Pegasus Oil & Gas Inc. says 2008 production increased 41% to 637 boe/d as compared to 2007.

In 2008, Pegasus drilled 12 (8.8 net) wells with a 60% success rate. Over 80% of the 'net' wells drilled during the year were exploratory wells with the majority of the drilling activity focused in the Company's core areas of Crossfield and Strathmore in Central Alberta. Average production increased 41% to 637 boe/d for the calendar year as compared to 2007. Fourth quarter 2008 production averaged 635 boe/d, relatively unchanged from the third quarter average of 655 boe/d with no wells drilled during the fourth quarter.

Reserves increased to 2,682,000 boe total proved and 4,393,000 boe total proved plus probable representing an increase from year end 2007 of 10% and 27%, respectively. Proved reserves account for 61% of the total booked reserves. The total proved and total proved plus probable reserve life index is 11.6 years and 19.0 years respectively, based on average fourth quarter 2008 production.

No wells were drilled in the fourth quarter of 2008 as the Company focused its capital on the 12 kilometre main pipeline installation (60% WI) at Strathmore. The pipeline was commissioned and operational in early January 2009 and two additional Pekisko wells were brought on stream. The third Pekisko well has been tested at 60 boe/d (60% net) and will be considered for tie-in when commodity prices improve. The pipeline has allowed the Company to keep its 2009 first quarter field estimated production level with the fourth quarter of 2008.

Two commitment wells remain undrilled as part of the Strathmore farm-in agreement. The commitment date for these remaining wells is June 30th, 2009. Currently, five locations have been either acquired, or licensed, to facilitate the commitment timeline. Pegasus has restructured the farm-in agreement to allow for the drilling of developmental stepout wells into this play as part of the remaining farm-in agreement. Vertical wells will be targeted offsetting existing production, and along the new pipeline route, as part of the remaining commitment. Capital costs are estimated at $400,000 to evaluate a well and approximately $1.1 million to complete, equip and tie in a successful well.

Tags: Pegasus Oil & Gas Inc.