Kick Energy Corporation
TSX : KEC

Kick Energy Corporation

May 15, 2006 16:15 ET

Kick Exits Q1 with Production Growth

CALGARY, ALBERTA--(CCNMatthews - May 15, 2006) -

All results are expressed in Canadian dollars.

Kick Energy (TSX:KEC) is pleased to report on operations for the quarter ended March 31, 2006. Production averaged 3,112 boe/d, down 12% from the first quarter of 2005. Lower production and higher operating costs resulted in cash flow of $9.4 million, down 22% from the first quarter of 2005. Earnings for the quarter were $2.1 million. Capital spending increased significantly to $16.0 million, up from $11.2 million in the same period of 2005.

Production was lower in the Brazeau/Pembina area, as the previously reported plant processing constraints and two pipeline hydrates significantly reduced production in January and February. March production averaged 3,600 boe/d with a first quarter exit rate of 4,500 boe/d. The hydrates were finally cleared and all of the associated pipeline repairs were completed in the first week of May. Production from new Pembina oil pools is expected to be on stream in the second quarter. Three Nisku wells are expected to add over 1,000 boe/d.

Kick drilled four (4.0 net) wells in the quarter resulting in two Nisku oil wells and two potential gas wells. One of the Nisku oil wells discovered a new accumulation and the second was a successful delineation well of Kick's May 2005 discovery. The two potential gas wells are secondary targets on Kick's deep test in the Edson area and on a Brazeau well. Completion and testing of these wells will be done as soon as service rig access is permitted. Drilling operations continued through break up except for a two week shut down for rig maintenance.

Production from sweet shallow gas is increasing as completions in the Rock Creek, Notikewin, and Edmonton Sands continue to yield positive results. Sweet gas compression is expected to be installed at the existing "T" pool facility in the second quarter so that four sweet gas/oil wells can be brought on. Kick has over 60 sweet, shallow gas drilling locations, based on two wells per section, and plans to drill two to four wells this year, not including the Nisku tests that drill through the zone. Wells drilled directly offsetting Kick's lands are now on production and will be monitored to establish long term deliverability of the wells.

Kick continues with its Nisku exploration and development and will be drilling wells at 6-6-48-10W5, 12-5-48-10W5 and 5-21-47-11W5 over the next three months. These wells are all targeting gas/condensate pools.



Quarterly Highlights
Three months ended March 31, December 31, March 31,
2006 2005 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
Financial
($thousands, except per share amounts)
Revenue, before royalties 16,654 19,912 18,935
Revenue, net of royalties 12,373 14,291 14,334
Cash flow from operations(1) 9,425 10,889 12,022
Per Common Share - basic 0.21 0.24 0.28
Per Common Share - diluted 0.21 0.24 0.27
Net earnings 2,121 3,309 4,929
Per Common Share - basic 0.05 0.07 0.12
Per Common Share - diluted 0.05 0.07 0.11
Capital expenditures 16,014 15,007 11,214
Working capital deficiency 13,870 19,116 10,100
Bank debt 19,182 7,346 6,493
Common Shares outstanding (millions) 44.8 44.8 42.8
Operating
Average daily production
Light and medium oil (bbls/d) 210 64 98
Natural gas (mcf/d) 7,561 8,425 7,776
NGL (bbls/d) 1,642 1,680 2,146
Barrels of oil equivalent (boe/d) 3,112 3,148 3,540
Average prices
Light and medium oil ($/bbl) 69.45 65.58 65.77
Natural gas ($/mcf) 8.15 12.13 7.55
NGL ($/bbl) 66.06 65.19 67.51
Barrels of oil equivalent ($/boe) 59.34 68.59 59.34
Wells drilled
Gross 4 2 4
Net 4.0 2.0 4.0
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Cash flow from operations is a non-GAAP measurement. Management
uses cash flow from operations (before changes in non-cash working
capital) to analyze operating performance and leverage. Cash flow
from operations as presented does not have any standardized meaning
prescribed by Canadian GAAP and therefore it may not be comparable
with the calculation of similar measures for other entities. Cash
flow as presented is not intended to represent operating cash flow
or operating profits for the period nor should it be viewed as an
alternative to cash flow from operating activities, net earnings or
other measures of financial performance calculated in accordance
with Canadian GAAP. All references to cash flow from operations
throughout this report are based on cash flow before changes in
non-cash working capital.


Units of natural gas have been converted into barrel of oil equivalents ("boe") at a ratio of six thousand cubic feet of natural gas to one barrel of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion rate 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.



Balance Sheets
(thousands)
March 31, December 31,
(unaudited) 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
Assets
Current
Accounts receivable $ 8,531 $ 9,656
Prepaid expenses 41 50
------------------------------------------------------------------------
Total current assets 8,572 9,706

Property and equipment (Note 2) 120,737 109,331
------------------------------------------------------------------------
Total assets $ 129,309 $ 119,037
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $ 22,441 $ 28,822
Production loan (Note 3) 19,182 7,346
------------------------------------------------------------------------
Total current liabilities 41,623 36,168
Asset retirement obligation (Note 4) 4,218 3,858
Future income tax liability 21,981 20,175
------------------------------------------------------------------------
Total liabilities 67,822 60,201
------------------------------------------------------------------------
Shareholders' Equity
Share capital (Note 5) 26,694 26,694
Contributed surplus (Note 5) 4,170 3,640
Retained earnings 30,623 28,502
------------------------------------------------------------------------
Total shareholders' equity 61,487 58,836
------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 129,309 $ 119,037
------------------------------------------------------------------------
------------------------------------------------------------------------


Statements of Operations and Retained Earnings
(thousands, except per share amounts)

Three months ended March 31, (unaudited) 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
Revenue
Oil sales $ 1,311 $ 580
Natural gas sales 5,546 5,286
Natural gas liquids sales 9,765 13,041
Other 32 28
Royalty expense (net of ARTC) (4,281) (4,601)
------------------------------------------------------------------------
12,373 14,334
------------------------------------------------------------------------
Expenses
Operating 3,397 1,834
General and administrative 872 493
Depletion and depreciation 4,884 4,520
Accretion of asset retirement obligation
(Note 4) 84 59
Interest 146 84
------------------------------------------------------------------------
9,383 6,990
------------------------------------------------------------------------
Earnings before income taxes 2,990 7,344
Provision for current income taxes (937) 19
Provision for future income taxes 1,806 2,396
------------------------------------------------------------------------
Net earnings 2,121 4,929
Retained earnings, beginning of period 28,502 14,217
------------------------------------------------------------------------
Retained earnings, end of period $ 30,623 $ 19,146
------------------------------------------------------------------------
------------------------------------------------------------------------
Net earnings per share (Note 6)
Basic $ 0.05 $ 0.12
Diluted $ 0.05 $ 0.11
------------------------------------------------------------------------
Weighted average Common Shares outstanding
(Note 6)
Basic 44,770,040 42,753,374
Diluted 45,758,322 45,256,027
------------------------------------------------------------------------
------------------------------------------------------------------------


Statements of Cash Flows
(thousands)


Three months ended March 31, (unaudited) 2006 2005
------------------------------------------------------------------------
------------------------------------------------------------------------
Cash flows related to the following activities:
Operating activities
Net earnings $ 2,121 $ 4,929
Items not requiring cash
Depletion and depreciation 4,884 4,520
Accretion of asset retirement obligation 84 59
Provision for future income taxes 1,806 2,396
Employee stock option expense 530 118
------------------------------------------------------------------------
9,425 12,022
Changes in non-cash operating working capital (3,869) (3,030)
------------------------------------------------------------------------
Cash provided by operating activities 5,556 8,992
------------------------------------------------------------------------
Financing activities
Proceeds from issue of shares, net of costs - -
Increase (decrease) in production loan 11,836 (1,232)
------------------------------------------------------------------------
Cash provided by financing activities 11,836 (1,232)
------------------------------------------------------------------------
Investing activities
Additions to property and equipment (16,014) (11,214)
Changes in non-cash investing working capital (1,378) 3,454
------------------------------------------------------------------------
Cash used in investing activities (17,392) (7,760)
------------------------------------------------------------------------
Net cash inflow - -
Cash position, beginning of period - -
------------------------------------------------------------------------
Cash position, end of period $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------
Supplemental cash flow information:
Interest $ 146 $ 84
Cash taxes $ - $ 19
------------------------------------------------------------------------
------------------------------------------------------------------------



Contact Information