Churchill Energy Inc.

Churchill Energy Inc.

November 28, 2008 18:00 ET

Churchill Announces Q3 Results

CALGARY, ALBERTA--(Marketwire - Nov. 28, 2008) - Churchill Energy Inc. (TSX VENTURE:CEI) ("Churchill") is pleased to announce operational and financial results for the nine months ended September 30, 2008.


Churchill Energy Inc. ("Churchill" or the "Company") is pleased to report to shareholders the Company's activities in the third quarter of 2008.

Funds from operations were $1.0 million and operating netback was $55.62 per boe in the third quarter of 2008 compared to $0.4 million and $21.75 per boe, respectively in the same quarter of 2007. This was primarily a result of record crude oil prices combined with strong natural gas prices. Operating costs were $22.90 per boe for the quarter, up from last quarter as a result of the sale of the Smoky property.

The Company's efforts were primarily focused on our Grand Forks water flood project. Two wells were drilled as injectors and one well was drilled and completed as a Glauconite producer. Currently the Company is expanding its battery to handle future increases in production and these facility upgrades will be completed in the fourth quarter. Four 750 barrel tanks and one additional water pump will be installed allowing Churchill to increase the throughput capacity at the facility by 70 percent. This expansion, along with the higher oil production rates expected from the waterflood, will ultimately lower our operating costs per boe.

One well (0.2 net) was also drilled in the Alexander area and completed as a Wabamun oil producer with tie in expected prior to the end of November.

Daily production decreased to 253 boe/d in the third quarter of 2008 as a result of the Smoky disposition in the second quarter and a prior period adjustment of 32 boe/d on a non-operated property. Excluding this prior period adjustment production in the quarter would have been 285 boe/d. Current production is approximately 320 boe/d.

Churchill also had GLJ complete a reserve update for the Company effective September 30, 2008 which utilized GLJ's October 1, 2008 price deck. Total proven reserves were 796 mboe's and total proven plus probable reserves were 1,175 mboe's, which incorporate the Smoky asset disposition in the second quarter of 2008.


Oil prices have been volatile to say the least, with a high of $147/ WTI barrel for oil only a matter of a few short months ago to current pricing of approximately $50/ WTI barrel. Natural gas prices that were very high in the beginning of Q2 have now settled in the $6/Gj range at AECO. In the current environment, where access to capital is restricted due to the global credit crisis, Churchill has planned its 2009 capital expenditures to be no more than funds from operations.

Churchill's water flood project is well under way and the Company is optimistic that we will see increased production from this pool in the next three to six months. The Company recently acquired additional lands in Grand Forks and will continue to focus our efforts in this area in 2009.

Churchill is well positioned with a strong balance sheet to allow the Company to execute its capital program and take advantage of acquisition or merger opportunities in the current environment as they present themselves.

On behalf of the Board of Directors,

Kelly D. Cowan, Chief Executive Officer

James P. Baker, President

November 27, 2008

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007 Change
($, except
share data)

Oil and gas
revenues, before
royalties 1,974,782 1,597,817 7,494,243 5,605,993 34%

Funds from
operations 984,764 443,082 3,306,797 1,857,586 78%
Per Share - Basic
and diluted
($ per share) 0.03 0.01 0.09 0.06 50%

Net income (loss) 879,134 (626,918) (7,659,109) (1,793,719) 327%
Per Share - Basic
and diluted
($ per share) 0.03 (0.02) (0.21) (0.06) 250%

Expenditures 1,988,007 2,919,971 3,915,554 9,814,610 (60%)
Proceeds on
dispositions (1) (5,979) - 14,140,728 - 100%

Total assets 38,004,357 57,187,387 38,004,357 57,187,387 (34%)

Working capital
(deficit) (2) 1,031,251 (2,525,138) 1,031,251 (2,525,138) (141%)

Bank debt - 9,741,110 - 9,741,110 (100%)

Weighted average
shares outstanding
Basic 35,691,669 31,048,141 35,691,669 31,048,141 15%
Diluted 35,691,669 31,057,547 35,691,669 31,050,512 15%

as noted)

Average Daily
Production (3)
Crude oil and NGLs
(bbls/d) 133 119 137 137 0%
Natural gas (mcf/d) 718 1,850 1,498 1,870 (20%)
Barrels of oil
(boe/d) (4) 253 428 387 449 (14%)

Average Product
Prices Received (5)
Crude oil and NGLs
($/bbl) 104.49 56.53 96.23 52.66 83%
Natural gas ($/mcf) 10.13 5.49 9.22 6.89 34%
Combined ($/BOE) 83.78 39.55 69.83 44.80 56%

Netback 55.62 21.75 44.54 27.09 64%

Wells Drilled
Gross 5 2 6 4 50%
Net 2.6 0.20 3.10 1.15 170%

Success 94% 50% 95% 75% 20%

Undeveloped land
(net acres) 41,338 53,338 41,338 53,338 (22%)

(1) On May 30, 2008, Churchill closed the sale of its operated property in
Smoky, Alberta. Under full cost accounting, if crediting the proceeds
from disposition to costs results in a change of 20 percent or more to
the DD&A rate then a gain or loss should be recognized. When a gain or
loss is to be recognized the total net book value of capitalized costs
should be allocated between the properties sold and properties retained.
The sale resulted in an adjustment to the book value of properties and
equipment of $28.5 million and an adjustment to accumulated DD&A of $5.1
million. Churchill received net proceeds of $14.1 million resulting in a
loss on sale of assets of $9.3 million.
(2) Excludes bank debt and the risk management contracts
(3) For the nine months ended September 30, 2008, operations include Smoky
production volumes from January 1, 2008 to May 30, 2008.
(4) The three and nine months ended September 31, 2008 includes prior period
adjustments from a non-operated property. Excluding this prior period
adjustment, average daily production for the quarter was 285 boe per
(5) Before realized hedging gains and losses


- Churchill drilled 5 (2.60 net working interest) wells during the quarter resulting in 2 (0.95 net) oil wells and 2 (1.5 net) injection wells, for an overall success rate, based on net wells of 94 percent.

- Generated $1.0 million in funds from operations for the three months ended September 30, 2008, up 122% from $0.4 million in the same period of the previous year. The increase is primarily a result of higher commodity prices and lower interest and financing charges. Churchill has no debt at September 30, 2008.

- Net income increased to $0.9 million for the three months ended September 30, 2008 compared to a net loss of $0.6 million in the same period of the previous year. The increase was primarily driven by higher commodity prices and an unrealized gain on the risk management contracts.

- Average daily production decreased to 253 boe per day from 428 boe per day in the comparative quarter. The decrease relates mainly to the Smoky property sale in the second quarter of 2008. In addition, third quarter production volumes include prior period adjustments from a non-operated property. Excluding these adjustments Churchill production for the three month period would have been 285 BOE per day.

- Churchill's operating netback increased 156 percent to $55.62 per boe in the quarter compared to $21.75 per boe in the third quarter of 2007. Excluding the prior period production adjustments Churchill's operating netback would have been $49.23 per boe. The increase is primarily a result of higher commodity prices offset by higher operating expenses per boe.

Churchill will be filing its quarterly report for the nine months ended September 30, 2008 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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