Insignia Energy announces its 2012 year end crude oil and natural gas reserves and first half 2013 capital budget

Insignia Energy Ltd. (“ISN” – TSX) (“Insignia” or the “Company“) is pleased to announce the results of its independent reserve evaluation, effective December 31, 2012 , of the Company’s reserves by GLJ Petroleum Consultants Ltd. (“GLJ“).

2012 YEAR-END RESERVE HIGHLIGHTS

• Finding & Development (“F&D”) costs for 2012 were $10.60 /boe proved reserves and $8.07 /boe proved plus probable reserves, including change in future development costs;
• Finding, Development & Acquisition/Disposition (“FD&A“) costs for 2012 were $4.40 /boe proved reserves and $0.42 /boe proved plus probable reserves, including change in future development costs;
• Achieved a F&D recycle ratio of 2.1x based on an estimated 2012 average operating netback of $17.09 /boe and the F&D of $8.07 /boe for proved plus probable reserves and achieved a FD&A recycle ratio of 40.8x based on an estimated 2012 average operating netback of $17.09 /boe and the FD&A cost of $0.42 /boe for proved plus probable reserves;
• Proved reserves decreased by 2.7 per cent to 7.2 mmboe and were essentially flat on a fully diluted per share basis;
• Proved plus probable reserves decreased by 2.5 per cent to 15.0 mmboe and were essentially flat on a fully diluted per share basis;
• Based on field estimates, Insignia’s production averaged approximately 3,575 boe per day and 3,290 boe per day for the fourth quarter and full year 2012, respectively, which represented a 1.8 percent increase in fourth quarter 2012 production compared to the fourth quarter of 2011 production and a 3.8 percent increase on a fully diluted per share basis;
• In 2012, Insignia spent $22.1 million (unaudited), which represented approximately 1.3 times estimated 2012 cash flow and, factoring in the $6.0 million of dispositions, represents a ratio of 1.0 times estimated 2012 cash flow; and,
• Based on fourth quarter 2012 average production, Insignia’s reserve life index is 5.5 years on a proved basis and 11.4 years on proved plus probable basis.

NET ASSET VALUE (“NAV”)^(a)

The net present value of the future net revenue attributable to the Company’s proved plus probable reserves (before tax and discounted at 10%) was $110.6 million resulting in a net asset value per share of $1.98 per fully diluted common share.

RESERVES

See “Cautionary Statement – Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” for explanations and discussions and “Cautionary Statement – Forward looking information and statements” for a statement of principal assumptions and risks that may apply.

Summary of Oil and Gas Reserves as of December 31, 2012

Net Present Values of Future Net Revenue
As of December 31, 2012 , Forecast Prices and Costs

Summary of Pricing and Inflation Rate Assumptions
Forecast Prices and Costs, GLJ Forecast Effective January 1, 2013

Reconciliation of Gross Reserves By Principal Product Type
Forecast Prices and Costs

FINDING, DEVELOPMENT & ACQUISITION COSTS

In 2012, Insignia’s capital program was directed toward the drilling of four (3.5 net) wells and the completion of seven (5.5 net) wells in the Company’s three core areas.  Exploration and Development Expenditures (“E&D“) included opportunistic land purchases in a low natural gas price environment.  In 2012, Insignia spent $22.1 million on E&D of which $2.1 million was on land purchases and $18.9 million on drilling, completions and equipping.

FUTURE DEVELOPMENT COSTS USING FORECAST PRICES AND COSTS

On Insignia’s current properties, management has identified in excess of 200 potential net drilling locations which the Company may exploit.  In the 2012 year end reserve report of these 200 potential net drilling locations, 9.0 net wells have been included in the proved reserves and 25.4 net wells (13% of the potential drilling locations) have been included in the total proved plus probable reserves. Entering 2013, the Company has a significant unbooked drilling inventory.

LAND HOLDINGS
The Company has completed an internal evaluation of the fair market value of the Company’s undeveloped land holdings as at December 31, 2012 . This evaluation was completed principally using industry activity levels, third party transactions and land acquisitions that occurred in proximity to Insignia’s undeveloped lands during the past year. The Company has estimated the value of its net undeveloped acreage at $18 million ( $152 per acre).

