GFI Oil & Gas Corporation

GFI Oil & Gas Corporation

October 29, 2007 18:20 ET

GFI Oil & Gas Corporation Announces Fiscal Year 2007 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - Oct. 29, 2007) - GFI Oil & Gas Corporation (TSX VENTURE:GFI) ("GFI" or the "Company") announced today that it has filed on SEDAR, its annual consolidated financial statements for the fiscal year ended June 30, 2007, related Management's Discussion and Analysis, and the required certificates from the CEO and CFO. These documents are available on SEDAR at or on GFI's website at


GFI is a public company listed on TSX Venture Exchange Inc. (symbol "GFI.V") with core interests in two offshore fields currently under development. Offshore Thailand, GFI is farming in to a 60% ownership interest in the 104,000 acre Block B8/38, which contains the Bualuang oilfield. Offshore northern Sumatra, Indonesia, GFI owns a 35% non-operated interest in the 94,000 acre Glagah Kambuna Technical Assistance Contract (TAC), where GFI and the operator are developing the Kambuna Field. GFI also holds a 22.5% working interest in the Seruway Production Sharing Contract (PSC) offshore northern Sumatra, and owns a 50% interest in 83,000 gross acres in the Crystal gas project in the USA.

Financial Highlights

GFI's projects are in the development phase and the Corporation has not begun to realize revenue from oil and gas investments. As a result, as shown in the table below, GFI generated net losses in 2007 and prior years:

Selected Annual Information

(USD $000s) 2007 2006 2005
Interest income $ 1,195 $ 259 $ 5
Expenses 6,403 5,162 365
Write down of property, plant and equipment 7,843 - -
Net loss 13,051 4,903 360
Per share, basic and diluted (0.11) (0.13) (0.01)
Total assets 71,700 28,721 3,039
Total liabilities $ 9,016 $ 5,940 $ 99
Reserves (MBOE)
Proved 9,259 - -
Proved Plus Probables 19,291 16,393 -

GFI recorded a Net Loss of $13,051,000 in 2007, as compared to a loss of $4,903,000 the prior year. Interest income for the year increased to $1,195,000 (2006 - $259,000) due to larger cash balances from the recent private placements and the income on cash placed in restricted accounts. Total expenses were approximately $14,246,000 (2006 - $5,162,000) for 2007. This includes a charge of $7,843,000 related to the write off of our investment in the Asahan PSC in Indonesia after the end of the exploration period. Also contributing to the higher net loss were higher expenses for general and administrative, Business Development, and depreciation and accretion, as well as higher costs for greater reliance on outside professional services.

Partly offsetting was lower stock compensation expense of $1,213,000 (2006 - $2,041,000), and realization of a net gain of $571,000 (2006 - loss of $140,000) on balances held in Canadian dollars from the rapid appreciation of the Canadian Dollar against the US Dollar.

Operating Highlights


Bualuang PSC

Effective January 10, 2007 GFI acquired the right to increase its working interest from 35% to 60% in Block B8/38 in the Gulf of Thailand, which contains the Bualuang Field. In February 2007, the annual plan of development was submitted to the Department of Mineral Fuels and the Government. GFI completed a pseudo-3D seismic shoot in May of 2007, allowing the Company to delineate bottom hole locations for the field's six development wells (five producers and one injector). GFI is currently preparing the environmental permit for production and expects to receive approval by the end of 2007 in time for first production in the first half of 2008.

GFI has made substantial progress in project management, with the completion of procurement for all long lead items complete. On January 27, 2007, we entered into a five-year lease agreement for the floating production, storage and offloading (FPSO) vessel contract, whereby we are obligated to a minimum payment of approximately $55 million over the five year period beginning March 18, 2008 . The construction of the platform is well underway and an installation contract has been awarded. The installation of the platform and topside production facilities on the FPSO are scheduled for completion in mid December 2007. We have executed a contract for a drilling rig and a support barge. We are actively engaged in finalizing the drilling program and are scheduled to begin drilling the first of the six development wells in January 2008 with full production expected by June of 2008. We have opened a shore base in Sattahip, Thailand and relocated an expatriate production manager to support the drilling program and production operations thereafter.

