Canadian Phoenix Resources Corp.
TSX VENTURE : CPH

Canadian Phoenix Resources Corp.

August 28, 2009 20:00 ET

Canadian Phoenix Releases Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2009) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

CANADIAN PHOENIX RESOURCES CORP. ("Canadian Phoenix") announces its consolidated results for the three and six months ended June 30, 2009. The consolidated financial and operational results include Canadian Phoenix and its controlled subsidiary of Serrano Energy Ltd. ("Serrano") (defined as the "Group"). Canadian Phoenix's investment in Marble Point Energy Ltd. ("Marble Point") is reflected in the investment loss and loss for the period.



HIGHLIGHTS For the three months For the six months
ended ended
June 30 June 30
2009 2008 2009 2008
($000's except as indicated)
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Average Production (boe/d) 882 98 975 150
Average realized price -
oil ($/boe) 53.27 95.55 43.55 78.11
Average realized price -
natural gas ($/mcf) 3.41 - 4.61 7.29

P&NG revenue 4,278 850 7,683 2,081
Netbacks - $/boe 22.74 48.43 17.15 45.94

Investment loss (836) - (5,780) -

Loss for the period (11,083) (2,956) (20,292) (5,180)
Per share - basic & diluted $ (0.01) $ (0.01) $ (0.02) $ (0.01)

Funds from Operations 149 (3,167) (148) (3,484)

Capital Expenditure 1,070 169 8,036 195

Cash on hand 474 25,197 474 25,197

Working Capital (Deficiency) (11,533) 28,329 (11,533) 28,329

Total assets 107,795 74,843 107,795 74,843

Weighted Average Number of
Shares Outstanding 1,131,894 534,804 1,131,894 387,541
Basic & Diluted (000's)

Number of Shares Outstanding
(000's) 1,131,894 556,054 1,131,894 556,054
Number of Shares Outstanding
- Diluted (000's) 1,840,853 534,804 1,840,853 387,541


Canadian Phoenix's interest in Serrano increased to 56.8% in January 2009, following the completion of a transaction between Serrano and BlackPearl Resources Inc. ("BlackPearl"). Under the terms of that transaction, the 4.0 million shares of Serrano held by BlackPearl were cancelled in return for a $6.3 million expenditure commitment from Serrano on the Blackrod oil sands project, and a reduction in Serrano's working interest in the project from 35% to 20%.

In the second quarter, Canadian Phoenix's interest in Serrano decreased slightly to 55.6%, following the issuance of shares by Serrano to certain creditors. Subsequent to June 30, 2009, Canadian Phoenix's interest in Serrano was diluted again to 54.5% following the issuance of 400,000 shares to a private mezzanine lender.

Canadian Phoenix's equity investment in Marble Point remains at 56.5%, consistent with December 31, 2008.

For the respective three and six months ended June 30, 2009 the Group recorded a loss after tax of $11.1 million and $20.3 million, after recording a second quarter impairment in property, plant and equipment of $7.7 million. The Corporation's equity investment in Marble Point contributed a loss of $0.8 million for the second quarter and $5.8 million for the six month period. The loss otherwise reflects operating, administrative, and depletion charges in excess of the Group's net revenue from operations of $3.2 million.

At June 30, 2009 the Group had a working capital deficit of $11.5 million, net assets of $64 million, no external debt, and capital expenditure commitments of approximately $1.6 million. Subsequent to June 30, 2009 Serrano finalized a mezzanine debt facility in the amount of $8.1 million to alleviate immediate working capital needs. The Group is continuing to look for alternative debt or equity sources of financing to fund ongoing administrative costs and exploration and development activities. On August 27, 2009, Canadian Phoenix and Serrano entered into an agreement whereby Serrano settled the advance of funds on behalf of Canadian Phoenix by way of a $1.4 million subordinated, secured debenture due by Canadian Phoenix on December 15, 2009. Serrano may, subject to certain conditions, extend the maturity to March 31, 2010. The debenture will bear interest at 15% per annum, requires the return of 69,000 common shares to Serrano, is secured by a general security agreement over the assets of Canadian Phoenix, subordinated to the security of Canadian Phoenix's senior lender, and is subject to regulatory approval.

