Churchill Energy Inc.

Churchill Energy Inc.

November 22, 2007 21:05 ET

Churchill Announces Q3 Results

CALGARY, ALBERTA--(Marketwire - Nov. 22, 2007) - Churchill Energy Inc. (TSX VENTURE:CEI) ("Churchill") announces operational and financial results for the nine months ended September 30, 2007.


Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006 Change

FINANCIAL ($, except
share data)

Oil and gas revenues,
before royalties 1,597,817 1,911,783 5,605,993 5,229,170 7%

Funds from operations 443,082 886,294 1,857,586 1,978,413 (6%)
Per Share - Basic and
diluted ($ per share) 0.01 0.03 0.06 0.08 (25%)

Net income (loss) (626,918) (208,441) (1,793,719) 339,842 (628%)
Per Share - Basic and
diluted ($ per share) (0.02) (0.01) (0.06) 0.01 (700%)

Capital Expenditures 2,919,971 5,356,788 9,814,610 20,011,364 (51%)

Total assets 57,187,387 53,036,580 57,187,387 53,036,580 8%

deficiency(1) 2,525,138 1,921,159 2,525,138 1,921,159 31%

Bank debt 9,741,110 5,276,292 9,741,110 5,276,292 85%

Weighted average
shares outstanding
Basic 31,048,141 27,842,797 31,048,141 25,767,892 20%
Diluted 31,057,547 27,998,408 31,050,512 25,993,028 19%


OPERATIONS (units as

Average Daily
Crude oil and NGLs
(bbls/d) 119 178 137 162 (15%)
Natural gas (mcf/d) 1,850 1,732 1,870 1,568 19%
Barrels of oil
equivalent (boe/d) 428 467 449 423 6%

Average Product
Prices Received
Crude oil and NGLs
($/bbl) 56.53 59.98 52.66 57.13 (8%)
Natural gas ($/mcf) 5.49 5.74 6.89 6.26 10%
Combined ($/BOE) 39.55 44.17 44.80 44.92 0%

Netback ($/BOE) 21.75 26.56 27.09 25.74 5%

Wells Drilled
Gross 2 11 4 21 (81%)
Net 0.20 5.78 1.15 7.71 (85%)

Success 50% 83% 75% 79% (4%)

Undeveloped land
(net acres) 53,338 57,078 53,338 57,078 (7%)

(1) Excludes bank debt and the risk management contracts


- Production averaged 428 boe per day in the third quarter of 2007, a decrease of eight percent from the 467 boe per day in the third quarter of 2006 due partially to the disposition of non-operated production in SE Saskatchewan in the fourth quarter of 2006. In addition, Churchill's production has been hampered due to the delay of the Smoky 1-16-59-2W6 well coming on stream. Operations were temporarily suspended on the well in March due to weather conditions and road bans in the area and recommenced in the third quarter. The Company has brought the well on production in the fourth quarter and it is currently producing natural gas along with frac sand and fluid. It will take some time to determine the well's productive capability due to sand plugging of the surface equipment.

- Churchill's operating netback decreased 18 percent from $26.56 per boe in the third quarter of 2006, compared to $21.75 per boe realized in the third quarter of 2007. The lower operating netback was mainly due to lower realized commodity prices and a higher effective royalty rate. The decrease in the netback was partially offset by a 22 percent reduction in operating costs.

- Capital expenditures for the quarter were $2.9 million of which the majority was spent on the Smoky 1-16- 59-2W6 well completion and drilling 2 (0.20 net) wells in Alexander which resulted in 1 (0.10 net) gas well.

- In the third quarter, Churchill increased its revolving demand loan facility from $11.0 million to $12.8 million and reduced its non-revolving acquisition/development demand loan from $2.5 million to $0.7 million.

- On October 25, 2007, the Alberta Government announced the New Royalty Framework increasing provincial royalty rates. These proposals, if enacted as stated on January 1, 2009, will have effects on the Company's net operating income. Churchill is currently assessing the full impact of these royalty changes on its operations.


