Montana Exploration Corp Announces 2011 Year End Results

CALGARY, May 1, 2012 /CNW/ - Montana Exploration Corp. (TSX-V; MTZ) announces its financial results for the year ended December 31, 2011. The Corporation's audited year-end Financial Statements, Management's Discussion and Analysis ("MD&A") and Annual Information Form ("AIF") including a statement on reserve data and other information specified in NI 51-101 are available for review at www.sedar.com and on the Corporation's website at www.montanaexplorationcorp.com.

2011 was a year of transition for MTZ commencing with a recapitalization, share consolidation and name change for the Corporation. During the year our efforts were focused upon developing oil opportunities, both on our substantial Blaine County acreage position and on other areas of Montana. During 2011 we repaid a substantial proportion of our outstanding bank debt and undertook drilling of a Bakken oil target on our Fort Belknap property exposing a modest amount of capital (approximately 12% of total well cost) in conjunction with partners. While that single well was not a commercial success, it showed the presence of oil within the Bakken system and the potential for discoveries structurally higher to the North West on our acreage position.

Our primary focus in the next six months will be on the Upper and Lower Shaunavon prospects on approximately 150,000 acres of our total 270,000 Montana acreage position which is the extension of the proven Shaunavon trend from north of the Canada/US border where hundreds of wells have been drilled over the past several years by Cenovus, Crescent Point, Talisman, Husky and others. There is offsetting production in Montana from the Lower Shaunavon at Bowes Field (operated by Citation - 13.5 million barrels to date) and at the Rabbit Hills Field (operated by Paramount - 3.5 million barrels to date). Our goal has been to analyze the potential of our own acreage position based upon 600 miles of 2-D data and all existing Shaunavon wells, to secure a partner that would validate the value of our acreage position and participate actively in the play.

Following six months of due diligence, we signed a joint venture on March 30, 2012 with a Denver based partner with a highly qualified technical and management staff supported by private equity investors. Out joint venture partner has committed approximately $10 million comprised of a staged cash payment of $6.7 million, a 25 square mile 3-D seismic program (we have agreed on a 50 square mile total 3D program and MTZ will pay 50% of the incremental 25 square miles) and a partial carry of our Corporation on drilling 2 new wells. Upon completion, our partner will earn a 50% interest in approximately 110,000 net acres representing a substantial proportion of our acreage on the Shaunavon trend. The joint venture commitment is equivalent to approximately $170 per acre or approximately $0.60/share on a fully diluted basis, if $170/acre was applied to our entire block.

To support the re-initiation of activities on our acreage we have identified five initial Shaunavon play types: the first two are Upper and Lower Shaunavon targets based upon mound features and Paleozoic highs offsetting the existing Rabbit Hills field (25 features have been identified on 2D seismic alone); the third play type consists of drill ready development wells in the Lower Shaunavon offsetting Bowes Field (4 initial locations); the fourth play is a feature similar to Bowes field identified on 2D seismic (the first target of our 3D seismic program) and the fifth is a channel play on the eastern part of the Shaunavon trend.

We expect to commence a 3-D program on the Shaunavon oil targets in May. The Shaunavon exists on our acreage at depths of between 4,000 and 4,500 feet. A "double" rig is available to commence drilling in June. Vertical well costs are expected to be about $600,000 and horizontal well costs are expected to be about $1.9 million. Our current plan is to execute a first year program of approximately 13 wells and we are moving ahead with a capital raising program to support this seismic and drilling program initiative.

Our existing natural gas properties, comprising almost 100 wells, have been excluded from the joint venture. The price of natural gas continues to retreat and has seriously impacted both the value and the amount of natural gas we have booked as reserves. Our Montana reserves are at shallow depths and do not contain natural gas liquids. Three years ago, in December 2008, we reported 17bcf of gas reserves which our independent evaluation valued at $32 million (P+P 10% discount). At current pricing, the same evaluation presents 2P reserves of only 3bcf of economic gas valued at $2 million. The gas is still there but is not economic at today's pricing. With increases in gas prices this value will return. At this time we are determined to broaden our activities to assess and commercialize the oil potential on our large land position.

MTZ no longer has any bank debt. The refinancing, renaming and consolidation completed in February 2011 left $3.4 million of debt. Announced in February 2012 most of this last block of bank debt was assumed by MTZ's principal shareholder, who has removed onerous covenants and agreed to hold that debt as a convertible instrument until February 2014.

Don Foulkes, President
Telephone: [phone] (ext 248)
Fax: [phone]

Charles Selby, Executive Chairman
Telephone: [phone] (ext 247)
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