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Press release from Marketwire

Arcan Provides Operations Update, 2013 Budget, and Executes $10.0 Million Non-Core Asset Sale

Monday, January 14, 2013

Arcan Provides Operations Update, 2013 Budget, and Executes $10.0 Million Non-Core Asset Sale09:00 EST Monday, January 14, 2013CALGARY, ALBERTA--(Marketwire - Jan. 14, 2013) - Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Corporation") has approved a $26.0 million capital expenditure budget for the first half of 2013 and estimates its full year 2013 budget at $52.0 million. The 2013 budget includes drilling an estimated 13 gross (9.4 net) wells. Arcan also completed a disposition of one and three-quarters sections of undeveloped land in 64-09W5 for proceeds of $10.0 million. The land sold was located in the southern-most area of Arcan's Swan Hills acreage, did not have any associated production, and was isolated from Arcan's existing core production and infrastructure. Arcan announces a capital budget program of $26.0 million for the first half of 2013, including an estimated $14.0 million towards drilling seven (4.4 net) wells with the remainder being spent on infrastructure, recompletions, and waterflood activities. Arcan currently estimates 2013 production to be approximately 4,300 to 4,700 boe per day, an increase to the average production rate for the second half of 2012, which Arcan estimates to be approximately 3,950 boe per day, net of dispositions. In line with its strategic direction, Arcan plans to manage capital within its estimated cash flow stream for 2013. The land sale is consistent with Arcan's stated intention to dispose of non-core assets through a number of targeted dispositions. Arcan remains focused on the excellent opportunities in its core operating areas and the sale proceeds will be applied directly against the debt on the balance sheet. Arcan is pleased with this sale price, as only $0.5 million had been invested in these lands and development had not yet begun. Arcan's strategy continues to be to maximize and extract value in the forms of strategic sales or farm-outs, without sacrificing the development inventory. Arcan expects to continue reviewing all aspects of its assets, operations, and governance to strengthen its operational capability, capital efficiencies, and to support its base of production. Along that line, the first PetroBakken Energy Ltd. farm-out well at 06-28-68-09W5 was on-stream November 29, 2012. After completing its production testing period, this well is now producing into a pipeline directly into Arcan's production facilities. The second well in this five to seven well program has already been drilled at 04-19-66-09W5 with completion expected in the first quarter of 2013. Arcan is currently drilling the third well of this program at 05-01-67-09W5. Arcan has also completed and commenced production on three of the four wells on its 10-05-68-08W5 pad. The fourth well is currently in the process of being completed.Arcan will focus on developing the large light oil resource in the Swan Hills area. In addition to concluding the majority of the development in Deer Mountain Unit #2, Arcan has transformed its Ethel area, which is comprised of 74 sections of land, into a large development inventory of drill-ready locations. This asset is now supported by an infrastructure corridor consisting of all weather roads, pipelines, and facilities. As at June 30, 2012, Arcan's external independent reserve auditors had recognized recoverable remaining reserves of 8.9 million boe on a total proved plus probable reserve basis in Deer Mountain Unit #2, and 18.9 million boe on a total proved plus probable reserve basis in Ethel. The investments over the last 18 months in the Ethel corridor provide the ground work for Arcan to begin to capitalize on the value of the oil assets in Ethel. In addition to the Ethel corridor development, Arcan is focused on development of its farm-out lands in 2013, in order for Arcan to accelerate exploitation of its land base as management feels that this would be an advantageous time to do so given the current state of the capital markets.Arcan will continue to shift to a program of sustainable growth, supported by a strengthened balance sheet and focused cost reductions. Arcan continues to take a measured approach to capital investment focused on capital efficiencies where higher capital spending during the winter months is followed by a curtailment of capital during times when access is only possible at an increased cost. Arcan estimates that using a more measured approach to capital spending will allow for wells to be drilled, completed, and tied-in at a cost of $4.5 million to $5.0 million. The 2013 drilling program will focus on high graded locations throughout Arcan's land base with the balance of the capital program targeting production constraints and the expansion of the waterflood process. To secure the capital program and cash flow Arcan is hedged at 2,000 barrels per day for all of 2013 and 2014 at approximately $100.00 and $93.00 West Texas Intermediate, respectively. Arcan will continue its efforts to control committed capital and the pace of its development. This is expected to ensure that the Corporation can continue financially sustainable growth and efficient deployment of capital. The changing capital market environment is driving Arcan to make operational adjustments as well. The recently announced farm-outs to PetroBakken Energy Ltd. provide for capital-efficient development on areas stretching across Arcan's land base that would not otherwise have been developed in the near term. Arcan will continue to implement changes that provide for a stable financial base, maximize shareholder value and provide secure growth per share as Arcan transitions to a more efficient oil producer positioned for long term success. Holding a large multi-year