Iteration Energy Provides Operational Update and Management Update

Iteration Energy Provides Operational Update and Management Update

05:30 EST Monday, January 18, 2010

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CALGARY, Jan. 18 /CNW/ - Iteration Energy Ltd. (TSX-ITX) ("Iteration" or the "Company") is pleased to provide an operational update highlighting its 2009 activity.

In the fourth quarter of 2009 the Company completed an 11 (10.5 net) well program for Sunburst oil at Manyberries in southern Alberta. Ten (9.5 net) wells were successful, and though the program was focused on improving the secondary recovery in existing pools, one new pool was discovered. Other activities in Manyberries completed during the fourth quarter included a number of facility upgrades, and the conversion of wells to water injection in order to improve waterflood recovery. Production in this area has increased by approximately 175 bbls/d and is currently estimated to be 450 bbls/d of light oil. Production for the area is expected to increase in the future as the waterflood recovery improves.

Iteration is currently conducting a winter drilling program aimed almost entirely at light oil prospects. We are currently on the third of a planned six (6.0 net) well program for Keg River reefs in the Rainbow area in northwestern Alberta. The first of these wells has flowed light oil at an average of 360 bbls/d since December 27, 2009. The second well in the program has flowed light oil at an initial rate of 100 bbls/d. In addition, Iteration plans to drill between 6 (4.5 net) and 8 (7.25 net) wells in Western Alberta, primarily the Gold Creek and Gordondale areas, targeting numerous stacked pays in the Cretaceous and Triassic formations. The first Montney farm-out well will be completed at Monias in BC in the first quarter of 2010, with the second well expected to follow later in the quarter - Iteration will have a 50% working interest in this play. A planned Q1 2010 eight (6.9 net) gas well drilling program in east central Alberta has been deferred to January 2011 due to the higher current net backs on oil prospects.

Production for the 2009 year is expected to average approximately 15,950 boed, which is toward the upper end of our most recently issued guidance of 15,600 to 16,100 boed. Exit production for 2009 is estimated to be 13,000 boed, which matches our guidance. In total, we drilled 16 (13.5 net) wells in the fourth quarter of 2009 with a 93% success rate bringing total drilling for 2009 to 31 (23.7 net) wells with a 89% success rate. Financial results for 2009 are expected to be released in mid March 2010 and we currently expect to be in line with our latest guidance.

Consistent with our hedging philosophy, Iteration added to its gas and oil 2010 hedge positions in the fourth quarter of 2009. On the gas side 15,000 mcf/d has been hedged against AECO for each of the first three quarters of 2010 at prices of $5.49/mcf for the first and second quarters and $5.84/mcf for the third quarter. Similarly on the oil side 800 bbls/d has been hedged against Canadian dollar WTI for each of the first three quarters of 2010 at prices of $85.25/bbl for the first quarter, $87.75/bbl for the second quarter and $85.10/bbl for the third quarter. Approximately 30% of Iteration's production is now hedged through the first three quarters of 2010. Below is a summary of Iteration's hedge positions:

    <<     -------------------------------------------------------------------------                        AECO Gas                        Cdn$ WTI Oil     -------------------------------------------------------------------------              Volume (mcf/d)  Price ($/mcf)    Volume (bbl/d)  Price ($/bbl)     -------------------------------------------------------------------------     Q1/10    18,300          $5.44            400 (collar)    $70.00- $94.00                                               800 (swap)      $85.25     -------------------------------------------------------------------------     Q2/10    18,300          $5.44            400 (collar)    $70.00- $94.00                                               800 (swap)      $87.75     -------------------------------------------------------------------------     Q3/10    18,300          $5.74            400 (collar)    $70.00- $94.00                                               800 (swap)      $85.10     -------------------------------------------------------------------------     Q4/10    2,400           $5.82            400 (collar)    $70.00- $94.00     -------------------------------------------------------------------------     Q1/11    1,900           $6.33            -               -     -------------------------------------------------------------------------     Q2/11    1,900           $6.33            -               -     -------------------------------------------------------------------------     Q3/11    1,900           $6.33            -               -     -------------------------------------------------------------------------     Q4/11    600             $6.33            -               -     -------------------------------------------------------------------------     >> 

We regret to announce that Peter Scott has left the Company effective January 17, 2010. Peter has made a very significant contribution as CFO since April 2009, and has greatly strengthened our accounting department over the last nine months. We wish him every success as he takes on similar responsibilities at a larger Calgary based company.

Mr. Willie Dawidowski joined the Company in June 2009 and is currently Vice President and Controller. Willie has 30 years of oil and gas experience and has served as Controller, Vice President or CFO for a number of oil and gas companies. Willie will provide ongoing continuity and leadership of the accounting and finance groups.

Additional Information:

Iteration is an Alberta based corporation engaged in the business of exploring for and developing oil and natural gas reserves in Western Canada and acquiring natural resource properties. Iteration's common shares are listed on the Toronto Stock Exchange under the symbol "ITX". Other information about the Company, including the Annual Information Form for the 2008 year, is available through the internet on the Company's website at www.iterationenergy.com and on the Company's SEDAR profile at www.sedar.com.

The TSX has not reviewed this press release and does not accept responsibility for the accuracy of any of the data presented here-in.

