AvenEx Energy Corp.

AvenEx Energy Corp.

March 29, 2012 21:05 ET

AvenEx Energy Corp. Announces Fourth Quarter and Year End 2011 Results, Reserve Information & April 2012 Monthly Dividend Declaration

CALGARY, ALBERTA--(Marketwire - March 29, 2012) -


AvenEx Energy Corp. ("AvenEx" or the "Company") (TSX:AVF) is pleased to announce the financial and operational results for the fourth quarter and year ended December 31, 2011 and to announce they have filed the complete Management Discussion and Analysis, the Audited Consolidated Financial Statements and the Annual Information Form. Certain selected financial and operational information is set out below and should be read in conjunction with AvenEx's consolidated financial statements and related Management Discussion and Analysis. These filings will be available on the Corporation's SEDAR profile at www.sedar.com.

For the three months ended For the year ended
December 31 December 31
(in thousands of dollars except for per share % %
amounts) 2011 2010 Change 2011 2010 Change
Total Revenue $ 278,487 $ 179,159 55 $ 1,009,548 $ 628,147 61
Funds From Operations (FFO)1 $ 14,251 $ 13,138 8 $ 52,999 $ 44,478 19
FFO Per Share1 - Basic $ 0.27 $ 0.27 0 $ 1.00 $ 1.01 (1 )
Dividends $ 7,217 $ 5,681 27 $ 31,085 $ 28,768 8
Dividends Per Share - Basic $ 0.14 $ 0.12 17 $ 0.58 $ 0.65 (11 )
Dividend Payout Ratio2 51 % 43 % 19 59 % 65 % (9 )
Net Income $ (30,066 ) $ (26,885 ) (12 ) $ (2,744 ) $ (21,693 ) 87
Net Income Per Share - Basic $ (0.56 ) $ (0.56 ) 0 $ (0.05 ) $ (0.49 ) 90
Total Assets $ 491,280 $ 423,144 16 $ 491,280 $ 423,144 16
Working Cap. excluding assets held for sale $ (51,024 ) $ (30,026 ) (70 ) $ (51,024 ) $ (30,026 ) (70 )
Mortgages (assets held for sale) $ 3,141 $ 5,634 (44 ) $ 3,141 $ 5,634 (44 )
Wtd. Avg. Shares Outstanding - Basic 53,454,021 48,386,763 10 53,140,509 44,148,429 20
Shares Outstanding 53,475,546 52,783,690 1 53,475,546 52,783,690 1

1 Funds from Operations ("FFO"), FFO per share are not recognized measures under International Financial Reporting Standards ("IFRS"). FFO is calculated by taking cash provided by operating activities on the statement of cash flows adjusted for the effect of changes in non-cash working capital and asset retirement costs incurred. Management believes that these measures are useful supplemental measures to analyze operating performance as they demonstrate AvenEx Energy Corp.'s ("AvenEx" or the "Corporation") ability to generate the FFO necessary to fund future dividends and capital investments. AvenEx's method of calculating these measures may differ from other issuers, and accordingly, they may not be comparable to measures used by other issuers. Investors should be cautioned that these measures should not be construed as an alternative to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS.

2 Dividend Payout Ratio is calculated by dividing the Monthly Dividends by the FFO. During the year ended 2011 there were thirteen dividends declared versus eleven in 2010. In the fourth quarter of 2011 there were three dividends declared versus two in the fourth quarter of 2010.

3As a result of the conversion from a trust to a corporation AvenEx now refers to common shares, shareholders and dividends which were formerly referred to as trust units, unitholders and distribution under the trust structure.

The Corporation's fourth quarter 2011 operating results were ahead of the prior year as higher oil prices and strong crude-by-rail activity offset significantly lower natural gas prices and lower natural gas production volumes in the fourth quarter. For the quarter ended December 31, 2011, the Corporation had net loss of $30.1 million, Funds from Operations of $14.3 million and dividends of 51% of Funds from Operations. This compares to the fourth quarter of the previous year, where the Corporation had net loss of $26.9 million, Funds from Operations of $13.1 million and distributions of 43% of Funds from Operations. For the year ended December 31, 2011, the Corporation had a net loss of $2.7 million (2010 - net loss of $21.7 million), Funds from Operations of $53.0 million (2010 - $44.5 million) and dividends of 59% (2010 - 65%) of Funds from Operations. The payout ratio continued to track our annual 60% target. For the year ended 2011, the Oil & Gas Division provided 70% of the Funds from Operations, with 29% coming from Elbow River and 1% from the Real Estate and the Corporate Divisions. The Corporation's net loss was primarily due to the recognition of an impairment charge of $23.9 million in the fourth quarter reflecting the impact of forecasted lower natural gas prices on gas weighted cash-generating units (CGU's) under IFRS.

