Canoro Resources Ltd.
TSX VENTURE : CNS

Canoro Resources Ltd.

August 27, 2009 14:11 ET

Canoro Resources Ltd. Appoints New CEO and Announces Its Results for the Quarter Ended June 30, 2009

CALGARY, ALBERTA--(Marketwire - Aug. 27, 2009) -

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Canoro Resources Ltd. ("Canoro" or "the Company") (TSX VENTURE:CNS) announces senior management changes and its financial and operational results for the first quarter ended June 30, 2009 (the "Quarter").

Canoro Chairman, Doug Martin, announced that effective immediately Les Kondratoff has left Canoro and Robert S. Wynne has been appointed President and Chief Executive Officer of the Company. Mr. Wynne was appointed to the Board of Directors in November 2008 and recently appointed Managing Director and Chief Operating Officer. Mr. Wynne holds a BSc. in Mechanical Engineering and a Master of Business Administration. A Calgary resident, he is a senior level international investment banker and corporate executive. Mr. Wynne has over 28 years experience in the oil and gas industry and investment banking. He was previously Chief Financial Officer of Pan-Ocean Energy Corporation Limited, formerly a TSX-listed international oil and gas company.

The table below provides a summary of the Company's financial and operating results for the three-month periods ended June 30, 2009 and March 31, 2009, and the same period ended June 30, 2008. Consolidated financial statements with management's discussion and analysis (MD&A) will be available on the Company's website (www.canoro.com) and on the SEDAR website (www.sedar.com) within the next 24 hours. All amounts are presented in US$ unless otherwise noted.



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Three months ended
June 30 Prior (1)
US$000s, US$ per share 2009 2008 % change Quarter
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Financial
Funds generated by/(used) in operations (915) 1,565 n/m (1,476)
per share diluted (0.01) 0.01 n/m (0.01)
Profit/(loss) for the year (2,195) (381) 476 (2,663)
per share diluted (0.02) - n/m (0.02)
Capital expenditures 1,197 6,588 (82) 3,829
Working capital 4,956 31,384 (84) 6,989
Long-term debt - - - -
Shareholders' equity 76,155 82,935 (8) 78,138
Common shares outstanding (000s) 113,709 113,709 - 113,709

Operational
Natural gas (mcf/d) 2,629 3,731 (30) 2,617
Oil and Condensate (bbl/d) 172 282 (39) 209
Total (boe/d) 610 904 (33) 645

Realized gas price ($/mcf) 1.96 2.40 (18) 1.84
Realized oil price ($/bbl) 61.62 131.77 (53) 50.64
Nigerian Bonny Light ($/bbl) 58.51 125.46 (53) 47.59

Realized price ($/boe) 25.79 51.06 (49) 23.87
Royalties ($/boe) 2.79 5.04 (45) 2.86
Operating costs ($/boe) 8.40 4.36 93 9.68
Netback ($/boe) 14.60 41.66 (65) 11.33
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(1) Denotes the three months ended March 31, 2009


First Quarter Highlights

- production declined 5% over Q4 FY2009 to 610 ("boe/d"), due to both a decision by Canoro to restrict natural gas production to maintain reservoir pressure in anticipation of the installation of gas reinjection in early 2010 and reduced demand for natural gas in the region;

- reduced production, partially offset by slightly higher commodity prices, consumed funds from operations of $0.9 million compared with $1.5 million funds used by operations in the prior quarter;

- exited the quarter with no debt and working capital of $5.0 million;

- Amguri condensate recovery and gas injection project on track for Q1 2010 commissioning with engineering and procurement 90% complete; and

- commenced site preparations for first well on Block AA-ONN-2003/2 (Canoro 15%).

Subsequent to Quarter Highlights

- closed limited-recourse funding of US$4.0 million for the purchase and installation of gas compression;

- completed primary volume of Amguri 3D Pre-Stack Depth Migration seismic re-processing with full re-interpretation of Amguri Block expected by year-end;

- in the wake of positive election results in India, the Company renewed its efforts to work with the various stakeholders to secure the necessary approvals to proceed with the Changpang project in Nagaland;

- initiated a feasibility study for a 50 megawatt to 100 megawatt gas-fired power plant in Amguri.

Canoro entered the first quarter of its fiscal 2010 year committed to solidifying its production base, financial position and organization in preparation for the next stage of the Company's growth. Canoro continues to navigate through very challenging times both for the Company and the industry as a whole. Capital markets have begun to be accessible for select oil and gas companies. Canoro succeeded in attracting a US$4.0 million follow-on investment in Amguri from a private equity fund which underscores both the quality of the asset and the confidence of the investors in the Company's ability to generate value from Amguri.

Over the past number of months, and in light of the performance to date, the Company's Board of Directors has supervised a fundamental overhaul of Canoro's senior management team, concluding with a change in leadership. There are going to be continued challenges and obstacles ahead, but the Company has the beginnings of a significant asset base in India, high value prospects and the technical and management expertise to explore and develop these opportunities.

Financial review

The Company incurred a net loss during the Quarter of $2.2 million and utilized funds from operations of $0.9 million. During the Quarter and subsequent to Quarter-end, the Company continued to reduce general and administrative expenses and management believes that Canoro is now a leaner and more efficient organization going forward. The Company does not expect the full realization of G&A savings to be evident until the third quarter of 2009. The Company exited the Quarter with no debt and working capital of $5.0 million.

