Candax Energy Inc.
TSX : CAX

Candax Energy Inc.

November 13, 2009 09:13 ET

Candax Reports Third Quarter 2009 Results

TORONTO, ONTARIO--(Marketwire - Nov. 13, 2009) -

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

Candax Energy Inc. ("Candax") (TSX:CAX) reports revenues of $2.2 million for the third quarter 2009 compared to $13.9 million for the same period in 2008. The Company generated negative cash flow from its operating activities of $3.7 million in the third quarter, compared to positive cash flow of $6.4 million for the same period in 2008. Candax recorded a loss of $3.7 million (($0.02) per common share) for the three months ended September 30, 2009, compared to net income of $1.6 million ($0.01 per common share) for the same period in 2008, as a result of lower sales and crude oil prices.

Candax's net average production for the third quarter was 782 boepd, compared to 1,451 boepd in the same period for 2008. Production was comprised of 582 bopd and 1.2 mmcf/d compared to 1,126 bopd and 2.0 mmcf/d in 2008. The reduction in oil production is attributable to reduced production from the El Bibane Field as discussed below under Operations.

As at September 30, 2009, Candax had cash and cash equivalents of $4.7 million and had utilized US$44.4 million of its US$45.0 million credit facility. Capital expenditures in the third quarter were $1.0 million compared to $11.3 million for the same period in 2008.

Candax's third quarter 2009 Interim Consolidated Financial Statements and Management's Discussion and Analysis may be viewed under the Candax profile at www.sedar.com.

Operations and Corporate Update

Operations

Further to the Company's press release of September 21 which reported the results of the work-over of the El Bibane 4 well (EBB-4) and the failure of the production tubing in well El Bibane 3 (EBB-3), a comprehensive remedial work program has been developed and is being prepared by the technical team in conjunction with service company experts. The program will involve a two stage work-over of the two wells with the first stage consisting of repair of the failed tubing in EBB-3 together with the acquisition of a comprehensive set of logs for both wells. This will allow resumption of production from EBB-3 and will provide data to enable detailed planning of the second stage which will consist of the setting of swellable packers in both wells to reduce the level of water production such that both wells can be produced simultaneously. The schedule for the work-overs is driven by equipment availability with the first stage currently planned for January 2010 and the second stage planned for early in the second quarter 2010.

A successful two stage work-over will bring the El Bibane field production back to the previously reported 2P volumes. In the interim the Company will continue gas lift operations on the EBB-4 well and is producing approximately 250 bopd and 3 mmscf/d of gas which is being delivered to the SEEB plant. Candax's next equity crude oil lifting is expected to amount of over 100,000 bbls (net to Candax) and is scheduled and contracted for mid-December.

On the Ezzaouia Field, the drilling of the two sidetracks, EZZ-2 and EZZ-5, has been delayed as a result of problems securing a suitable drilling rig by the operator. A suitable drilling rig has now been secured and drilling is expected to be completed during the first quarter of 2010, this program is intended to enhance the levels of production from the Ezzaouia field.

Corporate Update

Candax's Q3 2009 results have been prepared on a going concern basis. The continued appropriateness of this basis of accounting is dependent upon the Company achieving a number of important steps in restructuring the Company's balance sheet, which include reaching agreement with its lending bank and securing additional sources of finance through a combination of the issue of new equity and/or debt instruments. There is a risk that the various negotiations may not be completed on either a timely basis or on acceptable terms. The Company's directors and management are addressing this issue and anticipate that financing options will be available to enable the Company to continue to operate as a going concern.

As reported in press releases of June 23 and August 14, the Company is undertaking a strategic review process with Scotia Waterous as advisors. The process is ongoing and the Company expects to be able to make an announcement in due course.

The Company has previously given guidance for 2009 forecast average net oil production in the range of approximately 1,700 to 2,100 bopd and net sales of natural gas to SEEB of approximately 4.7 mmcf/d (2,400 to 2,900 boe/d). Updated full year guidance for 2009 is for average net oil production of approximately 822 bopd and net sales of natural gas to SEEB of approximately 2.8 mmcf/d (460 boe/d). The revisions reflect lower levels of production from El Bibane. Candax's revised production guidance assumes that oil production will continue to produce in EBB-4 through gas lift. Current gross production at Ezzaouia of approximately 1,000 bopd (275 bopd net) is forecast to remain constant for the remainder of the year as the planned work-over and sidetrack program has been delayed from the second quarter of this year to the first quarter 2010 due to rig availability issues.

Other News

In other news, the Company reports that John Clarke resigned his position of Executive Vice President, Corporate at the end of October to pursue other business interests. The Company will not be hiring a replacement for Mr. Clarke as his responsibilities have been re-allocated amongst other members of the Candax executive team.

Candax Energy Inc. is an international energy company with its head office in Toronto and offices in London, Tunis, and Madagascar. The Candax group is engaged in exploration and the production of oil and gas and power generation in Tunisia and holds an interest in an exploration permit in Madagascar.

This press release includes "forward looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of Management 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 projected in the forward looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Such risks and uncertainties include, but are not limited to, risks associated with the oil and gas industry (including operational risks in exploration development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of Candax Energy Inc. to obtain all permits, consents or authorizations required for its operations and activities; and health safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the ability of Candax Energy Inc. to fund the capital and operating expenses necessary to achieve the business objectives of Candax Energy Inc., the uncertainty associated with commercial negotiations and negotiating with foreign governments and risks associated with international business activities, as well as those risks described in public disclosure documents filed by Candax Energy Inc. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of Candax Energy Inc. should not place undue reliance on these forward-looking statements. Statements in relation to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

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