GEOCAN Energy announces record cash flow and earnings for fiscal 2005

CALGARY, March 31 /PRNewswire-FirstCall/ -- GEOCAN Energy Inc. (TSX: GCA) announces the achievement of record results from its operations in 2005, the fifth year of continual financial growth. In its annual report for the year ending December 31, 2005, GEOCAN reports substantial growth from a combination of exploration and acquisition. As a result of these initiatives, GEOCAN is now substantially larger than it was at the start of 2005, with increased production, cash flow, prospects and opportunities.

GEOCAN'S $51.5 million strategic acquisition of Assure Energy, Inc. which was completed in September 2005, brought to the Company a balance of stable, low-decline reserves and exciting new prospects that have given the Company a greater natural gas focus.

The Company notes that this news release contains selected financial and other information from its 2005 annual report which is available at SEDAR (http://www.sedar.com/) and its web site (http://www.geocan.com/). This information should be read in conjunction with the December 31, 2005 and 2004 audited consolidated financial statements of the Company, attached notes and management's discussion and analysis, all of which are contained the 2005 annual report. The Company also notes that its complete reserves report was the subject of a new release distributed on March 30, 2005 and is also available at the two web sites.

Highlights of 2005 include: - Value of reserves increased 230 percent to $135,005,000 from $40,895,000 in 2004, with its volumes evenly distributed between natural gas (33 percent), light oil and medium oil (30 percent) and heavy oil (37 percent). - Exit production was 3,414 boepd in 2005, up 70 percent from 2,006 boepd in 2004. - Exit production in 2005 was 46 percent heavy oil, 32 percent natural gas and 22 percent light and medium oil, a substantial shift from 2004 (86 percent heavy oil, 10 percent gas and 4 percent light and medium oil). - Finding and development costs in 2005 were better than industry average. Total proved and probable finding and development costs of $13.21 per boe, proved - $13.96 per boe. - Capital assets increased 199 percent to $107,639,000 from $35,940,709 at the start of the year. - Gross undeveloped land increased 67 percent to 128,818 acres (101,697 net), compared with 77,100 (69,265 net) in 2004. Most of this land is in gas-prone areas. - Gross revenues from all sources were $33,381,746, up 99 percent from $16,788,351 in 2004. - Cash flow was up 97 percent to $12,972,434 compared to $6,590,332 in 2004. - The Company achieved an 87 percent success rate on 23 wells drilled, resulting in 11 oil wells and nine natural gas wells. - NPV10 percent proven plus probable reserves valued at $2.48 per basic share (based on 54,481,301 common shares at December 31, 2005) - Total proved plus probable reserves replacement ratio of 1.78 times 2005 production - Proved plus probable recycle ratio of 1.43 times Year To Date Highlights Year ended Year ended Dec 31, 2005 Dec 31, 2004 Percent Change ------------- ------------- -------------- Gross Revenue $ 33,381,746 $ 16,788,351 99% Net Revenues $ 27,772,725 $ 13,937,682 99% Production Expenses $ 9,999,149 $ 5,433,064 84% Per unit ($/boe) $ 12.52 $ 10.16 23% Depletion & Site Restoration Expense $ 10,809,221 $ 7,488,910 44% Per unit ($/boe) $ 13.54 $ 14.00 -3% General & Administration Expense $ 2,184,961 $ 1,451,068 51% Per unit ($/boe) $ 2.74 $ 2.71 1% Cash flow $ 12,972,434 $ 6,590,332 97% Per share (basic) $0.00 $0.40 -104% Per share (diluted) $0.34 $0.39 -12% After Tax Net (Loss) Income $ 1,552,666 $ (1,155,226) Per share (basic) $0.05 ($0.07) Capital Expenditures $ 19,905,887 $ 23,869,948 -17% Total Capital Assets (net of depletion) $ 107,639,000 $ 35,940,709 199% Average Production (boepd) 2,188 1,465 49% Exit Production (boepd) 3,414 2,006 70% Drilling Results

Historically, GEOCAN has enjoyed a high success rate in drilling. From 1998 to 2005, the Company participated in 100 wells (drilling, recompletions and re-entries); the overall success rate in that period averaged 86 percent, well above the industry average. In 2005, GEOCAN drilled 23 gross wells with an 87 percent success rate (nine natural gas, 11 oil wells), compared with 31 wells and an 84 percent success rate in 2004. While the number of wells drilled in 2005 was lower, the focus in 2005 was 'west of 5', with its deeper, higher cost and higher impact natural gas and light oil targets. The majority of the wells are operated by GEOCAN and at 100 percent GEOCAN working interest.

