Avatar Energy Ltd.
TSX VENTURE : AVG

Avatar Energy Ltd.

April 30, 2012 21:45 ET

Avatar Energy Ltd. Announces 2011 Yearend Financial Results

CALGARY, ALBERTA--(Marketwire - April 30, 2012) - Avatar Energy Ltd. ("Avatar") (TSX VENTURE:AVG) is pleased to announce its 2011 yearend financial results. Copies of the financial statements and management discussion and analysis (MD&A) for the year ended December 31, 2011, and Avatar's Statement of Reserves Data and Other Oil and Gas Information (National Instrument Forms 51-101F1, 51-101F2 and 51-101F3) are available for review at www.sedar.com and on our website at www.avatarenergy.ca. Selected financial and operational information is outlined below and should be read in conjunction with our financial statements and MD&A.

2011 Summary

  • Production averaged 157 barrels of oil equivalent ("BOE") per day, a 115% increase compared to 2010. Current production, after the March 2012 disposition of our non-core assets, is approximately 70 BOEPD.
  • Operating costs decreased approximately 21% to $17 per BOE.

As a result of changes in forecasted commodity prices and certain reserve additions being lower than anticipated in relation to certain well costs, Avatar incurred an impairment of approximately $4 million on its property, plant and equipment 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 will 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.

Subsequent to year end, the Corporation renewed its existing credit facilities. Its revolving line of credit limit has been reduced to $2.1 million and its acquisition/development demand loan has been reduced to a maximum of $750,000. The Corporation has received the lenders permission to draw $660,000 of the acquisition/development loan to assist with the Corporation's portion of the drilling costs on its next well. The terms and conditions for the revolving line of credit and the acquisition/development demand loan remain as they were at December 31, 2011. In addition, the Corporation has secured a bridge demand loan for a maximum of $600,000. Interest is payable on the bridge demand loan at a rate of prime plus 5%. Repayment terms are interest only and the lender's right of demand. The bridge demand loan is payable in full upon the earlier of a reduction of the Corporation's existing letters of credit (which the Corporation is in the process of eliminating) and the next scheduled review which is May 1, 2012. The Corporation 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 Corporation's area of focus is on properties in the Pembina Cardium light oil resource play that exhibit long life high quality reserves with repeatable drilling upside.

BOEs

Reference to BOE means barrels of oil equivalent and is derived by converting gas to oil in the ratio of six thousand cubic feet (mcf) of gas to one barrel (bbl) of oil. BOEs 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 top and does not represent a value equivalency at the wellhead. References to BOEPD means barrel of oil equivalent per day.

FORWARD LOOKING STATEMENTS

This press release contains forward looking statements. More particularly, this press release contains statements concerning future drilling plans, proposed acquisition strategies, use of available funds and the likelihood of successful future results. Although the Corporation believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because the Corporation 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 Corporation is subject include, but are not limited to, operational risks inherent in the exploration, development and production of oil and gas; availability of debt and equity financing; general economic conditions and changes in the capital markets; volatility of oil and gas prices; changes in development plans of Avatar or by third party operators of Avatar's properties; 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 Corporation 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.

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