Vaquero Energy Increases Reserves by 50% in 2004

Vaquero Energy is pleased to announce the results of its year-end reserves evaluation prepared by Paddock Lindstrom & Associates Ltd. Highlights of the report are:

- Proved plus probable reserves increased by 50% to 10.0 million boe from 6.7 million boe at year end 2003

- Proved reserves increased by 37% to 6.1 million boe

- Vaquero's average cost of reserve additions for the three year period 2002 through 2004 was:

- $10.21/boe for proved plus probable reserves

- $14.40/boe for proved reserves

The table below summarizes the Company's working interest reserves from the December 31, 2004 PLA reserve report and provides a comparison with reserves at December 31, 2003 also as evaluated by PLA. Both evaluations were run under forecast price and cost assumptions in accordance with National Instrument 51-101.

                                              December 31            %
                                           2004      2003     Increase

Proved producing oil & NGLs (mbbls)       1,910     1,715           11%
Proved producing natural gas (bcf)         11.6      10.3           13%
                                        -------------------------------
Total proved producing (mboe)             3,845     3,427           12%

Proved oil & NGLs (mbbls)                 3,410     2,358           45%
Proved natural gas (bcf)                   16.4      12.8           29%
                                        -------------------------------
Total proved (mboe)                       6,144     4,485           37%

Probable oil & NGLs (mbbls)               2,207     1,377           60%
Probable natural gas (bcf)                 10.2       5.1           99%
                                        -------------------------------
Total probable (mboe)                     3,905     2,231           75%

Proved plus probable oil & NGLs (mbbls)   5,618     3,735           50%
Proved plus probable natural gas (bcf)     26.6      17.9           49%
                                        -------------------------------
Total proved plus probable (mboe)        10,049     6,716           50%
                                        -------------------------------

All of Vaquero's reserve growth in 2004 was achieved through exploration and development drilling, and positive technical revisions to existing pools. During 2004 Vaquero added 2,754 mboe of proved reserves replacing 2004 production by over 250%. The addition of 4,428 mboe of proved plus probable reserves in 2004 replaced 2004 production by over 400%.

Based on Vaquero's 2004 year-end production rate of 3,800 boe/d and year-end proved reserves of 6,144 mboe, the Company's proved reserve life index (RLI) is approximately 4.4 years. Similarly, the Company's year-end proved plus probable reserves of 10,049 mboe yields a reserve life index of 7.2 years.

Vaquero's 2004 Reserves Reconciliation

------------------------------------------------------------------------
                                                                Oil
                          Oil & NGLs       Natural Gas      Equivalent
Proved Producing            (mbbls)           (bcf)           (mboe)
                     ---------------------------------------------------
                           WI     Net        WI    Net       WI     Net
December 31, 2003       1,715   1,275      10.3    6.9    3,427   2,418

Discoveries &
 Extensions               515     390       4.5    3.3    1,264     933
Technical Revisions       272     161      (0.1)   0.2      249     199
Acquisitions                -       -         -      -        -       -
Dispositions                -       -         -      -        -       -
Production                593     416       3.0    2.1    1,095     769

December 31, 2004       1,910   1,411      11.6    8.2    3,845   2,780
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                                Oil
                          Oil & NGLs       Natural Gas      Equivalent
Total Proved                (mbbls)           (bcf)           (mboe)
                     ---------------------------------------------------
                           WI     Net        WI    Net       WI     Net
December 31, 2003       2,358   1,751      12.8    8.9    4,485   3,228

Discoveries
 & Extensions           1,424   1,099       8.5    6.1    2,839   2,123
Technical Revisions       221     131      (1.8)  (1.2)     (85)    (76)
Acquisitions                -       -         -      -        -       -
Dispositions                -       -         -      -        -       -
Production                593     416       3.0    2.1    1,095     769

December 31, 2004       3,410   2,564      16.4   11.6    6,144   4,505
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                                Oil
Total Proved              Oil & NGLs       Natural Gas      Equivalent
 Plus Probable              (mbbls)           (bcf)           (mboe)
                     ---------------------------------------------------
                           WI     Net        WI    Net       WI     Net
December 31, 2003       3,735   2,800      17.9   12.5    6,716   4,883

Discoveries
 & Extensions           2,095   1,612      12.2    8.9    4,135   3,097
Technical Revisions       380     244      (0.5)  (0.3)     293     186
Acquisitions                -       -         -      -        -       -
Dispositions                -       -         -      -        -       -
Production                593     416       3.0    2.1    1,095     769

December 31, 2004       5,618   4,241      26.6   18.9   10,049   7,397
------------------------------------------------------------------------

Vaquero's Cost of Reserve Additions

The tables below summarize the cost of reserve additions for the Company in 2004 and for the three-year period 2002 through 2004. The analysis includes reserve additions and revisions, net capital expenditures (including capitalized G&A) and estimated incremental future capital expenditures based on the PLA reserve reports. An unaudited estimate of 2004 capital costs of $60,383,000 was used.

Vaquero's Cost of 2004 Reserve Additions

------------------------------------------------------------------------
                                                                 Proved
                                                  Proved  Plus Probable
2004 Capital Expenditures ($000)                  60,383         60,383
Incremental Future Capital ($000)                    665          4,418

Total Capital ($000)                              61,048         64,801

Reserve additions (mboe)                           2,754          4,428

Cost of reserve additions ($/boe)                  22.17          14.63
------------------------------------------------------------------------

In 2004 Vaquero spent over $18 million on seismic and undeveloped lands identifying and capturing exploration opportunities to fuel future growth in west central Alberta. In addition the Company spent over $14 million constructing pipelines and facilities to provide capacity for production growth in its core areas. Although nearly 50% of the total expenditures on seismic and land in 2004 were made late in the year and did not impact reserve or production additions in 2004 they did, however, dramatically increase the Company's inventory of exploration and development opportunities for 2005 and beyond.

Vaquero's Cost of Three - Year Reserve Additions
(fiscal 2002 through 2004)
------------------------------------------------------------------------
                                                                 Proved
                                                  Proved  Plus Probable
2002 through 2004 Capital Expenditures ($000)    102,731        102,731
Incremental Future Capital ($000)                  3,773          8,120

Total Capital ($000)                             106,504        110,851

Reserve additions (mboe)                           7,398         10,856

Cost of reserve additions ($/boe)                  14.40          10.21
------------------------------------------------------------------------

In this press release:

- the Company's working interest reserves are reserves determined before deduction of royalties. Company net interest reserves are Company working interest reserves minus royalties payable.

- where reserves and production are stated in a barrel of oil equivalent (boe) basis, gas volumes have been converted to barrel of oil equivalent (boe) at a ratio of 6,000 cubic feet of gas to a barrel of oil equivalent. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Boes may be misleading, particularly if used in isolation.

- probable reserves at December 31, 2003 and December 31, 2004 are reported on a risked basis under NI 51-101. Probable reserves at December 31, 2001, not evaluated under NI 51-101, have been assigned a 50% risk factor to make more appropriate comparisons of probable and proved plus probable reserves.

- costs of reserve additions include the future incremental capital to bring the proved undeveloped and probable reserves on to production.

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