In the Oil and Gas Division, fourth quarter 2011 production averaged 2,235 Bbls/d of crude oil and natural gas liquids (NGL) up 3% from the 2,170 Bbls/d in the corresponding quarter of 2010, as 2011 drilling replaced production and natural decline. For the year ended 2011, crude oil and natural gas liquids production averaged 2,256 Bbls/d versus the 2010 average production of 1,646 Bbls/d reflecting the impact of the Great Plains acquisition in the fourth quarter of 2010. Natural gas production however, was down 15% at 15,540 Mcf/d from the prior year's fourth quarter 2010 levels of 18,192 Mcf/d, as flush production declines and limited capital expenditures on natural gas projects impacted production volumes. For the year ended 2011, natural gas averaged 16,737 Mcf/d up 20% from the prior year average reflecting the impact of the fourth quarter acquisition in 2010. On a BOE/D basis production averaged 4,825 BOE/D flat to the previous quarter of 4,888 BOE/D but down from the 5,201 BOE/D in the fourth quarter of 2010. Quarterly production volumes were split 46% oil and NGL and 54% natural gas. Fourth quarter 2011 oil and NGL prices were $88.56 up 21% over the previous year corresponding quarter. For the fourth quarter of 2011, after hedging, natural gas prices were $3.77 per Mcf down 17% from the previous year. Natural gas prices for the year ended December 2011 averaged $4.20 per Mcf for natural gas down 21% from 2010. 2010 benefited from a natural gas hedging program at a significantly higher price than currently available and in place in 2011. The Corporation was able to benefit from a hedging program that added approximately an 11% premium to the 2011 average market price of around $3.77 per Mcf. The Corporation was able to hedge about 25% of its 2012 natural gas production at average prices of $5.25 but a portion of those hedges come off in the second quarter of 2012. Operating netbacks for the fourth quarter of 2011 increased to $25.20 per BOE versus $24.39 per BOE in the comparable period last year as higher oil prices were offset by lower natural gas prices, higher royalties and operating costs. The Great Plains properties acquired in late 2010 have higher royalties and incurred a large third party processing adjustment in the quarter that increased costs by about $0.72 per BOE for the quarter.

In 2011, capital activity was focused on oil opportunities with 27 out of 28 gross wells drilled for oil targets predominately in the Beaverhill Lake, Viking, Cardium and Slave Point formations. AvenEx participated in the non- operated horizontal drilling of the Beaverhill Lake in Deer Mountain Unit #2 and the Viking in the Eagle Lake Unit for a total of 16 gross (1.2 net) wells. In East Pembina, three horizontal (2 net) horizontal Cardium wells were placed on production in mid-October having met the Corporation's expectations with average daily rates of 155 BOE/D in the first 90 days of production. In the Randell area, delineation of the Slave Point resource was initiated in the first quarter of 2011 with the drilling of two 600 meter horizontal wells. Both wells have proved productive with only acid squeeze stimulations averaging 46 Bbls/d in the first 6 months of production. A third horizontal well was drilled in the fourth quarter with a multi-stage frac stimulation planned for the first quarter of 2012. Further to the development activities, AvenEx spent $6.3 million on land purchases in 2011 in the continuing effort to enhance the oil portfolio. In total, 7,490 hectares of land were purchased at crown land sales on which the Corporation believes several Slave Point oil resource plays to exist in both the Randell and Cranberry areas. AvenEx, in the first quarter of 2011, also closed a $9.3 million oil asset acquisition in its core Grand Forks area.

For the year ending December 31, 2011, the Corporation produced a total of 1,842 MBOE from the asset base. The combined working interest and royalty interest proved plus probable petroleum and natural gas reserve additions from development and acquisition activities ("FD&A") as per the year end independent reserve report was 1,854 MBOE resulting in a 101% production replacement. As a result of the forecast gas pricing as of December 31, 2011, the Corporation had negative revisions of 337 MBOE to the proved plus probable natural gas reserves. Including all capital expenditures, asset acquisitions and changes in future development costs, the Corporation booked $52.4 million in 2011 yielding an FD&A cost of $28.29 per BOE on a working interest proved plus probable basis. Included in the total year capital expenditures are land and seismic acquisitions of $6.8 million which accounted for 14% of the capital spending in 2011. Calculation of the total proved plus probable FD&A costs without land and seismic results in $24.62 per BOE with a recycle ratio of about 1.4 times.

Elbow River's fourth quarter results were in line with management expectations and ahead of the comparable quarter in 2011 with Funds from Operations of $5.2 million versus $3.9 million in 2010. The fourth quarter, which is traditionally one of Elbow River's strongest, benefited from strong crude-by-rail shipments, improved growth in heavy fuel oils, short-term strength in ethanol margins and the final receipt of US ethanol credits. Crude oil has become Elbow River's second largest sales commodity and additional tank cars, staff, processes and working capital are being allocated to this product area. With the limited crude oil takeaway capacity in some producing regions and the wide differential between Brent and WTI pricing, crude oil sales by rail was strong. Offsetting the strength in the crude and heavy fuel oil segments was weaker propane sales than the previous two years as North America experienced a much warmer than usual 2011-2012 winter heating season.

Elbow River's first quarter is traditionally one of the stronger quarters for Elbow River with seasonal propane and butane sales. For the first quarter of 2012, spot propane sales have been weaker than the prior two years due to mild temperatures, but propane and butane sales have continued to be supported by stronger term sales. Crude-by- rail continues to experience strong demand and should support a solid first quarter of 2012 as Elbow River moves to take advantage of its rail expertise in this product offering.

The Corporation continues with an active disposition process of its real estate portfolio in order to focus on its more energy related divisions. In the fourth quarter 2011, two theatre properties sold for gross proceeds of approximately $2.5 million which were used to repay all the Landmark mortgages. Two portfolio properties remain; an industrial property in Ontario and a Western Canadian theatre property. Properties are still expected to be sold in 2012 with funds generated on the sales used to pay off mortgages and the balance redeployed by initially paying down bank debt. The real estate portfolio continues to be 100% leased and performs as expected.

AvenEx continues to hold about 328,000 EnerVest Diversified Income Trust units for investment purposes. It is expected that the Corporation will sell the balance of these units over the next few months with the proceeds used to reduce bank debt or fund capital expenditures.

First Quarter 2012 Update

The Corporation combines the cash flows of a junior oil and gas producer with an energy marketing company to target a dividend payout ratio of approximately 60% of Funds from Operations. As the energy marketing company does not require a reinvestment of capital, funds can be allocated to oil and gas projects or paid out in dividends. Elbow River continues to deliver 2012 results in line with expectations with upside potential in crude-by-rail opportunities. In 2011, AvenEx increased its split of oil and natural gas liquids to natural gas production as a percentage of BOE/D to 46% and it is increasing that percentage further in 2012 as funds are allocated only to oil projects. While oil prices have held relatively firm, natural gas prices in the first quarter of 2012 have declined significantly compared to 2011 with recent daily pricing of sub $1.70 per gigajoule and a forecast 2012 balance of year price of just over $2.00 per gigajoule. Natural gas hedges have sheltered the price impact on about 25% of our natural gas production but the hedges will continue to roll off throughout 2012 beginning in April. Given the low natural gas prices and the pace to date of adding additional oil and natural gas liquid BOEs, the Oil & Gas Division cash flow is now forecast to be more than 20% below 2011 levels. 2012 oil and gas capital expenditures will continue to target oil prospects although the Corporation may move to reduce its exposure in some of its newer more capital intensive Slave Point resource plays in order to support its balance sheet strength.

April 2012 Dividend Declaration

The AvenEx Board of Directors reviews the dividend level monthly, based on the Corporation's expected cash flows, forecast commodity prices, and balance sheet strength with a targeted dividend payout ratio of 60% of Funds from Operations. Based on the current outlook for continued very low natural gas prices the Board of Directors has set the April 2012 dividend, payable May 15, 2012, at $0.035 per share. This is a reduction from $0.045 per share for the March 2012 dividend, payable on April 15, 2012. AvenEx remains committed to paying a sustainable monthly dividend.