Advisory:

Natural gas is converted to crude oil equivalent at a ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent ("boe"). Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release contains forward-looking statements, including in particular statements in respect of planned drilling as part of Iteration's drilling program and estimated production levels. Although Iteration believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Iteration can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The forward-looking statements contained in this press release are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company including estimated production levels which are based assumptions for commodity prices, capital expenditures and funds from operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. Information regarding these factors may be found under the heading "Risk Factors" in Iteration's Annual Information Form for the year ended December 31, 2009 and in Iteration's most recent financial statement's and management's discussion and analysis, which are available at www.sedar.com. The forward looking statements contained in this press release are made as of the date hereof and Iteration undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

%SEDAR: 00002576E

For further information: Mr. Brian Illing, President and CEO at (403) 261-6883

Get ready for Generation T There's a huge global government tax bill waiting to be paid in the next decade

We're largely familiar with Generation X and Generation Y. But perhaps it is time to brace for the emergence of another generation in the United States-- Generation T, where T stands for tax.

This group can be described as young Americans, maybe aged 16 to 30, stuck with forking over higher taxes to pay off the debt legislators built up in the years leading up to the great recession, and then allowed to swell substantially in a bid to save the economy from disaster.

The American members of Generation T are likely to be hit with taxes their parents were lucky enough to avoid. Among the types they will get quite acquainted with is the VAT, or value-added tax. Think Canada's GST on a U.S. scale.

Nobody will like it, analysts warn, and protests are bound to bubble. But in the end investors will demand it in return for buying the bucket-loads of bonds Washington has to sell to finance the programs that legislators are reluctant to cut.

"The fiscal situation in the United States is not merely difficult, it is catastrophic," said Andrew Busch, global currency and public policy strategist with BMO Capital Markets. "The projections are just horrendous."

Exacerbating the U.S. scenario is the need to fund the three major entitlement programs -- Medicare, Medicaid and Social Security. Federal spending on these three big-ticket items is set to rise from 8.4% of GDP, at present, to roughly 14.5% by 2030, the Congressional Budget Office has estimated. Meanwhile, revenue will rise only modestly from its present 18.8% level.

Americans won't be the only ones singled out with new widespread taxes. The debt-to-GDP ratios in key developed economies, including Canada's, are set to swell in the coming years. But in the U.S. case, it is projected to reach triple digits -- over 100% in 2012 -- joining the ranks of Japan and Italy.

These growing debts in advanced countries will also put pressure on government imbalances as interest charges to service budget shortfalls will almost double from 1.9% of GDP in 2007 to 3.6% of GDP in 2014.

That has triggered alarm bells among the chattering classes and has prompted some prominent economists, led by Nobel Prize winner Paul Krugman, to predict that a U.S. VAT isn't just probable but inevitable.

"The reality is if you jacked up the corporate rate to the level that Washington needs, all the corporations would leave the U.S.," said Gary Clyde Hufbauer, senior fellow at the Peterson Institute for International Economics. "As for jacking up personal rates, you can't do it on the back of just millionaires -- you need to draw deep into the terrain of people, or folks that President Obama said he would never tax."

According to Mr. Hufbauer, the U.S. tax burden will have to climb significantly, from its present level of 18% to 20% of GDP to the mid-20% range.

Tax experts say a VAT is among the least-damaging taxes a government can deploy because it does not tax savings, thereby providing an incentive for people to work harder.

Other tax experts say the VAT's introduction could help fix myriad flaws in the present U.S. tax regime. Leonard Burman, director of the Washington-based Tax Policy Centre and public finance expert with the Urban Institute, said that a large fraction of households -- up to 40% -- do not pay income tax because they don't generate enough in wages or use credits to offset earned income.

"The concern is that households who do not owe income tax perceive government to be free and thus will always support new programs, even if they have very little value. Put differently, they have no stake in reducing [government] spending," Mr. Burman said in a paper for the Virginia Tax Review.

Mr. Burman has recommended introducing a VAT, whose proceeds would help finance surging health-care costs. But to soothe public fears of overtaxation, the VAT would need to be accompanied by other reforms, he suggested, such as cuts to personal and corporate income tax rates and a "credible process" to curb program spending.

Alas, some analysts wonder if this is at all possible.

Mr. Busch said the U.S. Congress appears to be "oblivious" to the need to curb spending, noting the Senate just approved a US$1.1-trillion omnibus bill that will see spending at a number of government departments climb by a staggering 10%, well ahead of inflation.

"This gives drunken sailors a bad name. At least with drunken sailors they pass out or run out of money. Congress does neither," he said.

Chris Edwards, director of tax policy studies at the Cato Institute, said the public would likely reject, in droves, a new consumption tax, regardless of its potential benefits. It will be seen as giving legislators more reason to spend, he said, adding the VAT's European origins will also anger Americans.

However, he noted there is a movement afoot in Washington to establish a special bipartisan task force to draft a deficit-reduction plan, co-led by Sen. Kent Conrad of North Dakota -- among the most high-profile VAT advocates.

"From my point of view, this appears to be a nefarious plot to implement the VAT," he said, acknowledging it could well materialize.

pvieira@nationalpost.com---------

DEBT WILL DRIVE TAXES

A rebound in the global economy is set to kick off the beginning of the next decade. But this return to growth will be accompanied by a surge of another sort -- in the amount you, the taxpayer, are about to pay to government.

The great global recession exacerbated the state of budget balances in much of the developed world. The debt burden among Group of 20 nations is expected to rise to over 120% of GDP, up from roughly 80% before the onset of the recession.

Legislators have to restore fiscal order or risk credit downgrades, such as Greece has sustained in recent weeks. Spending restraint is an option, but history dictates politicians find this hard to do -- especially with an aging population that's expecting social security and health care.

"Countries like Japan, Britain and the U.S. with large public deficits and growing debt are painting themselves into a corner whereby tax increases will be a necessity in order to stabilize debt burdens," says Jack Mintz, a leading tax expert and a professor at the University of Calgary's school of public policy.

"While governments will look to raise taxes in the most politically acceptable way, which often means imposing higher levies on the rich and corporations, there is little room for manoeuvre."

Source: Paul Vieira, Financial Post