Redcliffe Exploration Inc.

Redcliffe Exploration Inc.

November 27, 2009 17:50 ET

Redcliffe Announces Q3 2009 Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 27, 2009) -


Redcliffe Exploration Inc. ("Redcliffe" or the "Company") (TSX VENTURE:RXP.A)(TSX VENTURE:RXP.B) is pleased to announce that it has filed its unaudited interim consolidated financial statements and related Management's Discussion and Analysis as of and for the three and nine months ended September 30, 2009 with Canadian securities regulatory authorities. These filings are available for review at

Q3 2009 Highlights:

- Production for Q3 2009 increased 4% to 864 boe/d and 8% to 982 boe/d for the three and nine months ended September 30, 2009, respectively, compared to the corresponding periods in 2008. Q3 2009 production continued to be affected by low natural gas prices, resulting in approximately 250 boe/d of production shut-ins combined with delayed tie-ins of previously drilled wells. The Company estimates its current production capability at 1,000 - 1,100 boe/d, and expects all of its wells to be on production in December 2009, although some are expected to produce at restricted rates.

- Net debt decreased 50% to $6,687,000 at September 30, 2009, compared to $13,472,000 at December 31, 2008. This compares to Redcliffe's bank lines at September 30, 2009 of $14.1 million. The decrease was primarily the result of closing two equity financings in Q2 - Q3 2009 for gross proceeds of $8,200,000.

- Net capital expenditures totaled $2,629,000 for Q3 2009 and $5,270,000 for the nine months ended September 30, 2009. The Company did not drill any wells during Q3 2009 with the majority of capital expenditures during the period consisting of Crown land purchases and completion activity on previously drilled wells. During the first nine months of 2009, the Company drilled 3 (1.81 net) wells, which resulted in 2 (1.38 net) natural gas wells and 1 (0.43 net) dry and abandoned well, for an overall net success rate of 76%.

- Petroleum and natural gas sales decreased 57% to $2,347,000 and 45% to $9,224,000 for the three and nine months ended September 30, 2009, respectively, compared to the corresponding periods in 2008. This was primarily caused by a decrease in product prices realized of 42% and 49% for the respective periods in 2009 compared to 2008, and has had a corresponding impact on cash flows from operations in 2009.

- Established an $8 million Q4 2009 / Q1 2010 winter drilling program focused in the Company's core gas area in the Gold Creek / Wapiti / Karr regions of northwestern Alberta, and in the developing Cardium horizontal oil play in the Pembina area of central Alberta.

Three months Nine months
ended September 30 ended September 30
Financial 2009 2008 2009 2008
($ thousands, except per share

Petroleum and natural gas sales 2,347 5,411 9,224 16,693
Funds from operations (1) 321 2,011 2,956 7,021
Per basic and diluted share - 0.02 0.03 0.09
Cash provided by operating activities 861 1,368 2,126 5,923
Per basic and diluted share 0.01 0.02 0.02 0.08
Net income (loss) (2,160) 1,856 (4,575) 632
Per basic and diluted share (0.02) 0.02 (0.04) 0.01
Capital expenditures, net 2,629 4,474 5,270 13,096
Weighted-average shares (thousands)
Basic 122,080 80,484 109,966 75,549
Diluted 122,080 80,484 109,966 78,872

Capital Structure September 30, 2009 December 31, 2008
($ thousands, except share amounts)

Working capital deficiency (2) 1,156 4,885
Bank debt 5,531 8,587
Net debt (3) 6,687 13,472
Total assets 61,878 66,683
Shares outstanding (thousands)
Class A (4) 110,308 74,235
Class B 1,494 1,494

Three months Nine months
ended September 30 ended September 30
Operations 2009 2008 2009 2008

Daily production
Crude oil and condensate (bbl/d) 166 224 180 176
Natural gas liquids (bbl/d) 97 47 126 109
Natural gas (mcf/d) 3,605 3,345 4,057 3,739
Oil equivalent (boe/d @ 6:1) 864 828 982 908
Per million diluted shares 7.1 10.3 8.9 12.0
Average prices (4)
Crude oil and condensate ($/bbl) 69.18 115.45 58.55 115.95
Natural gas liquids ($/bbl) 25.40 49.79 24.10 55.04
Natural gas ($/mcf) 3.20 8.95 4.86 9.17
Oil equivalent ($/boe) 29.52 71.00 34.39 67.08
Operating netback ($/boe) (5) 10.73 39.22 16.80 38.79
Realized gain (loss) on financial
derivatives ($/boe) - (3.36) 0.66 (1.99)
General and administrative ($/boe) (5.74) (7.68) (5.34) (6.97)
Interest ($/boe) (0.95) (1.78) (1.10) (1.61)
Funds from operations ($/boe) 4.04 26.40 11.02 28.22
Drilling activity
Gross wells - 2.00 3.00 5.00
Net wells - 1.03 1.81 3.53
Success rate, net wells - 100% 76% 100%
(1) Funds from operations is calculated as cash provided by operating
activities and adding changes in non-cash working capital and asset
retirement expenditures, if any. Funds from operations is used to
analyze the Company's operating performance and leverage. Funds from
operations does not have a standardized measure prescribed by GAAP and
therefore may not be comparable with calculations of similar measures
for other companies.
(2) Working capital deficiency includes only accounts receivable, prepaid
expenses and deposits, and accounts payable and accrued liabilities.
(3) Net debt represents the sum of working capital deficiency and bank debt.
(4) Average prices are before the deduction of transportation costs; oil
equivalent includes sulphur sales.
(5) Operating netback equals petroleum and natural gas sales less royalties,
operating expenses and transportation costs, calculated on a boe basis.
Operating netback does not have a standardized measure prescribed by
GAAP and therefore may not be comparable with the calculation of similar
measures for other companies.


