Avatar Energy Ltd.

Avatar Energy Ltd.

May 31, 2012 12:41 ET

Avatar Announces First Quarter 2012 Financial Results

CALGARY, ALBERTA--(Marketwire - May 31, 2012) - Avatar Energy Ltd. ("Avatar, "we", "us", "our" or the "Company") (TSX VENTURE:AVG) is pleased to announce its first quarter 2012 financial results. Copies of the financial statements and management discussion and analysis are available for review at www.sedar.com and on our website at www.avatarenergy.ca.

First Quarter 2012 Highlights

  • stable production averaging 63 barrels of oil equivalent per day
  • reduction in general & administrative expenses by 40% over the same period in 2011

Update on Operations and Credit Facilities:

Avatar and its joint venture partner plan to drill a well on our core Pembina acreage before August 1, 2012. The well is anticipated to have a 1,200 metre horizontal leg into the Cardium sand and the completion program contemplates a 15 stage slick water fracture stimulation. The estimated cost to drill, complete, equip and tie-in this well is $2.7 million.

Initial three month production from offset wells in the same area average 120 to 245 BOE per day. Upon successful completion of the first well, Avatar's development program proposes four wells per section for a total of 16 gross wells.

The Company has received its lenders' permission to draw $660,000 of its acquisition/development loan to assist with the Company's portion of the drilling costs on its next well.

The Company has repaid in full its $600,000 bridge demand loan through the elimination of its outstanding letters of credit. The Company is currently in violation of its working capital ratio covenant under its credit facilities which is required to not be less than 1 to 1. Management feels this is a temporary deficiency caused by its drilling activities and purchase of additional lands in 2011, and expects to remedy this deficiency by reducing expenditures and through increased revenue streams created from the development of its purchased lands. The lenders have not indicated any course of action in relation to this deficiency.

Avatar is an emerging junior oil and gas company with production in Alberta. The Company's area of focus is on properties in the Pembina Cardium light oil play that have long life high quality reserves with repeatable drilling upside.

Forward-Looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning future drilling plans, proposed acquisition strategies and the likelihood of successful future results. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The risks to which the Company is subject include, but are not limited to, operational risks inherent in the exploration, development and production of oil and gas; availability of financing; general economic conditions and changes in the capital markets; volatility of oil and gas prices; competition; and changes in legislation and the regulatory environment. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws.

Avatar converts certain natural gas volumes to BOEs on the basis of one barrel to six thousand cubic feet and daily production is presented as barrels of BOE per day. BOEs may be misleading, particularly if used in isolation. A conversion ratio of one barrel of crude oil or natural gas liquids to six thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent 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 release.

Contact Information

  • Avatar Energy Ltd.
    Mr. Alan D. Jack, P. Eng
    President & Chief Executive Officer
    (403) 517-8818

    Avatar Energy Ltd.
    Ms. Lorie J. Hynes, CA
    Chief Financial Officer
    (403) 517-8818