Production
Admiral Bay Resources currently plans to be drilling 18 to 20 wells a month for the balance of FY 2006 and for FY 2007, assuming current market conditions. Based on this expected level of drilling activity and an assumed average initial gas production rate of 30 Mcf/day per well, increasing at 3% per month, the Company expects to produce between 0.3 and 0.4 net Bcf of gas in fiscal 2006 increasing to between 2.5 and 3.5 net Bcf of gas in fiscal 2007. Targeted net exit rates are between 2.5 and 3.5 MMcf/day for fiscal 2006 and between 10.0 and 13.0 MMcf/day for fiscal 2007.
Reserves
A reserve report completed as at July 31, 2007 by Norwest Questa Engineering Corporation of Golden Colorado reports Proved Reserves of 32.61 Bcf (2P & 3P Reserves of 143.01 Bcf ).
In November 2006, Admiral Bay reported on an updated independent reserve report from Norwest Questa Engineering Corporation of Golden, Colorado. The report covered the Company's unconventional gas projects in the Cherokee Basin in southeast Kansas and the Appalachian Basin in Pennsylvania. Proved Reserves in Kansas increased by 52% to 35.3 Bcf, as at the Company's July 31, 2006 year-end. During this period, Proved Developed Reserves increased by 89% to 21.8 Bcf, with Probable Reserves remaining constant at 9.3 Bcf.
The total 3P Reserves were 277.6 Bcf. While total potential drilling locations increased from approximately 1,700 to 2,200 due to an increased acreage position, a change in estimation methodology by the reserve engineers for possible reserves caused a decrease in reserves per drilling location, relative to last year. Management expects to continue to increase the Company's acreage positions in most of the existing project areas in 2007, which will continue to increase the Company's 3P reserves.