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Exall Energy Corporation: Exall Energy Corporation Announces Results for the Three Months March 31, 2009

CALGARY, ALBERTA--(Marketwire - May 13, 2009) - Exall Energy Corporation (TSX:EE) ("Exall" or the "Company") is pleased to announce financial and operating results for the three months ending March 31, 2009.

Exall achieved record production in the first quarter of 2009 due to successful drilling in 2008.

Highlights include:

- Production averaged 690 boe per day in the first quarter of 2009 compared to 176 boe per day in the prior quarter,

- Production for the month of March 2009 averaged 860 boe per day,

- The Marten Mountain 7-12 well came on production in January 2009 and averaged 435 barrels of light oil per day for the quarter and 600 barrels per day in the month of March net to Exall,

- Approval for the waterflood project at Marten Mountain is expected by the end of May with completion of pipeline and facility construction and increased production rates expected in the third quarter of 2009.

HIGHLIGHTS Three months ended March 31
 %
 2009 2008 change
---------------------------------------------------------------
Financial ($)
Gross revenue 2,955,661 1,661,741 78
Funds from operations 1,123,112 844,182 33
 Basic and diluted per share 0.02 0.02 -
Net income (loss) (944,609) 213,299 -
 Basic and diluted per share (0.02) 0.01 -
Capital expenditures 533,016 2,570,009 (79)
Net debt 5,483,765 2,449,090 124

Operations
Daily production
 Crude oil (bbl) 577 124 367
 Natural gas liquids (bbl) 14 16 (13)
 Natural gas (mcf) 598 520 15
Total daily production (boe @ 6:1) 690 226 206
Netback per boe (6:1) ($) 23.94 49.43 (52)

Overview

First quarter production increased to an average 690 boe per day in 2009 primarily due to the drilling success at Marten Mountain in the Mitsue area of Alberta during the last quarter of 2008.

The 7-12-75-6W5 well was completed as a flowing oil well in December 2008 and placed on production January 2, 2009. The well produced at an average rate of 540 (356 net) barrels of oil per day through to the end of February. A production optimization procedure conducted near the end of February resulted in a rate increase to 900 (600 net) barrels of oil per day through to the end of March. The well was shut in at the end of March, at which time the New Oil Well Production Period expired and the well had produced its allowable through to the end of September. It will come back on production in October or upon approval of Good Production Practice (GPP). The 14-1 well is currently restricted to a daily allowable production rate of 148 barrels of oil. The produced oil has negligible water cut.

The Company has applied for Waterflood Project status and GPP approval, which will allow higher production rates from the currently restricted 14-1 horizontal well and the new 7-12 well. Approval of the project is expected during the second quarter of 2009. Construction of the pipeline and battery facilities currently under design will begin once Waterflood Project status is given and higher production rates have been approved. Completion of the construction projects and increased production rates are expected in the third quarter of 2009.

Results of Operations

Funds from operations for the quarter are $1.1 million or $0.02 per share and were the result of production increasing to 690 boe per day, reduced operating costs per boe and impacted by significantly lower commodity prices than in the prior year. Net loss for the quarter was $944 thousand or $0.02 per share.

As planned, the Company spent only $0.5 million on capital expenditures while planning and doing minor field work on the waterflood project at Marten Mountain.

Outlook

During Q1 2009 Exall continued the program to fully develop and exploit the Marten Mountain discovery. The proven reserves and production capability established by the wells are expected to increase the corporate cash flow and borrowing power sufficiently to fund further development of that key property, as well as other assets owned by the Company. The completion and testing of the water injection well has allowed the Company to quickly advance the application for enhanced recovery. Exall is currently focused on the waterflood project and the design and permitting of the pipeline and battery facilities in the area. The Company expects to have final approvals for the project and to proceed with construction in the second quarter of 2009. Completion of the project is scheduled for the summer of 2009 to coincide with higher production rates upon the waterflood project approval.

Exall has also begun preparation of a second surface location for the drilling of up to five wells along the extension of the Marten Mountain channel trend beginning in the fourth quarter of 2009. The Company plans to drill the wells as horizontal development wells from a single pad. The wells drilled to date have had extended lateral offsets (up to 2,400 meters) to the reservoir due to restricted surface access in Lesser Slave Lake Provincial Park. Subsequent wells will have substantially shorter offsets (less than 1,200 meters) to the reservoir as drilling has established that the channel trend is exiting the provincial park. The resulting savings in drilling cost will be substantial, with the well cost dropping from the historical average of $4 million to an estimated $2 million. In addition, the downward pressure on costs due to inactivity in the service sector along with the recently announced Alberta Government drilling incentive and 5 percent maximum Crown Royalty incentive programs will have a positive effect on the Company's proposed capital expenditures. Most of the Company's production is located in Alberta which will allow Exall to recover $200 per meter drilled or $600,000 for a 3,000 meter well through a credit of 50 percent on Crown Royalties paid.

The horizontal well drilled in Jayar, Alberta during the first quarter of 2008 and production optimization in the pool has resulted in production increasing to 120 boe per day net to Exall from less than 100 boe per day a year ago. The Operator of the Jayar property has finished conducting a review of the property and has released information regarding its intent to drill up to ten infill locations targeting poorly drained areas of the pool. Exall will be participating (8.7% WI) in the drilling of another horizontal infill well at Jayar, scheduled for the fourth quarter of 2009. Exall has an average 14.5 percent working interest in future wells.

The first quarter of 2009 has continued an exciting and dynamic year for Exall and the industry in general. Starting from a modest production base of light oil and gas, the Company has shown itself capable of setting and achieving ambitious targets, beginning with the drilling of an outstanding well in the first quarter of 2008, and finally in the fourth quarter, duplicating the drilling success and setting the Company on track for explosive production growth in the future as shown by the production results in the first quarter of 2009. Exall is a light oil-weighted company with high operating margins. This puts the Company in a favorable position to weather the current economic downturn and potentially take advantage of opportunities that arise.

A major challenge over this quarter has been operating during times of low prices with continued high costs, including the imposition of the New Royalty Framework in Alberta. The control of drilling and facilities costs will be a challenge in the coming quarters although the current economic crisis and depressed prices should be expected to bring those costs to more reasonable levels. With the drilling success enjoyed in 2008, the prospect of many additional drilling locations to follow and the realization of significant productive capacity growth in the first quarter of 2009 Exall is well positioned for future growth. Completion of the waterflood approval and facilities construction phase planned for early summer will precipitate a jump in production rates and projected cash flow for the Company.

About Exall

Exall Energy Corporation is a junior oil and gas company active in its business of oil and gas exploration, development and production from its properties in Alberta, British Columbia and Texas. Exall is currently developing a new oil discovery in north-central Alberta.

The Company currently has 45,921,277 common shares outstanding. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol EE.

Exall's Annual General Meeting is scheduled for May 27, 2009 at 10:00 a.m. in the auditorium on the 5th Floor, 715 - 5th Avenue SW, Calgary, Alberta and we welcome all shareholders and interested parties.

Reader Advisory

Certain selected financial and operational information for the three months ended March 31, 2009 is set out above and should be read in conjunction with the financial statements and related management's discussion and analysis (MD&A) for the three months ended March 31, 2009, the audited financial statements and related MD&A for the three months and year ended December 31, 2008 as well as the Company's Annual Information Form for the year ended December 31, 2008. These documents are filled on SEDAR at [ www.sedar.com ] and on the Company's website at [ www.exall.com ].

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at [ www.sedar.com ]. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. The net present values disclosed may not represent fair market value.