Exall Energy Corporation
TSX : EE

Exall Energy Corporation

November 13, 2009 10:55 ET

Exall Energy Corporation Announces Results For the Three And Nine Months Ended September 30, 2009

CALGARY, ALBERTA--(Marketwire - Nov. 13, 2009) - Exall Energy Corporation (TSX:EE) ("Exall" or the "Company") is pleased to announce financial and operating results for the three and nine months ending September 30, 2009.

During the three and nine months ended September 30, 2009 Exall has continued to work diligently to develop the Mitsue area discoveries announced in 2008.

Highlights of the third quarter include:
  • Significant progress was made on the Marten Mountain pipeline and battery facility
  • Commenced water injection for the enhanced oil recovery scheme at Marten Mountain
  • Production averaged 265 boe per day in the third quarter and 400 boe per day in the first nine months of 2009, a 44 percent increase over the first nine months of 2008
FINANCIAL HIGHLIGHTS(1)Three months ended Sept. 30Nine months ended Sept. 30
      %    %
  20092008change20092008change
Financial ($)           
Gross revenue 1,257,6463,992,318 (68) 5,229,0077,320,904 (29)
Funds from operations 97,7772,235,414 (96) 1,336,8393,845,006 (65)
 Basic and diluted per share -0.06 - 0.030.10 (70)
Net income (loss) (749,276)731,938 - (2, 336,656)1,122,077 (308)
 Basic and diluted per share (0.02)0.02 - (0.05)0.03 (270)
Capital expenditures, net 985,898749,168 32 1,578,3824,680,068 (66)
Net debt -- - 6,315,4041,058,742 497
 
Operations           
Daily production:            
 Crude oil (bbl) 161302 (47) 289173 67
 Natural gas liquids ( bbl) 1113 (15) 1214 (14)
 Natural gas (mcf) 554579 (4) 598550 9
Total daily production            
 (boe @ 6:1) 265412 (36) 400279 44
Netback per boe (6:1) ($) 19.6768.52 (71) 23.0260.98 (62)

1) Funds from operations, funds from operations per common share, and netback are Non-GA AP measurements – see the discussion under Non-GAAP measurements contained in the management discussion and analysis filed on SEDAR.

Overview

During the third quarter of 2009 the Company made significant progress on its goal to permanently increase production volumes, cash flows and profits. On June 30, 2009 the Company received approval for Waterflood Project status and Good Production Practice (GPP) from the ERCB. With the approvals in place Exall initiated plans to build a pipeline and battery facility which will allow higher production rates from the 14-1 well once the pipeline is completed and solution gas is collected and sold. Approval for the pipeline and battery was received and construction on the pipeline began in October. At the date of this release the pipeline has been completed and pressure tested, and it is expected the battery will be complete by the end of the fourth quarter.

Water source and injection wells in the Marten Mountain area have been completed and equipped and are operational as of the end of the quarter. Equipping of the 14-1 well will be completed concurrently with the pipeline and battery construction and increased production rates are expected before the end of the fourth quarter. Application for waterflood and GPP approval for the 2-12 well (previously identified as the 7-12 well) has been submitted to the ERCB as an amendment to the current waterflood approval. The 2-12 well (which was shut in after reaching maximum initial production volumes allowed by the ERCB) was placed back on production at a restricted daily allowable rate of 145 (95 net) barrels of oil per day in October of 2009. It is expected that unrestricted production will commence with waterflood and GPP approval.

Results of Operations

Production for the nine months ended September 30, 2009 averaged 400 boe per day which is a 44% increase over the same period in 2008 when production averaged 279 boe per day. This increase in production can be attributed to the successful completion and production of the 2-12 well in the first quarter of 2009 along with restricted production levels under ERCB guidelines for the 14-1 well throughout 2009. Production for the three months ended September 30, 2009 averaged 265 boe per day which is a 36% decrease from the 412 boe per day in the third quarter of 2008. The spike in production volumes in the third quarter of 2008 is the direct result of ERCB restrictions on the first Marten Mountain well which was placed on production at rates of 550 boe per day (325 net to Exall) from July 22, 2008 through August of 2008 and then shut in. The high volumes had a significant impact on the average boes per day for the third quarter of 2008 but did not have as much of an impact on the boes per day for the nine months ended September 30, 2009.

