Bow Valley Reports Lower Earnings for Q4, Full Year

Highlights

Corporate

--2006 funds flow was $20.4 million, down 34% from 2005. Funds flow per share (basic) was $0.29 ($0.28 per share fully diluted), down 41% year-over-year (fully diluted down 40%). The majority of the decrease in funds flow is attributable to the Canadian operations due to lower production and lower natural gas prices.
--Fourth quarter, 2006 funds flow was $2.0 million, down 82% over fourth quarter, 2005. Fourth quarter funds flow per share (basic) was $0.03, down 81%. In addition to lower Canadian funds flow, fourth quarter funds flow was also negatively effected by a non-operating realized foreign exchange loss of $1.5 million.
--Loss per share was $0.04, down 140% compared to 2005.
--Sales volumes averaged 2,443 boe/d in 2006, down 24% compared to 2005. Fourth quarter sales volumes averaged 2,107 boe/d, down 24% compared to the fourth quarter of 2005.
--Net debt and working capital deficiency was $91.4 million at year-end, including bank debt of $76.4 million.

U.K.

--Funds flow was $10.5 million, up 5% over 2005. Fourth quarter funds flow was $0.5 million, down 73% year-over-year. Funds flow was negatively effected by a realized non-operating foreign exchange loss of $1.5 million in the fourth quarter of 2006.
--The Company spent $88.8 million in the U.K. in 2006, with the majority of expenditures related to the development of the Company's non-producing properties. First production from the Enoch and Blane fields is expected in the second quarter of 2007, from the Chestnut field in the third quarter of 2007 and from the Ettrick field in the second quarter of 2008.
--The Company agreed to a US$150 million debt facility with the Bank of Scotland. This increased debt facility is expected to fund the development of all of the Company's U.K. fields, including the Ettrick field, which received Field Development Plan approval in 2006.
--The Company has significantly improved its cost structure in the U.K. as a result of redirecting Kyle production from the Maersk Curlew to the Ramform Banff. Operating costs averaged $7.41 per boe in 2006, an improvement of 65% compared to the 2005 full year average of $21.29 per boe. As a result, the Company's operating netback increased 102% year-over-year to $58.67 per boe.
--The net present value (NPVBT(10)) of U.K. proved plus probable reserves increased 60% to $351.3 million.
--Sales volumes averaged 647 boe/d, down 46% year-over-year due largely to lower production owing to capacity constraints at the Ramform Banff. Fourth quarter sales volumes averaged 517 boe/d, down 8% year-over-year.

Alaska

--Bow Valley entered a Joint Venture Agreement to participate in an exploration program on the North Slope of Alaska.
--The first well of this exploration program was spud February 8th, 2007 and is expected to take approximately thirty to forty days to drill. A second exploration well is expected to be drilled immediately following, if time and conditions permit.

Canada

--Funds flow was $11.4 million, down 46% over 2005. Fourth quarter funds flow was $1.5 million, down 81% year-over-year.
--Sales volumes averaged 1,796 boe/d, down 12% year-over-year. Fourth quarter sales volumes averaged 1,590 boe/d, down 29% year-over-year.
--On February 20, 2007, Bow Valley announced that it had engaged Tristone Capital to assist in evaluating strategic alternatives for its Canadian assets and operations.

Operations

U.K.

Although sales volumes in the U.K. were 46% lower year-over-year, funds flow from operations was up 5%, as significant operating cost improvements year-over-year, combined with higher commodity prices, led to a 102% improvement in the operating netback per boe.

The operating cost improvements occurred due to the tie-back of the Kyle production from the Maersk Curlew to the Ramform Banff in 2005. The effect of redirecting the production was to reduce operating costs at the field by 65% year-over-year to $7.41 per boe, which has improved profitability and extended field life. The Ramform Banff is a smaller vessel, therefore Kyle production is now capacity constrained, contributing to the lower year-over-year production.