A summary of the Company’s land holdings at December 31, 2012 is outlined below:

FIRST HALF 2013 CAPITAL BUDGET
In the first half of 2013, the Board of Directors of Insignia have approved a capital budget of $7.5 million which is intended to be directed to the drilling, completion and tie-in of one (1.0 net) Mannville liquids rich natural gas well at Caroline and one (0.2 net) horizontal Cardium oil well at Pembina and one (1.0 net) recompletion of a vertical Montney well at Pouce Coupe.

NORMAL COURSE ISSUER BID (“NCIB”)
On March 16, 2012 the Company had announced a NCIB to purchase the Company’s common shares on the TSX.  As of December 31, 2012 the Company had purchased 1,103,200 common shares at an average price of $0.79 per common share for a total cost of $0.9 million .  As a result of the NCIB the Company had 57,858,909 common shares outstanding as of December 31, 2012 .

CAUTIONARY STATEMENTS

Unaudited financial information

Certain financial and operating information included in this press release for the quarter and year ended December 31, 2012 , such as exploration and development expenditures, cash flow, finding, development and acquisition costs, net debt, operating netback and net asset value, are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under “Forward- looking information and statements” set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2012 and changes could be material.

Information Regarding Disclosure on Oil and Gas Reserves and Operational Information

The reserves data set forth above is based upon an independent reserves assessment and evaluation prepared by GLJ with an effective date of December 31, 2012 (the “GLJ Report”). The presentation summarizes the Company’s crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for the Company’s reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in National Instrument 51-101 (“NI 51-101“).

All evaluations and reviews of future net revenue are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables above represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.

The reserve data provided in this release only represents a summary of the disclosure required under NI 51-101.  Additional disclosure will be provided in the Company’s Annual Information Form filed on www.sedar.com on or before March 31, 2013 .

In relation to the disclosure of net asset value (“NAV“), the NAV table shows what is normally referred to as a “produce-out” NAV calculation under which the current value of the Company’s reserves would be produced at forecast future prices and costs and do not necessarily represent a “going concern” value of the Company. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. It should not be assumed that the future net revenues estimated by GLJ represent the fair market value of the reserves, nor should it be assumed that Insignia’s internally estimated value of its undeveloped land holdings represent the fair market value of the lands.

Non-GAAP Measures Advisory

The above information includes non-GAAP measures not defined under generally accepted accounting principles (“GAAP“) applicable to public companies at the relevant time, which for certainty, for financial years beginning on or after January 1, 2011 is International Financial Reporting Standards applicable to public accountable enterprises, including operating netback, recycle ratio, net cash and reserve life index. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Operating netback is calculated as revenue less royalties, operating expenses, transportation expenses and net of any realized gains or losses on financial contracts. Recycle ratio is calculated as operating netback divided by the capital cost of reserve F&D/FD&A costs which is one of our indicators to ensure our capital programs are adding reserves at an economic cost. Reserve life index is calculated by dividing our reserves by our annualized fourth quarter production which is one of our indicators for quality of a reserve base.

Forward-looking information and statements

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following: capital expenditures; the volumes and estimated value of Insignia’s oil and gas reserves; the life of Insignia’s reserves; the volume and product mix of Insignia’s oil and gas production; and future oil and natural gas prices.

In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Insignia which have been used to develop such statements and information but which may prove to be incorrect. Although Insignia believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Insignia can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund Insignia’s current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Insignia operates; the timely receipt of any required regulatory approvals; the ability of Insignia to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Insignia has an interest in to operate the field in a safe, efficient and effective manner; the ability of Insignia to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Insignia to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Insignia operates; and the ability of Insignia to successfully market its oil and natural gas products.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Insignia’s products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Insignia or by third party operators of Insignia’s properties, increased debt levels or debt service requirements; inaccurate estimation of Insignia’s oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased operating costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Insignia’s public disclosure documents, (including, without limitation, those risks identified in this news release and Insignia’s Annual Information Form).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Insignia does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

BOE equivalent

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

ABOUT INSIGNIA

Insignia is a Calgary , Alberta based oil and gas exploration, development and production company whose shares are traded on the Toronto Stock Exchange under the trading symbol “ISN”.