Guardian Exploration (GX.v) & (GUEXF.pk)

GX.v -.05 to C$.30. GX popped .10 on Thursday when this PR was released and gave back .05. This confirms the potential of Girouxville. GX has 55%WI in this third well. They are getting 300bpd net right now. Considering they avgd 74boepd in Q1, this is a huge addition. They should be around 650boepd now with 300boepd gas from Kotcho and 350bpd from Girouxville.

The news on the first two Girouxville wells is mixed. They still don't have GPP approval on the first well so they have had to curtail production even more to 87bpd gross or 43bpd net for GX. The second one sounds like it has some water problems and is only producing 30bpd gross. Need more disposal facilities to run it at a higher production rate to net more oil.

The operator on this project is Breaker Energy. They are a good sized producer with over 6000bpd production. They are obviously good at what they do and Guardian has 11 more well sites that they can farm in with Breaker. GX pays 80% to get 55% WI so it's a good deal for both.

Breaker considers Girouxville one of their three key projects for near term growth and has allocated 13million out of their 105million capex budget to drill Girouxville this year. As long as Guardian can finance their end of the drillings, production could jump dramatically going forward. The first two wells tested over 200bpd and now this one tested 936bpd!

As I outlined in my first post, GX.v has warts. They have been issuing a lot of shares to finance these Girouxville wells and to fix the cashflow problems they have left over from a bad 2007. They are being sued by vendors because two JV partners didn't/couldn't fund their share of expenses on an expensive dry hole. GX has at least two lawsuits they are fighting to deal with the mess.

However based on current pricing, they cashflow .09 on 600boepd production for a full qtr. That's a forward annualized rate of .36cashflow for a .30 stock! This is extremely high netback oil because there is a royalty free exemption on the first million bucks of revs from these wells.


Here is Breaker Energy's latest update that briefly mentions Girouxville.

http://biz.yahoo.com/cnw/080616/breaker_produtn_incrs.html?.v=1

I think GX.v will be worth C$1+ in 6-9 months. They should have a decent Q2 with about 400boepd production, mostly ngas and then Q3 will jump with a 50/50mix of oil/gas and 650boepd. If they can finally get their GPP approval on well 1, production could move up higher than 650 but I think that's a reasonable guess for avg production. Q3 won't be reported until November so it might take a few months but GX.v should show dramatic increases in production and cashflow for the next several qtrs. The cashflow should be sufficient to fix the balance sheet problems, debt and allow GX to move ahead with more Girouxville wells. The 80% funding of each well could strain their cash and cause more shares issued but I think it's worth it. Bobwins

Guardian Announces Third Successful Discovery Well With Initial Flow Rate in Excess of 800 Barrels of Oil Per Day
Thursday July 17, 1:17 pm ET CALGARY, ALBERTA--(Marketwire - July 17, 2008) - Guardian Exploration Inc. (TSX VENTURE:GX - News; "Guardian" or the "Company" or the "Corporation") is pleased to announce that on July 7, 2008 Guardian's operating partner completed drilling and testing the third Girouxville light oil pool. Initial flow tests over a four hour period produced 156 barrels with stable pressures. Extrapolated over a 24 hour period the flow rate would equal approximately 936 barrels of oil per day. As of July 12, production data indicates the well is flowing at a restricted rate of approximately 530 barrels of oil per day with stable pressures, and no water. Guardian has a 55% WI (working interest) in this well, approximately 300 net barrels of oil per day to Guardian.

