Raven Energy Ltd.
TSX VENTURE : RVL

Raven Energy Ltd.

May 24, 2006 18:17 ET

Raven Energy Ltd. Announces Results for the Three Months Ended March 31, 2006

CALGARY, ALBERTA--(CCNMatthews - May 24, 2006) - Raven (TSX VENTURE:RVL) presents financial and operating results for the three months ended March 31, 2006. Unless otherwise stated, the volume conversion of natural gas to barrel of oil equivalent (BOE) is presented on the basis of 6 thousand cubic feet of natural gas being equal to 1 barrel of oil.



Three Months
($000's, except per Ended March 31 Year Ended
share amounts) (unaudited) December 31
------------------------------------------------------------------------
2006 2005 2005
------------------------------------------------------------------------
Petroleum and natural
gas revenue $ 7,054 $ 4,791 $ 22,095
------------------------------------------------------------------------
Net income 1,475 662 4,024
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Per share - basic and diluted 0.04 0.02 0.12
------------------------------------------------------------------------
Cash flow from operations 4,613 2,983 14,459
------------------------------------------------------------------------
Per share - basic and diluted 0.13 0.09 0.43
------------------------------------------------------------------------
Net capital expenditures 4,850 6,011 17,865
------------------------------------------------------------------------
Shareholders' equity 38,156 30,697 37,725
------------------------------------------------------------------------
Working capital (deficiency) (3,220) (5,892) (3,032)
------------------------------------------------------------------------
Natural gas production (Mcf/d) 5,938 4,805 4,713
------------------------------------------------------------------------
Oil and NGL production (bbl/d) 340 312 309
------------------------------------------------------------------------
Production (BOE/d) 1,330 1,113 1,095
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Natural gas selling price ($/Mcf) 9.65 7.48 8.80
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Oil and NGL selling price ($/bbl) 61.96 55.43 61.78
------------------------------------------------------------------------
BOE selling price ($) 58.95 47.84 55.32
------------------------------------------------------------------------
Operating expenses ($/BOE) 9.28 8.16 8.24
------------------------------------------------------------------------
Cash flow netback ($/BOE) 38.55 29.79 36.20
------------------------------------------------------------------------
Common shares
------------------------------------------------------------------------
Weighted average (millions) 34.9 33.4 33.7
------------------------------------------------------------------------
Outstanding (millions) 34.9 33.4 34.9
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------------------------------------------------------------------------


OPERATIONS REVIEW

During the first quarter of 2006, Raven participated in the drilling of two (1.4 net) wells resulting in two dry and abandoned wells in the Inland area of east central Alberta. Undeveloped land holdings at March 31, 2006 within the Province of Alberta totaled 82,600 gross (75,300 net) acres at an average 91% working interest.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis (M D & A) dated May 24, 2006 should be read in conjunction with the unaudited interim financial statements for the three months ended March 31, 2006 and 2005 and the audited financial statements for the years ended December 31, 2005 and 2004.

The M D & A contains the terms cash flow from operations and cash flow per share. Cash flow, as used by the Company, is before changes in non-cash working capital. Cash flow and cash flow per share as presented are not defined by generally accepted accounting principles (GAAP) and therefore are referred to as non-GAAP measures. These non-GAAP measures may not be comparable to the calculation of similar measures for other entities.

Where amounts are expressed on a barrel of oil equivalent basis (BOE), natural gas volumes have been converted to barrels of oil at six thousand cubic feet per barrel. BOE's 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.

Revenue and Production

Petroleum and natural gas revenue increased 47 percent to $7.1 million in the first quarter of 2006 compared to the first quarter of 2005 due to increased production and commodity pricing. Production volume increases contributed 41 percent of the revenue growth. Average daily production volumes increased 19 percent to average 1,330 BOE per day (74 percent natural gas) in the first quarter of 2006 compared to the 2005 period.

Natural gas production increased 24 percent over the comparable period due to new production from the Ante Creek and Inland areas. Production of oil and natural gas liquids increased nine percent to 340 barrels per day, from 312 barrels per day in the first quarter of 2005, as the result of new oil production from the Ante Creek area. Production in the first quarter of 2006 increased 13 percent over the fourth quarter of 2005 (1,181 BOE per day).

The average sales price received increased 23 percent to $58.95 per BOE in the first quarter of 2006 from $47.84 per BOE in the comparable period of 2005. Natural gas prices increased 29 percent to average $9.65 per Mcf in the first quarter of 2006 compared to $7.48 per Mcf in the same period of 2005 while prices received for oil and natural gas liquids increased 12 percent to average $61.96 per barrel.

