Novus Energy Inc. has approved a 2011 Capital Budget of $60 million for exploration and development activities. This budget is expected to generate an average production rate of approximately 2,400 boe/d for the year and an exit production rate of approximately 3,000 boe/d, with approximately 80% of average production volumes and 85% of exit production volumes comprised of oil and liquids.

Viking Oil Resource Play The majority of Novus' 2010 drilling program was focused in its Viking light oil resource play at Dodsland, Saskatchewan, where the Company achieved a 100% success rate on the drilling of 33 operated, 100% working interest wells.

Novus' strategic direction remains unchanged, with the Company competitively positioned in the repeatable, low risk, highly economic Viking resource play in West Central Saskatchewan. This light oil resource play constitutes the core of the Company's development program in 2011, where the Company has 110 net sections of land and 575 high quality drilling locations.

2011 Capital Program The 2011 capital expenditure budget of $60 million will exclusively be devoted to oil development activities, and is expected to incorporate the drilling of 60 wells (57 net), the majority of which will be horizontal wells targeting light Viking oil at Dodsland, Saskatchewan. Of note, 51 net wells of the planned 57 net well program will be drilled horizontally. Novus will be operating 98 percent of the capital expenditures it incurs in 2011, which gives the Company significant flexibility on the timing and scale of its capital program. The Company is currently planning to drill 50 wells (48 net) in its Dodsland Viking light oil resource play, one well (1 net) targeting the Cardium light oil resource play in the Wapiti area of Alberta, one well (1 net) for Halfway light oil in the Wembley area, and eight wells (7 net) in its other oil focused areas. The Company is currently completing a Bakken light oil well in Saskatchewan, and two recently drilled wells in the Wembley area.

In total, approximately 90% percent of the budget is allocated to drilling and completions. 79% of the capital budget will be incurred in the Company's core Viking light oil resource play. This 2011 capital program is consistent with the Company's model to achieve significant internal organic growth.

Production Volumes The 2011 capital budget is expected to result in 2011 average production of 2,400 boe/d which represents growth of approximately 118% over the estimated 2010 average production rate. Approximately 80% of the 2011 average production rate is expected to be comprised of oil and liquid volumes. The forecasted 2011 exit production rate is 3,000 boe/d, 85% of which will be oil and liquid volumes.

Financial Position The Company ended the 2010 fiscal year with no bank debt and undrawn lines of credit of $28 million. Novus expects that its capital budget will be entirely funded through internally generated cash flow and its existing $28 million lines of credit. 2011 year end debt is estimated to be approximately $25 million, and would result in Novus having a debt to annualized fourth quarter 2011 cash flow ratio of approximately 0.5 times. The Company expects to see positive funds flow from operations of $34 million for 2011. This forecast is based on an oil price of US $88.40 WTI per barrel, an AECO natural gas price of CDN $4.04 per mmbtu, and an exchange rate of $0.93 CDN/US.

Tags: Novus Energy