Market Cap

At year-end, the Company held a strong balance sheet position with total shareholders equity of $67.8 million compared to net debt of $20.8 million, which equates to a 1:3.3 times debt-to-equity coverage ratio. When compared to GEOCAN's $112 million market capitalization at December 31, 2005, the Company's net debt of $20.8 million equated to a 5.4 times debt coverage ratio.

Land Position

During 2005, the Company increased its land holdings by 66,703 gross (41,233 net) acres at an average working interest of 62 percent. This substantial increase occurred primarily through the acquisition in September of Assure Energy, Inc. and its subsidiaries. The acquisition provided GEOCAN a number of new core areas, most notably northeast British Columbia, which contributed over 26,000 gross undeveloped acres. Property acquisitions within GEOCAN's new and existing core areas contributed over 55,000 gross developed and undeveloped acres and direct Crown land sales contributed 10,960 gross/net acres of undeveloped land. The vast majority of the 10,960 gross/net acres acquired at Crown sales targeted natural gas and are located in the central Alberta core area (4,480 gross/net acres) and in gas-prone lands on the Saskatchewan side of the Lloydminster core area (6,440 gross/net acres), with only 40 acres having been acquired specifically for heavy oil.

As a result of this activity, GEOCAN now has in excess of 158 sections of undeveloped land to explore and develop. The Company is continuing to expand its land base in core areas, with an emphasis on increasing holdings in northeast British Columbia, west-central Alberta and northwest Alberta. As an example, GEOCAN will earn an additional 6,400 undeveloped acres in the first quarter of 2006 with a seismic data acquisition in northwest Alberta after signing a seismic option agreement with a major integrated oil and gas producer.

Building for the Future

GEOCAN plans to grow larger while building additional value for shareholders. The Company plans to remain focused on this strategy and continue to deliver results. In 2006, the emphasis is to grow organically through the drill bit. The Company's $30-million capital program will be funded entirely from cash flow and existing bank facilities. GEOCAN anticipates drilling 34 wells (30.33 net), acquiring more land within core areas, conducting 3D and 2D seismic programs, and undertaking various facilities projects. Approximately 65 percent of the drilling program of 10 exploratory wells and 24 development wells will target natural gas and light oil, mostly in high working-interest core areas of northeast British Columbia, west-central Alberta and west-central Saskatchewan.

