NuLoch Resources Inc.

NuLoch Resources Inc.

November 19, 2008 23:30 ET

NuLoch Resources Releases Q3 2008 Results

CALGARY, ALBERTA--(Marketwire - Nov. 19, 2008) - NuLoch Resources Inc. (TSX VENTURE:NLR.A)(TSX VENTURE:NLR.B), advises that it has filed its unaudited interim financial statements for the three and nine months ended September 30, 2008 at

NuLoch Resources Inc. was incorporated on May 13, 2005 and commenced operations on July 1, 2005. Production averaged 594 boe/d in the third quarter of 2008 and is currently 550 boe/d with an additional 75 boe/d expected to be on-stream in December (this document contains Forward-Looking Information - see Advisories).

Accomplishments in Q3 2008

- Averaged 594 boe/d in Q3 - up 33 boe/d over Q2 and 81% higher than Q3 2007;

- Achieved quarterly profit of $531,000 compared to $231,000 loss in Q3 2007;

- Funds flow from operations in Q3 was $2,064,000 compared to $324,000 in Q3 2007;

- New pool oil discovery at Enchant placed on stream;

- Expanded available bank line of credit from $6.5 million to $9.0 million.

Periods ended September 30,
Three months Nine months
--------------- ---------------
2008 2007 2008 2007
------- ------- ------- -------
Production - daily average
Oil and NGL (bbls/d) 234 57 198 39
Natural gas (Mcf/d) 2,164 1,627 1,952 1,500
Combined (boe/d)(1) 594 328 523 289
Average sales prices
Oil and NGL ($/bbl) 112.51 75.32 109.89 71.12
Natural gas ($/mcf) 7.84 5.10 8.87 6.39
Combined ($/boe) 72.77 38.37 74.61 42.78

($ thousands except per share amounts)
Petroleum and natural gas revenue 3,979 1,158 10,686 3,378

Funds flow from operations(2) 2,064 324 5,654 1,077
Per share - basic 0.06 0.01 0.16 0.05
Per share - diluted 0.05 0.01 0.16 0.05

Net earnings (loss) 531 (231) 1,639 (387)
Per share - basic 0.01 (0.01) 0.05 (0.02)
Per share - diluted 0.01 (0.01) 0.05 (0.02)

Working capital deficiency (3,871) (5,190) (3,871) (5,190)
Line of credit available 9,000 5,500 9,000 5,500

Capital expenditures 2,040 1,201 14,541 3,996

Class A, end of period 30,780 15,197 30,780 15,197
Class B, end of period 653 653 653 653
Options, end of period 2,885 1,378 2,885 1,378
Basic, weighted average combined 37,305 21,722 34,276 21,722
Diluted, weighted average 37,830 21,722 34,653 21,722

(1) Six mcf of natural gas is considered equivalent to 1 barrel of oil.
(2) Cash flow from operations before changes in non-cash operating working
capital. (see Advisories)

Financial Performance and Current Production

NuLoch has generated $5.7 million in funds flow from operations in the first 9 months of 2008 equivalent to $0.16 per share basic and diluted. Production in Q3 2008 was up 6 percent compared to the previous quarter but average commodity prices fell - down 6 percent on oil and NGL and down 26 percent on natural gas. Nevertheless, funds flow was strong at $2.1 million in Q3 2008 compared to $2.4 million in Q2. Year-to-date net earnings stand at $1.6 million being $0.05 per share basic and diluted.

October 2008 production is estimated at 550 boe/d with plans to tie-in two natural gas wells (1.7 net) in late November. Production in December is expected to exceed 625 boe/d with the tie-in of two (1.7 net) gas wells.

Tableland, Saskatchewan

During Q2 and Q3, NuLoch undertook completion operations on its first horizontal well at Tableland, Saskatchewan. NuLoch is currently acquiring surface locations for potential follow-up wells but has deferred plans to spud a second well in 2008.

The initial well, located at 14-04 HZ 01-04-001-10W2 has been fracture stimulated in eleven separate stages over its 1,434 metre horizontal length. The fracture stimulation injected hydrocarbon-based load fluid and ceramic proppant at planned volumes, rates and concentrations. The evaluation of the well commenced on June 21, 2008.

Most of the 8,500 barrels of hydrocarbon-based load fluid injected into the wellbore during the fracture stimulation was recovered by mid-October. At the end of the production test period the well was producing over 90 percent water. The decision was made to shut-in the well when cash netbacks went negative.

Core analysis suggests the Sanish Formation should not be capable of delivering these high water volumes. NuLoch has concluded the water production is a result of misdirected fracture stimulation. There are other approaches to stimulation that have been successful nearby in North Dakota. Further study and analysis is being undertaken with plans to drill a second well in 2009. It will likely use a modified or different stimulation technique.

With the drilling and completion of Tableland 14-4, the Company has earned working interests ranging from 35% to 50% in the balance of the 51 section farm-in block. Subsequent to Q3, NuLoch and its partner acquired additional Crown lands at Tableland that directly offset its existing position.

Alberta Operations

Alberta operations accounted for all of the net 33 boe/d increase in average production in Q3 over Q2.

NuLoch drilled a 100% working interest well at Enchant in March 2008 and completion operations were undertaken in July. This well has resulted in a new pool oil discovery. Production commenced on August 5 and solution gas tie-in was added later in the quarter. This well contributed 46 boe/d to the Company's Q3 production and is currently pumping at approximately 60 boe/d.

The Company has partially de-bottlenecked the gathering system used to produce the Mississippian gas well (1.0 net) placed on-stream in May 2008. During Q3, the gas well averaged 78 boe/d. In July, NuLoch drilled another Mississippian gas well (1.0 net) 1.5 miles away using the same play concept. That well is expected to be tied-in to the existing system during November. Further de-bottlenecking is possible with the construction of a two mile line to take both wells directly into the third-party gas plant but that decision will depend upon the production performance of these wells. The Company has two additional follow-up locations that have now been deferred into 2009.

A 70 percent working interest gas well drilled in Southern Alberta was tested during the third quarter and tie-in operations are underway. Expectations for this gas well are modest with net production budgeted at 30 boe/d.


These are unprecedented and highly uncertain times. Preservation of capital and the maintenance of a healthy balance sheet are important. NuLoch believes the oil price freefall has gone beyond fundamentals. Natural gas, essentially a North American commodity, has found some recent price support as we enter the winter heating season. However, given recent turmoil in the financial markets, a developing world-wide recession and extraordinary volatility in commodity prices, there can be little certainty when energy prices will stabilize.

NuLoch retains considerable financial flexibility. The Company has a $9.0 million demand line of credit with its banker of which less than $4.0 million has been allocated at September 30, 2008. This level of borrowing is equivalent to 0.5 times annualized Q3 funds flow. While this is a modest use of leverage, the borrowing base, due for review in April 2009, is partly dependent upon the bank's own commodity price forecast in use at that time. In the short term, capital expenditures are expected to be funded primarily through cash flow while minimizing the use of additional debt. Our previously announced plans to drill four wells in Q4 have been deferred. Capital investment plans for 2009 will be firmed-up as more visibility comes to energy prices.


Use of Barrels of Oil Equivalent (boe)

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf of natural gas to 1 bbl of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

Non-GAAP Measurement - Funds Flow

Funds flow from operations, calculated as cash flow from operating activities before changes in non-cash working capital, is used by the Company as a key measure of performance. Funds flow from operations does not have a standardized meaning prescribed by Canadian GAAP and therefore may not be comparable with the calculation of similar measures for other companies. Funds flow from operations as presented is not intended to represent operating profits for the period, nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Many of the Company's peers in the oil and natural gas industry use the same definition and, therefore, disclosure herein enhances comparability with those peers. Funds flow from operations per share is calculated using the same share bases which are used in the determination of earnings per share.

Forward-Looking Information

Certain statements in this document or incorporated herein by reference constitute "forward-looking statements". These forward-looking statements can generally be identified as such because of the context of the statements, including words indicating that the Company "believes", "anticipates", "expects", "plans" or words of a similar nature. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; successful negotiations with bankers and other third parties; the success of exploration and development activities; production levels; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); asset retirement obligations; and other circumstances affecting revenues and expenses.

Readers are cautioned that the foregoing factors do not constitute an exhaustive list. Forward-looking information is effective as of the date it is presented and is expressly qualified by this cautionary statement. Except as required by securities law, the Company undertakes no obligation to update or revise any forward-looking statements.

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

Contact Information

  • NuLoch Resources Inc.
    R. Glenn Dawson
    President and CEO
    (403) 920-0455
    (403) 920-0457 (FAX)
    NuLoch Resources Inc.
    2200, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8