Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

October 03, 2007 11:49 ET

Ember Resources Inc. Provides Q3 Operational Update

CALGARY, ALBERTA--(Marketwire - Oct. 3, 2007) -

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Ember Resources Inc. ("Ember") (TSX:EBR) today provided an operational update on activities in the third quarter and for the remainder of the year.

Highlights

- An aggressive second-half drilling campaign is underway with 21 wells drilled to date out of a 42 well program.

- Current production is estimated at 6.1 mmcf/d, up from an average 5.0 mmcf/d in the second quarter.

- Year-end production is expected to reach 11 mmcf/d based on completion of drilling and start-up of a new gas processing facility at Acme.

Low-cost Horseshoe Canyon Drilling

As announced earlier this year, Ember's second-half drilling program is focused on accelerating development of its Horseshoe Canyon CBM resources, which are characterized by low cost, low risk drilling. Further costs savings are being recorded with the recent decline in rig utilization rates which is reducing costs for essentially all activities provided by the service sector.

"Our strategy is to move reserves to production in our Horseshoe Canyon projects which we can do both efficiently and cost-effectively. We are beginning to see production growth as our second-half capital program is geared to having 51 new wells onstream by year end, 42 of those being new drills. An added boost is the decline in costs we are seeing in the service sector," said Doug Dafoe, Chairman and CEO.

Drilling completed at Fenn-Big Valley

All of Ember's planned 14 wells at Fenn-Big Valley were drilled and completed in the third quarter. Nine wells are currently producing, four wells will soon be on production and one well was abandoned due to mechanical difficulties in the wellbore.

Second rig accelerating drilling at Acme

Drilling commenced at Acme in September and a second rig has been contracted to accelerate the project. To date seven wells have been drilled and cased, and an additional 21 wells will be drilled during the fourth quarter. Completion of these wells will start later in the quarter and will be timed with start-up of a new gas plant being built in partnership with AltaGas Income Trust ("AltaGas"), at no capital cost to Ember, which will process the Company's CBM production from the Acme area.

AltaGas has commenced construction of the new gas processing facility with planned capacity of 10 mmcf/d, along with associated gathering and sales lines. The facility is scheduled for completion late in the fourth quarter.

Production growth to year end

With completion of the Acme facility, Ember will add approximately 4 mmcf/d from bringing on-stream 28 newly drilled wells and nine existing shut-in wells. Additional upside is expected from conventional sands which will be completed with the Horseshoe Canyon coals.

Current production is estimated at 6.1 mmcf/d. Production adds from Fenn Big Valley and Acme, plus upside from the area's conventional zones, should allow the Company to reach its targeted exit rate of 11 mmcf/d.

Capital spending

With the completion of the fourth quarter capital program, Ember expects total net debt will increase to $22 million on a current line of credit of $25 million. Using current natural gas prices and the expected year-end exit rate, forward debt to cash flow is estimated at 1.6 times.

Alberta Royalty Review

The Company has reviewed the recommendations made to the Alberta government by the Alberta Royalty Review Panel ("ARRP") and its potential impact to the Company. The current recommendations include provisions that will reduce royalties paid on low productivity wells. As Ember's Horseshoe Canyon CBM production, by its nature, is low productivity, the Company would benefit under the proposed changes. For example, current producing wells at Fenn Big-Valley average 40 mcf/d and pay an average royalty rate of 10%. Using current prices, the average royalty on existing production would decrease to less than 5%. For new investments where initial productivity is estimated at 50-100 mcf/d invested rates of return would improve when natural gas prices are less than $7.50/mcf and decline marginally at gas prices above $7.50.

Ember is concerned that the ARRP report does not take into consideration all of the elements required in determining economic returns for the oil and gas industry in the Province of Alberta and is working with industry representatives to express that view. Ember encourages the government of Alberta to consider input put forward by all interested stakeholders in response to the panel's report prior to making its final determination.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including expectations of future production, funds from operations, earnings, operating expenses and capital expenditures. 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: 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. 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.

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
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    President & COO
    (403) 270-0803
    (403) 270-2850 (FAX)