Ember Resources Inc.

Ember Resources Inc.

January 26, 2007 09:32 ET

Ember Resources Inc. Acquires Assets, Arranges Private Placement and Provides 2007 Guidance

CALGARY, ALBERTA--(CCNMatthews - Jan. 26, 2007) -


Ember Resources Inc. (TSX:EBR) ("Ember") announces that it has entered into an agreement to acquire coal bed methane ("CBM") assets (the "Acme acquisition") in a contiguous new core area and has arranged a $15 million private placement of new equity. Ember also announces an operational and capital spending update for 2007.


- Ember has agreed to acquire CBM assets from a private Alberta-based company for $8.75 million. The assets include proven plus probable reserves of 27.4 Bcf with an addition 6.2 Bcf of possible reserves in the Acme area of Alberta. The transaction is expected to close on March 1, 2007.

- The assets will expand Ember's operations into a new contiguous core area where major CBM development is underway in the Horseshoe Canyon coals, and which is on trend with Ember's current successful commercial Horseshoe Canyon production base at Fenn-Big Valley. The Acme acquisition includes 10 recently drilled, successfully tested, non-producing wells with a productive capacity of 1 mmcf/d and a 70.5% operated interest in 16,960 gross acres of land.

- Including the Acme property, Ember will now have a low-risk development inventory of 220 net Horseshoe Canyon wells.

- In a separate agreement, Ember has agreed to sell, by way of a private placement, 5,660,400 common shares at $2.65 per share for total proceeds of $15 million to funds managed by KERN Partners Ltd., a Calgary-based private equity firm. The private placement is subject to certain terms and conditions including the closing of the asset acquisition and regulatory approvals.

- Current production is approximately 6.7 mmcf/d with an increase expected in the next few months as production from wells drilled in last year's fourth quarter should incline early in their production life.

- The 2007 capital program will be $30 million including the Acme acquisition, which will be used to accelerate drilling in Ember's Mannville projects, and to expand Ember's production base through development of its Horseshoe Canyon projects.

Strategic Acquisition

The assets to be acquired include proven plus probable reserves of 27.4 Bcf with an addition 6.2 Bcf of possible reserves located in the Acme area of Alberta. These reserves are associated with Horseshoe Canyon coals and are on trend with significant development by other operators and Ember's Fenn-Big Valley operation. A total of 10 wells have been drilled and tested on the property. Ember anticipates drilling over the next several years a further 140 wells (105 net) to achieve full development on these lands. Proven plus probable gas-in-place is estimated at 5 Bcf per section. Ember will have an average 70.5% operated working interest in 16,960 gross acres.

The total acquisition cost is $8.75 million. Ember estimates reserve acquisition costs at $3.72/boe proved, $1.91/boe proved plus probable, and $1.56/boe for possible reserves. When including future capital investments, the reserve acquisition cost is estimated at $15.11/boe proved, $12.24/boe proved plus probable, and $10.83/boe for possible reserves. Ember estimates netbacks from this property of $5/mcf using an $8 gas wellhead price, resulting in a projected all-in recycle ratio greater than two times.

The property has been evaluated by McDaniel & Associates, an independent engineering firm. The following is a summary of the evaluation of the reserves associated with the Acme property as of September 1, 2006.

Reserve Summary, Forecast Prices as of September 1, 2006 - Acme Area

Company Share of Company Share of
Remaining Reserves Net Present Values
Gross BCF Before Income Tax
($ millions)
Discounted at
0% 10% 15%
Proved Undeveloped Reserves 14.1 33.6 13.9 8.5
Probable Reserves 13.3 36.7 13.4 7.8
Total Proved plus Probable reserves 27.4 70.3 27.3 16.3
Possible Reserves 6.2 23.2 7.7 4.7
Total Proved, Probable & Possible Reserves (1) 33.6 93.5 35.0 21.0

1) Includes future capital of $26.9 million for proved undeveloped
reserves, $20.4 million for probable reserves and $4.7 million for
possible reserves for a total of $52 million in future capital costs.

Private Placement

Ember has entered into an agreement with KERN Partners Ltd., a Calgary-based private equity firm to sell, by way of a private placement, 5,660,400 common shares at a purchase price of $2.65 per share. Total proceeds of $15 million will be used to acquire the Acme assets, with the balance of $6.25 million to be used to expand Ember's capital program for 2007. The private placement is subject to certain terms and conditions including the closing of the Acme acquisition and regulatory approvals.

