Breaker Smashes Production Target

Breaker Energy Ltd. on Wednesday provided an operational update including four oil successes at its core properties and robust production, exceeding Breaker's year-end exit target of 4,300 boe/d.

Breaker's first farmin well (50 percent working interest before payout, 32.5 percent after payout) resulted in a Granite Wash light oil discovery, testing in excess of 400 bbls/d (gross). The well will initially produce at a restricted rate of 120 bbls/d (gross). Breaker has elected to drill an option well, offsetting the discovery.

Breaker shot its largest 3-D seismic program ever at Girouxville in the fourth quarter, covering 56 square kilometers, obtaining an excellent image immediately adjacent to its multi-zone discoveries of 2005/2006. Subsequent to obtaining the 3-D data, Breaker's crown land sale activity has increased its deep light oil drill inventory by 7 (gross) wells. Two locations on the newly acquired lands are being surveyed for potential drilling later in the year. One well is a mile south of the 13-15 discovery, while the other is proximal to the 7-29 and 11-29 discoveries. Breaker has also received a Special Maximum Rate Limitation ruling on the 13-15 Granite Wash discovery of 625 bbls/d.

East Prairie

Breaker's 100 percent success rate at East Prairie continued, with two discovery wells on the Viking trend in the fourth quarter, one gas (100 percent working interest) and one 33 degrees API oil (75 percent working interest). The oil discovery flowed at an average of approximately 200 bbls/d over a two day test, with no water and a very low gas/oil ratio. Four to six immediate drill offsets are planned for the first quarter. The gas discovery well tested approximately 400 mcf/d with no water from one of the thickest pay zones (greater than 3 meters) seen on the trend to date. This well was a three mile step out from the nearest producer, proving up a significant amount of 100 percent working interest acreage for development in the first quarter and beyond. The company recently acquired approximately 6,800 additional acres and now holds a 100 percent interest in over 36 sections of land on this trend. Breaker plans to drill 5-10 wells in the East Prairie area during the first quarter, making this the most active quarter to date for the area.

Millard Lake

Acquisition production volumes have increased more than threefold to over 300 bbls/d via drilling of four horizontal wells. This increase in production significantly reduces operating costs per barrel. The horizontals were widely spaced (one per square mile) throughout this large original oil in place pool. Initial rates have met expectations, averaging over 70 bbls/d of oil per well to date. Various drilling and completion practices were implemented on each of the four wells in order to determine the most cost effective method for future development.


A single vertical well and a single horizontal well were successfully recompleted in the fourth quarter, adding more than 100 bbls/d of total incremental production. The vertical well was re-started after being shut-in for eight years. Despite being adjacent to an offset horizontal (approximately 200 meters away) which has drained more than 225,000 bbls, the vertical came on at 80 percent of its original pressure and at approximately half its production rate of eight years ago. As the field is currently drilled at 800 meter spacing and Breaker plans on infilling to 400 meter spacing, this excellent 'infill' well result at only 200 meter spacing gives great confidence to Breaker's upcoming 400 meter spaced horizontal wells. It also suggests that further infilling to 200 meters may be viable.

Due to the various bottom-hole configurations in its current horizontal wells, Breaker opted to pilot a single horizontal fracture versus the multiple fracture treatments that numerous producers are currently using to stimulate these types of reservoirs. This operation has exceeded expectations; increasing production rates from 6 to 70 bbls/d of light oil and accessing new oil reserves. This single fracture was just as successful as the company's previous expectations for a multi-fracture. All of Breaker's current horizontal oil wells (25+ net wells) are considered good candidates for similar fractures, and the company intends to perform several more in the first quarter.

The first of the infill horizontal drills is planned for the first quarter. This will be designed to allow for a multi-fracture stimulation. As each multi-fracture includes the equivalent of 6-10 single fractures, the company believes future infill wells with multi-fractures have the potential to be significantly better than the historical offsets.

2007 Guidance

Breaker is well positioned to continue to achieve per share growth. Breaker's 2007 guidance is as follows:

	           Average Production Rate             4,750 boed
	           Exit Production Rate                5,250 boed
	           Cash flow                           $40 million
	           Cash flow per A share               $1.15
	           Capital Program                     $46 million
	           Year-End Debt                       $42 million

The above guidance assumes US$60.00/Bbl WTI, CDN$7.00/Mcf AECO and US$/CDN$0.90.

Breaker maintains an inventory of more than 200 predominantly low-risk drilling locations and an excellent balance sheet.

Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.


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