Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

August 07, 2009 08:30 ET

Ember Resources Inc. Reports Second Quarter 2009 Results

CALGARY, ALBERTA--(Marketwire - Aug. 7, 2009) -

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Ember Resources Inc. ("Ember") (TSX:EBR) announced today that it has filed its unaudited financial statements and related management's discussion and analysis ("MD&A") for the quarter ended June 30, 2009 on www.sedar.com.



Financial Highlights

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Three Three
months months Six months Six months
ended ended ended ended
(000s except per June 30, June 30, Percent June 30, June 30, Percent
share amounts) 2009 2008 Change 2009 2008 Change
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Natural gas sales $ 8,293 $ 7,358 13 $ 20,574 $ 12,833 60
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Funds from
operations $ 2,927 $ 4,568 (36) $ 10,239 $ 7,219 42
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- per share basic
& diluted $ 0.06 $ 0.32 (81) $ 0.20 $ 0.50 (60)
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Net income (loss) $ (4,437) $ 1,942 (328) $ (7,288) $ 2,010 (463)
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- per share basic
& diluted $ (0.09) $ 0.13 (169) $ (0.14) $ 0.14 (200)
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Capital investment
additions $ 1,266 $ 2,435 (48) $ 5,216 $ 5,487 (5)
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Property
acquisition $ 51 $ - NA $ 3,212 $ - NA
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Property
disposition $ 4,436 $ - NA $ 5,120 $ - NA
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Total assets $370,792 $109,235 239 $370,792 $ 109,235 239
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Net bank debt and
working capital
deficit $ 95,239 $17,949 431 $ 95,239 $17,949 431
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Shares outstanding 51,367 14,441 256 51,367 14,441 256
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Operating Highlights

----------------------------------------------------------------------------
Three Three
months months Six months Six months
ended ended ended ended
(000s except per June 30, June 30, Percent June 30, June 30, Percent
share amounts) 2009 2008 Change 2009 2008 Change
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Daily avg gas
production (Mcf/d) 26,048 8,045 224 26,605 8,004 232
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Daily avg
production (BOE/d) 4,341 1,341 224 4,434 1,334 232
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Average sales
price ($/Mcf) 3.50 10.05 (65) 4.27 8.81 (52)
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Realized hedging
gain ($/Mcf) - - NA 0.27 - NA
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Royalties expense
(recovery) ($/Mcf) (0.21) 0.81 (126) 0.09 0.80 (89)
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Operating expenses
($/Mcf) 1.34 1.84 (27) 1.28 1.82 (30)
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Transportation
expenses ($/Mcf) 0.17 0.17 - 0.18 0.18 -
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Operating netback
($/Mcf) 2.20 7.23 (70) 2.99 6.01 (50)
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Operating netback
($/BOE) 13.21 43.40 (70) 17.93 36.04 (50)
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CBM wells drilled
(gross/net)
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- Horseshoe
Canyon 0.0/0.0 4.0/2.1 NA/NA 13.0/7.3 22.0/10.9 (41)/(33)
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Land (000s of net
acres) 476 262 82 476 262 82
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Q2 2009 Highlights

Financial performance

- Funds from operations for the three months ended June 30, 2009 decreased 36% to $2.9 million ($0.06/share diluted) from $4.6 million ($0.32/share diluted) for the same period in 2008. The decline reflects a 65% lower average natural gas price of $3.50/mcf and higher interest costs offset by reduced royalties, operating costs and general and administrative costs.

- Net loss for the second quarter was $4.4 million ($0.09/share diluted) versus net income of $1.9 million ($0.13/share diluted) for the same period in 2008.

- Capital expenditures for the second quarter totaled $1.3 million and were limited to workovers and remedial work. No new wells were drilled during the period.

- Cost efficiencies have continued to improve. Operating costs declined $3.23/BOE from the first half of 2008 to $7.69/BOE; general and administrative costs declined $1.33/BOE to $2.63/BOE.

- Total cash costs, including operating, transportation, general and administrative and interest costs, declined 24% in the first half to $13.94/BOE from $18.33/BOE in the first half of 2008.

- The effective royalty rate declined in the first half of 2009 to 2.3% reflecting the new Alberta Crown royalty rate, offset by higher freehold royalties on purchased production and a recovery of previously paid Crown royalties. At current gas prices, Ember's royalty rate is estimated at 4 to 5% of revenue.

- Net bank debt and working capital has been reduced to $95.2 million from $101.2 million at the end of Q-1 2009. The decline resulted from the sale of non-core assets effective April 1, 2009 which generated gross proceeds of $4.55 million and application of excess cashflow in the second quarter.

- A new $102 million borrowing facility was negotiated with Ember's banking syndicate comprised of a $5 million dollar revolving working capital amount and a $97 million revolving term facility.

Operating performance

- Average production for the second quarter increased 224% to 26.0 MMcf/d from 8.0 MMcf/d during the same period in 2008, with most of the increase from the acquisition of Cordero Energy Inc. in September 2008.

- Production declined 4% from Q-1 including divested non-core production of 0.8 MMcf/d. Excluding divestitures, base production declined a modest 1.4% with no new drilling and modest capital expenditures.

- The operating netback for the first half of 2009 was $17.93/BOE compared to $36.04/BOE in 2008. Low gas prices contributed to a revenue decline of $27.22/BOE, offset by a $3.26/BOE reduction in operating and transportation expenses and a $4.21/BOE decrease in royalties.

- Non-core assets sold during the quarter generated $4.55 million and included production of 125 BOE/d. To date, non-core asset dispositions have generated $7.0 million and included 138 BOE/d, 350,000 BOE of proved plus probable reserves and 32 thousand net acres of undeveloped land.

Guidance update

- Ember has revised its production and spending guidance for full-year 2009 due to low gas prices. Production is expected to average 25-26 MMcf/d, down from the previously forecast 26-27 MMcf/d, and capital spending has been reduced to $15 million, down from $25 million. Capital expenditures will remain within cash flows, while non-core asset divestitures and excess cash flow will be used to reduce debt.

- This level of spending will result in an estimated 20-25 net wells for the full year. For the remainder of the year eight wells (4.8 net) have been drilled in the third quarter and 5-10 net wells are planned for the fourth quarter.

Signs of gas market rebalancing

Natural gas prices in the second and third quarters have remained weak and below levels required to encourage new investment in most natural gas projects in North America. Natural gas storage is at record levels for this time of the year which is keeping prices depressed. There are signs of rebalancing beginning to emerge in the marketplace. The sharp reduction in natural gas drilling has reduced supplies in both Canada and the United States and signs are emerging of an economic recovery. Although weather dependent, the combination of these factors could help restore balance in the marketplace and improved natural gas pricing during the upcoming winter months.

Outlook

- Ember is continuing to focus on development of its CBM properties and generating cost efficiencies on its core properties located on trend with the Horseshoe Canyon coals in Alberta.

- Ember's low cost structure generates one of the highest netbacks for natural gas production in Western Canada.

- Base production is very stable as evidenced by the low rate of decline in the second quarter despite no new drilling and minimal capital maintenance costs.

- A large number of locations are drill-ready for when natural gas prices and cash flow improve. Easy access to surface leases and existing infrastructure allow Ember to have new wells drilled and producing within six weeks.

"Ember continues to generate one of the highest gas netbacks in Western Canada which points to our success in managing our way through this low gas price environment. We have reduced our cash costs, lowered our debt levels and maintained a stable production base despite minimal levels of new drilling activity," said Doug Dafoe President and CEO. "Our Horseshoe Canyon resource play and extensive drilling inventory are ready to resume our historical growth profile once natural gas markets improve."

As referred to above, Embers' unaudited financial statements and related MD&A for the quarter ended June 30, 2009 can be located at www.sedar.com or www.emberresources.com. To the extent investors do not have access to the internet, copies of the unaudited financials and related MD&A can be obtained on request without charge by contacting Ember Resources Inc. at 403 270 0803.

Conference Call

A conference call to review Ember's second quarter results will take place on August 7, 2009 at 9:00 AM MDT (11:00 AM EDT). The conference call can be accessed by dialing in 15 minutes prior to the scheduled start at 1-877-407-8033. A live webcast will also be provided on: www.emberresources.com. A playback recording of the conference call will be available for 30 days and can be accessed by calling 1-877-660-6853 and enter the account #286 and conference ID #322279.

Reader Advisory

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including future production, anticipated levels of bank debt, 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: 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.

Reserve information in this press release is based on an independent reserve evaluation report prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") dated March 4, 2009 with an effective date of December 31, 2008. Net asset value calculations do not necessarily represent or equate to fair market value.

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
    President & CEO
    (403) 270-0803
    (403) 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    Executive Vice-President & COO
    (403) 270-0803
    (403) 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Bruce C. Ryan
    Vice-President Finance & CFO
    (403) 270-0803
    (403) 270-2850 (FAX)
    Website: www.emberresources.com