C1 Energy Ltd.
TSX : CTT

C1 Energy Ltd.

June 08, 2006 07:30 ET

C1 Energy Operations Update

CALGARY, ALBERTA--(CCNMatthews - June 8, 2006) - C1 Energy Ltd. (TSX:CTT) ("C1") is pleased to provide this update on current production, operations, reserves, recent exploration and reallocation of our 2006 capital budget.

Exploration and Development

Recent operations allow us to now confirm that C1 participated as to a 50% non-operated working interest in a previously announced new Devonian gas discovery in the Royce area, previously referred to by the operator as the Earring area. This well is part of our core Blueberry project in the Peace River Arch region of Alberta. C1 and the operator have completed the construction of a 28 kilometer pipeline to a midstream gas plant in the area that allowed for the production startup of the discovery well.

This well, identified as Bear Ridge Exploration Royce 8-28-83-7W6M has now been on production for approximately one month through this pipeline at a stabilized average rate of 1.3 mmcf/d with approximately 40 barrels of condensate per million cubic feet of produced gas (140 boe/d, net sales). Production from the well is currently restricted due to high operating pipeline pressures in the area. Installation of compression facilities is anticipated by the operator to be completed early in the third quarter to potentially increase production from the discovery well.

C1 has a 50% to 100% interest in 10 sections of land surrounding the discovery well, the majority of which has been evaluated by proprietary 3D seismic. C1 has identified four development (2.5 net C1) and three exploratory locations (1.74 net C1) on the lands. C1 is the operator of five of the ten sections surrounding the discovery well.

Access to lands immediately adjacent to the discovery well is limited to winter operations due to regulatory restriction. This restriction will delay the first development drilling until later this year or early in 2007. Drilling of one or more of the exploratory locations is expected to commence in the third quarter of this year as surface access and equipment availability permits.

C1 had also participated as to a 50% operated interest in a new Kiskatinaw light oil discovery at Blueberry as previously announced without being identified. The C1 Blueberry 16-14-82-7W6M well encountered multiple zones in the Kiskatinaw of which one zone is now on production at a stabilized rate of 30 barrels per day of light sweet oil (net to C1). Additional zones are expected to be tested after spring breakup through further completions and/or development drilling. Pipeline application has been made to produce potential gas zones identified in the discovery well and approvals are anticipated to be received in the next several months.

C1 has a 50% to 100% operated interest in three additional sections surrounding this discovery well. Development drilling to delineate this discovery will commence in the third quarter of this year as surface access and equipment availability permits.

Given our recent success in these areas, C1 intends to make it our priority for incremental capital expenditures during the next year.

Current Production

C1's current production is approximately 950 boe/d comprised of 70% natural gas. Recent production is below our Q1 exit rate of 1,100 boe/d due to natural production declines and high pipeline operating pressures at our Blueberry and Royce properties. Compression facilities are scheduled to be installed at our recent Royce 8-28 discovery to potentially increase production from this well which may offset a portion of the of this production decline.

Capital Reallocation and Reserves

Due to the successful program in the Blueberry and Royce areas we will be reallocating a significant portion of the balance of our 2006 capital program to those areas. To accomplish this we will redirect capital from certain projects that were forecast in our February 28, 2006 reserve update.

As a result of this reallocation we anticipate that we may experience negative reserve additions at these properties by not expending capital in 2006 for these projects. As well less than expected production performance at two of our properties may result in negative reserve additions at year-end. The resultant possible negative revisions to reserves is anticipated to be approximately 14% of proved plus probable reserves and 7% of the net present value of reserves, before tax, discounted at 10% utilizing the then forecast prices in the February 28, 2006 Reserves Update.

The properties and projects that may be negatively revised are:

- Gift Lake - C1 will not drill a development well this year in the "G" Pool. We will continue to monitor our waterflood performance prior to making a final decision to drill this well. This is a substantially higher cost operating area and will be reevaluated for 2007. The anticipated net reduction on a gross basis is approximately 93,000 boe to probable undeveloped reserves with an anticipated NPV 10% before tax value of approximately $460 thousand.

- Chipmunk - Production performance has been below that forecast in the February 28th update. We have downwardly adjusted the reserves in proportion to actual versus forecast production performance to date this year. The anticipated net reduction on a gross basis is 85,000 boe to proved producing reserves with an anticipated NPV 10% before tax value of approximately $1.2 million.

- Cardinal Lake - Production performance has been significantly below that forecast in the February 28th update. C1 farmed out the capital associated with this well prior to operations and we have virtually no capital costs associated with this well. We have removed all of our reserves from the February 28th update at this time. A second well will be drilled in the third quarter by the farmee to attempt to restore production at no cost to C1. The anticipated net reduction on a gross basis is 85,000 boe to proved undeveloped reserves with an anticipated NPV 10% before tax value of $2.0 million.

- Sarcee - C1 will not drill a development well this year as was scheduled in the February 28th update. Uncertainty for processing capacity and lower natural gas prices and operating netbacks associated with this project have caused us to defer this project indefinitely. The anticipated net reduction on a gross basis is 411,000 boe to proved undeveloped reserves with an anticipated NPV 10% before tax value of $1.5 million.

Working Capital

C1 estimates that its working capital deficiency was $11.8 million as at April 30, 2006. This represents an increase of $2.8 million from March 31, 2006 and is a result of capital expenditures undertaken by C1 since the end of Q1 related primarily to the Royce 8-28 discovery.

C1 has a current borrowing capacity of $17 million comprised of a $13 million revolving loan and a $4 million development demand loan.

Staff Changes

C1 also announces that Mr. Ron Barmby, Vice President and Chief Operating Officer will be leaving C1 to pursue other business opportunities effective July 15, 2006. C1 has initiated a search for a replacement for Mr. Barmby and in the interim all inquiries normally directed to Mr. Barmby should be directed to the President and Chief Executive Officer Mr. Hugh Pattillo. C1 wishes him success in his future endeavors.

C1 has a large inventory of drilling locations on an undeveloped land base of approximately 140,000 acres, net to C1. C1 has exclusive access to an additional 168,000 acres of undeveloped land bringing the company's total undeveloped land inventory to over 300,000 acres. C1 currently has approximately 33 million common shares outstanding.

Disclosure provided herein in respect of barrels of oil equivalent ("boe") 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 tip and does not represent a value equivalency at the wellhead.

Certain information set forth in this press release contains forward-looking statements. All statements other than historical fact contained herein are forward-looking statements, including, without limitation, statements regarding the future financial position, business strategy, production rates and plans and objectives of or involving C1 Energy Ltd. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond C1's control, including the impact of general economic conditions, industry conditions, governmental regulation, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. C1's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance 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 C1 will derive therefrom. C1 disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Contact Information

  • C1 Energy Ltd.
    Hugh Pattillo
    President & CEO
    (403) 232-1115 ext 107
    or
    C1 Energy Ltd.
    Gary Lobb
    VP & CFO
    (403) 232-1115 ext 106
    or
    C1 Energy Ltd.
    500, 521-3rd Avenue S.W.
    Calgary, AB T2P 3T3
    (403) 232-1115
    (403) 232-1130 (FAX)
    Website: www.c1energy.ca