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This well qualifies for Alberta's new pool royalty holiday program which allows for the first million dollars of sales to be royalty free. The oil from the Girouxville area is very high quality light, sweet crude that had an average sale price of approximately $145 per barrel in the first half of July.
Girouxville Project Update
03-21-76-22W5M (first farm-in well)
This well is currently flowing at an ERCB (Energy Resources Conservation Board) MRL (Maximum Rate Limitations) allowable rate of approximately 87 BOPD with no signs of water. Guardian's partner has applied for GPP in May and is still awaiting this approval. Guardian owns a 50% WI in this well.
02-29-74-21W5M (second farm-in well)
Flowing at 30 barrels of oil per day, this well has encountered a water cut, typical of these reservoirs. Guardian is currently evaluating a water disposal or a water injection well in the area for the produced water to increase netback. Guardian owns a 55% WI in this well.
Future Girouxville Project Wells
Guardian is evaluating the next farm-in well location in the area to be drilled. Under the terms of the farm-in agreement, Guardian has a rolling option to drill 11 more locations with its operating partner.
Cut Bank, Montana
The wells in this region are continually producing approximately 40 BOE per day.
Future Montana Wells
Guardian is reviewing a 100% owned seismic program over its solely owned Tesoro field. A title opinion is nearing completion. Guardian foresees no issues and will enter the next phase of the exploration program and applying for well approvals. Management is optimistic that the Tesoro project has the potential to yield the largest amount of production in Guardian's current portfolio.
Ft. Nelson, British Columbia - Kotcho Lake Project
The purchase of additional working interest in Guardian's Kotcho Lake field has been producing very well to date. Guardian owns 100% of the two flowing wells, B-71-H-94P-4, and B-100-E-94-P-3. These wells' combined; flow rate is 300 BOE, with a manageable amount of water. Guardian, is negotiating with its 3 partners on a third well, C-68-E/94-P-3, 32.5% owned by Guardian, to be brought on in the coming months. A trial period will be established and given no issues with current productions, be brought on.
Future Ft. Nelson Operations
Guardian is negotiating with two large producers in the area to purchase production from these companies' non-core assets. Guardian is confident these negotiations will be successfully closed in the near future. The Company has received a statement of claim from a third party relating to before payout earning in the B-100-E well. The position of the Company is that the claimed earning did not occur and intends to defend the claim vigorously.
About Guardian Exploration Inc.
Guardian Exploration Inc. is an Alberta-based oil and natural gas company. Guardian is engaged in the exploration for, and the acquisition, development and production of, natural gas and crude oil with emphasis on the shallow to mid-depth hydrocarbon rich zones of Canada's Western Sedimentary Basin focusing on Alberta and northeastern British Columbia.
The term barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions herein are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Investors are cautioned that the preceding statements of the Corporation may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Corporation may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections, in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Corporation, including natural gas/oil prices, reserve estimates, drilling risks, future production of gas and oil, rates of inflation, changes in future costs and expenses related to the activities involving the exploration, development and production of gas and oil hedging, financing availability and other risks related to financial activities. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.


Contact:Graydon Kowal
Guardian Exploration Inc.
President and Chief Executive Officer
(403) 269-5870

550 - 435 4 Ave SW
Guardian Exploration Inc.
Calgary, AB T2P 3A8

Guardian Exploration is a Canadian junior with rapidly growing production. They are a bad news/good news story.

They had a gas/oil field that was shutin for over a year. So the company had minimal revs during that time. The field has just been brought back online at 332boepd by Guardian building their own facilities and pipeline.

They also had two JV partners that didn't pay their share of drilling expenses totaling over 1.5 million dollars. This caused Guardian to default on payments to vendors on two drilling projects. Combined with the shutin wells, this resulted in several lawsuits. Guardian is attempting to settle the suits but is still in litigation on at least two.

The good news is that Guardian JV'd with Breaker Energy on two oil wells at Girouxville. They both hit and tested over 200bpd each. Guardian paid 80% to earn 50-55%WI. The wells have been producing for several months at reduced rates of 125-150bpd, waiting for GPP approval. Breaker has 12 developmental drilling sites at Girouxville that Guardian has the right to option into. They have agreed to drill one in the next month.

Based on the 332boepd and the 50% of two Girouxville wells, I calculated cashflow for Q2 on 400boepd avg and .03. Q3 should avg 600boepd and cashflow .06. Forward annualized cashflow of .24 versus the current .32 share price is extremely cheap. Similar success on more Girouxville wells could boost production by several hundred boe by 12/08.

The company has minimal staffing and recently hired some professionals. That will increase overhead but could mean the company is intending on ramping up operations now that cashflow is coming in. They were late with their 2007 financials but did file 2007 annual and Q1 at the end of May. They made .01eps because of non cash income from settling old accts payable. They have still not received GPP approval to produce the wells at full capacity so my Q3 forecast may be too high.

In addition to the Girouxville property, Guardian had a large 100,000 acre property on the Blackfeet Indian reservation in Montana. The company felt this land was highly prospective. They had a requirement to drill two wells before this spring. They did not comply and the Blackfeet cancelled their agreement. The company is attempting to salvage their rights.

This company is still recovering from financial hardship but the new production from their old field at Kotcho and new wells at Girouxville should make them financially viable very quickly. They did two financings in early 08 that will increase share count to over 40 million from 27 million. If the share price doubles, the diluted share count will be 41 million for Q3 counting warrants and options.

If they can hit my targets for Q3, the stock should move to a quick double with more upside if they have continued success at Girouxville.

website: http://www.guardianex.com/

presentation: http://www.guardianex.com/operations/GuardianExploration2008May.pdf