Operational Highlights 2005 Corporate Highlights for the 9 mths for the for the period year ended year ended ended for years ended Dec 31, Dec 31, Dec 31, March 31, 2005 Production 2004 2003 2003 2002 ---- ---------- ---- ---- ---- ---- Exit volumes ------------ 6,513 Gas (mcf/d) 1,173 1,493 1,141 800 740 Light Oil (bbl/d) 88 126 137 126 1,589 Heavy Oil (bbl/d) 1,722 524 305 152 n/a NGL's (bbl/d) - incl in light oil n/a 2 8 18 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3,414 Boepd (@ 6:1) 2,006 901 640 429 Average volumes --------------- 2,188 Boepd (gas @ 6:1) 1,465 751 443 309 ------------------------------------------------------------------------- ------------------------------------------------------------------------- period ended for years ended Dec 31, March 31, 2005 Prices 2004 2003 2003 2002 ---- ------ ---- ---- ---- ---- $ 10.21 Gas ($/mcf) $ 6.80 $ 5.67 $ 5.65 $ 3.87 $ 59.87 Light Oil ($/bbl) $ 48.47 $ 37.30 $ 41.26 $ 32.62 $ 34.15 Heavy Oil ($/bbl) $ 30.03 $ 25.25 $ 31.23 $ 21.24 ------------------------------------------------------------------------- ------------------------------------------------------------------------- period ended for years ended Dec 31, March 31, 2005 Reserves 2004 2003 2003 2002 ---- -------- ---- ---- ---- ---- Proven ------------------- 9,051 Gas (mmcf) 2,089 1,442 1,377 1,671 3,741.4 Oil & NGL (mbbls) 2,207.6 1,243.9 1,237.8 895.5 ---------- ------------------- ---------- -------- -------- -------- 5,249.9 Boe equivalents 2,555.8 1,484.2 1,467.3 1,174.0 Probable ------------------- 4,964 Gas (mmcf) 1,083 522 219 22 1,818.1 Oil & NGL (mbbls) 1,294.9 843.1 619.4 260.1 ---------- ------------------- ---------- -------- -------- -------- 2,645.4 Boe equivalents 1,475.4 930.1 655.8 263.8 Proven & Probable ------------------- 14,015 Gas (mmcf) 3,172 1,964 1,596 1,693 5,559.5 Oil & NGL (mbbls) 3,502.5 2,087.0 1,857.2 1,155.6 ---------- ------------------- ---------- -------- -------- -------- 7,895.3 Boe equivalents 4,031.2 2,414.3 2,123.1 1,437.8 period Total Canadian Land ended for years ended ------------------- Dec 31, March 31, 2005 (acres) 2004 2003 2003 2002 ---- ------- ---- ---- ---- ---- 164,290 Gross 97,586 49,003 29,153 27,175 125,536 Net 84,303 41,272 22,445 14,468 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2005 AND 2004 December 31, December 31, 2005 2004 ------------- ------------- Assets Current Accounts receivable $ 10,181,438 $ 1,741,724 Prepaid expenses 763,289 317,577 ------------------------------------------------------------------------- 10,944,727 2,059,301 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Property and equipment 107,639,000 35,940,709 Investment 968,266 - Goodwill 2,653,902 - ------------------------------------------------------------------------- $ 122,205,895 $ 38,000,010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current Bank indebtedness $ 650,856 $ 2,079,767 Accounts payable 14,078,650 5,694,222 Cumulative dividend payable 70,286 - Risk management liability - 555,677 Bank debt 10,900,000 3,735,000 Long term debt - current portion 1,190,221 - ------------------------------------------------------------------------- 26,890,013 12,064,666 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Asset retirement obligation 5,926,421 2,587,598 Long term debt 2,206,559 - Future income taxes 16,663,800 5,628,028 Preferred shares 2,739,676 ------------------------------------------------------------------------- 54,426,469 20,280,292 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Shareholders' Equity Share capital 64,763,778 18,060,734 Share purchase warrants 2,094,819 628,676 Contributed surplus 657,476 314,422 Retained earning (deficit) 263,353 (1,284,114) ------------------------------------------------------------------------- 67,779,426 17,719,718 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ 122,205,895 $ 38,000,010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Approved on behalf of the Board: "Wayne S. Wadley" Raymond Cej Wayne S. Wadley Raymond Cej President, CEO and Director Director CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT) Year ended December 31, 2005 2004 ---- ---- Revenue: Revenues $ 33,381,746 $ 16,788,351 Less: Royalties (net of ARTC) (5,609,021) (2,850,669) ------------------------------------------------------------------------- 27,772,725 13,937,682 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Expenses: Operating 9,999,149 5,433,064 Transportation 821,363 542,761 General and administration 2,184,961 1,451,068 Stock based compensation 421,337 183,105 Interest and bank charges 836,816 472,118 Cumulative dividend on preferred shares 70,286 - Depletion, depreciation and accretion 10,809,221 7,488,910 ------------------------------------------------------------------------- 25,143,133 15,571,026 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income (loss) before income taxes 2,629,592 (1,633,344) Provision for income taxes (recovery) Current 396,510 4,016 Future 680,416 (482,134) ------------------------------------------------------------------------- 1,076,926 (478,118) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) for the period 1,552,666 (1,155,226) ------------------------------------------------------------------------- Deficit, beginning of period (1,284,114) (128,888) Acquisition of shares in excess of assigned value (5,199) - ------------------------------------------------------------------------- Retained earnings (deficit), end of period $ 263,353 $ (1,284,114) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income (loss) per share Basic $ 0.05 $ (0.07) Diluted $ 0.05 $ (0.07) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31, 2005 2004 ---- ---- Operating activities Net income (loss) for the period $ 1,552,666 $ (1,155,226) Adjustments for non-cash items: Depletion, depreciation and accretion 10,809,221 7,488,910 Change in unrealized financial risk management liability (561,492) 555,677 Stock based compensation 421,337 183,105 Cumulative dividend on preferred shares 70,286 - Future income taxes (recovery) 680,416 (482,134) ------------------------------------------------------------------------- $ 12,972,434 $ 6,590,332 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Asset retirement obligation settled (244,102) (197,635) Other income on disposal of asset (1,031,688) (802,584) Change in non-cash working capital (1,268,890) (706,455) ------------------------------------------------------------------------- 10,427,754 4,883,658 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Investing Capital asset expenditures $ (19,905,887) $ (23,869,948) Proceeds on disposition of capital assets 1,031,688 2,705,368 Assure transaction costs (2,724,120) Change in non cash working capital (2,086,746) 3,389,807 ------------------------------------------------------------------------- $ (23,685,065) $ (17,774,773) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Financing: Issuance of common shares 20,595,730 10,324,507 Proceeds of debt 7,165,000 1,480,000 Repayment of debt affiliated with Assure (11,755,216) Repurchase of shares (10,200) Share issuance costs (1,309,092) ------------------------------------------------------------------------- $ 14,686,222 $ 11,804,507 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Increase (decrease) in cash 1,428,911 (1,086,608) (bank indebtedness) beginning of period (2,079,767) (993,159) ------------------------------------------------------------------------- (bank indebtedness), end of period $ 650,856 $ (2,079,767) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental information Interest paid $ 772,566 $ 321,840 Taxes paid $ - $ 4,016 ------------------------------------------------------------------------- ------------------------------------------------------------------------- GEOCAN Energy Inc. Production & Revenue

