Canext Announces Second Quarter Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Aug. 17, 2009) - Canext Energy Ltd. ("Canext" or the "Company") (TSX VENTURE:CXZ) is pleased to announce its operating and financial results for the three and six months ended June 30, 2009.

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Three Months Ended Six Months Ended
June June
2009 2008 2009 2008
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Average daily production
Oil and NGLs bbls/d 152 140 197 158
Natural gas (mcf/d) 5,059 5,613 5,321 5,567
Production (boe/d) 995 1,076 1,083 1,086

Highlights ($000's)
Revenue 2,399 6,524 5,846 11,909
Funds from operations 347 3,479 931 5,821
Net income/(loss) (2,024) 376 (2,962) (408)
Capital spending 697 1,582 2,489 4,538
Acquisitions/(Dispositions) (2,896) (6,024) (3,196) (6,024)

Per Common Share
Funds from operations 0.00 0.05 0.01 0.08
Net earnings/(loss) (0.02) 0.00 (0.03) (0.01)

Balance Sheet at period end (000's)
Property, plant and equipment 61,750 52,713
Working capital surplus/(deficit) (6,482) 6,793
Shareholders' equity 53,639 58,021

Wt average shares 000's 87,981 77,036 87,981 76,665
Outstanding at period end 000's 87,981 88,485

Revenue $/boe 26.49 66.65 29.81 60.26
Royalty $/boe (4.72) (13.16) (6.67) (12.05)
Opcost $/boe (11.36) (10.82) (12.39) (12.29)
Transportation $/boe (0.45) (0.43) (0.47) (0.41)
Operating Netback $/boe 9.96 42.24 10.28 35.51
G&A $/boe (5.53) (5.63) (5.05) (4.91)

(1) Funds from operations and operating netbacks as presented do not have
any standardized meaning prescribed by Canadian GAAP and therefore they
may not be comparable with the calculation of similar measures for
other entities.

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Highlights:

- Production averaged 995 boe/d down 7.5% from same period last year due to Sweeney oil production being shut-in for 62% of the quarter due to spring break-up, resulting in a loss of 120 boe/d,

- Sold 1,150 mcf/d (190 boe/d) of producing assets at Worsley which closed on May 29, 2009,

- Net debt was reduced to $6,482,000 down 28% from the first quarter of 2009,

- Operating costs per boe declined 14% from the first quarter of 2009,

- Funds from operations for Q2 2009 declined to $347,000 primarily due to a 64% drop in realized natural gas prices and a 50% drop in oil and NGL prices as compared to the same period in 2008,

- Operating netback averaged $9.96/boe and was negatively impacted by less production from Sweeney which had an average operating netback of $20.29/boe.

Second Quarter Summary

Canext has emerged a stronger company following its most challenging quarter to date. Despite a sharp reduction in natural gas prices combined with a lengthy shut-in of its highest netback property, the Company maintained positive funds from operations. Canext continued to move forward with its highly focused and opportunistic business plan. Non-core short life natural gas reserves were sold to strengthen the balance sheet which will allow the Company to redirect capital into its higher value oil play at Sweeney.

In June the Company elected to shut-in 240 - 300 mcf/d (40 - 50 boe/d) of high operating cost production. If natural gas prices continue to weaken additional production may be shut-in.

Operational Update

Pouce Coupe

During the second quarter the Company brought on-stream its second Montney horizontal well (45% WI) at Pouce Coupe. As discussed in the April 22, 2009 press release, the well was stimulated with three - 100 tonne foam fracs to test a new completion technique. Results to date are encouraging with production stabilizing at 90 - 100 boe/d (net 40 - 45 boe/d). However, the Company and its partners have elected to defer the final five fracs until natural gas prices recover. This has delayed the start-up of an incremental net 70-90 boe/d.

Production at Pouce Coupe averaged 392 boe/d for the second quarter which was up from the first quarter despite having approximately 200 boe/d off line for 14 days for a third party plant turnaround.

Subsequent to the quarter a non operated Montney horizontal well (25% WI) was brought on-stream at restricted rates of 1,200 mcf/d (300 mcf/d net or 50 boe/d).

Due to continued weak natural gas prices, the Company has deferred the tie-in of a 100% well at Pouce Coupe which tested 800 mcf/d (130 boe/d) from the Upper and Lower Montney. The tie-in route has been surveyed and the right of way is being acquired which will allow the Company to quickly proceed with a tie-in once conditions improve. Given the current climate for natural gas, the Company has also deferred drilling additional wells at Pouce and has farmed out its 62.5% WI in a shallow (non Montney) gas test.

Senior producers continue to be active proving up acreage directly offsetting Canext. The Company has an inventory of 32 net horizontals based on three wells per section in the Lower Montney and two wells per section in the Upper Montney.

Sweeney

Sweeney/Clear Prairie production averaged 132 boe/d for the second quarter down from 253 boe/d in the first quarter. On-stream efficiency was only 38% for the second quarter due to spring break-up limiting the ability of the Company to truck out its oil production. The net effect was a loss of 120 boe/d. The 8-32 well continues to produce at 240 - 250 boe/d (140 - 150 boe/d net) with a high pumping fluid level.

The Company recently acidized two wells which had shown high skin damage limiting production. One well increased production from 30 bbls/d to 130 bbls/d with a high fluid level however, the watercut increased from 4% to 75% eliminating any gain in oil production. The second well was stimulated and saw only a minor increase in production. Additional technical work including more detailed core analysis will be conducted to help understand the damage mechanism.

The Company is currently drilling a step out well (60% WI) at Sweeney. The well encountered the target zone as expected and has been plugged back to begin drilling a 250 m horizontal section in the zone of interest. The horizontal will be left open hole to allow for increased inflow with reduced drawdown which will maximize oil production while minimizing water production. A second well (60%) is planned directly offsetting the prolific 8-32 well. This vertical well will be drilled immediately after the horizontal.

The Company plans to move forward with additional oil infill and step out locations this winter to maximize its return under the Alberta drilling and incentive program which pays $200/m for drilling new wells and reduces the first year royalty to 5%.

Outlook

The stronger balance sheet has allowed the Company to take a disciplined approach to the timing of certain projects and temporarily suspend production at higher operating cost properties. The Company is estimating approximately 290 boe/d remains off line pending a recovery in commodity prices. Production for the third quarter is expected to average 900 boe/d. Capital spending in the third quarter will be approximately $1,700,000 to drill, complete and equip a 60% WI horizontal and vertical well at Sweeney. The Company has budgeted $5,000,000 for 2009 capital spending however, actual spending may be adjusted based on the outlook for natural gas and/or oil prices.

Year end production is expected to return to 1,000 - 1,100 boe/d based on additional production at Sweeney and assuming no recovery in gas prices. The percentage of oil and liquids production is expected to increase to 40% from 20% at the start of the year. The increased weighting on oil and lower royalties for new wells are expected to significantly increase the operating netback and funds from operations for the Company.

With the healthy balance sheet and impressive inventory of oil and natural gas development projects, the Company is in a favorable position to react to those opportunities which provide the best return for our shareholders.

Reader advisory:

The term "BOE" may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio for natural gas of 6 mscf: 1 bbl has been used which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Investors are cautioned that the preceding statement of the Company may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Company may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections, in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including natural gas/oil prices, reserve estimates, drilling risks, future production of gas and oil, rates of inflation, changes in future costs and expenses related to the activities involving the exploration, development and production of gas and oil hedging, financing availability and other risks related to financial activities. The Company's forward looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.