CALGARY, Alberta--(BUSINESS WIRE)--May 21, 1999--Canadian 88 Energy Corp. (TSE:EEE) (AMEX:EEE) (Alberta Stock Exchange:EEE) of Calgary, Alberta, Canada announced today that it achieved record production growth, cash flow and significant exploration success in the first quarter of 1999. The first quarter of 1999 was a very exciting time for Canadian 88 with the Company's exploration activity reaching record levels as we continued to work toward our goal of building North America's premier natural gas exploration company. Highlights of the First Quarter of 1999 - Record Production Growth, Cash Flow and Exploration Success Operations - The first quarter of 1999 was an exciting period for the Company as we began to enjoy the benefits of bringing new production onstream from our Waterton project. Production from Waterton was ramped up during the quarter, resulting in record production and cash flow increases. - The Company also continued to develop the "Canadian 88 Advantage" and we ramped up our deep Foothills exploration drilling program. Our focused strategy of exploring for deep high quality reserve-based natural gas prospects within the Foothills Corridor of Alberta is clearly demonstrated by our drilling activity in the first quarter. We began 1999 utilizing seven deep Foothills rigs in the Wildcat Hills, Ricinus, Strachan, Olds and Waterton areas. We also commenced drilling on the Windy Point overthrust Foothills exploration play in western Wyoming during the first quarter. This aggressive phase of drilling activity has yielded a number of significant new discoveries, all of which will add significantly to our reserve base and production levels as we progress through 1999 and 2000. - At Wildcat Hills, two wells have been drilled into two separate structures at Benjamin Creek and Salter. Both wells have encountered significant hydrocarbons and completion operations are currently underway. Drilling of additional wells will commence shortly and pipeline construction has commenced at West Benjamin. - In the Ricinus and Strachan areas, Canadian 88 has placed on production a discovery at 15-33-37-8 W5M, and a second successful Leduc test at 12-2-36-9 W5M will be tied-in after spring break-up. - At Windy Point in western Wyoming, the Company has successfully completed the drilling of a 14,483 foot exploration test well, which was directionally drilled into the Mission Canyon formation, and encountered over 600 feet of highly fractured, structurally high dolomite. Completion and testing of this exciting new discovery will commence within the next 30 days. Tie-in arrangements have been made to place the well onstream immediately thereafter, and plans are underway to commence the drilling of several follow-up wells. - On the development front, at Olds/Crossfield, four wells were drilled to further delineate this large property. All four wells were successfully drilled and are now on production. In addition, a seventh Waterton well, which includes a 405 meter horizontal leg, has been successfully drilled and completion operations are underway on this high impact well, which we expect to be placed on production by the end of June into our new Waterton pipeline. Furthermore, testing operations have commenced on the Canadian 88-operated Caroline 10-2-35-6 W5M well through a temporary above ground pipeline constructed by Canadian 88 into the nearby Shell Caroline plant. - Of the seven high-impact wells drilled during the first quarter of 1999, we are pleased to report six discoveries and only one dry hole which represents an 86 percent success rate on our high-impact winter drilling program. New reserves associated with these discoveries should ensure that Canadian 88 continues to enjoy record low average finding and onstream costs for proven reserves which over the last three years has averaged $0.51 per mcfe, placing Canadian 88 at the forefront of the industry. A recent Peters & Co. survey for three year average finding and onstream costs showed the Canadian industry average to be $0.71 per mcfe. Accordingly, our above-mentioned projects set the stage for a very exciting 1999. Financial - Average daily production increased 40 percent during the first quarter of 1999 to record levels of 149.0 mmcfe/d compared to 106.5 mmcfe/d in 1998. Average natural gas production increased 61 percent to a record level of 119.5 mmcf/d from 74.2 mmcf/d in 1998. - Average natural gas prices increased 15 percent to $2.25 per mcf from $1.96 during the first quarter of 1998. However, average prices for oil and ngl's were down significantly (28 percent) to $13.38 from $18.57 in 1998. This decline was a result of lower commodity prices experienced in the industry. Fortunately, liquids prices have recovered in recent weeks. - Record cash flow of $10.7 million was up 26 percent from $8.5 million in 1998. EBITDA increased 45 percent to $14.4 million in 1999 as compared to $9.9 million in 1998. Earnings were $1.3 million, down from $2.3 million in 1998, primarily due to an increase in interest expense of $2.2 million over 1998 and higher depletion costs. Revenue also increased 47 percent in the first quarter to a record level of $28.0 million from $19.0 million in 1998 due to higher natural gas production and strong natural gas pricing. - Capital expenditures during the first quarter of 1999 decreased to $36.2 million from first quarter 1998 expenditures of $49.4 million primarily due to reduced capital required for facilities and infrastructure and significantly lower land costs. Capital expenditures incurred were as follows: $28.6 million for exploration and development activities (1998 - $25.9 million); $5.7 million for plants, facilities and pipelines (1998 - $12.0 million); and $1.9 million toward strategic land acquisitions (1998 - $11.5 million). - Canadian 88, in conjunction with Prize Energy Inc. (45.3 percent owned by Canadian 88), ranked third in terms of total acreage acquired