Buffalo Resources Corp.

Buffalo Resources Corp.

April 29, 2008 08:30 ET

Buffalo Resources Announces Year-End and Q4 2007 Results

CALGARY, ALBERTA--(Marketwire - April 29, 2008) - Buffalo Resources Corp. ("Buffalo")(TSX VENTURE:BFR) is pleased to announce its financial and operating results for the fourth quarter and ten months ended December 31, 2007. The Buffalo Oil Corporation ("Old Buffalo") and Choice Resources Corp. ("Choice") amalgamated on August 2, 2007 (the "Amalgamation") and the new entity, Buffalo adopted December 31 as its year-end. The results for the ten months reflect the amalgamated company from August 2, 2007 to December 31, 2007 and Choice for the period March 1, 2007 to August 1, 2007. All comparative figures are those of Choice and reflect Choice's year and fourth quarter ended February 28, 2007.


- Production for the fourth quarter ended December 31, 2007, which reflects the amalgamated company for the full period, averaged 4,054 boe/d compared with 1,959 boe/d for the comparative period.

- Annual production increased 81% from 1,636 boe/d for the year ended February 28, 2007 to 2,956 boe/d for the ten months to December 31, 2007.

- Proved plus probable reserves increased 57% to 15.1 million boe.

- Net asset value of $2.25 per fully diluted share at December 31, 2007 using the proved plus probable reserves value discounted at 10% of $196.5 million and the balance sheet values of undeveloped land, seismic data, bank debt, working capital deficit and asset retirement obligations.

- Finding, development and acquisition costs of $10.68 per boe on a proved plus probable reserves basis and $17.29 per boe on a proved reserves basis for the ten months.

- Drilled 22 (net 13.6) wells at an 86% success rate during the ten months.

FINANCIAL ($000s except shares and per share amounts)

Four months Three months Ten months months
ended ended ended ended
December 31, February 28, December 31, February 28,
2007 2007 2007 2007

Revenue 20,664 8,358 39,208 25,741
Cash flow from
operations 4,382 1,826 7,696 7,700
Basic and diluted
per share $0.07 $0.05 $0.15 $0.22
Net earnings (loss) (3,096) (1,020) (5,236) 417
Basic and diluted
per share ($0.05) ($0.03) ($0.10) $0.01
expenditures, net 19,618 7,180 83,435 28,455

As at December 31 2007 2006

Working capital
(deficit) (63,600) (41,700)
Shareholders' equity 94,461 61,018
Total assets 205,272 133,396
Common shares
outstanding (000s) 65,702 84,148


Four Three Ten Twelve
months months months months
ended ended ended ended
December February December February
31, 2007 28, 2007 31, 2007 28, 2007
Average daily production
Oil and NGLs (bbls/d) 2,101 298 1,241 153
Natural gas (mcf/d) 11,716 9,965 10,289 8,898
Barrels of oil equivalent (boe/d) 4,054 1,959 2,956 1,636
Average realized prices
Oil and NGLs ($/bbls) 45.53 56.87 48.82 63.89
Natural gas ($/mcf) 6.17 7.43 6.47 6.67
Barrels of oil equivalent ($/boe) 41.78 47.41 43.35 43.10
Field netback ($/boe) 15.17 23.71 17.59 21.98
Cash flow ($/boe) 8.86 7.64 8.51 12.89


Production volumes averaged 4,054 boe/d in the fourth quarter of 2007, a 107% increase over the comparative quarter of the year ended February 28, 2007. Revenue increased 147% to $20.7 million largely the result of the Amalgamation and the resultant increase in production. Heavy oil and natural gas selling prices did not rise in conjunction with the rise in light oil prices through 2007. Buffalo realized $45.53 per bbl for oil and $6.17 per mcf for gas in Q4. The average price realized per boe was $41.78 in 2007 compared with $47.41 in the comparative period, mainly as a result of the higher proportion of heavy oil in the Company's commodity mix. In the current period, Buffalo's production was weighted 48% to natural gas compared with 85% in the prior year.

Field netback was $7.5 million for the four months ended December 31, 2007 or $15.17 per boe compared with $4.2 million ($23.71 per boe) for the three months ended February 28, 2007. Royalty expense was $5.5 million for the current period and increased to 27% of revenue compared with 14% in the comparative period. This increase resulted from a higher proportion of revenue being derived from wells which are subject to the payment of gross overriding royalties, as well as one time costs related to crown royalty audits of prior years. Operating costs totalled $7.7 million for the current quarter or $15.51 per boe (lower than last year at $16.88 per boe) and included a number of non recurring charges such as the 2006 year-end adjustment of third party gas plant processing costs for Buffalo's Pincher Creek gas production. A number of initiatives are being undertaken to further reduce the operating cost per boe operating costs which should be reflected in future quarters.