For Canadian resident shareholders the dividend declared is designated as an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any similar provincial legislation.

Oil and Natural Gas Reserves

In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), McDaniel & Associates Consultants Ltd. ("McDaniel") prepared the a report dated March 2, 2012, evaluating the crude oil, natural gas, natural gas liquids and sulphur reserves of the Corporation as at December 31, 2011 (the "McDaniel Report"). The tables below are a summary of the Corporation's oil, NGL and natural gas reserves and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report based on forecast price and cost assumptions. The information set forth below is prepared in accordance with standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGEH") and the reserves definitions contained in NI 51-101 and the COGEH.

Reserves Data - Forecast Prices and Costs Summary of Oil and Gas Reserves

Gross Reserves (1) Net Reserves(2)
Light and Medium Crude Oil Heavy Oil Natural Gas Liquids Natural Gas Light and Medium Crude Oil Heavy Oil Natural Gas Liquids Natural Gas
Mbbls Mbbls Mbbls Mmcf Mbbls Mbbls Mbbls Mmcf
Producing 3,227.2 1,152.2 166.3 21,833.5 2,633.7 1,071.1 113.6 18,780.0
Developed Non-
Producing 53.7 0 5.8 1,025.8 39.6 0 3.7 856.3
Undeveloped 288.7 59.4 10 10,071.6 244.9 52.9 8.6 8,843.3
Total Proved 3,569.6 1,211.5 182.1 32,930.9 2918.2 1,124.0 125.9 28,479.7
Total Probable 1,635.5 300.5 77.7 15,030.1 1,288.3 274.8 50.6 12,178.3
Total Proved
plus Probable(3) 5,205.1 1,512.1 259.7 47,961.0 4,206.5 1,398.9 176.5 40,658.0


  1. Gross reserves include working interest reserves before deduction of royalties but do not include royalty interest reserves.
  2. Net reserves include working interest reserves less the deduction of royalties plus royalty interest reserves.
  3. Some totals may differ slightly due to rounding.

Net Present Value of Future Net Revenue of Oil and Gas Reserves(1)

Before Future Income Tax Expenses and Discounted at
0% 5% 10% 15%
(M$) (M$) (M$) (M$)
Developed Producing 236,780 191,138 161,320 140,425
Developed Non-Producing 3,944 3,467 3,072 2,745
Undeveloped 17,534 10,157 5,255 1,859
Total Proved 258,257 204,762 169,647 145,029
Total Probable 138,923 85,317 58,210 42,639
Total Proved plus Probable 397,180 290,079 227,857 187,667


1. Estimated values do not represent fair market value.

Reserves Reconciliation

The following table sets forth a reconciliation of the Corporation's total proved, probable and proved plus probable working interest and royalty interest reserves as at December 31, 2011 against such reserves as at December 31, 2010 based on forecast price and cost assumptions.

Total Working Interest and Royalty Interest Oil Equivalent
Proved Probable Proved Plus
Reserves Reserves Probable
Opening Balance December 31, 2010 10,919 4,517 15,436
Extensions/Infill Drilling 374 202 576
Improved Recovery 803 39 842
Technical Revisions 144 (207 ) (63 )
Economic Factors (256 ) (81 ) (337 )
Acquisitions 420 82 502
Dispositions (2 ) (1 ) (3 )
Production (1,842 ) 0 (1,842 )
Closing Balance December 31, 2011 10,561 4,551 15,112

Economic factors in the year end 2011 reserves reconciliation are defined as the downward revision to the natural gas reserves as a result of the reduction in the gas price forecast used by McDaniel at December 31, 2011 as compared to December 31, 2010.

Properties With No Attributed Reserves

The following table summarizes the gross and net acres of unproved properties in which the Corporation has an interest. The Corporation does not have any properties that are unproductive at this time.

The following table sets out the Corporation's undeveloped land holdings as at December 31, 2011:

Undeveloped Acres
Gross Net
Alberta 204,351 112,944
British Columbia 121,217 67,986
Saskatchewan 24,110 9,645
Total 349,679 190,575

The Corporation estimates the value of this land at approximately $30.1 million based on third party evaluations by effective December 31, 2011.

2010 Drilling Activity

The following table summarizes the Corporation's drilling results for the year ended December 31, 2011.

Gross Net
Oil 26 9.4
Natural Gas 1 0.2
Coal bed methane 0 0
Dry & Abandoned 1 0.2
Total 28 9.7

Finding and Development Costs

The following table summarizes the finding and development ("F&D") and the finding, development and acquisition ("FD&A") costs of AvenEx for 2011 and the three year average from 2009 to 2011:

2011 Three Year Average
Total Total
Proved Proved
Total plus Total plus
Proved Probable Proved Probable
Finding and Development
Explore and Develop (M$) 33,161 33,161 72,842 72,842
Change in Future Capital (M$) 769 3,233 16,311 18,998
Total (M$) 33,930 36,394 89,153 91,840
Reserve Additions (MBOE) 1,320 1,355 5,139 5,515
F&D Excluding Future Capital ($/BOE) 25.12 24.47 14.17 13.21
F&D Including Future Capital ($/BOE) 25.70 26.86 17.35 16.65
Finding, Development and Acquisition
Explore and Develop (M$) 49,209 49,209 200,228 200,228
Change in Future Capital (M$) 769 3,233 25,288 34,643
Total (M$) 49,978 52,442 225,516 234,871
Reserve Additions (MBOE) 1,739 1,854 8,920 11,368
FD&A Excluding Future Capital
($/BOE) 28.30 26.54 22.45 17.61
FD&A Including Future Capital ($/BOE) 28.84 28.29 25.28 20.66

AvenEx calculates the FD&A costs inclusive of all exploration and development expenditures including land and seismic. Under NI 51 - 101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital ("FDC") required to bring the proved undeveloped and probable reserves to production. For continuity, AvenEx has presented herein FD&A costs calculated both excluding and including FDC. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect the independent evaluator's best estimate of what it will cost to bring the proved undeveloped and probably reserves on production.

As a result of various land and seismic acquisitions in 2011, AvenEx has included the expenditure of $6.8 million in the FD&A analysis which equates to 14% of the total expenditures during the year. Calculation of the total proved plus probable FD&A costs without the land and seismic results in $24.62 per BOE.

For further information regarding the Corporation's reserves, please refer to its Annual Information Form for December 31, 2011 which will be posted on the Corporation's profile at www.sedar.com.


Net loss for the quarter ended December 31, 2011 was $30.1 million, higher than the net loss of $26.9 million for the quarter ended December 31, 2010 as the Corporation recognized a $23.9 million impairment on its natural gas weighted cash-generating units ("CGUs") reflecting a decline in forecasted natural gas prices. The net loss for the year ended December 31, 2011 of $2.7 million was reduced from a net loss of $21.7 million in 2010 as a result of an unrealized gain on financial instruments in Elbow River of $6.0 million in 2011 versus an unrealized loss on financial instruments of $21.9 million in 2010. Offsetting this unrealized gain was a $6.9 million higher impairment on the natural gas weighted CGUs in 2011 versus 2010.

Funds from Operations were $14.3 million for the quarter ended December 31, 2011, up from Funds from Operations for the quarter ended December 31, 2010 of $13.1 million as a result of the acquisition of Great Plains Exploration Inc. ("Great Plains") in the fourth quarter of 2010 and increased crude-by-rail sales in Elbow River. Funds from Operations for the year ended December 31, 2011 were $53.0 million versus $44.5 million in 2010 reflecting the inclusion of the Great Plains acquisition for a full year and increased 2011 crude-by-rail sales in Elbow River.

AvenEx declared dividends of $7.2 million ($0.135 per share) for the quarter ended December 31, 2011 which is up from the $5.7 million ($0.12 per share) distributed for the quarter ended December 31, 2010, as the fourth quarter of 2010 included only two dividend payments of $0.06 each versus three dividend payments in the fourth quarter of 2011 of $0.045 each. In conjunction with the conversion from a trust to a corporation, monthly dividends were lowered reflecting the tax effected nature of the dividend and the normal December 2010 dividend was delayed until January 7, 2011. The fourth quarter payout ratio was 51% of Funds from Operations compared to 43% at December 31, 2010. The 2011 dividend payout ratio of 59% was approximately equal to the long term targets of 60%. Without the additional dividend declared on January 7, 2011, the dividend payout ratio would have been 55%.

On December 31, 2010, Avenir Diversified Income Trust (the "Trust") effectively completed its conversion to a dividend paying corporation from an income trust pursuant to a plan of arrangement (the "Arrangement") under Section 193 of the Business Corporations Act (Alberta). Pursuant to the Arrangement, holders ("unitholders") of trust units ("trust units") of the Trust received one common share ("common shares") of AvenEx for each trust unit. In addition, holders of exchangeable shares of AvenEx received common shares of AvenEx for each exchangeable shares. As a result of the Arrangement, on December 31, 2010 AvenEx had approximately 52.8 million common shares issued and outstanding.

The common shares of AvenEx trade on the Toronto Stock Exchange (the "TSX") under the trading symbol "AVF". Previous historical references to "unitholders", "distributions", "trust units" and "per unit' have now been replaced by "shareholders", "dividends", "common shares" and "per share", respectively, where applicable. Despite the change in legal structure from a trust to a dividend paying corporation, AvenEx's business activities and business strategy remain unchanged and all officers and directors remain the same.

AvenEx Energy Corp.
As at
December 31, December 31, January 1,
2011 2010 2010
(in thousands of dollars) $ $ $
Cash - 1,028 2,183
Marketable securities 4,182 7,595 19,842
Accounts receivable 130,739 64,658 56,310
Prepaid expenses 3,038 3,514 8,626
Inventory 29,735 25,591 13,687
Risk management assets 9,489 4,950 22,825
Current assets 177,183 107,336 123,473
Assets held for sale - Real Estate 10,517 12,533 -
187,700 119,869 123,473
Exploration and evaluation 35,500 32,613 14,586
Property, plant and equipment 202,914 204,731 147,498
Investment property - - 33,529
Intangibles and other assets 11,428 12,836 9,094
Goodwill 28,603 28,603 23,424
Deferred income taxes 25,135 24,492 20,102
491,280 423,144 371,706
Bank indebtedness 102,608 58,380 12,351
Accounts payable and accrued liabilities 120,170 73,521 67,194
Dividend payable 2,406 - 2,527
Deferred revenue - - 215
Risk management liabilities 3,023 5,461 404
Current portion of mortgages - - 4,063
Current liabilities 228,207 137,362 86,754
Liabilities of assets held for sale - Real Estate 3,258 5,862 -
231,465 143,224 86,754
Mortgages - - 21,391
Decommissioning liabilities 31,630 22,198 16,885
Deferred income taxes - - 8,099
Liability for share-based compensation - - 4,279
263,095 165,422 137,408
Commitments and contingencies
Shareholders' equity
Share capital 254,500 250,337 -
Unitholders' capital - - 421,270
Contributed surplus 7,545 6,144 -
Deficit (34,032 ) - (187,550 )
Accumulated other comprehensive income 172 1,241 578
228,185 257,722 234,298
491,280 423,144 371,706

AvenEx Energy Corp.
For the year ended December 31,
2011 2010
(in thousands of dollars) $ $
Oil and gas revenue 95,360 69,282
Royalties (16,502 ) (9,472 )
Unrealized gain (loss) on financial instruments 967 (1,299 )
Total oil and gas revenue 79,825 58,511
Elbow River revenue 922,615 588,843
Unrealized gain (loss) on financial instruments 6,010 (21,884 )
Total Elbow River revenue 928,625 566,959
Gain (loss) on sale of marketable securities 442 1,599
Interest and other revenue 656 1,078
Total revenue 1,009,548 628,147
Oil and gas operating 30,929 23,132
Oil and gas transportation costs 2,492 1,754
Elbow River operating 896,455 567,418
General and administrative 18,491 16,278
Share-based compensation 2,859 4,603
Bad debt recovery (2,005 ) (748 )
Finance costs 4,596 3,318
Capital taxes 362 347
Exploration and evaluation expense 3,728 2,242
Depletion, depreciation and amortization 30,671 23,173
Impairment 23,871 16,987
Acquisition costs of Great Plains - 4,159
1,012,449 662,663
Income (loss) from continuing operations before income tax (2,901 ) (34,516 )
Income taxes:
Current income tax expense (1,398 ) -
Deferred income tax recovery 483 13,078
(915 ) 13,078
Net loss from continuing operations (3,816 ) (21,438 )
Net income (loss) from discontinued operations - Real Estate 1,072 (255 )
Net loss for the year (2,744 ) (21,693 )
Other comprehensive (loss) income:
Change in fair value of marketable securities, net of tax (1,069 ) 663
Other comprehensive (loss) income (1,069 ) 663
Comprehensive loss for the year (3,813 ) (21,030 )
Net loss from continuing operations per share
Basic and diluted (0.07 ) (0.49 )
Net income (loss) from discontinued operations per share
Basic and diluted 0.02 (0.00 )
Net loss per share
Basic and diluted (0.05 ) (0.49 )

