Stonefire Energy Corp.

Stonefire Energy Corp.

November 25, 2009 16:01 ET

Stonefire Energy Corp. Announces 2009 Third Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 25, 2009) -


Stonefire Energy Corp. (the "Corporation" or "Stonefire") (TSX VENTURE:SFE.A) (TSX VENTURE:SFE.B) is pleased to announce that it has filed on SEDAR its unaudited financial statements and related management's discussion and analysis ("MD&A") for the three month and nine month periods ended September 30, 2009. Selected operational and financial results are outlined below and should be read in conjunction with Stonefire's unaudited financial statements and related MD&A which can be found at

Financial and Operating Highlights

Three months ended Nine months ended
Sep 30, 2009 Sep 30, 2008 Sep 30, 2009 Sep 30, 2008
($ except share
amounts) (unaudited) (unaudited) (unaudited) (unaudited)
Petroleum and
natural gas
revenue $3,577,003 $ 5,385,975 $ 11,993,627 $ 12,796,008
Funds flow from
(used in)
operations (1) 1,964,972 2,795,950 5,880,523 5,945,661
Per share, basic (1) 0.08 0.12 0.23 0.25
Net income
(loss) (37,193) 781,426 (368,391) 1,343,673
Per share, basic 0.00 0.03 (0.01) 0.06
expenditures $3,618,177 $ 8,688,403 9,951,068 16,364,955
Working capital
deficit (end of
period) $ (23,438,763) $ (18,111,215)
outstanding (end
of period)
Class A,
including shares
under share
purchase loans 18,265,000 18,265,000
Class B 1,012,000 1,012,000
Options 1,785,000 1,775,000
Weighted average
Class A 18,202,500 18,202,500 18,202,500 18,202,500
Class B 1,012,000 1,012,000 1,012,000 1,012,000
Conversion of
Class B shares
(2) 6,165,305 4,458,270 6,165,305 4,458,270
Weighted average
basic shares
outstanding 25,379,805 23,672,770 25,379,805 23,672,770
Class A share
High $ 2.00 $ 2.75
Low 0.95 0.65
Close $ 1.41 $ 1.85
Crude oil
(bbls/d) 183 81 232 27
Natural gas
liquids (bbls/d) 177 137 185 121
Natural gas
(mcf/d) 5,325 4,318 5,418 3,369
Total (boe/d at
6:1) 1,247 938 1,320 710
Average selling
Crude oil (per
bbl) $ 68.38 $ 111.14 $ 55.64 $ 111.14
Natural gas
liquids (per
bbl) 49.67 95.89 45.32 92.90
Natural gas
(per mcf) 3.29 8.42 4.18 9.63
netback (per boe
at 6:1) 20.63 37.54 20.05 37.62
Funds flow
netback (per boe
at 6:1) $ 17.13 $ 32.40 $ 16.32 $ 30.56

(1) Management uses funds flow from operations (before changes in non-cash
working capital) to analyze operating performance and leverage. Funds
flow from operations as presented does not have any standardized meaning
prescribed by Canadian generally accepted accounting principles (GAAP)
and, therefore, may not be comparable with the calculation of similar
measures by other entities.
(2) For the period ended September 30, 2009, the Class B shares are
converted at the period-end Class A share price of $1.41 (2008 - $1.85)
and added to the Class A shares to calculate basic shares outstanding.
(3) Sales of crude oil by the Corporation commenced in August 2008.

2009 Third Quarter Corporate Highlights

- Third quarter production averaged 1,247 boe per day, a 33 percent increase over Q3 2008 production of 938 boe per day.

- The Corporation continued to achieve very low operating and cash costs (operating, transportation, interest and general and administrative costs), which came in at $4.55 per boe and $9.44 per boe, respectively, in the third quarter. The operating cost per boe represents a decline of 5 percent on a unit-of-production basis from the third quarter of 2008 and is inline with our target of $4.50 per boe for 2009.

- Funds flow from operations for the third quarter was $2 million or $17.13 per boe in spite of some of the lowest natural gas prices seen in the last seven years, which averaged just $2.79 per gigajoule at AECO for the quarter.