The Company enters into physical contracts for the sale of natural gas at fixed prices and terms to protect cash flow against price volatility. The price realized on the sale of natural gas was increased by $1.62 per Mcf in the first quarter of 2006 (increased by $0.26 per Mcf in the 2005 period) as a result of these contracts as compared to daily spot prices. Currently, the Company has contracted an average of 2.4 MMcf of natural gas per day for the period from April 1 to 30, 2006 at an average price of approximately $6.91 per Mcf. The Company has not contracted any natural gas liquids or oil.



Operations Summary

Three months ended March 31(a)
------------------------------------------------
2006 2005
------------------------------------------------
$000's $/BOE % $000's $/BOE %
------------------------------------------------
Petroleum & natural
gas revenue $ 7,054 $ 58.95 100.0 $ 4,791 $ 47.84 100.0
Royalties, net of ARTC 1,109 9.26 15.7 769 7.68 16.1
Operating costs 1,110 9.28 15.7 818 8.16 17.1
------------------------------------------------------------------------
Field netback $ 4,835 $ 40.41 68.6 $ 3,204 $ 32.00 66.9
General &
administrative (1) 203 1.70 2.9 193 1.93 4.0
Cash interest 20 0.16 0.3 28 0.28 0.6
------------------------------------------------------------------------
Cash flow from
operations $ 4,612 $ 38.55 65.4 $ 2,983 $ 29.79 62.3
Stock based
compensation 26 0.22 0.4 14 0.14 0.3
Depletion,
depreciation &
accretion 2,361 19.73 33.5 1,952 19.50 40.8
Future income taxes 751 6.28 10.7 354 3.54 7.4
------------------------------------------------------------------------
Net income $ 1,474 $ 12.32 20.8 $ 662 $ 6.61 13.8
------------------------------------------------------------------------
------------------------------------------------------------------------

(a) Columns may not add in the above table due to rounding
(1) Net of non-cash general and administrative expenses


Royalties, net of ARTC, on a barrel of oil equivalent basis, increased 21 percent from $7.68 in the first quarter of 2005 to $9.26 in the first quarter of 2006. Royalties increased due to increased commodity prices and the higher level of production from Ante Creek compared to the declining production in the Viking area. Producing wells in the Viking area are natural gas wells and receive the benefit of reduced royalty rates as productivity declines. Solution gas production at Ante Creek is subject to full Crown natural gas royalty rates. Operating costs increased to $9.28 per BOE for the first quarter of 2006 versus $8.16 per BOE in the comparable period due mainly to increased oil transportation costs. In the 2005 first quarter, oil from the Ante Creek area was transported on a third party pipeline. However, later in 2005 pipeline transportation was curtailed and the oil is currently trucked to market. We anticipate this oil will be transported through alternative pipelines later in 2006.

Gross general and administrative expenses, before overhead recovered and stock based compensation expense, increased approximately 23 percent in the 2006 period compared to the 2005 period due mainly to additional staffing. Overhead recovered by the Company as operator of drilling and construction activities increased in the first quarter of 2006 in accordance with increased Company operated drilling and construction activities. General and administrative expenses, net of overhead recovered and stock based compensation expense, decreased to $1.70 per BOE in the first quarter of 2006 versus $1.93 per BOE in the comparable period.

Interest expense of approximately $20,000 was incurred in the first quarter of 2006 compared to $28,000 in the first quarter of 2005. The Company is not currently taxable on income and does not have any operations outside of Alberta.

Cash flow from operations increased 55 percent to $4.6 million in the first quarter of 2006 ($3.0 million in the 2005 period) as a result of increased production volumes and increased oil and natural gas prices. On a barrel of oil equivalent basis, cash flow from operations increased 29 percent to $38.55 per BOE in the 2006 period ($29.79 per BOE in 2005). Cash flow per share increased 44 percent to $0.13 per share. The weighted average number of shares outstanding increased five percent to 34,917,441.


Depletion, depreciation and accretion increased to $19.73 per BOE in the first quarter of 2006 versus $19.50 per BOE in the comparable period of 2005. Depletion, depreciation and accretion increased slightly on a per unit basis due to a higher depletable base resulting from the first quarter expenditures. A future income tax provision of $751,000 was recorded in the first quarter of 2006 versus $354,200 in the comparable period due to the increase in the 2006 first quarter pre-tax income.

Net income for the first quarter of 2006 was $1,475,134 compared to $661,660 in the 2005 period mainly as a result of increased production and commodity pricing offset by an increase in the future income tax provision. Net income per share for the period was $0.04 per share compared to $0.02 in the 2005 period.

Capital expenditures of $4.9 million in the first quarter were financed through a combination of cash flow and the utilization of credit facilities. At March 31, 2006 the Company had a working capital deficiency of $3.2 million. Bank facilities of $15.0 million were available at March 31, 2006. Additional capital expenditures in 2006 will be financed through cash flow and the utilization of credit facilities.



