Canadian Phoenix Resources Corp.
TSX VENTURE : CPH

Canadian Phoenix Resources Corp.

June 01, 2009 16:59 ET

Canadian Phoenix Releases First Quarter Results

CALGARY, ALBERTA--(Marketwire - June 1, 2009) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

CANADIAN PHOENIX RESOURCES CORP. ("Canadian Phoenix") (TSX VENTURE:CPH) announces its consolidated results for the first quarter ended March 31, 2009. The consolidated financial and operational results include Canadian Phoenix and its controlled subsidiary of Serrano Energy Ltd. ("Serrano") (defined as the "Group"). Canadian Phoenix's investment in Marble Point Energy Ltd. ("Marble Point") is reflected in the investment loss and loss for the period.



HIGHLIGHTS

For the three months ended
($000's except as indicated) March 31
2009 2008
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Average Production (boe/d) 1,068 201
Average realized price - oil ($/boe) 35.74 69.01
Average realized price - natural gas ($/mcf) 5.23 7.29

P&NG revenue 3,404 1,230
Netbacks - $/boe 12.48 44.78

Investment Loss 4,944 -

Loss for the period (9,209) (2,224)
Per share - basic & diluted ($0.01) ($0.01)

Funds from Operations (297) (317)
Per share - basic & diluted $0.00 $0.00

Capital Expenditure 6,966 26

Cash on hand 6,068 35,075

Working Capital (Deficiency) (13,192) 40,307

Total assets 127,029 74,396

Weighted Average Number of Shares
Outstanding - Basic & Diluted (000's) 1,131,894 209,275

Number of Shares Outstanding (000's) 1,131,894 514,065
Number of Shares Outstanding
- Diluted (000's) 1,897,225 811,833


For the three months ended March 31, 2009 the consolidated loss after tax was $9.2 million (March 31, 2008: loss of $2.2 million), of which $8.9 million related to non-cash items. The loss otherwise reflects operating, administrative, and depletion charges in excess of the Group's net revenue from operations of $2.8 million.

At March 31, 2009 the consolidated working capital deficit was $13.2 million, net assets were $92.7 million, there was no external debt, and consolidated capital expenditure commitments were approximately $2.5 million. Canadian Phoenix's investment in Marble Point decreased during the quarter as a result of higher non-cash charges, and the book value of the investment at March 31, 2009 was $38.2 million. Canadian Phoenix and Serrano are currently negotiating credit facilities, with expected limits of $0.5 million (Canadian Phoenix) and $7.5 million (Serrano), to alleviate immediate working capital requirements. The Group is seeking other debt and/or equity financing to fund exploration and development activities.

Increased production volumes and revenue reflect the acquisition of Serrano in August 2008. Netbacks in 2009 were significantly lower than 2008 on a per boe basis due mainly to the much higher realized prices in 2008.

Negative funds from operations were experienced in both 2009 and 2008, reflecting the impact of higher general and administrative costs on a consolidated basis.

Capital expenditure during the quarter of $7 million relates primarily to the Blackrod oil sands project. Serrano spent approximately $6 million at Blackrod during the quarter, fulfilling its commitment to its joint venture partner.

Outlook

The depressed state of the economy and low oil and natural gas prices have continued during the first five months of 2009. The impact of this difficult economic environment on the Group continues to be lower revenue, albeit offset partially by lower royalties and operating costs. With the exception of flow-through funded drilling at the Blackrod oil sands project ($6 million spent in the first quarter), planned capital expenditure has been reduced significantly. Consolidated capital expenditures will be evaluated on a case-by-case basis considering cash availability, economic metrics, and strategic positioning.

The current economic conditions have also made it difficult to raise either debt or equity capital. In January 2009, Canadian Phoenix and Serrano jointly entered into a revolving credit facility with an arm's length lender. The facility provided a maximum loan of $6.5 million to each party, repayable on demand and bearing interest at prime plus 1%. The loans were cross-guaranteed by each of Canadian and Serrano with a $25 million floating debenture and a general security agreement over the property and assets of both corporations. This credit facility was suspended in March 2009, however, due to events of default caused by the financial conditions of Serrano. To date both companies have been in independent discussions with an arm's length lender with the objective of establishing stand-alone facilities without cross-corporate guarantees.

In general, the outlook and objective of Canadian Phoenix for 2009 is to reduce capital expenditures, renegotiate debt facilities, and continually monitor internal and external data to weather what is expected to be a challenging operating environment during the year. Working with creditors and understanding and rectifying capital shortfalls will be an important aspect of Serrano's ongoing operations. The impact of lower commodity prices on internal funds from operations has been mitigated through hedging only by Marble Point.

Other conventional and alternative methods of financing are being investigated. Future financings will likely be concurrent with acquisitions, but may also be associated with capital expenditures on existing assets. In addition, internal restricting may be necessitated with the intent of seeking further refinements to stream-line operations, enhance efficiency, and increase the effectiveness of both oil and natural gas assets and human resources. Canadian Phoenix is optimistic that it will identify additional acquisition targets and drive the business plan forward in future periods.

Canadian Phoenix's interest in Serrano increased to 56.8% in January 2009, following the completion of a transaction between Serrano and another industry partner. Under the terms of that transaction, the 4 million shares of Serrano held by the partner were cancelled in return for a $6.3 million expenditure commitment from Serrano on the Blackrod oil sands project, and a reduction in Serrano's working interest in the project from 35% to 20%. Subsequent to March 31, 2009 Canadian Phoenix's interest in Serrano decreased slightly to 55.7%, following the issuance of shares by Serrano to certain trade creditors.

The consolidated financial statements and related MD&A can be found on SEDAR's website at www.sedar.com and the Corporation's website at www.canadian-phoenix.com.

About Canadian Phoenix Resources Corp.

Canadian Phoenix is a publicly-traded junior oil and gas exploration, development and production company with operations in Western Canada. Canadian Phoenix is pursuing a corporate strategy of being a consolidator of oil and gas assets located in the Western Canadian Sedimentary Basin. Strategic corporate acquisitions promote partnerships for the future development of acquired or targeted oil and gas assets. Canadian Phoenix's shares trade on the TSX Venture Exchange under the symbol "CPH".

FORWARD-LOOKING STATEMENTS Certain information set forth in this document, including management's assessment of the ability to secure another credit facility, the financial viability of its subsidiary, and the ability to raise additional equity, contain forward-looking statements. In particular, forward-looking statements included in this document, include but are not limited to, statements with respect to the approval of another credit facility, and the financial condition of its subsidiary. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Canadian Phoenix's control, including the impact of general economic conditions, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. In making such forward-looking statements Canadian Phoenix has made certain assumptions concerning the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and service; and the receipt of applicable approvals. 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. Canadian Phoenix's actual results, performance or achievements 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 Canadian Phoenix will derive therefrom. Canadian Phoenix disclaims any intention or obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise, except as required pursuant to applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Service 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

  • Canadian Phoenix Resources Corp.
    Robert Chenery
    Interim President and Chief Executive Officer
    (403) 920-0040
    (403) 920-0043 (FAX)
    Website: www.canadian-phoenix.com