Churchill Energy Inc. ("Churchill" or the "Company") is pleased to report to shareholders the Company's activities in the third quarter of 2007. The Company's efforts in the third quarter were focused on the Smoky 1-16-59-2W6M well.

Churchill encountered numerous operational difficulties on the 1-16 well. When the Company resumed operations in the third quarter, it discovered that during the completion operations in March the cross over sub and bit that were supposed to be attached to the tubing had come off and was now down the hole. Fishing operations commenced and after numerous attempts the Company was unable to fish the equipment out of the hole. The tools were stuck above a number of zones that the Company had completed. Churchill deliberated its options and based on a new strategy came up with a plan to fish the equipment one last time and was successful in doing so. These operations took longer than expected and resulted in spending that exceeded the original budgeted amount. The well has just recently been put on production and is producing natural gas along with frac sand and fluid, so it will take some time to determine the well's productive capability due to sand plugging of the surface equipment.

In the Alexander area the Company participated in one (0.1 net) well that is a producing gas well that was placed on production at an initial rate of 3.5 mmcf/d and one (0.1 net) well that was unsuccessfully completed and abandoned. In Q4 the Company has participated in one (0.1 net) well that was cased as a potential gas well.

Churchill is proceeding with the installation of oil and water pipelines for its Grand Forks Glauconite waterflood project in the fourth quarter. Based on an independent simulation evaluation, the reservoir is estimated to have 4.5 mmstb's of original oil in place with an estimated 15% to 19% recovery factor. The Company believes that the pool will be re-pressured by mid-2008. The Company plans to drill three additional wells into the pool in 2008, one producer and two additional injectors as well as re-activate two existing oil wells.

Operating costs in the quarter decreased to $13.26 per boe from $16.47 per boe in the second quarter primarily as a result of the purchase of the rental compressor in Smoky in the fourth quarter of 2006 and plant turnarounds having been completed in the second quarter.


Natural gas prices continued to be weak in Q3 2007 due to the absence of weather related supply disruptions and record levels of LNG imports in the U.S. resulting in record natural gas in storage heading into the winter. Natural gas prices are currently improving, however due to the strength of the Canadian dollar, Canadian natural gas prices have not seen as much of an improvement as U.S benchmarks. Oil prices on the other hand continue to move upwards. Oil prices have achieved record highs during the quarter; however, the strength of the Canadian dollar has eroded the gains in the U.S. dollar WTI price, resulting in lower crude oil price quarter over quarter in Canadian dollar terms. Prices for both commodities continue to be volatile.

Churchill continues to evaluate potential property acquisitions and corporate opportunities. The Company does believe that there will be numerous opportunities to acquire or merge as a result of low natural gas prices, challenging capital markets and higher debt levels for juniors and the need for a large segment of the juniors to grow significantly in order to get market recognition. The Alberta government's royalty review caused a great degree of uncertainty in the markets. The Company is evaluating the impact of the new royalty framework which was unveiled in late October to increase royalty rates on January 1, 2009.

The Company has a large inventory of drilling locations, a number of which are drill ready. These locations have the potential to grow the Company significantly. The challenge for the Company is to be able to get these wells drilled in the current environment. We look forward to updating you on our progress.

The Company has current production of approximately 550 boe/d.

On behalf of the Board of Directors,

(signed) "Kelly D. Cowan" (signed) "James P. Baker"
Chief Executive Officer President

November 20, 2007

Churchill will be filing its quarterly report for the nine months ended September 30, 2007 including the financial statements, accompanying notes and MD&A on SEDAR ( and on the company's website at Churchill is a Calgary-based junior oil and natural gas company with operations in Alberta and Saskatchewan. The common shares of Churchill are listed on the TSX Venture Exchange and trade under the symbol "CEI".

Forward Looking Statements: Certain information regarding Churchill in this news release including management's assessment of future plans and operations, production estimates, drilling inventory and wells to be drilled, timing of drilling and tie-in of wells, productive capacity of new wells, capital expenditures and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, 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, the timing and length of plant turnarounds and the impact of such turnarounds and the timing thereof, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence Churchill'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 events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits Churchill will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Churchill's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (, at Churchill's website ( Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Churchill 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.

BOEs 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 TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.

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