at the Alberta government land sales during the first quarter of 1999. We continue to expand our high quality inventory of undeveloped land and drilling prospects. At the end of the first quarter of 1999, Canadian 88 held over 600,000 net acres of highly focused undeveloped land in Western Canada primarily located in the Foothills of Alberta with an average working interest of over 85 percent. Canadian 88 has firmly established itself as a dominant player in the Foothills Corridor with one of the largest single undeveloped land positions in the area, where it is estimated 47 percent of Western Canada's remaining undiscovered natural gas reserves, which are estimated to be 122 TCF of marketable gas, remain to be found. - Canadian 88's strong balance sheet and our predominately gas oriented reserve base is now capable of supporting credit facilities of $300 million. OUTLOOK As a result of the hard work and dedication of our employees and the support of our shareholders, our focussed strategy of developing long-life high quality natural gas reserves is now reaping the benefits of our combined efforts in combination with a very strong Canadian and North American natural gas market. During the first quarter of 1999, we concentrated on ramping-up our drilling to record levels. Land and seismic activities also advanced at a record pace upon which 600 square miles of new high-resolution 3D seismic is currently being shot. Service costs in the last 10 years have never been lower and Canadian 88 worked hard to capture these opportunities while most companies were contracting their operations. Accordingly, we further advanced our Canadian 88 Advantage developing several new deep basin natural gas plays. New deep basin plays being developed by Canadian 88 in the Foothills of Alberta in areas such as Blackstone, Stolberg and Ram River, in addition to ongoing operations at Waterton, Caroline and in the Strachan, Ricinus and Chedderville areas complimented by our recent discovery at Windy Point in western Wyoming position Canadian 88 for continued growth over the months and years to come. By maintaining our focussed deep basin strategy and capitalizing on our strengths in 3D seismic and deep Foothills drilling, we have demonstrated our ability to successfully grow through the drillbit and consistently increase shareholder value. In order to achieve our objective of creating North America's premier natural gas exploration company, Canadian 88 has combined this strategy with a long-range plan of positioning ourself towards participation in the development of world-class natural gas prospects evolving in frontier areas of North America. We previously acquired a highly prospective 215,000 acre block in the Northwest Territories where drilling is expected to commence this fall, and we have also recently acquired two large blocks off the coast of Nova Scotia near Sable Island where very large, highly prospective structures have been identified on our lands. These latter exploration licenses total 951,900 acres and were acquired in exchange for work commitments totaling $30 million over the next five years. These prospects provide Canadian 88 with exposure to world class exploration opportunities with potential structures ranging up to 10 Tcf of natural gas and over 500 million barrels of liquids. Both of these areas are gas prone and we will work to explore and develop these areas in a logical and cost effective manner to maximize value for shareholders. Accordingly, we are very excited about the opportunities and challenges of the future. CANADIAN 88 ENERGY CORP. FIRST QUARTER 1999 FINANCIAL AND OPERATING STATISTICS Three Months Ended Percent March 31 Change ------------------------------ 1999 1998 ---- ---- Financial: (000's except per share amount) Production Revenues $28,001 $18,997 47 Cash Flow from Operations $10,691 $8,478 26 EBITDA $14,363 $9,932 45 Net Earnings $1,297 $2,327 -44 Per Common Share: Cash Flow from Operations $0.10 $0.09 11 Net Earnings $0.01 $0.02 -50 Average Common Shares (000's) 104,916 93,221 13 Operations: Production Volumes: Total (mmcfe/d) 149.0 106.5 40 Natural gas (mmcf/d) 119.5 74.2 61 Oil & NGL's (bbls/d) 2,952 3,232 -9 Sales Prices: Natural Gas ($/mcf) $2.25 $1.96 15 Oil & NGL's ($/bbl) $13.38 $18.57 -28 Capital Expenditures (000's): Exploration & Development $28,594 $25,917 10 Plants, Facilities and Pipelines 5,671 12,030 -53 Land & Lease 1,913 11,463 -83 ------- ------- $36,178 $49,410 -27 ------- ------- ------- ------- Canadian 88 Energy Corp. (EEE) is an independent public oil and gas company with its head office in Calgary, Alberta, Canada. The shares of Canadian 88 Energy Corp. are traded on the Toronto, Alberta and American Stock Exchanges. Disclosure Regarding Forward-Looking Statements Certain statements in this release contain forward-looking statements including outlook on prices, expectations of future production, business plans for drilling and exploration and expectations of capital expenditures. Information concerning reserves contained in this report may also be deemed to be forward-looking statements as such estimates involve the implied assessment that the resources described can be profitably produced in future. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated by the Company. These risks include, but are not limited to: the background risks of the oil and gas industry (e.g., operational risks in development, exploration and production; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors which could affect the Company's operation or financial results are including in the Company's Annual Report under the headings "Management's Discussion and Analysis - Business Risk and Uncertainties" and in the Company's other reports on file with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. The information contained herein has neither been approved nor disapproved by the Toronto, Alberta or American Stock Exchanges.  