AvenEx Energy Corp.
For the year ended December 31,
2011 2010
(in thousands of dollars) Number $ Number $
Share capital
Balance, beginning of year 52,783,690 250,337 - -
Issued to trust unitholders - - 51,652,333 481,232
Exchanged for exchangeable shares - - 1,131,357 7,116
Elimination of deficit - - - (238,011 )
Exercise of options 691,856 4,163 - -
Balance, end of year 53,475,546 254,500 52,783,690 250,337
Unitholders' capital
Balance, beginning of year - - 42,110,678 421,270
Exercise of options - - 978,526 5,586
Issued upon acquisition of Great Plains - - 8,563,129 54,376
Exchanged for common shares - - (51,652,333 ) (481,232 )
Balance, end of year - - - -
Contributed surplus
Balance, beginning of year 6,144 -
Exercise of options (1,645 ) -
Cash settlement of options (242 ) -
Share based compensation capitalized 429 -
Share based compensation expensed 2,859 -
Reclassification from liability - 6,144
Balance, end of year 7,545 6,144
Retained earnings (deficit)
Balance, beginning of year - (187,550 )
Net income (loss) (2,744 ) (21,693 )
Distributions - (28,768 )
Dividends (31,288 ) -
Transfer into share capital - 238,011
Balance, end of year (34,032 ) -
Accumulated other comprehensive income
Balance, beginning of year 1,241 578
Change in fair value of marketable securities, net of tax (1,069 ) 663
Balance, end of year 172 1,241
AvenEx Energy Corp.
For the year ended December 31,
2011 2010
(in thousands of dollars) $ $
Net loss from continuing operations (3,816 ) (21,438 )
Add (deduct) non-cash items:
Share-based compensation 2,859 4,603
Non-cash general and administrative 1,007 629
Exploration and evaluation expense 3,728 2,242
Depletion, depreciation and amortization 30,671 23,173
Impairment 23,871 16,987
Accretion of decommissioning liabilities 1,777 1,277
Unrealized loss (gain) on financial instruments (6,977 ) 23,183
Unrealized foreign exchange (277 ) 804
Transaction costs - 4,159
Deferred income tax recovery (483 ) (13,078 )
Funds from continuing operations 52,360 42,541
Funds from discontinued operations - Real Estate 639 1,937
52,999 44,478
Asset retirement expenditures during period (1,352 ) (671 )
Net change in non-cash working capital (14,303 ) (18,628 )
Cash provided (used in) by operating activities 37,344 25,179
Issue of shares, net of issue costs 2,379 2,877
Cash settlement of options (242 ) (314 )
Dividends (31,085 ) (28,768 )
Increase in bank indebtedness 44,228 46,080
Real estate repayment of mortgages (2,493 ) (614 )
Net change in non-cash working capital (2,609 ) (2,527 )
Cash provided by (used in) financing activities 10,178 16,734
Oil and gas property acquisitions (9,284 ) (57 )
Oil and gas property disposals 261 2,809
Oil and gas evaluation and exploration (6,791 ) (631 )
Oil and gas development expenditures (33,202 ) (28,412 )
Acquisition of Great Plains Exploration - (30,621 )
Purchase of other assets (486 ) (351 )
Purchase of financial services royalty - (5,035 )
Real estate dispositions 2,397 3,801
Real estate development expenditures (33 ) -
Net change in non-cash working capital (1,472 ) 15,505
Cash provided by (used in) investing activities (48,610 ) (42,992 )
Decrease in cash and cash equivalents during the year (1,088 ) (1,079 )
Cash and cash equivalents, beginning of year 1,028 2,148
Change in cash within assets held for sale 60 (41 )
Cash and cash equivalents, end of year - 1,028
Supplemental information:
Cash taxes paid 429 104
Cash interest paid 2,977 1,887

An electronic copy of this press release may be obtained on AvenEx's SEDAR profile at www.sedar.com.

