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Press release from Marketwire

Arcan Executes Non-Core Asset Sale and Updates Operations

Wednesday, August 08, 2012

Arcan Executes Non-Core Asset Sale and Updates Operations09:17 EDT Wednesday, August 08, 2012CALGARY, ALBERTA--(Marketwire - Aug. 8, 2012) - Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Corporation") executes on its commitment to reduce debt and focus on its core assets through the sale of approximately ten sections of undeveloped land assets in the Virginia Hills area of Alberta for $7.0 million. These lands were isolated from Arcan's existing core production and infrastructure and did not include the successfully drilled horizontal well, or related lands, at Virginia Hills 13-32-64-13W5. "The land sale is consistent with our stated intention to dispose of non-core assets through a number of disposition processes," said Arcan President Doug Penner. "The sale proceeds will apply directly against the debt on our balance sheet. We remain focused on the excellent opportunities in our core operating areas of Deer Mountain and Ethel. We are pleased with this sale price, as we originally acquired these lands for $3.4 million and had not yet begun to develop them." Arcan's second quarter 2012 production was up 83 per cent over the second quarter of 2011 to average 5,250 barrels of oil equivalent per day (boepd) during the three-month period ending June 30, 2012. Unusually wet conditions in the Swan Hills area have impacted production, operations and costs. As a result, five wells drilled in the second quarter and scheduled to be fractured in June have not yet been completed. The first of these wells, at Gere 16-20-64-8W5, was fractured on August 2, 2012. Arcan expects to complete the other four wells at the 10-05-67-08 surface drill pad when access conditions provide for safe and economical completion operations. In light of poor weather conditions and volatility in oil pricing, Arcan continues to adjust its operational plans for the remainder of 2012. Slowing the pace of drilling is intended to ensure that the Corporation will continue financially sustainable growth and efficiently deployed capital. Thus, while Arcan drilled 16 wells in the first half of 2012, the Corporation plans to limit drilling to a maximum three wells in the second half of the year. Based on the reduced capital and drilling program, Arcan has also disposed of the surplus raw acid inventory held by its subsidiary, StimSol Canada Inc. Although Arcan realized a net loss of approximately $8.0 million on the sale, the disposition will strengthen the Corporation's balance sheet. Arcan has retained an adequate inventory of acid for its drilling plans over the next twelve months. Arcan continues to respond to the current weakness and uncertainty in the capital markets with reductions in the number of new wells planned and operational modifications to achieve capital efficiencies. With no new production coming on-stream since early in the second quarter and production impacts related to to the anticipated shut-down and turnaround of a downstream third party processing facility in September, Arcan now expects 2012 full-year production to average 4,500 - 5,000 boepd, which is over 50 per cent higher than the 2011 average rate. "Having invested heavily in the infrastructure needed to realize the potential of our Swan Hills land base, our top two current priorities are to strengthen our balance sheet and maximize our capital efficiency," Mr. Penner continued. "Waiting for drier weather to complete and tie in our most recent wells is in line with our commitment to reduce capital and operating costs, fund operations from cash flow and maximize the impact of our spent capital. We are taking a measured approach to capital investment as we transition Arcan from a high-growth junior to an efficient oil producer positioned for longer term success. We are also reviewing all aspects of our assets, operations and governance to strengthen Arcan's operational capability and to support our larger base of production." 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. 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: future availability of acid to facilitate Arcan's drilling plans for the next 12 months, second quarter 2012 anticipated production; anticipated average production for 2012; anticipated timing of the fracture and completion of Arcan's recent wells; Arcan's expectations respecting its growth and activities throughout the remainder of 2012; Arcan's ability to execute on the remainder of its 2012 business plans and strategic direction; 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 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 further 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; the operation of Arcan's oil gathering pipeline and the Pembina pipeline may not have the impact on operating costs currently anticipated by Arcan and there may be interruptions of service in the future; Arcan's capital spending and operational plans for 2012 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: Douglas PennerArcan Resources Ltd.President(403) 262-0321dpenner@arcanres.comORSuite 2500, 308 - 4th Avenue S.W.Arcan Resources Ltd.Calgary, AB T2P 0H7Neither 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.