Bualuang oil reserves are comprised of medium gravity (26 degree API) oil and are located at depths of approximately 3,800 feet in a water depth of 210 feet. Based on third party independent reserves engineering estimates, the Bualuang Field contains more than 23 million barrels (MMB) of proved and probable reserves, (13.1 MMB net after royalty to the 60% working interest GFI will earn).


Glagah Kambuna TAC

At the Glagah Kambuna TAC, located offshore northern Sumatra, Indonesia, where we have a 35% working interest, a 450 kilometre 3-D seismic survey was completed to confirm the size of the Kambuna Field and to evaluate several other exploration and development leads. In addition, a seismic inversion and other attribute work has been completed on the 3-D seismic volumes, which revealed other development opportunities and a number of new exploratory leads. Based on an independent engineering reserve estimate as at June 30, 2007, GFI's net share of proved and probable reserves for the Kambuna TAC is estimated at 25.7 billion cubic feet of gas and 1.8 million barrels of condensate.

The operator expects to install a platform and begin drilling the first of the initial field development wells in late 2007.

Seruway PSC

A 100-square kilometre 3-D seismic program was conducted in the Seruway PSC, located offshore North Sumatra, Indonesia, to determine the location of the next development well for the Gurame Field. The survey delineated a large structural feature in which five wells have been drilled to date. This structure will be evaluated by the Gurame #6 well, which we expect to be drilled in the first quarter of 2008.

GFI holds a 22.5 percent interest in the Seruway PSC. Located adjacent to the Kambuna TAC property, Seruway PSC covers approximately 1.1 million acres and contains six identified Greenfields and more than ten seismically defined exploration prospects.

Asahan PSC

The operator of the field was unsuccessful in satisfying the regulatory authority request prior to December 16, 2006, which was the end of the current exploration period. Based on the limited progress in getting an extension to the lease, GFI determined that there was impairment in its Indonesian cost center in the third quarter of fiscal year 2007.

United States

Crystal Gas Project

GFI continued to build on its acreage position as we evaluate various options to further develop the Crystal gas project. We expect to have the opportunity to drill or cause to be drilled several prospects in the calendar year 2008, ranging between 3,000 to 7500 feet in depth.

Reserves Summary

GFI engaged McDaniel & Associates Consultants Ltd ("McDaniels") to provide an evaluation of proved and probable reserves as at June 30, 2007 in conformity with the requirements of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The results of their evaluation are summarized below.

Thailand (1) Indonesia (2) Total
------------ --------------
Net GFI Reserves as at June 30, 2007 (MBO) (BCF) (MBO) (6:1)
Proved 6,137 12,857 979 9,259
Proved Plus Probables 13,113 25,753 1,886 19,291
Proved Plus Probables Plus Possibles 25,692 38,150 2,854 34,904

Value of Reserves (10% discounted
after tax cash flow , $000's) (3) 2007

Proved $ 25,530
Proved Plus Probables $ 113,383
Proved Plus Probables Plus Possibles $ 221,568
(1) GFI net reserves are based on GFI's share after royalty deductions
(2) GFI net reserves are based on GFI's share of total Cost and Profit Oil
(3) Reserves are valued using forecast prices by McDaniels

GFI's progress in the development of the properties in Thailand and Indonesia has improved its ability to estimate reserves and their recoverability and to better define future development and operation costs, royalties and taxes and the resultant netbacks for oil and gas. Accordingly, the proved and probable reserves have increased by approximately 18% over the 2006 evaluation by McDaniels and Associates.

BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The shares offered will not be and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

ADVISORY - Certain information regarding GFI set forth in this release, including management's assessment of GFI's future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing, and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers, currency exchange risks, uncertain political risk in countries where the operations of GFI take place, 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.

Issued and Outstanding Common Shares: 167,438,806

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • GFI Oil & Gas Corporation
    Alex T. Warmath
    Chief Executive Officer
    (281) 877-7940
    GFI Oil & Gas Corporation
    Gerald F. Clark
    Chief Financial Officer
    (281) 877-7299
    GFI Oil & Gas Corporation
    12707 North Freeway, Suite 425
    Houston, Texas 77060