- The Corporation's credit facilities were reviewed in September and remain unchanged at a total of $30 million, which is comfortably above the Corporation's combined net debt and working capital deficiency of $23.4 million at September 30, 2009.

- The Corporation drilled two 100 percent working interest wells at Edson during the third quarter. The first, a natural gas well, was tied in and is currently producing approximately 110 boe per day of liquids-rich sweet natural gas. The second well has been equipped as a pumping oil well and is producing at modest rates of 10 to 20 barrels per day. Although not prolific, the well has confirmed a 1.5-mile extension of Stonefire's 2008 light oil pool discovery at Edson which may lead to further drilling with vertical and/or horizontal wells.

- Added five gross (3.5 net) sections of undeveloped land during the quarter, which has increased the Corporation's current total land base to approximately 60 sections with an average working interest of approximately 73 percent.

- Exiting the third quarter Stonefire's drilling inventory stands at 42 gross (31.5 net) drilling locations. Along with these vertical drilling locations Stonefire has identified the potential for 30 gross (26 net) horizontal drilling locations on its lands. These horizontal locations target five Deep Basin sweet natural gas zones and two light oil zones.

President's Message

It is my pleasure to deliver what will likely be my last President's message to the shareholders of Stonefire Energy Corp., due to the recently announced acquisition agreement with Angle Energy Inc. Over the last four years it has been a privilege and an honour to be CEO of a full-cycle exploration company that has gone from a standing start with no land or production, through exploration and development drilling that included several substantial natural gas and oil discoveries, to a very focused, high-quality Deep Basin production company generating solid cash flow with low costs and manageable debt.

The Corporation is pleased to report continued operational success in the third quarter in spite of very low natural gas prices. Production averaged 1,247 boe per day, an increase of 33 percent over the third quarter of 2008 but lower than the 1,369 boe per day average for the second quarter of 2009. Third quarter production was reduced in part by our decision to shut-in approximately 45 boe per day at Bronson for September due to low natural gas prices, by a third-party gas plant's outage in July at McLeod and due to general production declines not being fully offset by new production. The tie-in of two low-rate gas wells at McLeod was also deferred due to low natural gas prices. In spite of the lowest natural gas prices seen in nearly seven years the Corporation achieved very respectable operating netbacks of $20.63 per boe for the quarter, thanks in part to our low cost structure, declining royalties and high liquids content of our natural gas.

Operating costs for the quarter averaged $4.55 per boe, in line with our full-year target of $4.50 per boe. Total cash costs averaged $9.44 per boe and total royalties were 14.7 percent of sales revenue. Funds flow from operations for the quarter totalled $2 million or $17.13 per boe. During the quarter the Corporation's credit facilities were reviewed and were left unchanged at $30 million. Total capital spent during the quarter was $3.6 million bringing total net debt and working capital deficit to $23.4 million at the end of the quarter. This is still comfortably within the Corporation's $30 million total credit facilities.


During the third quarter the Corporation's main focus of activity was the drilling and completion of two 100 percent working interest wells at Edson. The first well was completed in two Deep Basin natural gas zones and is currently producing liquids-rich sweet natural gas at approximately 110 boe per day. This well lies close to and has been tied-in to Stonefire's 100 percent working interest Edson gas plant.

The second well targeted a light oil zone and was a 1.5-mile step-out to the Corporations mid-2008 Edson light oil pool discovery. The oil zone was completed in this new well and is producing at approximately 10 to 20 barrels per day of 39 degrees API oil. This oil rate is lower than expected due to fewer natural fractures and lower than expected permeability in the reservoir. More importantly, though, the well has proven up a large extension to the light oil pool with the potential for additional development oil wells including a possible horizontal oil well. This well also encountered three highly prospective natural gas zones that can be completed as gas prices recover.

