RSX Energy Participates in Major Gas Discovery in Hinton Alberta

RSX Energy has participated (as to a 25% working interest) in a major gas discovery in the Hinton Area of Northern Alberta. The discovery was made as part of RSX's commitment to explore for high impact, high reserve base prospects. The company has historically dedicated approximately 10% of its yearly budget to deep drilling opportunities.

The discovery well, Cabot RSX Hinton, 11-16-51-25 W5M, was drilled to a total depth of 10,690 ft in late 2005. A 165 ft sand was encountered at 10,490 ft and gas was flared intermittently while the well was brought under control with increasing mud weights. Bottom hole pressure was measured at 8,532 psig, approximately double that of a normally pressured reservoir at similar depth.

The well was flow tested in early 2006 with 50 ft of total perforations. Approximately 106 ft of the reservoir has greater than 6% porosity based on log analysis. Although the well flowed naturally, near-wellbore damage was removed with a gelled-water frac and the well was flowed at restricted rates into 3 test incinerators. The flow rate was held constant at 7.3 MMcf/d (max rate for the incinerators) while the well was flowed for a 48-hour period. Reservoir drawdown was negligible during the test. The lowermost perforations were covered with frac sand during the test period and it is not likely that they contributed to the overall flow and pressure response. Once a sand clean- out has been conducted, the flow characteristics of the well may improve.

Flow and build-up test data have been analysed by an independent reservoir engineering firm.

The well has a calculated absolute open flow (AOF) of approximately 100 MMcf/d assuming non-turbulent flow. The AOF potential of a well is the rate at which the well would produce against zero sandface back pressure. Maximum deliverability constrained by tubulars and wellsite facilities is estimated by partners to be 27 MMcf/d. Two uphole zones also appear gas bearing in the 11-16 wellbore (based on log analysis) but were not tested. The well was directionally drilled to take advantage of local structure and to minimize the need for downhole directional tools. Gross cased hole costs were approximately $4.2 million with completion costs of an additional $3.4 million.

RSX has a 25% working interest in 2 sections of land (including the discovery well) a 40% working interest in 10 sections and a 100% interest in 3 sections of land adjacent to and on-trend with the discovery. The majority of the lands were acquired at the January 25, 2006 and February 8, 2006 Crown land sales and were lands posted by the partners. Using 2D seismic data and geologic mapping, RSX and its partner are reviewing 2 to 3 development and 2 exploration locations on joint-interest lands. For the remainder of 2006, partners will concentrate drilling efforts on the 2 development locations. Partners are also considering shooting 3D seismic survey over joint-interest lands to assist in planning the drilling program. Pool development will continue to be regarded as high risk drilling, until additional wells confirm sand presence and orientation. Drilling will commence as soon as regulatory approvals are received and continue throughout 2006. Natural gas from these formations is dry and sweet with drilling possible all year round with some restrictions from January 15 - April 15 of each year. A separate drilling program may be considered to exploit gas potentials in the shallower zones.

The current pipeline infrastructure has spare capacity of up to 12 MMcf/d at pipeline pressure of 850 psig. Depending on weather, the well may produce at rates between 5 and 12 MMcf/d. RSX expects the 11 - 16 well to be tied-in and on-stream by March 1, 2006.

RSX and its partner are working with a major gas transporter to increase pipeline capacity from the area. This may include twinning of existing pipelines, re-locating metering stations and possibly re-routing gas transmission. It is hoped by year-end that total capacity of 40 - 50 MMcf/d will be accessible.

Further pipeline expansion to accommodate pool development will be undertaken in 2007 if necessary.

In addition to developing the Hinton area in 2006, RSX will continue to explore and develop its other core areas of Randall, Gold Creek and Bezanson.


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