Serenpet announces conference call regarding company's production shortfall and anticipated results.

CALGARY, Alberta--(BUSINESS WIRE)--Dec. 19, 1994--Serenpet invites the media to participate in a conference call to review the company's progress and as a follow-up to the conference call held on Nov. 9 and the news release on Nov. 15.

The conference call will be held on Tuesday, Dec. 20, at 2 p.m. Calgary time (4 p.m. EST ) and will focus on current status of the previously reported production shortfalls, as well as the company's anticipated 1994 and 1995 results. Serenpet's management will discuss the shortfall in production during the conference call, as well as the other matters set out in this news release.

The company has completed its review of the previously announced production shortfall and has concluded that the shortfall is attributable to the following three sources:

1) Production from new drilling lower than expected.

Serenpet experienced unexpected problems at three of its oil well drilling projects -- Jayar, Zama and Latornelle -- which collectively resulted in production being less than expected by approximately 445 BOEPD. During completion, a portion of the horizontal section of the Jayar wellbore caved in. That section was redrilled and lined, and Serenpet is currently evaluating whether or not to drill additional pay.

The Zama and Latornelle wells did not produce as expected, and Serenpet had various engineering techniques applied to them through the months of August to November in an attempt to raise production to expected levels. Until recently, Serenpet expected that these techniques would restore production to previously expected levels. Serenpet has restimulated the Zama well with acid and installed a pumping system on the Latornelle well in a further attempt to evaluate production. It is now apparent that total production from these three wells will likely not exceed 100 BOEPD; currently, the wells produce a combined 30 BOEPD.

In addition, drilling results at McLeod, Heward and Puskwa were approximately 140 BOEPD less than expected. The aggregate shortfall attributable to less-than-expected drilling results, notably in the Jayar, Zama and Latornelle areas, was 585 BOEPD.

2) Steeper-than-anticipated declines on certain properties and temporary

operating restrictions on another property.

Production declines at the Kisbey field in southeastern Saskatchewan have been higher than anticipated. Various production optimization techniques were implemented, but were largely ineffective. Serenpet's competitors in the pool have continued to drill and increase drainage from the pool, which further accelerated oil production declines. Current production at Kisbey is about 125 BOEPD less than expected.

The Kakut property in northern Alberta reached the gas limits imposed by the Energy Resources Conservation Board (ERCB), and oil production was temporarily shut in. This situation has since been resolved, and production rates are currently at or above Serenpet's original expectations. The temporary shortfall amounted to approximately 240 BOEPD; 170 BOEPD net to Serenpet, plus 70 BOEPD net to Lakewood, over the period from June to October, inclusive.

3) Lower-than-anticipated production from certain properties acquired in

the Lakewood transaction.

Following the board of directors meeting on Nov. 10, management formed a task force to carry out a comprehensive review of the production shortfalls related to the properties acquired in the Lakewood transaction. The results of the review were reported to Serenpet's board of directors at its meeting held Friday, Dec. 16.

This review included a detailed analysis of the engineering reports prepared by Coles Gilbert for the Lakewood transaction, meetings and discussions with former principals of Lakewood, reviews and discussions with each joint venture partner, discussions with Serenpet's auditors (KPMG Peat Marwick Thorne) and a comprehensive review of internal engineering and accounting records.

This review process has determined that a production shortfall of 460 BOEPD occurred, of which 100 BOEPD has been reinstated, for a net Lakewood-related production shortfall of approximately 360 BOEPD, or 10 percent of the estimate average production set out in the Coles Gilbert engineering report for the period from April 1 to Dec. 31, 1994.

