Manitok Energy Inc. announces it's upcoming heavy oil drilling program, corporate update and asset disposition.

Press Release

August 10, 2010, Calgary, Alberta – Manitok Energy Inc. ("Manitok") (TSX-V: MEI) is pleased to provide the following corporate update.

Operational Update

Manitok's primary focus is in the Canadian Foothills where it is working on several high impact exploitation opportunities. Manitok's second area of focus is heavy crude oil in east-central Alberta. With the current Alberta royalty incentives and the higher price of crude oil relative to that of natural gas, Manitok intends to commit a portion of its working capital to generate production and reserves growth through development drilling on its heavy oil lands. Management of Manitok believes that this will establish a base cash flow for Manitok and also serve to create reserves value which can be leveraged financially in order to continue the development of its long term foothills strategy.

Swimming Heavy Oil

Manitok has 6,600 acres (10.3 sections), with 100% working interest, in the Swimming area approximately 80.5 kilometers (50 miles) east of Lloydminster. Based on a reserves report prepared by Sproule International Limited ("Sproule") for Manitok's predecessor, Manitok Exploration Inc. ("Sproule Report") effective as of June 30, 2009, Manitok has, as at June 30, 2009, 257,200 bbls (barrels) of proven heavy oil reserves and 178,900 bbls of probable heavy oil reserves from two separate pools. Most of those reserves are from one Manitok pool directly offsetting an existing competitor's pool which has produced over 1,300,000 bbls to date from over 15 wells.

Based on the existing four producing wells and our 3D seismic interpretation over the pool, management of Manitok believes that there are over 15 development drilling locations, with multi-zone potential. Manitok intends to drill five heavy oil targets within the pool perimeter established by the four producing wells. The first is scheduled to spud in late August of 2010. The entire capital cost of the program is expected to be about $2.8 million and will be funded from Manitok's existing working capital. Production from the wells is expected to occur in the fourth quarter. Manitok anticipates drilling up to another five heavy oil locations before the year end, depending on the evaluation of the results achieved by the first five drills.

Manitok intends to acquire both 2D and 3D seismic in the Swimming area during the fourth quarter of 2010 in order to further develop its exploitation and exploration efforts. A portion of the seismic is being acquired over the second, non-producing Manitok heavy oil pool, where two wells had produced 75,000 bbls of heavy oil before being suspended in 2004. Manitok intends to evaluate the seismic to determine the number of possible drilling locations on its lands over the pool. The remainder of the seismic is being acquired over 5,760 acres (9 sections) of Manitok's undeveloped land, to determine the number of heavy oil drilling locations.

Manitok intends to develop its heavy oil acreage as a means to generate the necessary cash flow and reserves growth to fund its long term foothills strategy. Given the strong valuation levels of heavy oil asset sales in east-central Alberta over the last year, Manitok believes that this strategy will provide better market valuations for its equity.


Manitok has identified over eight conventional liquids-rich Cardium natural gas development targets on its 100% working interest lands, 10,880 acres (17 sections), in the Fallen Timber area which is approximately 97 kilometers (60 miles) northwest of the town of Cochrane, Alberta. These locations were determined using 2D seismic and the well control provided by six producing competitor Cardium wells spaced throughout Manitok's acreage. The potential range of liquids production is approximately 50 to 70 bbls/MMcf (barrels per million cubic feet). The six producing wells, at about 2,500 meters deep, have already proven that the conventional reservoir can be economically exploited with vertical drilling. These drills could be extended deeper, to about 3,000 meters, to test the potential of the Viking zone which has proven production in the area. Three of the locations also have the potential for Cardium repeats (intersecting more than one prospective Cardium zone in the wellbore). The economics that generated the rates of return to support drilling these wells at current commodity prices were derived from a scenario of encountering only one Cardium zone in the wellbore. The Fallen Timber locations are along existing pipeline and the receiving natural gas plant has more than 50% spare capacity.

Manitok expects to drill three to six Cardium locations over the next 12 months with the spudding of the first drill in the fourth quarter of 2010. Both the number of drills, and the depth tested, will depend on several factors, which may include whether Manitok farms out a portion of the project to another party, the success of the above mentioned heavy oil drilling program, the level of commodity prices, and the availability of capital. Manitok could fund three wells, at 100% working interest, with its current working capital, expected debt capacity and cash flow over the next 12 months.