Oil and gas revenues rose 78 percent to $32,400,699 ($40.58 per boe) compared with $18,236,261 ($34.10 per boe) in 2004. This excludes other income in 2005 of $1,472,445, made up of predominantly the monthly receipt of the sale proceeds from the 2004 sale of the Breclav property in the Czech Republic and the net effect of realized loss on financial instruments.

While revenues were impacted early in the year by wet weather across western Canada they were bolstered by the acquisition of Assure Energy, Inc. in September 2005 as well as higher commodity prices versus those experienced in 2004. Production averaged 2,188 boepd for the year up 49 percent from 1,465 in 2004. Of note, fourth quarter 2005 production averaged 2,808 boepd compared with 1,944 in the fourth quarter 2004.

Exit production volumes for 2005 were 3,414 boepd, up 70 percent from 2,006 boepd for 2004. Exit volumes were distributed 32 percent to natural gas and natural gas liquids (NGL's), 22 percent to light oil and 46 percent to heavy oil. Overall, 2005 production of 798,534 was up 49 percent or 263,734 boe's compared to 534,800 in 2004.

Natural gas prices averaged $10.21 per mcf for 2005, up 46 percent from those experienced in 2004. Light oil prices averaged $59.87 in 2005 up 25 percent from 2004 while heavy oil prices averaged $34.15 up 3 percent from 2004.

Overall GEOCAN netbacks were up 22 percent in 2005 at $18.69 per boe compared with $15.32 per boe in 2004, driven by significantly higher netbacks on natural gas which were up 61 percent to $6.55 per mcf and on light oil which were up 69 percent to $39.95 per bbl. These figures reflect the significant impact that increased natural gas and light oil production had on overall cashflow. Heavy oil netbacks decreased 11 percent to $13.08 per bbl underscoring GEOCAN's strategic shift to a more balanced portfolio of commodities that led to the Assure acquisition.

Royalty expense in 2005 was $5,609,021 (net of Alberta Royalty Tax Credits ("ARTC")) or $7.02 per boe compared with $2,850,669 or $5.33 per boe in 2004. This 32 percent year-over-year increase on a boe basis results from higher commodity prices and the indexing of royalties to those higher commodity prices, as well as the higher royalty rates associated with natural gas and light oil resulting from the Assure acquisition.

Operating expenses in 2005 were $9,999,149 ($12.52 per boe) compared with $5,433,064 ($10.16 per boe) in 2004. This increase on a boe basis is due to cost increases across the oilfield services industry in areas such as field operations, workovers, fuel and down-hole equipment.

Of note, operating costs in the fourth quarter were $12.23 per boe, down significantly from $13.96 in the third quarter of 2005, a reflection of the lower costs associated with natural gas and light oil, commodities which increased their weighting at GEOCAN after the Assure acquisition. GEOCAN anticipates further operational efficiencies in 2006 as a result of recent key personnel added to the operations department and by bringing programs previously contracted out in-house to be managed by GEOCAN personnel.