Summary of quarterly results
($000's, except per share amounts)(unaudited)

2006 Quarter Ended March 31
------------------------------------------------------------------------
Revenue before royalties $ 7,054
Cash flow from operations 4,613
Per share - basic and diluted 0.13
Net income 1,475
Per share - basic and diluted 0.04
Production (BOE/d) 1,330

March June September December
2005 Quarter Ended 31 30 30 31
------------------------------------------------------------------------
Revenue before royalties $ 4,791 $ 4,878 $ 5,211 $ 7,214
Cash flow from operations 2,983 3,366 3,411 4,700
Per share - basic and diluted 0.09 0.10 0.10 0.13
Net income 662 983 838 1,541
Per share - basic and diluted 0.02 0.03 0.03 0.04
Production (BOE/d) 1,113 1,072 1,012 1,181

March June September December
2004 Quarter Ended 31 30 30 31
------------------------------------------------------------------------
Revenue before royalties $ 2,680 $ 3,127 $ 3,695 $ 4,032
Cash flow from operations 1,614 2,107 2,444 2,479
Per share - basic and diluted 0.06 0.07 0.08 0.08
Net income 236 312 266 559
Per share - basic and diluted 0.01 0.01 0.01 0.02
Production (BOE/d) 712 796 963 984


Quarterly revenues and cash flows in 2005 as compared to the same periods in 2004 increased to reflect higher production volumes and commodity pricing. Quarterly net income in 2005 also increased accordingly.

OUTLOOK

Details of the TriStar Oil & Gas Ltd. acquisition of Raven Energy Ltd. are available in the Company's news release dated April 10, 2006.



RAVEN ENERGY LTD.
Balance Sheets

March 31, December 31,
2006 2005
------------- ------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 360 $ 414,532
Accounts receivable 4,226,421 4,674,393
Prepaid expenses and deposits 232,217 145,927
------------- ------------
4,458,998 5,234,852

Petroleum and natural gas properties 52,219,381 49,674,490
------------- ------------

$ 56,678,379 $ 54,909,342
------------- ------------
------------- ------------


Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 4,582,858 $ 8,267,255
Bank debt (note 1) 3,096,000 -
------------- ------------
7,678,858 8,267,255

Asset retirement obligations 1,870,400 1,815,100

Future income taxes 8,972,800 7,102,300

Shareholders' equity
Share capital (note 2) 25,587,564 26,632,980
Contributed surplus 687,389 685,473
Retained earnings 11,881,368 10,406,234
------------- ------------
38,156,321 37,724,687
------------- ------------
$ 56,678,379 $ 54,909,342
------------- ------------
------------- ------------

See accompanying notes to financial statements.


RAVEN ENERGY LTD.
Statements of Income and Retained Earnings
(unaudited)

Three months ended March 31,
2006 2005
------------- ------------

Revenue
Petroleum and natural gas $ 7,054,422 $ 4,790,742
Royalties, net of Alberta Royalty Tax
Credit (1,108,609) (769,151)
------------- ------------
5,945,813 4,021,591
------------- ------------

Expenses
Operating 1,109,907 817,350
General and administrative 229,315 207,590
Interest 19,657 28,391
Depletion, depreciation and accretion 2,360,800 1,952,400
------------- ------------
3,719,679 3,005,731
------------- ------------

Income before income taxes 2,226,134 1,015,860
Income taxes
Future 751,000 354,200
------------- ------------
751,000 354,200
------------- ------------

Net income 1,475,134 661,660

Retained earnings, beginning of period 10,406,234 6,382,149
------------- ------------

Retained earnings, end of period $ 11,881,368 $ 7,043,809
------------- ------------
------------- ------------

Earnings per share - basic and diluted $ 0.04 $ 0.02
------------- ------------
------------- ------------

Weighted average number of common shares
outstanding - basic 34,917,441 33,378,552
------------- ------------
------------- ------------
Weighted average number of common shares
outstanding - diluted 35,268,489 33,611,409
------------- ------------
------------- ------------

See accompanying notes to financial statements.


RAVEN ENERGY LTD.
Statements of Cash Flows
(unaudited)

Three months ended March 31,
2006 2005
------------- ------------

Cash provided by (used in):
Operating activities
Net income $ 1,475,134 $ 661,660
Items not involving cash:
Stock based compensation 26,000 14,451
Depletion, depreciation and accretion 2,360,800 1,952,400
Future income taxes 751,000 354,200
------------- ------------
Funds from operations 4,612,934 2,982,711
Change in non-cash working capital 554,155 178,753
------------- ------------
5,167,089 3,161,464

Financing activities
Bank debt 3,096,000 2,757,000
Issue of share capital, net of issuance
costs 50,000 -
Change in non-cash working capital 17,455 (9,200)
------------- ------------
3,163,455 2,747,800

Investing activities
Petroleum and natural gas properties (4,850,391) (6,011,318)
Change in non-cash working capital (3,894,325) (518,409)
------------- ------------
(8,744,716) (6,529,727)
------------- ------------
Decrease in cash and cash equivalents (414,172) (620,463)

Cash and cash equivalents, beginning of
period 414,532 621,293
------------- ------------

Cash and cash equivalents, end of period $ 360 $ 830
------------- ------------
------------- ------------

See accompanying notes to financial statements.

