Bronco Energy Ltd.
TSX : BCF

Bronco Energy Ltd.

November 14, 2007 02:35 ET

Bronco Announces Operations Update and Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2007) - Bronco Energy Ltd. ("Bronco" or "the Company") (TSX:BCF) is pleased to announce another operations update, along with its proposed 2008 capital expenditure program and the filing of its unaudited interim consolidated financial statements and related management's discussion and analysis ("MD&A") for the quarter ending September 30, 2007. The selected operational and financial results outlined below should be read in conjunction with Bronco's unaudited interim consolidated financial statements and related MD&A for the quarter ending September 30, 2007, which can be viewed at www.broncoenergy.ca or by accessing the Company's profile at www.sedar.com.

Operations Summary

Bronco's production testing from 7 of its horizontal wells in the Upper Wabiskaw zone continues to improve, with aggregate current oil production ranging from 400 to 600 barrels per day. None of the 7 test wells have been optimized and are expected to show improved oil rates as the test production operations develop. Oil rates on the test wells are increasing as a result of a steady decrease in water cuts. The majority of the above combined production range is coming from 4 wells, with the remaining 3 test wells also producing new oil with high fluid inflow rates and slowly improving oil cuts as they continue to clean up drilling fluids during the early stages of the test production process. Economics for the current test production operations will improve in the near future as Bronco is expecting final EUB approval for its water disposal well prior to the end of November. Bronco has also executed processing and marketing agreements with a nearby major energy company that will allow it to deliver sales products to nearby facilities in the Wabasca area, and has already delivered several truck loads of sales oil to the third party facilities.

Based on the encouraging test results to date, Bronco has established the following production forecasts assuming a conservative average first year production estimate of 100 barrels of oil per day per well:

1. Bronco is targeting 700 to 1,000 barrels of oil per day exiting 2007;

2. 4,000 to 6,000 barrels of oil per day exiting the second quarter of 2008;

3. and 8,000 to 10,000 barrels of oil per day exiting 2008

Bronco Drilling Rig #1 continues its high standard of performance with the average drill times per well ranging from five to eight days. Bronco has drilled 34 of its previously announced 50 Wabiskaw horizontal well program, and is currently expecting to have 40 wells drilled by the end of December 2007. Management has decided to temporarily slow down development and defer the remaining 10 wells of this program to 2008 for the following reasons:

1. a slow down will allow more of the horizontal wells to be drilled by Bronco Drilling Rig #1, which will result in costs savings on a consolidated basis;

2. current high fluid inflow rates experienced on the test wells may require fewer wells to reach the above production targets when the Company's new oil processing battery ("battery") is operational; and

3. reduced working capital as a result of liquidity issues on $6.94 million of the Company's investments in Canadian third party asset-backed commercial paper ("ABCP") (see Bronco's MD&A for more detailed disclosure). All of the Company's remaining excess cash has been invested in overnight term-deposits with its bank. The above liquidity issues are not expected to have a material impact on long-term operational objectives, as the remaining working capital resources are sufficient to complete Bronco's revised drilling program and its battery and related production facilities, which is scheduled for completion by the end of Q1 2008.

The battery site's geophysical, civil and pile driving work is now complete, and the mechanical contractor is on site welding caps and prefabricating high pressure piping and spools. The base for the sales oil tank is installed and tank construction is scheduled to begin this week. The main treater vessel is expected to arrive for installation in early December 2007. A second treater, which would increase capacity to above 10,000 barrels of oil per day, has been quoted for price and a 14 week delivery. Price and delivery have also been quoted for additional sales oil tank capacity.

2008 Capital Program

Management of Bronco (subject to final approval of the board of directors) has proposed a 2008 capital expenditure program that calls for approximate expenditures in the range of $40 million to $66 million, and is outlined as follows:




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Description Amounts
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Wabiskaw zone horizontal wells - range of
30 to 50 wells $25.5 to $42.5 million
Battery expansion to above 10,000 barrels
of oil per day $3.0 to $5.0 million
Gathering pipelines and facilities $9.0 to $15.0 million
Stratigraphic test wells - range of 7 to 10 wells $2.5 to $3.5 million
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Totals $40.0 to $66.0 million
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The proposed 2008 capital expenditure program will be financed from a combination of projected future cash flows, equity and debt. When the expected Bigstone Treaty Land Entitlement is finalized in 2008 and more information on the additional reserve lands becomes available, the above proposed 2008 capital expenditure program may be increased.