light oil development inventory, Arcan's management continues to look strategically at all of Arcan's assets and will consider all opportunities for development and acceleration as they arise. Arcan recently launched its new website at www.arcanres.com. The website has been redesigned and features improved functionality to enhance the quality of the Corporation's disclosure. The new website contains standard disclosure materials, including information explaining the waterflood secondary recovery technique, news releases, financial documents and presentations, as well as supplemental information for the benefit of the investment community. Information is expected to be added shortly to include a new corporate presentation and a question and answer document that addresses some of the questions that Arcan's management frequently receive. About Arcan Resources Ltd. Arcan Resources Ltd. is an Alberta, Canada corporation that is engaged in the production, development, exploration and acquisition of petroleum and natural gas located in Canada's Western Sedimentary Basin. Legal AdvisoriesBarrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil is based on an energy equivalency conversion primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf : 1 bbl would be misleading as an indication of value. All reserves information contained within this press release comes from our independent reserves report prepared by GLJ Petroleum Consultants Ltd. with an effective date of June 30, 2012. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.Forward-Looking Information and StatementsThis press release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "estimates", ''expects'', ''will'', ''plans'' and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains forward-looking information and statements pertaining to, among other things, the following: anticipated average production for the second half of 2012; anticipated average production for 2013; anticipated timing of the fracture and completion of Arcan's recent wells; the expected use of proceeds from the disposition of the Swan Hills land; the 2013 capital expenditure program including drilling and expectations; anticipated operating costs for 2013; Arcan's expectations respecting its growth, activities and the deployment of capital throughout the remainder of 2012 and 2013; Arcan's strategic direction; Arcan's development and ability to implement and execute its 2013 business plans and strategic direction; Arcan's review of all aspects of assets, operations and governance; Arcan's consideration of development opportunities; the launch and contents of the Corporation's website; future growth including development, exploration, acquisition, construction and operational activities and related expenditures. The forward-looking information and statements contained in this press release, including but not limited to the estimates of 2012 and 2013 annual production, reflect several material factors and expectations and assumptions of Arcan including, without limitation: that Arcan will continue to conduct its operations in a manner consistent with past operations; the lack of any adverse weather conditions; the lack of significant changes in capital markets or commodity prices; the accuracy of current horizontal production data, historical well production and waterflood results; the general continuance of current or, where applicable, assumed industry conditions; continuity of reservoir conditions across Arcan's Swan Hills land base and its Ethel oil pool; availability of debt and/or equity sources to fund Arcan's capital and operating requirements as needed; the continuance of existing and, in certain circumstances, proposed tax and royalty regimes; the accuracy of the estimates of Arcan's reserve volumes; and certain commodity price and other cost assumptions and estimates. Arcan believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: for reasons currently unanticipated, Arcan's production rates may not reach the levels currently expected; the application and modification of horizontal, multi-stage fracture technologies may not have the impact currently anticipated by Arcan; the future drilling locations identified by Arcan may prove to be unsuitable or unavailable and drilling on the locations identified may not occur; water injection at additional sites in the Deer Mountain Unit #2 or in the Ethel field may not have the impact on production currently anticipated by Arcan; Arcan's capital spending and operational plans for 2013 may not be completed in the timelines anticipated, in the manner anticipated or at all and the execution of such plans may be negatively affected further; changes in tax or environmental laws or royalty rates; increased debt levels or debt service requirements; inaccurate estimation of Arcan's oil and gas reserves volumes; limited, unfavourable or no access to debt or equity capital markets; increased costs and expenses; the impact of competitors; changes in commodity prices; reliance on industry partners; and certain other risks detailed from time to time in Arcan's public disclosure documents including, without limitation, those risks identified in this press release, and in Arcan's annual information form for the year ended December 31, 2011, copies of which are available on Arcan's SEDAR profile at www.sedar.com.The forward-looking information and statements contained in this press release speak only as of the date of this press release and Arcan does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.FOR FURTHER INFORMATION PLEASE CONTACT: Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. Contact Information: Arcan Resources Ltd.Terry McCoyChief Executive Officer(403) 262-0321tmccoy@arcanres.comArcan Resources Ltd.Douglas PennerPresident(403) 262-0321dpenner@arcanres.comArcan Resources Ltd.Suite 2200, 500 - 4th Avenue S.W.Calgary, AB T2P 2V6