Gross revenues, funds from operations, and net income all declined in the three and nine month periods ending September 30, 2009 compared to the same periods in 2008. Gross revenues declined due to a 50% decrease in average sales prices, funds from operations decreased because of the decrease in sales prices and an increase in the average royalty rates paid to the Government of Alberta, and net incomes declined largely due to high rates of depletion expense. The Company expects that depletion rates will fall as additional reserves and lower average costs for drilling in the Marten Mountain area are realized.

Exall spent approximately $1.0 million on capital expenditures in the third quarter and $1.6 million on a year to date basis. The capital was spent planning and doing field work on the waterflood project at Marten Mountain. The pipeline and battery facility construction at Marten Mountain commenced in early October 2009.

Outlook

Exall is currently focused on the waterflood project, completion of construction of the battery facilities and tie-in of the 14-1 and 2-12 wells. Construction of the pipeline is complete and the Company expects to have the battery and tie-in completed and producing at higher rates by the end of the fourth quarter.

Exall is also working on plans for a second surface location which would allow it to drill up to five wells along the extension of the Marten Mountain channel trend. The recent approval of the routing of a large-diameter pipeline through the Marten Mountain project area by a major pipeline company may result in substantial cost savings in accessing future drilling locations. The proposed pipeline would share a portion of the proposed northern extension right-of-way which would result in a smaller cumulative environmental footprint as well as cost benefits.

With the recent waterflood approval in-hand, completion of the pipeline battery and tie-in imminent, and anticipation of additional approvals for the 2-12 well, Exall is in a good position for significant production growth. Increased world oil prices and expected decreases in operating costs and depletion rates should provide the Company with strong cash flow and profitability for 2010.

Change in CFO

Exall also announces that Scott Bonli, CA, has resigned his position as CFO, in order to pursue other opportunities. "We want to thank Scott for his valuable contributions to the growth of the Company over the last year" said Mr. Roger Dueck, President of Exall.

Exall is pleased to announce that Mr. Greg Ford, C.A., has been appointed Chief Financial Officer of the Company. Mr. Ford brings over 25 years of financial and business experience to Exall. Mr. Ford is currently the Vice President Finance and Chief Financial Officer of a public company listed on the TSX Venture Exchange and has spent a good portion of his career in public accounting practices, most recently as an Executive Director with Ernst & Young LLP. The Company has agreed to grant to Mr. Ford incentive stock options to purchase up to 100,000 common shares of the Company at an exercise price equal to the closing value of the common shares immediately following the release of the third quarter financial results and the end of the related "blackout period."

About Exall

Exall Energy Corporation is a junior oil and gas company active in the business of oil and gas exploration, development and production from its properties in Alberta, British Columbia and Texas.

The Company currently has 45,921,227 common shares outstanding. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol EE.

Reader Advisory

Certain selected financial and operational information for the three and nine months ended September 30, 2009 is set out above and should be read in conjunction with the financial statements and related management's discussion and analysis (MD&A) for the three and nine months ended September 30, 2009, the audited financial statements and related MD&A for the three months and year ended December 31, 2008, as well as the Company's Annual Information Form for the year ended December 31, 2008. These documents are filled on SEDAR at www.sedar.com and on the Company's website at www.exall.com.

Forward-looking statements and boe equivalents

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

 

Please visit Exall Energy's website at: www.exall.com

Contact Information

  • Exall Energy Corporation
    Frank S. Rebeyka
    Vice Chairman & CEO
    403-815-6637
    or
    Exall Energy Corporation
    Roger N. Dueck
    President & COO
    403-237-7820 x 223
    info@exall.com