Bowood Energy Inc.
TSX VENTURE : BWD

Bowood Energy Inc.

April 23, 2012 16:45 ET

Bowood Energy Inc. Announces 2011 Financial and Operational Results and Provides an Operational Update

CALGARY, ALBERTA--(Marketwire - April 24, 2012) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO U.S. PERSONS.

Bowood Energy Inc. (TSX VENTURE:BWD) ("Bowood" or the "Company") is pleased to announce its financial and operational results for the year ended December 31, 2011, and provides an operational update on the Kipp well production in southern Alberta, and on its strategic review process.

2011 Highlights

  • Added an additional 25,521 gross (13,081 net) acres to its significant land position in the emerging Alberta Bakken Petroleum System fairway ("Alberta Bakken"), bringing total land holdings in the fairway to approximately 140,000 gross (105,000 net) acres.
  • Progressed the Alberta Bakken play with the geological and well test data from the first two wells and booked its first oil reserves on the play.
  • With new additions in both the Armada field and in southern Alberta the Company increased oil weighting on production to approximately 20% and on year end reserves to approximately 22%.
  • Drilled two (1.25 net) wells in Armada resulting in one (0.9 net) gas well that produced at an average choked back rate in excess of 1 MMCF/d (900 mcf/d net) from late August 2011 to December 31, 2011, and one (0.35 net) standing potential gas well.

2012 Southern Alberta Operational Update

The Company's Kipp well, located at 8- 30-8-23 W4 on the Blood First Nation Reserve came on production late in December 2011. The Company has a 40% working interest in the Kipp well which has now produced over 12,000 bbls of light oil according to field estimates.

Following cleanup, the well has been on production for three full months and has averaged approximately 100 bbls per day of oil during the three months. Water cut has decreased from 60% in January to 25% in March and the well has now recovered over 70% of the injected load water from the fracture stimulation.

The Company is encouraged with the production results from the Kipp well to date and with offsetting industry results which have been publically released in 2012. As more wells are drilled into the Alberta Bakken fairway, initial production rates attained by industry continue to increase. Modifications and improvements in well trajectory and frac design are expected to continue to improve productivity in follow up wells in the play.

Strategic Review Process

On February 27, 2012, Bowood announced a review of strategic alternatives. Strategic alternatives may include, among other alternatives: a sale of the shares of the Company, either in one transaction or in a combination of transactions; a merger, recapitalization, arrangement, amalgamation or any combination thereof; or a sale of a material portion of the assets of the Company.

The process is currently ongoing; however, Bowood does not intend to make any further announcements regarding the review of strategic alternatives unless and until the Board of Directors has approved a specific transaction or otherwise determines that disclosure of developments is required or appropriate.

Financial Highlights

Certain selected financial and operational information for the three months and year ended December 31, 2011 are set out below and should be read in conjunction with Bowood's Financial Statements and Management Discussion and Analysis ("MD & A").

The Company has filed its audited consolidated Financial Statements and related MD & A for the year ended December 31, 2011 with the Canadian securities regulatory authorities on SEDAR. In addition, Bowood has also filed its Annual Information Form, which includes Bowood's statement of reserves data and other oil and gas information for the year ended December 31, 2011 as mandated by NI 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. An electronic copy of these materials are available under Bowood's issuer profile on SEDAR at www.sedar.com and will also be available on the Company's website at www.bowoodenergy.ca.