The Company's revolving and development/acquisition facilities were amended on September 20, 2005 after the Assure acquisition and at year end were $25 million and $6 million respectively. The revolving facility bear interest at bank prime plus a margin based on various debt to cash flow ratios. The non-revolving acquisition/development demand loan incurs interest at bank prime plus 0.50 percent. The total drawn on the two facilities was $10.9 million at year-end; both facilities are under review and management anticipates an increase to each, in line with 2005 reserves additions.

On December 5, 2005, GEOCAN paid off the remaining balance on a non-interest bearing shareholder loan in the amount of $1,340,678 that was inherited through the Assure transaction. On February 2, 2006, the Company made its last quarterly payments on a Canadian dollar denominated and US dollar denominated note and on February 28, 2006 GEOCAN fully retired the Canadian dollar denominated note, paying $608,003 Cdn (inclusive of accrued interest) and the U.S. dollar denominated note, paying $2,141,154 US (inclusive of accrued interest). These Canadian and U.S. dollar denominated notes bore interest rates of prime plus 3.5 percent per annum.

After tax cash flow from operating activities in 2005 was $12,972,434 ($0.40 per share basic) up 97 percent on an absolute basis as compared with $6,590,505 ($0.40 per share basic) in 2004. Cashflow was positively impacted by higher commodity prices and the increased netbacks affiliated with a higher weighting toward natural gas and light oil during the final four months of 2005, after the Assure acquisition.

Cashflow per common share (basic) was in line with 2004, a function of the common shares issued for the acquisition (19,287,296 common shares) and the $20,026,250 financing (10,825,000 common shares). As a measurement, cashflow per share alone does not reflect the strengthening of the year-end balance sheet which resulted from the October financing and only reflects four months of cashflow from the Assure Energy, Inc. acquisition.

Earnings after income tax for 2005 were $1,552,666 or $0.05 per share basic, up significantly from a loss of $(1,155,226) or $(0.07) per share basic in 2004. No Federal Income Tax was incurred in 2005. Current taxes of $396,510 are a combination of Federal Large Corporation Tax and the Saskatchewan Resource Surcharge.

Based on GEOCAN's capital expenditure plans, forecasted revenues and expenses, the Company does not anticipate being taxable under Federal Income Tax legislation in 2006. The Company has no outstanding flow-through share obligations at December 31, 2005.

The Company's share capital at December 31, 2005, was $67,779,426, an increase predominantly the result of the shares issued for the Assure acquisition in September 2005 and the October 2005 bought deal financing. The Company issued 19,287,296 common shares through the acquisition.

On October 13, 2005, the Company closed a $20,026,500 financing on a bought deal basis, issuing 10,825,000 common shares (including 1,325,000 common shares issued pursuant to an over-allotment option granted to the underwriters) at a price of $1.85 per share. The financing was oversubscribed, was subsequently increased and was closed in short order. The transaction parameters and its closing in less than a month was an affirmation by the market of the excellent metrics of the Assure acquisition. Gross proceeds of the equity financing were $20,026,250 and these common shares were subject to a hold period that expired on February 14, 2006. There were no broker warrants issued on the financing and broker commissions were 6 percent. As a result, GEOCAN had 54,481,303 basic common shares issued and outstanding at year-end 2005. GEOCAN will use the proceeds to fund its ongoing exploration and development program through 2006 and into 2007.

GEOCAN is an oil and gas company with operations in British Columbia, Alberta and Saskatchewan. The focus of GEOCAN's current growth strategy is exploration and development while pursuing accretive acquisitions that create value for its shareholders. Fiscal discipline, operational control and a balanced risk profile are key components of this strategy. Over the past two years, GEOCAN has made two major acquisitions totaling approximately $56 million, significantly increasing market capitalization and moving the Company's production mix toward natural gas and light oil. The Company currently has 54.7 million basic common shares issued and outstanding.

FORWARD-LOOKING STATEMENTS

This news release may contain forward-looking statements including expectations of future production, cash flow and earnings. This guidance is based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; 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), commodity price, price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. GEOCAN's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, to what benefit GEOCAN will derive therefrom. GEOCAN disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Boe presentation: barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion rate of 6 Mcf per 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in the report are derived by converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil.