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Novus Energy Inc. exceeds its 2011 exit rate production target

08:00 EST Wednesday, January 11, 2012

/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S./

CALGARY, Jan. 11, 2012 /CNW/ - Novus Energy Inc. ("Novus" or the "Company") (TSXV: NVS) is pleased to report that it has significantly increased its light oil production during 2011 and has exceeded its corporate exit rate production target of 3,000 boe/d.  With an active and successful drilling program in the second half of the year, the Company has been able to more than double production volumes from the second quarter of 2011.  Novus' strategic direction remains unchanged, with the Company competitively positioned in the repeatable, low risk, highly economic Viking resource play in West Central Saskatchewan.  This light oil resource play constitutes the core of the Company's development program and will remain an integral piece in driving its future growth.

HIGHLIGHTS

  • Estimated field level production for the month of December 2011 averaged approximately 3,150 boe/d with approximately 80% of these volumes comprised of oil and liquids.  This represents a 46% increase from third quarter 2011 production volumes of 2,159 boe/d.



  • Field level Viking production from the Dodsland area is estimated to be approximately 2,500 boe/d.  Novus is pleased with the volume increases it has achieved in its Dodsland Viking light oil assets from its highly successful 2011 drilling program and believes the area will provide the Company with predictable and sustainable organic growth opportunities going forward.



  • During 2011 Novus achieved a 100% success rate on its Dodsland area Viking oil drilling campaign.  Novus operated the drilling of 52 wells throughout the year, all using horizontal multi stage frac technology; five of these wells were drilled in the fourth quarter.



  • Results from the Company's Flaxcombe lands in the Dodsland area continue to materially exceed expectations.  In 2011 Novus drilled 16 wells in the area, with all now having in excess of 30 days of production history.  Average estimated per well oil production levels at 30 days are in excess of 74 bbls/d and do not include associated gas production volumes.  Thirteen of these wells have been producing in excess of 60 days, and average estimated per well oil production levels for these wells at 60 days is 65 bbls/d not including associated gas volumes.  Eight of these wells have in excess of 90 days of production history, and average estimated per well oil production levels for these wells at 90 days is 58 bbls/d not including associated gas volumes.



  • While the Company is pleased with the results it has achieved throughout the greater Dodsland area, the Flaxcombe region has emerged as an area which has exhibited consistent and reliable outperformance.  In addition to delivering higher initial production rates, the region is exhibiting lower than typical decline rates.



  • In the Flaxcombe region, Novus has identified two distinct Viking cycles which have been mapped over at least 10 contiguous sections. These 10 sections have the potential to add 80 future drilling locations for the Company through the development of both cycles at 8 well per section spacing.  Based on the Company's success in the area and industry downspacing trends, Novus believes that it may be able to develop each cycle independently at 16 well per section spacing, which would provide the potential for drilling up to 320 wells in the Flaxcombe area.



  • Well costs in the greater Dodsland area continued to decrease in 2011, with costs for drilling and completions averaging approximately $835 thousand, and tie in costs averaging $95 thousand, resulting in onstream costs averaging $930 thousand per well.



  • In 2011, the Company evolved into a large scale development phase of its Viking resource. With 33 wells drilled in 2010 and 52 wells drilled in 2011, Novus is now one of the most active drillers in the industry in the Viking play.



  • Novus currently has 108 wells licensed for drilling in the Dodsland area.



  • Upgrades at Novus' owned and operated facilities at Whiteside and Avon Hills were completed in the fourth quarter and increased fluid handling capacities at each facility.  An exclusive agreement was signed with a third party to take the Company's wet solution gas in Whiteside and will significantly reduce operating costs.  Construction of a sales gas line and emulsion line from the Whiteside facility to the meter station was completed which enabled an additional five wells to be placed onstream conserving gas prior to year end.



  • During the first quarter of 2012 Novus will upgrade its core facility at Whiteside to handle the increased volumes that will result from the Company's drilling program which will be commencing in early February.  Plans include the installation of an emulsion line running from the main facility to the Flaxcombe field.  A total of twenty-two wells in the southern portion of the area will be tied in conserving gas through a large satellite before flowing down the emulsion line to the Company's facility.  These facility upgrades will reduce downtime and virtually eliminate trucking expenditures and will significantly reduce future operating costs. These upgrades will allow Novus to tie in all new wells to be drilled in the Flaxcombe area throughout 2012 and will provide for further reductions in regional operating costs.



  • Novus now controls 127.75 net sections of Viking rights, and has a risked drilling inventory of 622 net, undrilled Viking oil locations based on 8 well per section spacing and the development of only one cycle on its Flaxcombe lands.  This extensive, low risk, high rate of return inventory will continue to provide the Company with opportunities to generate strong capital efficiencies for over ten years.



  • With highly economic operating netbacks from its Viking oil assets, the Company is generating strong funds flow which will provide it with the ability to help internally fund an aggressive drilling program in 2012.

Based upon the stable production rates, significant recoverable reserves, and the lower drilling and completion costs in the Dodsland area the Company has experienced to date, Novus plans on maintaining an aggressive drilling program on its current acreage throughout 2012, and will continue its efforts to further consolidate and expand its position within the area through acquisitions.  With a strong technical team and continual evolution by industry and the Company in lowering costs and improving production in its Viking light oil play, Novus is strategically positioned to exhibit strong growth in 2012.

Novus will be releasing its 2012 Capital Budget and production guidance at the end of January, 2012.

NON-GAAP FINANCIAL MEASUREMENTS

Included in this press release are references to certain financial measures commonly used in the oil and gas industry, such as funds flow and operating netbacks.  These measures have no standardized meanings, are not defined by International Financial Reporting Standards ("IFRS") or Canadian Generally Accepted Accounting Standards ("GAAP"), and accordingly are referred to as non-GAAP measures.

The Company considers funds flow to be a key measure as it demonstrates the Company's ability to generate the cash necessary to repay debt and to fund future growth through capital investment.  Novus determines funds flow as cash provided by (used in) operating activities prior to changes in non-cash working capital items and decommissioning expenditures.  The determination of the Company's funds flow may not be comparable to the same as reported by other companies.

Operating netbacks are calculated by deducting royalties, field operations and transportation and marketing expenses from production revenue.  Operating netbacks are used by management to assess operating results between periods and between peer companies as they provide an indication of results generated by the Company's principal business activities before the consideration of how these activities are financed or how the results are taxed.  Novus' reported amounts may not be comparable to similarly titled measures reported by other companies.  These terms should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined by IFRS or Canadian GAAP as an indicator of the Company's performance or liquidity.

OTHER MEASUREMENTS

Reported production represents Novus' ownership share of sales before the deduction of royalties. Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas has been converted at a ratio of six thousand cubic feet to one boe.  This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  Boe's may be misleading, particularly if used in isolation.  References to natural gas liquids ("liquids") include condensate, propane, butane and ethane and one barrel of liquids is considered to be equivalent to one boe.

Novus Energy Inc. is a well positioned, junior oil and gas company with a proven management team committed to aggressive, cost-effective growth of high netback light oil reserves and production. Novus will continue to grow through a targeted acquisition and consolidation strategy coupled with development and exploration drilling. Novus' current financial position will allow for the exploitation of its drilling inventory and expansion of the Company's opportunity suite through internally generated prospects and strategic light oil acquisitions.

Novus Shares trade on the TSX Venture Exchange under the symbol NVS. Novus currently has 169.0 million common shares outstanding.

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.

This news release will not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. Such securities have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States, or to a U.S. person, absent registration, or an applicable exemption therefrom.

ADVISORY REGARDING FORWARD LOOKING STATEMENTS

Certain disclosures set forth in this press release constitute forward-looking statements.  Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believes", "budget", "continue", "could", "estimate", "expects", "forecast", "intends", "may", "plan", "predicts", "projects", "should", "will" and other similar expressions.  All estimates and statements that describe the Company's future, goals, or objectives, including Management's assessment of future plans and operations, may constitute forward-looking information under securities laws.  Forward-looking statements involve known and unknown risks and uncertainties which include, but are not limited to: exploration, development and production risks; assessments of acquisitions; reserve measurements; availability of drilling equipment; access restrictions; permits and licenses; aboriginal claims; title defects; commodity prices; commodity markets; transportation and marketing of crude oil, liquids and natural gas; reliance on operators and key personnel; competition; corporate matters; funding requirements; access to credit and capital markets; market volatility; cost inflation; foreign exchange rates; general economic and industry conditions; environmental risks; Kyoto protocol; and government regulation and taxation.

Forward-looking statements relate to future events and/or performance and although considered reasonable by Novus at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made.  Novus does not undertake any obligation to publicly update forward-looking information except as required by applicable securities law.

For further information:

NOVUS ENERGY INC.                        
                         
Hugh G. Ross
President and CEO
(403) 218-8895
          Ketan Panchmatia
Chief Financial Officer
(403) 218-8876
          Julian Din
VP Business Development
(403) 218-8896

 




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