WestFire Energy Ltd. has completed an asset acquisition in its core Viking area at Redwater, Alberta. The Board of Directors has also approved an operating plan focused on the development of its considerable Viking light oil resources in 2012.

Redwater Viking Acquisition

As previously reported, the Viking development at Redwater has exceeded Company expectations. Predicated on its success and confidence in the area, WestFire has completed an acquisition of additional Viking assets in this area for $40.3 million, subject to customary post-closing adjustments. The purchase price was funded by the Company's credit facilities.

The assets are comprised of production, 10 sections of prospective undeveloped land in the Viking and complementary infrastructure and facilities. The production averaged 600 barrels of oil equivalent per day production between the effective and closing dates. The purchase adds 1.8 million barrels of oil equivalent of proved plus probable reserves as determined by independent reserves evaluators. WestFire has identified over 110 potential Viking horizontal oil drilling locations, of which 100 net locations are not currently reflected in the reserves evaluation. WestFire believes that these additional drilling locations represent upside potential of 6.5 Mmboe of reserves to the Company which can be developed at an estimated cost of $115 million. The projected finding, development and acquisition costs of $18.71 per boe translates into a recycle ratio of 4.0 based on WestFire's current Viking operating netback of approximately $75.00 per boe.

WestFire now holds 52.3 sections of undeveloped land on the Redwater Viking play with 26.3 sections in the higher reservoir quality trend. This high quality acreage holds the potential for 347 Viking horizontal drilling locations. This position ranks the Company as one of the leaders on the Redwater Viking play and represents multiple years of drilling inventory.

Plato Viking Update

WestFire is encouraged by recent well results in the Plato area of west central Saskatchewan. Prior to 2011, the Company had drilled 10 Viking horizontal oil wells with modest production results. This early drilling did, however, contribute valuable data about reservoir quality and completion techniques which are now being applied to drilling in the area.

During the third quarter, WestFire drilled four horizontal oil wells at Plato. Two of these wells, on trend and three miles apart, have shown considerably better results than the industry average in this area. The first well commenced production in late September and flowed at a restricted rate until early November when pumping equipment was installed. Over the past month, the well has averaged 75 bopd at controlled pumping rates and has produced in excess of 4,500 barrels of oil since September. The second well has pumped at a controlled rate of 60 bopd over the past month, after flowing initially. The cumulative production from this well is in excess of 2,500 barrels of oil to-date.

During 2011, the Company also embarked on a 10 well Viking vertical core hole program to better define reservoir quality and thickness at Plato. Eight core holes drilled to date confirmed the presence of hydrocarbons and show consistently high reservoir quality over the area studied.

WestFire currently holds 45.6 sections of land in this area, representing 264 potential Viking horizontal drilling locations. This position makes WestFire one of the largest stakeholders in the Plato area.

2012 Operating Plan

The Board of Directors has approved a capital expenditure budget for 2012 of $155 million focused on the development of the Company's considerable Viking resources. Approximately 85 percent of this budget is directed to drilling at Redwater and Provost, Alberta and to Plato, Saskatchewan where 110 wells in aggregate are planned during the year. The remainder of the budget will be spent on land, seismic and maintenance capital on existing properties.

The budget is expected to generate average production of 9,750 boepd, which represents a per share production growth of approximately 30 percent over 2011. WestFire's 2012 production mix is targeted to be 71 percent crude oil and liquids and 29 percent natural gas. Based on current strip commodity prices and exchange rates, this capital program will essentially be funded by funds flow from operations, thereby allowing WestFire to maintain its prudent financial strategy and sound balance sheet.

Tags: WestFire Energy Ltd.