Nexstar Energy Ltd.

Nexstar Energy Ltd.

April 29, 2008 22:00 ET

Nexstar Energy Files 2007 Financial and Reserve Results and Provides Corporate Update

CALGARY, ALBERTA--(Marketwire - April 29, 2008) -


Nexstar Energy Ltd. ("Nexstar Energy" or the "Company") (TSX VENTURE:NXE.A) (TSX VENTURE:NXE.B) announces that its financial and operating results for the three months and year ended December 31, 2007 have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") at The Company also advises that it has filed its audited financial statements, Management's Discussion and Analysis and its National Instrument 51-101 F1, F2 and F3 oil and gas reserve information for the year ended December 31, 2007 on SEDAR.

In addition, the Company provides the following corporate update regarding its financial position and future plans:


At December 31, 2007, the Company had a working capital deficiency of $6.4 million including the Company's bank debt but excluding its $5.0 million (face value) investment in asset backed commercial paper ("ABCP"). In addition, the Company incurred a net loss of $9.2 million for the year ended December 31, 2007. Several factors led to the Company's current financial position. A primary factor was the global situation surrounding ABCP which resulted in the Company's investment in Apsley Trust ABCP becoming illiquid in August, 2007. This amount represented the majority of the Company's most significant asset - cash, the source of which was flow-through funds from the Company's initial public offering. The effect of the ABCP situation on the Company has been severe. The situation not only impacted the Company's access to its own cash, but also the Company's ability to raise significant equity due to the uncertainties surrounding the value and the final disposition of the Company's ABCP. A restructuring proposal for the ABCP has been presented and was approved by a majority of the noteholders on April 25, 2008. The outcome of the vote is still subject to final court approval. There are currently outstanding legal challenges before the courts related primarily to the legal immunities granted to specific parties under the restructuring proposal. Under the proposal, the Company would receive various classes of notes in exchange for its existing Apsley Trust note. Of the exchanged notes, approximately $1.9 million would be excluded from the restructuring proposal, due to assets defined as ineligible. Based upon information to date and assumptions made by management, the Company recorded an impairment of $1.7 million on the $5.0 million note, with impairment ranging from 24% to 49% based on the proposed classes of notes. A change in any assumptions could significantly impact the fair market value of the notes. Should the proposal be accepted, it is anticipated that a secondary market would develop for the better quality notes. A detailed description of the restructuring proposal and note valuation is presented in note 3 to the Company's financial statements dated December 31, 2007. It is noted on April 8, 2008, the Company's banker announced a global policy for its commercial holders of ABCP. The policy indicates that the bank would provide lending of up to 75% of the value of excluded notes on a non-recourse basis and 75% to 100% on the notes included in the restructuring proposal, on a recourse basis. This would result in the Company's ability to transfer approximately $1.4 million of the existing bank debt to a new credit facility with recourse only to the excluded notes. The banking proposal is subject to the restructuring proposal being accepted.

A further impact on the Company's situation was its inability to expend the required $12.0 million flow-through commitment, resulting in a shortfall of approximately $2.9 million in 2007. As stated above, a significant amount of the Company's available cash was illiquid and the value of the asset uncertain, making raising significant capital extremely difficult. As a result of the time delays and the Company's inability to meet this commitment, interest charges, taxes and penalties totaling $1.9 million were incurred, including $1.1 million to indemnify the original subscribers for the shortfall in spending on qualifying expenditures. The Company may be able to reduce this amount by as much as $0.9 million, by amendment of the original subscription agreement to incorporate a combination of the look-back rule and the 24 month period. This would provide the Company with the opportunity to reduce the $1.1 million indemnity to approximately $0.2 million, provided the Company is able to spend the shortfall amount on qualifying expenditures by August 10, 2008. In order to achieve this, the Company plans to request that large specific subscribers agree to the amendment and the Canada Revenue Agency will be requested to accept the amended subscription agreements. There is no assurance that either of these events would occur. In addition to the ABCP, the Company had disappointing drilling results in 2007, which contributed minimal additions to cash flow and reserves leading to a significant balance sheet reduction of $6.2 million due to a ceiling test write-down.

The Company has several wells in various stages of completion and tie-in and an inventory of drilling prospects for which additional capital will be required. The future operation of the Company is dependant on its ability to raise capital to support its activities, to successfully explore, develop, produce and market economically viable reserves and to receive the continued financial support from its banker and creditors.


In late January 2008, seven Company interest wells (3.15 net) were undergoing completion and testing. Four (1.8 net) non-operated wells were completed and tested prior to spring break-up with uneconomic results in the primary zones of interest. The re-completion of a secondary zone in one of these wells (0.5 net) is planned in the second quarter although the Company may elect not to participate. Testing operations on an operated well (0.5 net) in the Goodwin area of Alberta resulted in oil recoveries and significant water and as a result, this well has been suspended for further evaluation until next winter. The successful completion and testing of two wells (0.85 net) in the Pembina area is anticipated to result in the tie-in of these wells later in 2008 with net production additions of approximately 40 boepd expected. As a result of production declines, fluctuations in pipeline pressures and third party processing plant outages, average production for the first quarter of 2008 is estimated at 50 boepd. To minimize downtime experienced from variations in pipeline pressures in the Pembina area, the Company plans to add well site compression at its 100/04-19-47-3W5M Pembina area gas well after spring break-up.

New Drilling Projects

Nexstar Energy holds a 33.34% working interest in 4,480 gross acres on a 3,100 metre deep exploration prospect indicated with 3-D seismic in the South Whitecourt region of northern Alberta. On April 30, 2008, the Company will be providing a pre-licensing submission to the Alberta Energy Resources Conservation Board for the proposed drilling of this oil and natural gas prospect. Subject to obtaining the necessary financing, regulatory approval and surface access, it is anticipated that the South Whitecourt prospect could be licensed and drilled by year end. In the Pembina area of Alberta, Nexstar Energy recently participated in the successful recompletion of a well for Cardium oil and associated gas. Following up on this success, the Company has identified several light oil drilling prospects in the region to be exploited with vertical and horizontal wells. Subject to the finalization of farm-in agreements, obtaining the necessary financing and securing a joint venture partner, drilling of the initial two wells on these prospects is expected to occur in the summer of 2008. If the initial wells are successful, as many as five follow-up locations have been identified by the Company.

Nexstar Energy is a junior oil and gas company that is focused on drilling multi-zone crude oil and natural gas prospects in central Alberta, complemented by strategic acquisitions.

For further information, please review Nexstar Energy's website.

ADVISORY: This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these 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, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as may be required by applicable securities laws.

Boes 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.

9,930,000 Class A Shares

1,080,000 Class B Shares

The TSXV has neither approved nor disapproved the contents of this news release.

Contact Information

  • Nexstar Energy Ltd.
    Peter A. Carwardine
    President and CEO
    (403) 263-6133 ext. 201
    (403) 263-3629 (FAX)
    Nexstar Energy Ltd.
    Brian J. Spilchen
    VP Finance and CFO
    (403) 263-6133 ext. 202
    (403) 263-3629 (FAX)
    Nexstar Energy Ltd.
    603 - 7 Avenue SW, Suite 525
    Calgary, Alberta T2P 2T5