Supplemental cash flow information:
Cash paid during the period for:
Interest expense $ 2,202 $ 15,403


RAVEN ENERGY LTD.
Notes to Financial Statements
Three months ended March 31, 2006
(unaudited)

The interim financial statements of Raven Energy Ltd. ("Raven" or the "Company") have been prepared by management in accordance with accounting principles generally accepted in Canada. The interim financial statements have been prepared following the same accounting policies and methods of application as the financial statements for the fiscal year ended December 31, 2005, except as noted below. The disclosures provided below are incremental to those included with the annual financial statements. The interim financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2005.

1. Bank debt:

The Company has access to a demand revolving facility of $15,000,000 from a Canadian chartered bank. The credit facility bears interest at the bank's prime rate plus 0.50% per annum and is secured by a general security agreement constituting a first ranking security interest on all personal property and a first ranking charge on all real property.



2. Share capital:

(a) Authorized:

The authorized share capital consists of an unlimited number of common
shares without nominal or par value and an unlimited number of
preferred shares, issuable in series. No preferred shares have been
issued.

(b) Common shares issued:

Number of Shares Amount
---------------- -------------
Balance, December 31, 2005 34,878,552 $ 26,632,980
Income tax effect of flow-through
shares - (1,119,500)
Issued on exercise of stock options 50,000 74,084
---------------- -------------
Balance, March 31, 2006 34,928,552 $ 25,587,564
---------------- -------------
---------------- -------------
(c) Stock option plan:

The Company has a stock option plan as described in note 6(d) of the
December 31, 2005 financial statements. The following table summarizes
the changes in the Company's stock option plan during the first three
months of 2006:

Weighted Average
Number of Options Exercise Price
------------------ -----------------
Outstanding, December 31, 2005 1,325,000 $ 1.49
Exercised (50,000) $ 1.00
------------------ -----------------
Outstanding, March 31, 2006 1,275,000 $ 1.51
------------------ -----------------
Options exercisable at March 31,
2006 1,100,000 $ 1.45
------------------ -----------------
------------------ -----------------

The following table summarizes information about the stock options
outstanding at March 31, 2006:


Options Outstanding Options Exercisable
---------------------------------- --------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
exercise Number Contractual Exercise Number Exercise
prices Outstanding Life (Years) Price Exercisable Price
--------------------------------------------------- --------------------
$1.00 - 1.39 400,000 1.8 $1.00 400,000 $1.00
$1.40 - 1.79 200,000 0.2 $1.40 200,000 $1.40
$1.80 - 2.00 675,000 4.3 $1.84 500,000 $1.84
------------------------------------------------------------------------
$1.00 - 2.00 1,275,000 2.9 $1.51 1,100,000 $1.45
------------------------------------------------------------------------
------------------------------------------------------------------------

(d) Contributed surplus

A reconciliation of contributed surplus is provided below:

------------------------------------------------------------------------

Balance, December 31, 2005 $ 685,473
Stock based compensation expense $ 26,000
Transfer to share capital on exercise of options $ (24,084)
------------------------------------------------------------------------

Balance, March 31, 2006 $ 687,389
------------------------------------------------------------------------
------------------------------------------------------------------------


3. Financial instruments:

The Company has a price risk management program whereby the commodity price associated with a portion of its future production is fixed. The Company has entered into fixed price sales contracts for a portion of its future gas production resulting in an average contracted volume of 2.4 million cubic feet per day for the period April 1, 2006 to April 30, 2006 at a weighted average contract price of $6.91 per thousand cubic feet.

4. Subsequent event:

Subsequent to March 31, 2006 the Company entered into an agreement whereby TriStar Oil & Gas Ltd. ("TriStar") has agreed to offer to acquire all of the issued and outstanding shares of the Company. The purchase price payable by TriStar for each Raven share will be, at the election of the holder, one of the following: (a) $2.25 in cash, (b) 0.32 common shares of TriStar, or (C) $0.6525 in cash and 0.2272 common shares of TriStar. A maximum of $22,500,000 in cash will be payable to the holders of Raven shares pursuant to the agreement.

The transaction will be completed by way of a plan of arrangement and is subject to regulatory, shareholder and final court approval.





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

Contact Information

  • Raven Energy Ltd.
    Laurie Smith
    President & Chief Executive Officer
    (403) 264-9058