AvenEx Energy Corp. was created to provide stable, sustainable dividends to shareholders while providing modest growth. AvenEx is focused on energy with two distinct business units, namely Oil & Gas development and production and LPG marketing and logistics.

AvenEx trades on the TSX under the symbol AVF.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

Forward Looking Statements

Certain statements contained herein including, without limitation, financial and business prospects and financial outlook, the effect of government announcements, proposals and legislation, plans in its Oil and Gas Division regarding hedging, wells to be drilled, expected or anticipated production rates, timing of expected production increases, the weighting of production between different commodities, expected commodity prices, exchange rates, production expenses, transportation costs and other costs and expenses, maintenance of productive capacity and capital expenditures; plans in the Elbow River Marketing Limited Partnership ("Elbow River") business regarding plans for its ongoing Liquefied Petroleum Gas ("LPG") business and activities around the exit from marketing its bio-diesel product; plans in the Real Estate Division for the timing and completion of selling assets, repayment of mortgages on the assets and the nature of capital expenditures; and the timing and method of financing these businesses, may be forward looking statements. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", "targeted" and similar expressions may be used to identify these forward looking statements. These statements reflect management's current beliefs and are based on information currently available to management. Forward looking statements involve significant risk and uncertainties.

A number of factors could cause actual results to differ materially from the results discussed in the forward looking statements including, but not limited to, 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 and the inability to retain drilling rigs and other services; risks associated with its Elbow River business including, but not limited to, counterparty risk in default, operational risks, hedging, access to credit, competitor risk, seasonality and impact of the global recession on overall economic activity; and risks associated with the Real Estate Division including, but not limited to the impact the overall economy has on valuations, future delinquencies, access to mortgages and impact on interest rates; as well as the risks associated with AvenEx's incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and the risk factors outlined under "Risk Factors" and elsewhere herein. The recovery and reserve estimates of AvenEx's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although AvenEx believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because AvenEx can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which AvenEx operates; the timely receipt of any required regulatory approvals; the ability of AvenEx to obtain qualified staff, equipment and services in a timely and cost efficient manner; Divisional results; the ability of operators to operate the field in a safe, efficient and effective manner; the ability of AvenEx to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of AvenEx to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which AvenEx operates; and the ability of AvenEx to successfully market its products, fluctuations in foreign exchange or interest rates and stock market volatility, credit risk and the ability to realize on collateral in the event of default, failure of counter parties to perform on contracts, fluctuation in the value of real property, failure to produce income or revenue from real estate, failure of tenants to meet lease obligations, increase in property taxes and mortgage, maintenance, insurance, operating costs and decreases in occupancy and rental rates, and fixed costs in relation to variable revenue streams. Readers are cautioned that the foregoing list of factors is not exhausted.

Forward looking statements and other information contained herein concerning the Oil and Gas Division, Elbow River's business, the Real Estate Division and AvenEx's general expectations concerning these industries are based on estimates prepared by each Division's management and from using data from publicly available industry sources as well as from reserve reports, market research and industry analysis and on assumptions based on data and knowledge of these industries which AvenEx believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While AvenEx is not aware of any misstatements regarding any industry data presented herein, these industries involve risks and uncertainties and are subject to change based on various factors.

These forward looking statements are made as of the date hereof and AvenEx assumes no obligation to update or review them to reflect new events or circumstances except as required by applicable securities laws.

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

Contact Information

  • AvenEx Energy Corp.
    William Gallacher
    President & CEO
    (403) 237-9949
    (403) 237-0903 (FAX)

    AvenEx Energy Corp.
    Gary H. Dundas
    Vice-President, Finance and CFO
    (403) 237-9949
    (403) 237-0903 (FAX)

    AvenEx Energy Corp.
    Suite 300, 808 - 1st Street S.W.
    Calgary, Alberta T2P 1M9