The Corporation continued to expand its land base with the purchase of five gross (3.5 net) sections of undeveloped land at Crown land sales in the Edson and McLeod fields. The Corporation's total land base currently stands at approximately 60 gross sections with an average working interest of 73 percent. Our drilling inventory has grown to 42 gross (31.5 net) high-quality, multi-zone drilling locations all Stonefire-operated. During the third quarter Stonefire conducted a technical review of its lands and identified potential for up to 30 gross (26 net) horizontal wells targeting five sweet natural gas zones and two light oil zones. Many of these locations are covered by 3D seismic and benefit from adjoining vertical well control.


On November 19, 2009 Stonefire entered into an agreement to sell the Corporation subject to certain conditions. This all-cash purchase offer of $2.00 per A share and $10.00 per B share represents a significant premium of 25.6 percent and 43.7 percent over the 10 day trading average for the A and B shares respectively. The nature of this transaction offers Stonefire's shareholders maximum liquidity without exposure to market and commodity price risk going forward. We believe that amidst the current low commodity price environment and uncertain equity markets this provides our shareholders a timely and profitable moment to exit and redeploy capital.

Accordingly Stonefire's board has unanimously approved the proposed transaction and has recommended that shareholders accept the offer. All of the directors, senior officers, management and certain other shareholders have entered into lock-up agreements which represent approximately 48 percent of the issued and outstanding class A shares on a diluted basis. Full details of the offer will be included in a takeover bid circular and a directors circular to be mailed to shareholders on or about December 4, 2009. The take-over is expected to close in early to mid January 2010.

Looking back Stonefire has enjoyed many successes and highlights over the last four years. The start-up of our 100 percent working interest gas plant at Edson in September 2007, the drilling of our light oil pool discovery at Edson in July 2008 which came on production as a flowing oil well at test rates in excess of 350 bbls per day, the drilling of Edson gas wells with four to six gas zones per well are a few of them.

These accomplishments and the value created for our shareholders were made possible by the skilled and dedicated Stonefire management and technical team, the finest that I've worked with in my 23 years of experience in the industry. As an exploration-focused company recognition must be given to Stonefire's explorationists, Fred Laudel, V.P. Exploration, and Bruce Shepard, Exploration Manager, who together are responsible for discovering over 7 million boe of light oil and natural gas reserves for Stonefire, all at industry leading finding and development costs. I'd also like to thank the Board of Directors for their guidance and wise counsel and Cormark Securities Inc, our financial advisors. The shareholders of Stonefire showed great patience and support through what have been especially challenging times for the junior oil and natural gas industry over the last three years. We thank all of you for your support.

Stonefire Energy Corp. is an Alberta-based corporation formed to participate in oil and gas exploration, development and acquisitions focusing in the West Central region of Alberta. The Corporation's shares trade on the TSX Venture Exchange under the symbols SFE.A and SFE.B. The Corporation currently has 18,265,000 Class A shares and 1,012,000 Class B shares outstanding.

As referred to above, to view a full copy of the Corporation's unaudited financial results for the period ended September 30, 2009, including the Corporation's unaudited financial statements and accompanying MD&A, please refer to the SEDAR website at or on the Corporation's website at

Reader Advisory

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 Stonefire's control. Such risks, uncertainties, and assumptions 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. Stonefire'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 Stonefire will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Stonefire 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 Stonefire 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.

Petroleum and natural gas volumes are converted to an equivalent measurement basis referred to as a "barrel of oil equivalent" (boe) on the basis of 6 thousand cubic feet of natural gas equalling 1 barrel of oil. This is based on an energy equivalency conversion method applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

Not for distribution to United States newswire services or for dissemination in the United States.

To request a free copy of Stonefire's financial report or if you would like to be put on Stonefire's mailing list please contact Ronald Williams, Vice President, Finance and CFO at

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

Contact Information

  • Stonefire Energy Corp.
    Mr. Richard Dahl
    President and CEO
    (403) 262-9885
    (403) 262-9887 (FAX)
    Stonefire Energy Corp.
    Mr. Ronald Williams
    Vice President, Finance and CFO
    (403) 262-9885
    (403) 262-9887 (FAX)