Culane Energy Corp.
TSX VENTURE : CLN

Culane Energy Corp.

August 27, 2009 17:30 ET

Culane Energy Releases 2009 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 27, 2009) - Culane Energy Corp. ("Culane"or the "Company") (TSX VENTURE:CLN) announces its financial and operating results for the second quarter ended June 30, 2009. The unaudited Financial Statements and related Management's Discussion and Analysis have been filed with Canadian securities regulatory authorities on SEDAR at www.sedar.com and posted on the Company's website at www.culaneenergycorp.com.

Highlights (per share information stated below is based on weighted average – basic outstanding shares)

  • Production averaged 1,592 BOE/d for the first half of 2009 compared to 2,525 BOE/d for the same period in 2008 [Q2/09 – 1,480, Q1/09 – 1,706, Q4/08 - 1,787]. Production mix is 72% oil and 28% natural gas.
  • Prices for 2009 averaged $52.06 per bbl for oil and $4.37 per Mcf for natural gas compared to 2008 first half prices of $94.24 per bbl for oil and $9.36 per Mcf of natural gas. Net backs were $24.29 for 2009 and $50.84 for the first half of 2008.
  • Gross revenues were $13 million for 2009 (Q2 - $6.8, Q1 - $6.2) compared to $37.8 million for the first half of 2008, a 66% decrease. This was due to a 37% decrease in the Company's production for 2009 compared to the first half of 2008, and a 47% decrease in commodity prices received in the two comparative periods.
  • Cash flow for 2009 was $5.7 million, or $0.25 per share, compared to $21.8 million for the first half of 2008, or $0.98 per share. [Q2/09 - $3.0 (0.13/share), Q1/09 - $2.7 (0.12/share), and Q4/08 - $2.7 (0.11/share)].
  • The Company recorded a loss of $3.2 million for 2009, or $0.14 per share, compared to earnings of $8.3 million, or $0.37 per share in the first half of 2008.
  • Capital expenditures of $3.8 million were invested in 2009 for the drilling and equipping of four water injection wells and tie in and equipping of two gas wells at Killam, and acquired additional undeveloped lands in a new area of exploration, compared to $13.9 million in 2008 to drill 18 oil and gas wells at Killam. The Company also acquired additional assets at Killam in the second quarter of 2008 for $21.4 million.
  • In January, the Company began injecting water at its Killam North water-flood pilot project through two injector wells drilled in 2008. The Company is currently waiting for regulatory approval to commence its full field water-flood program and plans to construct full field water-flood facilities during the third quarter.
  • Net debt (bank debt less working capital) at June 30, 2009 was $11.4 million compared to $13.2 million at December 31, 2008 and $18.3 million at June 30, 2008. Debt to annualized cash flow is 0.94 to 1 (based on second quarter cash flow), while debt to equity is 0.23 to 1.
  • The Company was drawn to $13 million on its primary credit facility of $27 million at June 30, 2009.
  • During the first quarter, the Company purchased and returned to treasury, 723,500 Culane shares at an average price of $0.99 per share, through the Normal Course Issuer Bid process. There are 23,122,754 common shares outstanding at June 30, 2009 (25,407,754 fully diluted).

During the second quarter of 2009, Culane continued its focus on government regulatory issues, reservoir engineering and facilities design for the Killam water flood project as well as debt reduction. On the regulatory front, Culane has been meeting with the regulator and is seeing progress towards attaining approval of four separate water flood applications submitted by Culane earlier this year. According to the regulator, approvals for water flood applications are released without any advance notice to the operator. Culane anticipates receiving government approval for its full field water flood applications by late third quarter or early fourth quarter. Culane has commenced development of its water injection facilities as of mid July. Lease preparation is almost complete, all pipelines have been surveyed, all major equipment has been procured and the water injection project construction commenced on August 24th, including pipeline construction. This project will involve central injection that will service all Culane lands in the Killam area. As previously announced the expected completion date of the Killam water flood injection facilities is by the end of the third quarter. The project as of this date is on schedule.