A recently completed reserve assessment of the Rochester, Kisbey and Kakut properties indicates minimal reserve revisions despite the production variances. The following key areas contributed to the majority of this production shortfall:

Rochester, Ontario -- 103 BOEPD due to higher-than-expected declines and the installation of a gas conservation plant which increased field back pressure and reduced oil well production;

Kakut, Alberta -- 70 BOEPD due to ERCB restrictions related to high gas/oil ratios (production reinstated by installation of compression facilities and relaxation of restrictions by ERCB);

Kisbey, Saskatchewan -- 85 BOEPD due to higher-than-expected decline rates as discussed above;

Panny, Alberta -- 60 BOEPD due to higher-than-expected decline rates and remote well access problems (decline reduced to 30 BOEPD);

Spirit River/Gordondale -- 41 BOEPD due to higher-than-expected decline rates;

Rodney, Ontario -- 22 BOEPD due to recurring well repairs;

Culp/Tangent, Alberta (a non-evaluated property) -- 67 BOEPD due to a gross overriding royalty interest being incorrectly recorded in the Coles Gilbert report as a working interest; and

Various non-operated properties -- investigation into the smaller, non-operated properties resulted in 10 to 15 BOEPD of production shortfall.

1994 Results

Serenpet's current production is 8,250 BOEPD. Serenpet currently expects to exit 1994 with production of approximately 9,000 BOEPD, including approximately 750 BOEPD of gas production (600 BOEPD from Comet and 150 BOEPD from McLeod). An additional 250 BOEPD of gas production, which was expected prior to year-end, is now expected to come on stream in mid-January (200 BOEPD from McLeod and 50 BOEPD from Adset).

Cash flow is expected to total approximately $24 million, or $1.45 per share, on approximately 16.6 million (weighted average) outstanding shares. Currently, Serenpet has approximately 22.8 million issued and outstanding common shares.

1995 Budget

Average production for 1995 is anticipated to be approximately equal to Serenpet's 1994 exit rate of 9000 BOEPD. On a per-BOE Ybasis, the company expects revenue of $19.43, royalties of $3.45, operating costs of $4.91, general and administrative expenses of $0.84 and interest expenses of $1.14. Cash flow is expected to be approximately $1.30 per share, based on 22.8 million issued and outstanding common shares. No earnings are expected due to provisions for deferred tax.

Key assumptions in the 1995 budget include oil prices of $17.50 (USDLR) per barrel (with a U.S. dollar conversion ratio of $0.72); gas prices of $1.93 per thousand cubic feet ("Mcf") over the first quarter and $1.65/Mcf (blended rate), based on actual contract prices and an estimated $1.30/Mcf spot price.

Current bank debt is approximately $45 million, with 1995 estimates of debt at below $50 million throughout the year, assuming a bank prime rate of 8.5 percent. Therefore, the capital expenditure program for 1995 is expected to remain largely within estimated cash flow. It is anticipated that between $31.2 and $38.1 million will be expended on capital projects. Serenpet expects to participate in the drilling of approximately 70 wells in 1995.

Appointment of New Officer

Effective Dec. 19, 1994, Greg Warner has been appointed treasurer of the company. Warner has more than 12 years' industry-related experience with local accounting firms, most recently as a senior tax manager with KPMG Peat Marwick. Warner graduated with distinction from the University of Saskatchewan with a bachelor of commerce degree in 1982 and was admitted as a member of the Institute of Chartered Accountants in 1986. He joined Serenpet in October 1994 as tax manager.

Conference Call Procedure

At the Dec. 20 conference call, Keith Conrad, president and chief executive officer, will represent Serenpet as chairperson. Gerry Sutton, chairman of the board; Dave Fitzpatrick, senior vice president, chief operating officer; and Greg Warner, treasurer will also be available on the call for questions. Prepared remarks will take approximately 10 minutes, to be followed by a question-and-answer period.

Initially, all participants are in a listen-only mode for the presentation portion of the conference. If they would like to ask a question, they can press the "1" followed by the "4" on their push- button telephone. Their request will automatically be registered with the conference administrator, and they will be polled individually by name during the question-and-answer portion of the conference. Participants may ask additional questions by depressing the "1" followed by the "4" again, as many times as needed.

If anyone wishes to participate in the conference call, the telephone number is 416/620-0077. Transcripts of the conference call will be available by approximately Dec. 23 and may be obtained by request to Serenpet. Postview service will be available from Dec. 20 to Jan. 6, when interested parties can phone [phone] to listen to the previously taped conference call.

CONTACT: Serenpet Inc., Calgary

              E. Keith Conrad, 403/231-3000
                               403/231-3099 (fax)