Financial Summary

On November 7, 2007, the Company entered into a Senior Secured Non-Revolving Term Facility ("Facility") for up to $13.0 Million. The Facility is being made available solely to finance (in part) the payment by the Company of the capital expenditures relating to the construction of the Company's battery, oil well pads, associated wellheads, gathering systems and production equipment for a minimum of twenty producing wells related to the battery. To date, no funds have been drawn from the Facility.

The following table discloses selected unaudited consolidated financial information for the three and nine month periods ended September 30, 2007 and 2006:



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Selected Financial Three Months Ended September 30
Information 2007 2006 Change
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P&NG revenue (net of royalties) $ 4,053 $ 10,487 (61)%
Drilling service revenue 242,982 573,281 (58)%
Total interest revenue 531,467 264,826 101%
Net loss (3,256,995) (1,603,266) (103)%
Basic and diluted earnings per share(1) (0.10) (0.08) (25)%
Total assets 122,026,066 40,435,457 202%
Working capital 30,857,031 21,344,510 45%
Long term debt Nil Nil -
Asset retirement obligation 1,907,490 78,266 2337%
Capital expenditures 25,623,820 2,447,005 947%
Wells drilled - gross (net) 14.0 (13.3) 0.0 (0.0) -
Operating days - drilling 80 17 371%
Utilization rate - drilling 87% 19% 358%
Weighted average common shares
outstanding 31,504,328 19,900,017 58%
Common shares outstanding 31,652,680 19,952,367 59%
Stock options outstanding 3,110,256 2,548,676 22%
Exercisable stock options outstanding 1,834,924 1,764,046 4%
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Selected Financial Nine Months Ended September 30
Information 2007 2006 Change
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P&NG revenue (net of royalties) $ 27,362 $ 44,015 (38)%
Drilling service revenue 1,209,842 621,666 95%
Total interest revenue 1,332,281 465,924 186%
Net loss (6,796,082) (2,286,717) (197)%
Basic and diluted earnings per share(1) (0.24) (0.15) (60)%
Total assets 122,026,066 40,435,457 202%
Working capital 30,857,031 21,344,510 45%
Long term debt Nil Nil -
Asset retirement obligation 1,907,490 78,266 2337%
Capital expenditures 47,576,810 3,482,717 1266%
Wells drilled - gross (net) 29.0 (27.6) 1.0 (0.5) 5420%
Operating days - drilling 148 17 771%
Utilization rate - drilling 54% 6% 800%
Weighted average common shares
outstanding 28,126,194 15,408,854 83%
Common shares outstanding 31,652,680 19,952,367 59%
Stock options outstanding 3,110,256 2,548,676 22%
Exercisable stock options outstanding 1,834,924 1,764,046 4%
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(1) Based on weighted average number of common shares outstanding for the
three months and nine months ended September 30 respectively of
31,504,328 (2006 - 19,900,017) and 28,126,194 (2006 - 15,408,854)


This news release contains forward-looking statements which involve known and unknown risks, delays and uncertainties not under Bronco's control which may cause actual results, performance or achievements of Bronco to be materially different from the results, performance or expectations implied by these forward-looking statements. Forward-looking statements such as the production estimates, the references to Bronco's exploration program and drilling program and capital expenditures relating to, and timing of, such programs are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. There are uncertainties inherent in forward-looking information, including factors beyond Bronco's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in providing production estimates, including many factors beyond Bronco's control, and no assurance can be given that the indicated production levels will be realized. In general, production estimates are based upon a number of factors and assumptions made as of the date on which the production estimates were determined. The production estimates for the lands and wells described in this news release may not reflect the same confidence level as production estimates for all of Bronco's lands and wells, due to the effects of aggregation. Bronco undertakes no obligation to update forward-looking information if circumstances or estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements.

Contact Information

  • Bronco Energy Ltd.
    Brian Alford
    President and CEO
    (403) 699-8383
    (403) 693-0038 (FAX)
    or
    Bronco Energy Ltd.
    James V. Esposito
    Executive VP and COO
    (403) 699-8383
    (403) 693-0038 (FAX)
    or
    Bronco Energy Ltd.
    David Johnson
    VP Finance and CFO
    (403) 699-8383
    (403) 693-0038 (FAX)
    Website: www.broncoenergy.ca