General and administrative expense increased from $1.3 million ($7.21 per boe) for the quarter ended February 28, 2007 to $2.2 million ($4.46 per boe) for the current period, mainly reflecting the additional month in the period and increased staffing associated with the larger production and exploratory land base. The Corporation generated cash flow from operations of $4.4 million or $0.07 per share for the current quarter compared with $1.8 million or $0.05 per share for the comparative period of the last financial year. Depletion, depreciation and accretion expense was $8.3 million, an increase from $2.8 million for last year. This was the result of the significantly higher production volumes as well as a 6% increase in the rate to $16.79 per boe. Buffalo's net loss before tax for the quarter was $4.1 million and resulted in an income tax recovery of $1.0 million for a net loss of $3.1 million (net loss of $1.0 million or $0.03 per share for Q4 of the year ended February 28, 2007). Cash flow from operations was $4.4 million for the current quarter compared with $1.8 million for last year.


Buffalo drilled 14 (9.2 net) wells during the four months ended December 31, 2007 and incurred $19.6 million in capital expenditures. This drilling included four (3.1 net) exploration wells in the Peace River Arch including a discovery well at Expanse, nine (5.5 net) development wells at Frog Lake of which five were on production by December 31, 2007. A 30 square mile 3D seismic shoot was completed at Clayhurst in the Peace River Arch and is currently being evaluated. Further modifications were made to the Killam battery during the four months. Buffalo sold two parcels of land for proceeds of $1.1 million in 2007 and subsequent to year-end, further non core asset sales have generated proceeds of $2.5 million.


On March 13, 2008, Buffalo announced an $11 million private placement of common shares and the formation of a $10 million drilling joint venture. The private placement is expected to close by mid May 2008. The drilling joint venture which will allow Buffalo to exploit its large land base and inventory of drilling prospects more quickly, for the benefit of its shareholders, is expected to be in place in Q2 2008.


Buffalo entered 2008 with a significant production base and a substantial drilling inventory, balanced between low risk development prospects which will provide steady growth and higher risk prospects which hold the potential to significantly increase production. During the first quarter of 2008, heavy oil selling prices improved dramatically. In March, Buffalo realized a selling sales price of $76.87 per barrel for its heavy oil compared with $40.13 per barrel for the fourth quarter, and $8.70 per mcf for natural gas compared with $6.17 per mcf in the fourth quarter. These higher commodity selling prices should result in significantly improved financial results for Buffalo in Q1 2008 and beyond.

In March 2008, Buffalo began drilling a deep Mississippian horizontal well at Pincher Creek in southern Alberta. Drilling is expected to continue until mid to late May. A 3D seismic data shoot is being undertaken over the gas discovery lands at Expanse and a follow up well is planned for drilling this summer. Other 2008 drilling plans include: two exploratory wells at Clayhurst following interpretation of the recently acquired 3D seismic data; two Charlie Lake horizontal development wells at Cecil; a Cretaceous well at Pincher Creek to test for the light oil and associated gas which other operators in the area have encountered; and approximately 50 heavy oil development wells at Frog Lake.

Buffalo is an emerging Canadian junior oil and gas company engaged in the exploration, development and production of oil and gas reserves in the provinces of Alberta and Saskatchewan.

Buffalo's consolidated annual financial statements and Management's Discussion and Analysis for the ten months ended December 31, 2007 are available on SEDAR (www.sedar.com) and on Buffalo's website at www.buffaloresources.com.

Certain information set forth in this press release contains forward looking statements. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, reliance should not be placed on forward-looking statements. Buffalo's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Buffalo will derive therefrom. Buffalo disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (Boe's) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf of gas equals 1 Bbl of oil is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The terms "cash flow from operations" and "field netback" are non-GAAP financial measures that do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. Both "cash flow from operations" and "field netback" provide useful information to investors and management since they are an indicator of the Corporation's profitability and ability to fund future capital expenditures which drives growth. Cash flow from operations is calculated as earnings (loss) before charges for depletion, depreciation and accretion, stock-based compensation and future income taxes and after deducting asset retirement expenditures. The inclusion of changes in non-cash operating working capital results in cash flow from operating activities. Field netback represents the profit margin from the sale of oil, natural gas and natural gas liquids and is calculated as revenues less royalties and operating expenses.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this press release.

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