In 2006, Bow Valley spent significant capital to advance the Enoch, Blane and Chestnut fields to first production. The first two of these fields (Enoch and Blane) are expected to commence production in the second quarter of 2007, with the third field (Chestnut) coming on stream in the third quarter of 2007. A fourth field (Ettrick) received U.K. government Field Development Plan approval in 2006, and is expected to be on production in the second quarter of 2008. Based on the total proved plus probable reserves in the GLJ Report, the Company's U.K. production is expected to average 7,594 boe/d in 2008.

U.K total proved plus probable reserves increased 3% to 13.3 mmboe as reported in the Company's February 20, 2007 press release. The net present value of those reserves increased 60% to $351.3 million (NPVBT(10) (at) forecast pricing) due to the increased volume of reserves, incurred capital outlays and increased commodity prices.

The Company continues to build its U.K. exploration portfolio in preparation for increased exploration activity late in 2007. The Company added to its working interest in the 16/27a North block, taking its total working interest to 100%. The company also added a 100% working interest in Block 22/11b, awarded in the 24th Offshore Oil and Gas Licensing Round. The Company now owns a 100% working interest in five U.K. North Sea exploration blocks, containing five exploration prospects. The Company is planning to drill as operator its first U.K. exploration well in the fourth quarter of 2007.

Alaska

Late in 2006, the Company entered into a Joint Venture Agreement to explore on the North Slope of Alaska. The first well of this exploration program was spud in early February and is expected to take thirty to forty days to drill. A second exploration well could be drilled before break-up if time and conditions permit.

Canada

Canadian production was down year-over-year 12%, averaging 1,796 boe/d. Fourth quarter volumes averaged 1,590 boe/d, down 29% year-over-year. The Company has engaged Tristone Capital to assist in evaluating strategic alternatives for its Canadian assets and operations.

Corporate

The Company's net debt plus working capital increased year-over-year to $91.4 million, mainly due to the increased spending related to the U.K. development projects. This debt is financed via the Company's US$150 million senior and mezzanine debt facilities with the Bank of Scotland and the C$22.5 million senior and C$7.5 million term facilities with the National Bank. The Company expects to be able to service the debt with significantly increased cash flows as a result of the field developments coming on production throughout 2007 and into 2008.

Robert G. Moffat, President and Chief Executive Officer stated: "The 2006 financial results are down year-over-year by most measures, but I do not believe these results represent the direction that the Company is headed. The Company is incurring significant capital spending ahead of production from the U.K. development projects and production growth is imminent. The exciting exploration programs in Alaska and the North Sea have begun with 3-4 wells scheduled to be drilled in 2007. The decision to evaluate strategic alternatives for the western Canadian assets is consistent with our goal of directing capital to areas that provide the most growth at the best economic return. Bow Valley is quickly evolving into a full-cycle exploration company with a strong and diversified production base. Looking ahead to the next two years, I am extremely optimistic. Bow Valley's production, revenue and cash flow growth should be significant. We are well positioned to enjoy exploration success from a broad and diversified prospect inventory. In the U.K., the Company is making the bold move by becoming an operator of exploration and with success, will subsequently become the operator of development and production. The move into the North Slope of Alaska is an example of our ability to recognize opportunity outside of our established areas. Overall, I believe Bow Valley will emerge as a well funded, balanced, diversified, international oil and gas company."

The Company's statement of reserves data and other oil and gas information on Form 51-101F1 has been included in the Company's annual information form for the year ended December 31, 2006 which has been filed on SEDAR at www.sedar.com. The report on reserves data by independent qualified reserves evaluator or auditor on Form 51-101F2 and the report of management and directors on oil and gas disclosure on Form 51-101F3 has also been filed on SEDAR at www.sedar.com.

Bow Valley Energy Ltd. is an international oil and natural gas exploration, development and production company with operations in western Canada, the U.K. sector of the North Sea and Alaska.