Canadian Spirit Resources Inc.

Canadian Spirit Resources Inc.

March 11, 2005 06:00 ET

Canadian Spirit Resources Announces 2004 Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CANADIAN SPIRIT RESOURCES INC.

TSX VENTURE SYMBOL: SPI

MARCH 11, 2005 - 06:00 ET

Canadian Spirit Resources Announces 2004 Financial
Results

CALGARY, ALBERTA--(CCNMatthews - March 11, 2005) - Canadian Spirit
Resources Inc. ("CSRI" or the "Company") (TSX VENTURE:SPI) announces the
release of its financial results and Management Discussion and Analysis
for the year ended December 31, 2004.

CSRI is a natural resources company pursuing the exploration and
development of unconventional gas opportunities with a focus on the
natural gas from coal ("NGC", also referred to as coalbed methane or
"CBM") sector of the energy industry. The Company is in the
pre-development stage and during 2004 concentrated its efforts on land
acquisition and prospect evaluation in northeastern British Columbia.

Operational highlights in 2004 were:

- the acquisition of 12,009 hectares of land in the Farrell Creek area
of northeastern British Columbia;

- the drilling and analysis of data from the two test holes in the
Farrell Creek area; and

- receipt of an independent engineering report from Sproule Associates
Limited, which included a contingent resource estimate of gas-in-place
ranging from 9.0 to 14.1 Bcf per section (over 46 sections) for the
Gething coals in the Farrell Creek area. (For a more complete summary of
this report, please see the company's press release dated November 15,
2004).



Selected Financial Data
(for the years ended or as at December 31)
2004 2003
---- ----
Total revenue $ 74,117 $ 13,304
Net Loss (1,741,820) (394,063)
Net loss per share (basic & diluted) (0.10) (0.06)
Working capital 5,591,284 2,513,156
Total assets 20,884,673 4,242,668
Total long term financial liabilities 871,569 86,761


The Company had no operating revenue during 2004 and 2003 and recorded
losses of $1.7 million and $0.4 million respectively during these
periods. Stock-based compensation expense was a very significant factor
representing $1.5 million and $0.2 million of the recorded losses in the
respective periods. Increased interest revenue was due to higher average
cash balances.

Relative to the increased level of exploration, evaluation and land
acquisition activity, the Company maintained a tight control on staff
and administration expenses. Cash expenses for 2004 and 2003 after the
capitalization of costs directly related to exploration activity were
$602,111 and $572,679 respectively. Capitalized overhead was $220,947
and $98,690 in the same respective periods.

Non-cash expenses related to outstanding stock appreciation rights and
stock options represented 71 percent of the reported before tax loss in
2004 and 24 percent of the before tax loss in 2003. The increased value
of the Company's shares and additional stock option grants to employees
and directors in 2004 both contributed to the increase in of reported
stock-based compensation expense in 2004 relative to 2003.

Capital expenditures in 2004 rose to $12.5 million compared to $1.5
million in 2003. Of these totals, land acquisition was $10.1 million
($1.0 million in 2003) and drilling and completion expenditures were
$2.1 million ($0.4 million in 2003).

During 2004 the Company closed four private placements totaling $14.0
million and together with $2.6 million from the exercise of share
purchase warrants and stock options resulted in a cash balance of $6.0
million at December 31, 2004. At year-end 2004, the Company's working
capital position was $5.6 million, up from $2.5 million at December 31,
2003. On March 10, 2005, the Company received approval from the TSX
Venture Exchange for the private placement announced January 12, 2005
and amended February 21, 2005. The closing of this private placement
will ensure funding for the Company's base capital program for 2005.

Long term financial liabilities of $871,569 at December 31, 2004 were
principally the accrued contingent liability for cash payments to key
employees pursuant to stock appreciation rights granted in 2003.
Payments under these SARs agreements are conditional upon the
achievement of specified production targets or profit thresholds. The
balance of this figure represents the current asset retirement
obligation of the Company.

Operations Update

The Company has responded to an overture from an independent third party
regarding the formation of a joint venture. This joint venture would
combine the technical skills of the Company and the financial strength
of the third party. The initial objective of this joint venture will be
NGC potential in central Alberta with CSRI acting as operator. Under the
terms of the proposed joint venture, the third party will pay 100% of
the first $2.5 million of land acquisition and drilling costs to earn a
50% working interest in the joint lands. To-date, three sections of land
has been acquired by the Company in the proposed area of mutual
interest. The Company expects to close this joint venture in April, 2005.

Notwithstanding the above proposed joint venture, the Company's prime
focus continues to be the Farrell Creek area. The Company has finalized
the program designs and access to equipment that will allow it to a)
complete and test the Gething coals and interbedded sands; b) complete
and test a conventional shallow gas zone; and c) drill and evaluate a
shale test hole.

Unusually warm conditions in northeastern British Columbia have resulted
in the early implementation of road bans (weight restrictions)
throughout the area. Barring a dramatic early change in current weather
conditions, this will have an adverse affect of from six to eight weeks
on the timing of the above operations set out in more detail in the
Company's news release dated February 28, 2005. This delay is not
expected to have an impact on the Company's overall capital program for
2005 and may result in improved equipment availability, lower costs and
eligibility for provincial government incentives.

Sproule Associates Limited have been retained to update their November
15, 2004 report on resource potential in the Farrell Creek area with
data obtained from the c-83-H test hole (the third test hole) drilled in
December 2004. This updated report will form the basis of a portion of
the Company's NI51-101 report "Disclosure of Oil and Gas Activities"
which is expected to be filed in April 2005.

Conference Call

A conference call to review operations and financial results will take
place on March 15, 2005 at 4:15 p.m. EST (2:15 p.m. MST). Phil Geiger,
President & COO and Don Gardner, CFO will speak on behalf of the
Company. A question-and-answer period will follow. To participate in the
call, please dial 1-866-822-1596 and enter Passcode 302366. Financial
statements and management's discussion and analysis of operations and
financial conditions can be found on SEDAR at www.sedar.com



On behalf of the Board of Directors,
Canadian Spirit Resources Inc.

"Phil Geiger"

Phillip D.C. Geiger, President & COO


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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Canadian Spirit Resources Inc.
    Phil Geiger
    (403) 539-5005
    (403) 262-4177 (FAX)
    phil.geiger@csri.ca
    or
    Canadian Spirit Resources Inc.
    Don Gardner
    (403) 539-5005
    (403) 262-4177 (FAX)
    don.gardner@csri.ca
    www.csri.ca
    THE TSX VENTURE EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED THE
    INFORMATION CONTAINED HEREIN AND DOES NOT ACCEPT RESPONSIBILITY FOR THE
    ADEQUACY OR ACCURACY OF THIS RELEASE.