The Board of Directors of the Corporation has constituted a Special Committee of independent directors to investigate and evaluate strategic alternatives available to the Corporation to maximize shareholder value. Specifically, the Special Committee will evaluate strategic alternatives associated with both Serrano and Marble Point as well as those associated with the oil and natural gas assets held directly. This process may result in Canadian Phoenix diversifying from its current business model, directly distributing assets to shareholders, selling its assets and/or consolidating its assets, all with the goal of maximizing shareholder value. No timetable has been set for the completion of the process being undertaken by the Special Committee.

Outlook

While oil prices have recovered approximately 44% (Edmonton Light crude has averaged $55/bbl over the first six months of 2009 as compared to $38/bbl at December 31, 2008), natural gas prices have remained depressed (AECO averaged $4.05/mcf over the first six months of 2009 versus a price of $6.64/mcf at December 31, 2008). The impact of lower commodity prices on the Group's internal funds from operations has not been mitigated through hedging or other price stabilizing activities, which further increases the importance of strong future commodity prices to the Group's overall success.

The impact of the difficult economic environment on the Group continues to be lower revenue, offset partly by lower royalties and operating costs. With the exception of flow-through funded drilling at the Blackrod oil sands project ($6 million spent during the six months ended June 30, 2009), planned capital expenditures have been reduced significantly. Capital expenditures in the Group will be evaluated on a case-by-case basis considering cash availability, economic metrics, and strategic positioning.

The depressed state of the economy has also made it difficult to raise either debt or equity capital. However, during the six months ended June 30, 2009, Canadian Phoenix and Serrano finalized revolving bank lines of credit with respective limits of $0.25 million and $7.5 million. Serrano's facility is currently capped at $3.5 million however, until a number of conditions are met, most notably the raising of at least $6 million of equity by December 31, 2009.

Subsequent to June 30, 2009 Serrano also negotiated an $8.1 million credit facility with a private mezzanine lender. The facility has been used to repay creditors ($5.1 million) and fund the Group's drilling commitments ($1.3 million). The term of the facility is to March 31, 2010 and bears interest at 15% per annum.

The Group continues to seek other conventional and alternative methods of financing in order to fund exploration and development activity, as well as general and administrative costs. While financings will likely be associated with capital expenditures on the Group's assets, they may also be concurrent with acquisitions.

In general, as liquidity and sources of capital will allow, the Group will continue to maintain its focus on economically viable exploration and development of its oil and gas assets. The Group will also continue to investigate and execute upon mergers and acquisitions. The discussed macro uncertainties will require the Group to seek such activities that attract new capital or can be financed in such a manner that non-cash elements are predominant.

The consolidated financial statements and related MD&A can be found on SEDAR's website at www.sedar.com and the Corporation's website at www.canadian-phoenix.com.

About Canadian Phoenix Resources Corp.

Canadian Phoenix is a publicly-traded junior oil and gas exploration, development and production company with operations in Western Canada. Canadian Phoenix is pursuing a corporate strategy of being a consolidator of oil and gas assets located in the Western Canadian Sedimentary Basin. Strategic corporate acquisitions promote partnerships for the future development of acquired or targeted oil and gas assets. Canadian Phoenix's shares trade on the TSX Venture Exchange under the symbol "CPH".

FORWARD-LOOKING STATEMENTS Certain information set forth in this document, including management's assessment of the ability to secure future credit, the financial viability of its subsidiary, and the ability to raise additional equity, contain forward-looking statements. In particular, forward-looking statements included in this document, include but are not limited to, statements with respect to the approval of future credit, and the financial condition of its subsidiary. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Canadian Phoenix's control, including the impact of general economic conditions, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. In making such forward-looking statements Canadian Phoenix has made certain assumptions concerning the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and service; and the receipt of applicable approvals. 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, undue reliance should not be placed on forward-looking statements. Canadian Phoenix'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 that Canadian Phoenix will derive therefrom. Canadian Phoenix disclaims any intention or obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Canadian Phoenix Resources Corp.
    Robert Chenery
    Interim President and Chief Executive Officer
    (403) 920-0040
    (403) 920-0043 (FAX)
    or
    Canadian Phoenix Resources Corp.
    Adeline Martin
    Interim Chief Financial Officer
    (403) 705-1192
    (403) 920-0043 (FAX)