CALGARY, Aug. 29 /CNW/ - Kroes Energy Inc. (TSX Venture: KRS) today announced its financial and operating results for the first half of 2005. Net earnings amounted to $425,345, essentially unchanged from the first six months of 2004 as lower crude oil production was offset by higher prices. Cash from operations amounted to $595,255, a gain of 12% from the same period in 2004. First half production averaged 227 barrels per day net to Kroes, compared with 250 barrels per day for the same period of 2004. Average prices rose from $32.19Cdn per barrel in 2004 to $45.36Cdn in 2005. At the end of June, crude oil in inventory awaiting sale amounted to 8,500 barrels. The first half production decline was due to the shut-in of seven producing wells that developed mechanical difficulties over the period from September 2004 to April 2005. Over the past three months, three of these wells were returned to production and the new development well No. 305 reached stable production rates from the K1 zone, while Kroes' share of production for July rose to 270 barrels per day. Development well No. 301 has reached total depth and production testing will begin in September. This well also will be completed in the K1 zone and, although the productive section appears to be somewhat thinner than in No. 305, the core was oil stained and the well is expected to be a good producer. The logs from both of these wells show oil saturation in the shallower P1-P2 zone and at some point in the future it is expected that production could occur from both zones. Preparations are underway to begin drilling well No. 304, the second follow-up to No. 305. In August, workovers were completed on two additional shut-in wells and when combined with anticipated production from well No. 301, it is expected that Kroes will exit the third quarter with production in excess of 300 barrels per day. In addition, the price received for crude oil in Ukraine has continued to rise in step with world prices. Late in June, the Company received a dividend from Kashtan Petroleum Ltd. in the amount of $177,000. This is the third annual dividend received by Kroes Energy and brings the total repatriation of investment to $669,000. Kroes Energy Inc.'s second quarter report as of June 30, 2005 has been filed on SEDAR (www.sedar.com). Kroes Energy is a junior oil and gas producer and explorer participating in the Lelyaki Oilfield redevelopment project in Ukraine, one of Eastern Europe's fastest growing economies. Kroes has a strong management team, with extensive international experience. Shares trade on the TSX Venture Exchange under the symbol KRS. Forward-Looking Statements This disclosure contains certain forward-looking estimates that involve substantial known and unknown risks and uncertainties, certain of which are beyond Kroes' control, including: the impact of general economic conditions in the areas in which the Company operates, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition, there are risks and uncertainties associated with oil and gas operations; therefore, Kroes' actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward- looking estimates and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking estimates will transpire or occur, or if any of them do so, what benefits, including the amounts of proceeds, that Kroes will derive from that. %SEDAR: 00007855E
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