Three Months Ended
December 31, 2011
Year Ended
December 31, 2011
(all amounts in Cdn $ except common share data)
Petroleum and natural gas revenue 1,855,677 6,349,800
Per share - basic 0.007 0.023
- diluted 0.007 0.023
Funds flow from operations 294,684 1,002,970
Per share - basic 0.001 0.004
- diluted 0.001 0.004
Net loss 12,276,690 13,916,145
Per share - basic (0.045 ) (0.051 )
- diluted (0.045 ) (0.051 )
Capital expenditures (net of dispositions) 2,430,252 11,036,441
Net debt (surplus) (excluding fixed commodity contracts) 4,280,792 4,280,792
Shareholders' equity 36,803,225 36,803,225
Total assets 45,126,885 45,126,885
Common share data:
Weighted average basic 274,933,373 274,829,811
Weighted average diluted 274,933,373 274,829,811
Issued and outstanding 274,933,373 274,933,373
Operating Highlights(6:1 boe conversion) Three Months Ended
December 31, 2011
Year Ended
December 31, 2010
Average daily production
Natural gas (mcf/d) 2,905 2,554
Liquids (Oil & NGLs) (bbls/d) 115 92
Oil equivalent (boe/d) 600 517
Production (boe/d) per million shares 2 2
Average sales price (including fixed commodity contracts):
Natural gas ($/mcf) 3.33 3.76
Liquids (Oil & NGLs) ($/bbl) 90.88 85.00
Oil equivalent ($/boe) 33.64 33.63
Operating cost ($/boe) 12.63 13.24
Operating netback ($/boe) (including fixed commodity contracts) 18.06 17.37
Wells drilled - gross (net):
Gas -- 1 (1.00 )
Oil -- 3 (0.71 )
Suspended -- --
D & A -- --
Total -- 4 (1.71 )

For the year ended December 31, 2011, Bowood incurred a net loss of $13,916,145. This was primarily from an impairment write down of $13,798,516 on Bowood's property and equipment. The majority of this write down (approximately 73%) was in Bowood's shallow gas Cash Generating Units (CGUs) and was due to the weakening in natural gas prices. The remaining 23% of the write down was in Bowood's southern Alberta area. The high capital costs associated with drilling the first exploratory wells in the resource play coupled with conservative initial reserves led to the impairment.

Reserves

Bowood's reserves were evaluated at December 31, 2011 by GLJ Petroleum Consultants ("GLJ"), an independent engineering firm. GLJ's evaluation was conducted in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook and is compliant with NI 51-101. All reserve numbers are Company gross* before royalties.

Bowood Energy
2011 Reserves (before royalties) (forecast prices) Gas
mmcf
Light and
Medium Oil
mbbls
Heavy
Oil
mbbls
NGLs
mbbls
Total
mboe
December 31, 2011
Proved producing 4,328 108 4.5 21 855
Proved developed non-producing 551 44 0 2 138
Proved undeveloped 640 62 0 2 171
Total Proved 5,519 214 4.5 25 1,164
Probable 2,667 125 1.5 14 585
Total Proved plus Probable 8,187 339 6 39 1,749

Note: Columns may not add due to rounding

*"Gross" reserves means the Company's working interest (operating and non-operating) share before deduction of royalties payable to others and without including any royalty interest of the Company

Reserve Reconciliation

The following tables provides a reconciliation of the Company's gross reserves of oil, natural gas, and natural gas liquids for the year ended December 31, 2011 versus the year ended December 31 2010.

Light and
Medium Crude Oil
Heavy Oil

Natural Gas
Natural Gas Liquids

BOE
(Mbbl ) Mbbl (MMcf ) (Mbbl ) (Mboe )
Proved
Balance at Dec. 31, 2010 182 4 5,694 24 1,159
Extensions and Improved Recovery 46 - 876 2 194
Technical Revisions 9 1 50 3 21
Discoveries 4 - 0 6 4
Acquisitions 1 - 2 - 2
Dispositions - - - - -
Economic Factors - - (171 ) - (28 )
Production (28 ) (1 ) (932 ) (4 ) (189 )
Balance at Dec. 31, 2011 214 5 5,519 25 1,164
Proved plus Probable
Balance at Dec. 31, 2010 269 6 8,391 39 1,711
Extensions and Improved Recovery 74 - 1,056 2 252
Technical Revisions 19 1 (37 ) 2 (16 )
Discoveries 5 - - 0 5
Acquisitions 1 - 3 - 2
Dispositions - - - - -
Economic Factors - - (294 ) - (49 )
Production (28 ) (1 ) (932 ) (4 ) (189 )
Balance at Dec. 31, 2011 339 6 8,187 39 1,749

