the ANH or with other third parties in countries other than Canada and the risk associated with international activity. The forward-looking information included in this news release is expressly qualified in its entirety by this cautionary statement. The forward-looking information included herein is made as of the date hereof and C&C Energia assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.GAAP and Non-GAAP MeasuresThe Corporation's financial statements have been prepared in accordance with Canadian generally accepted accounting principles, or Canadian GAAP, as applied to its financial statements.This report makes reference to the term "operating netbacks", which is not a recognized measure under Canadian GAAP and does not have a standardized meaning prescribed by Canadian GAAP. Accordingly, the Corporation's use of this term may not be comparable to similarly defined measures presented by other companies. Operating netbacks are calculated by subtracting royalties, production expense and, transportation expenses paid by the Corporation from crude oil revenue and dividing by sales volume. Management uses this non-GAAP measurement for its own performance measures and to provide its shareholders and potential investors with a measurement of the Corporation's efficiency and its ability to fund a portion of its future growth expenditures.FOR FURTHER INFORMATION PLEASE CONTACT: Richard A. WallsC&C Energia Ltd.President and Chief Executive Officer403-262-6046ORKen HillierC&C Energia Ltd.Chief Financial Officer403-262-6046