Espoir Begins First Production at Peace River Arch

Espoir Exploration has commenced production of a new pool light oil discovery drilled in the fourth quarter of 2003. The light oil discovery was drilled in the Corporation's Peace River Arch area in Alberta, Canada and will be produced at an average restricted rate of approximately 125 (net 88) barrels of oil equivalent per day (boe/d; 6:1). Field operations are underway to conserve associated gas and once complete, will facilitate the establishment of Good Production Practice (GPP). Once GPP is granted the production rate of the well can be increased towards its tested capacity of 330 boe/d. (net 230 boe/d).

For the period up to and including the fourth quarter of 2003, Espoir spent approximately $3.5 million on drilling, completions, land and seismic. During the fourth quarter of 2003, Espoir drilled seven (5.2 net) exploratory wells, resulting in six new pool gas discoveries and one new pool light oil discovery. All seven wells have been cased, completed and production tested. On the basis of encouraging test results, pipelining activities are ongoing to tie-in four gas wells and the gas associated with the light oil discovery. As a result of the successful fourth quarter 2003 drilling program and completion of the above mentioned field operations, Espoir targets producing in excess of 600 boe/d (80% natural gas) by the end of the second quarter of 2004.

Espoir announces that its initial Capital Budget for 2004 will be a minimum of $16 million. In order to capitalize on the success of the fourth quarter 2003 exploratory program, Espoir plans to drill six to eight wells (5.2 to 6.2 net) in the first quarter of 2004. For the full year 2004, the Corporation anticipates drilling 20 to 25 wells (16 to 21 net). Espoir is targeting average 2004 production in the range of 700 boe/d (80% natural gas).

Following spring break-up and once the first quarter drilling results have been evaluated, the 2004 Capital Budget will be reviewed. The 2004 Capital Budget will be funded through a combination of working capital, cash flow and debt. As of December 31, 2003 Espoir had an estimated $ 5.3 million in working capital and no debt.