Note: Columns and rows may not add due to rounding

NET PRESENT VALUES OF FUTURE NET REVENUE AS OF DECEMBER 31, 2011

(Forecast Prices and Costs)

Before Income Tax ($000s) After Income Tax ($000s)
Discounted at Discounted at
Reserve Category 0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
Proved
Developed Producing 14,564 12,076 10,348 9,084 8,124 14,564 12,076 10,348 9,084 8,124
Developed Non-Producing 2,401 2,130 1,903 1,713 1,551 2,401 2,130 1,903 1,713 1,551
Proved Undeveloped 3,967 3,332 2,839 2,451 2,139 3,967 3,332 2,839 2,451 2,139
Total Proved 20,932 17,537 15,090 13,247 11,814 20,932 17,537 15,090 13,247 11,814
Probable 13,512 9,508 7,211 5,738 4,724 13,512 9,508 7,211 5,738 4,724
Total Proved & Probable 34,443 27,045 22,302 18,986 16,537 34,443 27,045 22,302 18,986 16,537

Note: Columns may not add due to rounding

It should not be assumed that the undiscounted and discounted future net revenues estimated by GLJ which are set forth above represent fair market value.

GLJ's reserves evaluation is based upon the following price forecast (effective January 1, 2012)

Medium and Light Crude Oil Natural Gas NGL
Year WTI
Cushing
Oklahoma
40° API
(US$/bbl)
Edmonton
Par Price
40° API
($/bbl)
Cromer
Medium
29º API
($/bbl)
Alberta Gas Reference Price
Plantgate
($/MMBtu)
AECO - C Spot
($/MMBtu)
Pentanes
Plus
($/bbl)
Exchange
Rate
($US/$Cdn)
2012 97.00 97.96 90.12 3.23 3.29 107.76 0.98
2013 100.00 101.02 92.94 3.85 3.93 108.09 0.98
2014 100.00 101.02 91.93 4.30 4.39 105.06 0.98
2015 100.00 101.02 91.93 4.74 4.84 105.06 0.98
2016 100.00 101.02 91.93 5.19 5.30 105.06 0.98
2017 100.00 101.02 91.93 5.64 5.75 105.06 0.98
2018 101.35 102.40 93.18 5.87 5.99 106.49 0.98
2019 103.38 104.47 95.07 5.98 6.11 108.65 0.98
2020 105.45 106.58 96.99 6.11 6.23 110.84 0.98
2021 107.56 108.73 98.85 6.23 6.36 113.08 0.98
Escalated at 2.0% per year thereafter.

Credit Facility Update

Bowood renewed its bank facility with Canadian Western Bank in March 2012. Oil reserve additions at Armada and Kipp helped to offset low natural gas prices, resulting in a lending facility of $5.7 million.

About Bowood Energy Inc.

With operations based in Calgary, Alberta, Bowood Energy Inc. is a TSX-V Tier 2 corporation. Through its wholly owned subsidiary, Bowood Energy Ltd., the Company is engaged in the acquisition, exploration, development, and production of oil and gas resources. Current projects are in the Province of Alberta.

Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking statements, including but not limited to, management's assessment of future plans and operations, the anticipated spudding dates of various wells, capital expenditures and the timing thereof and expected timing and results from operations, 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. Forward-looking information in this press release may also include, but is not limited to, information with respect to the strategic alternative review process, the potential transaction(s) which may result from such process and the anticipated benefits of enhanced shareholder value that may result from such potential transaction(s). 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, 2011, on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). 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.

For more information on (TSX VENTURE:BWD) and to see the updated corporate presentation please visit our website at: http://www.bowoodenergy.ca.

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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