The Company has planned an $8 million winter capital program for Q4 2009 and Q1 2010, which will be funded from cash flows and the equity financings that were completed in Q2 - Q3 2009, which were initially used to repay debt. This capital program will be focused in the Company's core gas area in the Gold Creek / Wapiti / Karr regions of northwestern Alberta, and in the developing Cardium horizontal oil play in the Pembina area of central Alberta.

Redcliffe currently owns interests in 108 sections of land in the Peace River Arch multi-zoned gas basin, centered around its Gold Creek / Wapiti production. This winter's capital program will focus on the Company's Montney and Nikanassin gas potential in this area, and is being driven by anticipated strengthening gas prices in 2010 and by the recent nearby successes of intermediate and larger sized competitors.

In the Karr area, Redcliffe plans to drill two vertical wells offsetting the four existing and six additional planned horizontal wells of an intermediate gas producer. These two vertical wells, while also targeting up-hole gas horizons, will primarily target the Montney sand. The Montney potential has already been established by these adjacent horizontals that have reported test rates of up to 5 mmcfpd with associated liquids. Both wells will be cored for reservoir optimization purposes. Depending upon the outcome of a drilling option in the Gold Creek area currently being seismically evaluated, Redcliffe may allocate additional funds to the Karr area and convert one of these vertical tests to a horizontal drill or, alternatively, drill a horizontal well on farm-in lands. This determination will be made prior to year-end. Redcliffe maintains an approximate 90% working interest in 15 sections of land over this prospect. In addition, Redcliffe has exposure to Montney turbidite siltstone potential in approximately 89 sections across its Gold Creek / Wapiti / Karr core areas at an average controlling working interest of approximately 70%.

In the Wapiti area, Redcliffe will drill a vertical Nikanassin test on a recently acquired 100% working interest four-section block of land. This test well, if successful, will be the fourth Nikanassin producer for the Company. Like the Montney Formation at Karr, the Nikanassin Formation represents a resource-style play that offers upside from anticipated increases in natural gas prices combined with the predictable nature of a large gas deposit developed utilizing horizontal drilling and multi-staged stimulation techniques. While Montney shale and sand deposits are being developed at this time utilizing multi-staged horizontal fracture techniques, to our knowledge the Nikanassin has yet to be tested horizontally in the immediate area, although other operators have recently licensed horizontal wells nearby. Vertical wells drilled to the north and utilizing optimized fracture completion techniques have achieved initial rates in the 3 - 5 mmcfpd range. Redcliffe estimates that it has exposure to Nikanassin potential in approximately 82 sections in both its Wapiti / Gold Creek core areas at an average controlled working interest of 63%.

In the Gold Creek area, Redcliffe will re-complete the Nikanassin zone on an existing 50% working interest well in Q4 2009. The Company also has a number of drills planned, subject to partner approvals and the completion of an analysis of a recently acquired seismic program. These wells range in working interest from 30% - 72%. Confirmation of scheduling for these wells for 2010 is currently in progress.

Redcliffe plans to drill at least one horizontal Cardium well prior to year-end in Pembina. Recent drilling offsetting the Company's lands has resulted in initial rates over 250 bopd per well with the ultimate potential of drilling 2 - 4 wells per section. Two recent horizontal wells have been drilled directly offsetting Redcliffe's lands. This play is drawing significant attention due to both its areal extent and the potential reserves per section estimated at 400,000 - 600,000 barrels. Redcliffe has 12 sections of land with Cardium potential at an average working interest of 65%.

After a time of distressed natural gas pricing and resultant limited capital activity during the first three quarters of 2009, we are excited to recommence drilling activity at a meaningful level in anticipation of improved commodity prices through 2010. With our extensive land inventory and Montney / Nikanassin potential, we look forward to developing our assets for significant growth during the second half of 2010.

Reader Advisories

Forward-Looking Statements: This news release contains 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, uncertainties and assumptions, certain of which are beyond the Company's control. Such risks, uncertainties and assumptions include, without limitation, those associated with oil and gas exploration, development, exploitation, production, marketing, processing 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 that the Company will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports, including the Company's annual information form for the financial year ended December 31, 2008, on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website ( All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. 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, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE may be misleading, particularly if used in isolation. A BOE conversion 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

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