With the completion of the water injection facilities and government approval of its water flood applications, Culane intends to increase water injection rates from approximately 1,250 up to 6,000 barrels per day, essentially recharging the reservoir by increasing the reservoir pressure and subsequently reversing the oil production decline that occurred during the primary production phase of the reservoir. This will be achieved through a combination of vertical well injectors and converted horizontal wells. When Culane has replaced sufficient reservoir voidage and a clear increase in reservoir pressure and well fluid levels is observed, Culane intends to introduce surfactant polymer to the water flood. Existing pool analogies indicate that the addition of surfactant polymer has the potential to increase the oil recovery factor to in excess of 40%.

Production in the first half of 2009 averaged 1,592 BOE/d with a mix of 72% oil and 28% natural gas. Gross revenues were $13 million for the first half of 2009 with cash flow of $5.7 million for the first half of 2009. Bank debt less working capital at June 30, 2009 was $11.4 million. Debt to annualized cash flow is 0.94 to 1 (based on annualized second quarter cash flow) while debt to equity is 0.23 to 1. The Company has a primary credit facility of $27 million and a $3 million development/acquisition facility currently in place. Also during the first quarter, the Company purchased and returned to treasury, 723,500 Culane shares at an average price of $0.99 per share, through the Normal Course Issuer Bid process. There are 23,122,754 common shares outstanding at June 30, 2009.

Culane has weathered the economic storm favorably within its peer group over the past year. Culane is fortunate that it is essentially an oil story. The Company has followed strict financial controls, not only over the past year but since its inception. With the full implementation of the water flood at Killam, Culane expects to see a reversal of production declines and a return to much higher oil production rates. The advantage to Culane shareholders is that the Killam assets generate oil revenues that have allowed Culane to reduce its debt and most importantly allowed the Company to take advantage of the economic downturn and expand into other exciting oil prone areas through its ongoing exploration program without going to the capital markets. This will effectively increase shareholder value now and in the near future. Culane will continue to exploit in-house developed, high working interest oil opportunities, and grow the Company mainly through the drill bit as it has done since its inception. Culane will also continue to evaluate strategic oil acquisition opportunities. Culane expects a return to oil exploration drilling in the fourth quarter of 2009.

Culane is a healthy junior oil company with a solid oil production base and well established recoverable oil reserves. The company has both the financial and technical capability to continue its growth from a small junior oil company into a medium size oil company during this next cycle of high oil prices, which Culane feels has already begun. Going forward, Culane anticipates that rising oil production rates out of Killam coinciding with increasing oil prices, will allow the Company to fund its future growth in new oil prone areas. It is important to note that the Killam project was a very large undertaking (in excess of $100 million invested) that Culane management proved to be up to the task of discovering, capturing and developing. The consequence of this was $64 million in cash flow from Killam operations, $147 million in remaining 3P reserve value – 5% dcf (both as of December 31, 2008), only 23.1 million shares outstanding, and a debt of only $11.4 million. With Killam established as a base, management believes that Culane's future growth and rising shareholder value is ensured

Effective today, the Company has cancelled 750,000 share options which were previously granted to officers of the Company, exercisable at prices ranging from $5.93 to $7.95. There are 1,535,000 share options outstanding as of today's date.

About Culane Energy Corp.

Culane is a junior oil and gas company engaged in the exploration, development and production of oil and natural gas in Alberta.

ADVISORY: Certain information regarding Culane in this news release including management's assessment of future plans and operations, timing of drilling and tie-in of wells, productive capacity of the new wells, expected production rates, drilling success rates, dates of commencement of production, 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, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhausted. Additional information on these and other factors that could effect Culane'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). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Culane 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.

23,122,754 Class A Shares

Neither the TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Culane Energy Corp.
    Donald D. Staus
    President and Chief Executive Officer
    (403) 263-2773
    Fax: (403) 263-2776
    Email: dstaus@culaneenergycorp.com

    or

    Culane Energy Corp.
    Thomas H. Field
    Vice President, Engineering and Operations
    (403) 263-2773
    Fax: (403) 263-2776
    Email: tfield@culaneenergycorp.com

    or

    Culane Energy Corp.
    Stewart Larsen
    Vice President of Finance and Chief Financial Officer
    (403) 263-2773
    Fax: (403) 263-2776
    Email: slarsen@culaneenergycorp.com

    or

    Culane Energy Corp.
    420, 333 - 5th Avenue S.W.
    Calgary, Alberta T2P 3B6
    Website: www.culaneenergycorp.com