Manitok has added to its undeveloped foothills land position over the last year. Manitok currently has 62,390 acres (97.5 sections) of undeveloped land, with an average working interest of 96%. Included in the undeveloped land base are the following opportunities,

  • Conventional Liquids-rich Cardium Natural Gas: 33,280 acres (52 sections), 100% working interest, with prospectivity in both the conventional Cardium and Mannville formations; this total includes the above mentioned 10,880 acres (17 sections) in Fallen Timber. Depths vary from 1,200 meters to 2,600 meters for the Cardium and 1,500 meters to 3,000 meters for the Mannville. Manitok believes that the reservoirs in both conventional formations can be economically exploited with vertical wellbores. Both formations produce sweet natural gas with significant quantities of liquids.
  • High Impact Coleman Mississippian Horizontal Re-entries: 16,800 (14,240 net) acres with an average working interest of 84.8% located between two producing natural gas pools. The 194 Bcf (billion cubic feet) Savanna Creek natural gas pool is approximately 26 kilometers (16 miles) to the north and the 324 Bcf Coleman South natural gas pool begins approximately 6.4 kilometers (4 miles) to the south. Manitok has a 50% working interest in two producing vertical wells which had an initial production rates of about 2 MMcfpd (million cubic feet per day) and have cumulatively produced about 4 Bcf over the last 10 years. Factors such as a historically low decline rate and management's estimate of reserves in place suggest that the reservoir is not being optimally drained. Using an analog of a project with similar reservoir characteristics and the experience of Manitok's technical team, the management of Manitok believes that the best approach to exploit the reservoir is with a horizontal drill along the part of the structure where natural fracturing is most prevalent. The main advantage of drilling a horizontal re-entry is that the capital requirements are 30-40% of that required for a vertical drill from the surface. Based on actual comparisons of vertical versus horizontal well results in the foothills, Manitok anticipates a potential three to six fold increase in production rates and recoverable reserves with a horizontal re-entry versus a vertical well. If the production results of the two horizontal reentries establish an economic level of reserves, relative to the costs of drilling a horizontal well from the surface, the management of Manitok believes there would be nine drilling locations.

Manitok has established three core areas: Swimming heavy oil; Southern Alberta Cardium; and Coleman Mississippian. Each of the three areas has the ability to deliver production and reserves growth through the repeatability of drilling locations. The combination of the three plays provides Manitok shareholders with diversification of commodities produced, of drilling capital requirements and of overall corporate risk. Manitok will continue to add drilling opportunities through land sales while land values remain historically low thereby locking in strong expected returns on its future drilling inventory before commodity price recovery and competition drive land values back to their historical averages.

Disposition of Garrington Assets

Manitok closed the disposition of its Garrington asset for $1.8 million, net of adjustments on August 4, 2010, with an effective date of June 1, 2010. The asset is comprised of a 50% working interest in 640 developed acres of land and one vertical producing well in the Garrington area, near the town of Sundre, Alberta. The well produced an average of 20 (10 net) boepd over the first half of this year from the Mannville. Given Manitok's limited land position in the area and the fact that the asset did not fit into Manitok's long term strategic plans, management believes that the disposition of the asset and use of proceeds in its core areas will create more immediate value. Manitok will continue to review the marketability of its remaining non-core assets for potential disposition.

Working Capital Update

Manitok's currently capable of production of about 200 boepd (barrels of oil equivalent per day), including 75 bblspd heavy oil production and 125 boepd of natural gas. With the proceeds of the disposition, Manitok currently has $10.3 million of cash and an existing unused credit facility of $2.2 million. Manitok will finalize its Cardium locations and review the results of the heavy oil program in September, 2010 before committing capital to its next drilling program.

About Manitok

Manitok is a public oil and gas exploration and development company focusing on conventional oil and gas reservoirs in the Canadian foothills along with heavy crude oil in east-central Alberta. The high impact opportunities present in the foothills compliment the lower risk profile and currently higher operating netbacks of heavy crude oil. The combination of the two provides Manitok with a stable platform, which is less sensitive to the volatility of the natural gas price cycle, to launch its foothills strategy.

For further information contact:

Manitok Energy Inc.
Massimo M. Geremia, President and Chief Executive Officer
Telephone: 403-984-1751
Email: mass@manitok.com

Or view our website at www.manitokenergy.com

Reserves For Portion of Properties: With respect to the disclosure of reserves contained herein relating to portions of Manitok's properties, the estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenues for all properties due to the effects of aggregation.

BOE Conversions: The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent ("6:1"). A boe conversion ratio of 6:1 is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Information Cautionary Statement

This document contains forward-looking statements regarding the business and operations of Manitok Energy Inc. All statements other than statements of historical fact contained here are forward looking statements under applicable securities law. In particular statements as to recoverable reserves volumes and associated future net revenues and numbers of future wells that may be drilled are forward looking statements. These forward looking statements are based upon various assumptions as to future commodity prices, currency exchange rates, inflation rates, future well production rates, well drainage areas, success rates of future well drilling and future costs and availability of labor and services. With respect to estimates of reserves volumes and associated future net revenues and numbers of future wells to be drilled, a key assumption is the validity of the commodity prices, currency exchange rates, future capital and operating costs and well production rates forecast by Sproule in the Sproule Report. With respect to the number of future wells to be drilled, another key assumption is the validity of the geological and other technical interpretations that have been performed by Manitok's technical staff and which indicate that commercially economic reserves can be recovered from Manitok's lands as a result of drilling such future wells. There can be no assurance that the plan, intentions or expectations upon which these forward looking statements are based on will occur. In addition, all such forward-looking information necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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