Subsequent to Quarter end, the Company strengthened its financial position by entering into an agreement with a private equity fund (the "Fund") whereby the Fund provided a follow-on limited recourse funding of $4.0 million for the purchase and installation of the gas compression units as part of development operations in the Amguri Field in Assam, India. The Fund will not earn a participating interest in the field, nor will it be responsible for future capital costs. The Fund will be entitled to receive payments based on Canoro's 60% share of gross revenue from the Amguri Field ranging from 8% before recovery of the original $4.0 million, declining to 4% thereafter.

Operations review

Amguri

Amguri (Canoro 60% working interest) production averaged 610 boe/d consisting of 2,629 thousand cubic feet ("mcf") per day of natural gas and 172 barrels ("bbl") per day of oil and condensate. Production decreased 33 percent from the comparative quarter in the prior year and decreased five percent from the previous quarter. The reduction in quarterly year-over-year production is due to both a decision by Canoro to restrict natural gas production to maintain reservoir pressure while the gas injection facility is being constructed, combined with a decreased demand for natural gas in the region primarily from the tea gardens resulting from monsoons arriving later than normal. Quarter-over-quarter, natural gas volumes were essentially flat and liquids production decreased approximately 18% as the Amguri A-5 oil well was shut-in. The well had been producing approximately 30 bpd of oil net to Canoro prior to being shut in due to water influx. Canoro is currently reviewing the reservoir and well characteristics to determine the feasibility and options for a water shut-off work over.

The pipeline for the Amguri A-14 well tie-in into the central process facility was completed at the end of May 2009. The well was put into production in early June at an initial rate of 1.0 mmcf/d (0.6 mmcf/d net to Canoro) dry gas on a 10/64" choke with a with a tubing head pressure of 2180 psig (shut in tubing head pressure was 2200 psig). The well is capable of been produced at 4.0 mmcf/d with minimal drawdown, however, was recently shut-in due to limited local demand for natural gas. Canoro has been approached by a number of industrial users of natural gas in the area with respect to entering into longer term fixed price and volume contracts. Natural gas prices in northeast India are significantly lower than the rest of the country. The Company intends to explore all of its options before committing to further gas sales contracts at what it believes are sub-market prices. In response to both depressed natural gas prices in the region and the Government of India's initiative to increase national power generation, Canoro has begun preliminary studies and analysis into the feasibility of building a 50-100 megawatt natural gas-fired power plant in Amguri. The Company believes that, given high demand for electricity in the area and throughout India, generating and selling electrical power may be an effective method over the long term to monetize Canoro's natural gas reserves at substantially higher prices than currently received, thereby decreasing the Company's reliance on regional gas markets.

The Company is pleased to report that the gas compression project continues to be on time and on budget. At the present time, the engineering and procurement components are over 90% complete. The gas recycling scheme required to maximize recovery of condensate also mitigates Canoro's exposure to low priced spot markets for natural gas by allowing the Company to extract condensate and re-inject gas into the reservoir. As the condensate is removed from the produced gas stream, the remaining lean gas will be re-injected into the reservoir to maximize reservoir pressure and recovery of condensate reserves.

Obtaining a complete and accurate geo-technical understanding of Amguri remains a top priority for the Company. The Pre-Stack Depth Migration ("PSDM") reprocessing of the primary volume of Amguri 3D seismic data is complete with preliminary results expected by the end of September. A secondary PSDM volume has been commissioned and a full re-interpretation of the Amguri Block is expected by the end of the year.

AA-ONN-2003/2

Due to adverse weather conditions and complications associated with lease construction during monsoon season, the spudding of the JRMC location on the AA-ONN-2003/2 Block (Canoro 15% working interest) has been delayed. Other locations, not as significantly impacted by these operational constraints, are being evaluated and prepared presently for the initial drilling program. Canoro is actively working with the Operator and the partners to address these operational and timing issues.

Additional Information

Additional information relating to Canoro, including Canoro's First Quarter 2010 Report, 2009 Annual Report, 2009 Year-End Audited Financial Statements, Management Discussion and Analysis and Annual Information Form for the year ended March 31, 2009, can be accessed on-line on SEDAR at www.sedar.com, or from the Corporation's website at www.canoro.com.

Disclaimer

This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond Canoro's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, 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 foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Canoro's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances 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, including the amount of proceeds, that Canoro will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Canoro or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Canoro does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Additional information on these and other factors that could affect Canoro's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), at Canoro's website (www.canoro.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Canoro does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Disclosure provided herein in respect of barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The press release contains the terms "funds from operations", and "netbacks" which are not recognized measures under Canadian generally accepted accounting principles. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations has been defined by the Company as net earnings adjusted for non-cash items (depletion, depreciation and accretion, stock-based compensation, unrealized (gain)/loss on foreign exchange, and unrealized investment (gain)/loss) and excludes the change in non-cash working capital related to operating activities and expenditures on asset retirement obligations and reclamation. Canoro's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP.

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

Contact Information

  • Canoro Resources Ltd.
    Robert S. Wynne
    President and Chief Executive Officer
    (403) 592-6295
    or
    Canoro Resources Ltd.
    Ryan Ellson
    Vice President, Finance
    (403) 410-6777
    or
    Canoro Resources Ltd.
    700 Elveden House
    717 Seventh Avenue SW
    Calgary, Alberta
    Canada T2P 0Z3
    Website: www.canoro.com