"The Acme acquisition establishes a complementary core property to our Fenn-Big Valley operation, expands our drilling inventory in this proven CBM play, and will allow us to apply our Horseshoe Canyon expertise to an undeveloped property," said Doug Dafoe, Chairman and Chief Executive Officer.

Operational Update

Mannville Coals

With additional funds raised by the private placement, Ember will accelerate development drilling in its Mannville coals, particularly at its Manola property. New drilling will commence in the second quarter with up to nine horizontal Mannville wells to be drilled prior to the end of the year.

The Mannville program is based on drilling modifications introduced last fall which are continuing to meet expectations. With these second-generation wells, production rates are achieving Ember's mid-case productivity estimate of 250 mcf/d and at Manola approaching Ember's high case scenario of 500 mcf/d.

At Manola, the first of Ember's second-generation wells was placed on production in late July. Since mid-December the well has averaged 340 mcf/d and 115 bbls/d of water, a water and gas level that is on target with expectations. Two offsetting wells were drilled and put on production in the fourth quarter. Both wells are in the early stages of de-watering and have not yet produced significant quantities of gas. One of the offset wells underwent an experimental stimulation treatment, which combined a high-rate water flush with a light-weight proppant to enhance deliverability and reduce formation damage. Early indications are that this has resulted in enhanced flow conditions. If successful this technique could be employed on future wells. Six development wells will be drilled in close proximity to these wells post break-up to establish a larger area of coal depressurization and ultimately higher gas production and recoveries.

At Rosalind, one second-generation well has been producing since the beginning of September. By early January, gas rates had increased to 220 mcf/d with water production averaging 110 bbls/d. Two offset locations to this well will be drilled in the third quarter.

Production from Ember's Mannville projects has been averaging 850 mcf/d with additional contributions expect from new wells towards the end of the quarter.

Horseshoe Canyon Coals

Production continues to grow from Ember's Horseshoe Canyon development program at Fenn-Big Valley. Current production is estimated at 5.8 mmcf/d. This base of production should increase over the next few months as wells drilled in the fourth quarter will see production incline early in their production life. Ember is currently working on a number of recompletions, and a summer drilling program of up to 10 wells is in the planning stages.

On the Acme property, facility design and planning will commence upon closing of the acquisition in March. This property has no production facilities and requires investment in both pipelines and processing capacity. Full-scale development at Acme could occur in late 2007 or 2008.

With the addition of the Acme property, Ember now has a low-risk development inventory of 220 net Horseshoe Canyon wells.

2007 Guidance

With additional funds raised in the private placement, Ember estimates total 2007 capital spending of $30 million, including the Acme acquisition. Funding for this program will come from cashflow, existing lines of credit and the private placement. Capital will be deployed to Mannville projects with an estimated nine ( 7.5 net ) new horizontal wells to be drilled this year; investment in Horseshoe Canyon assets will combine re-completions and new drills with an estimated 20 new wells to be put on production during the year. Production is estimated to average 7.5 mmcf/d for the full year with a target exit rate of 9 mmcf/d by year end.

Reader Advisory


This press release may contain forward-looking statements including expectations of the completion of the property acquisition and related private placement, future production, anticipated capital expenditures and development plans. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: risks associated with the completion of the property acquisition and related private placement; the risks associated with the oil and gas industry (e.g., operational risks in development, exploration 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 relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Actual results, performance or achievement could differ materially from those expressed in, or implied by, such 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. Except as required by law, Ember undertakes no obligation to update or revise any forward looking statements. Additional information on these and other factors that could affect the Company's operations or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.

BOE Disclosure: 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.

Ember Resources Inc. is a resource company specializing in coalbed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember's shares are traded on the Toronto Stock Exchange under the trading symbol "EBR"

Contact Information

  • Ember Resources Inc.
    Mr. Douglas A. Dafoe
    Chairman & CEO
    (403) 270-0803
    (403) 270-2850 (FAX)
    Ember Resources Inc.
    Mr. Terry S. Meek
    President & COO
    (403) 270-0803
    (403) 270-2850 (FAX)