Canoro Resources Ltd.
TSX VENTURE : CNS

Canoro Resources Ltd.

July 24, 2009 16:28 ET

Canoro Resources Ltd. Announces US$4 Million Financing, Operations Update and Management Changes

CALGARY, ALBERTA--(Marketwire - July 24, 2009) - Canoro Resources Ltd. ("Canoro" or the "Company") (TSX VENTURE:CNS) has entered into an agreement with Gemini Oil and Gas Fund II, L.P. ("Gemini"), a private fund based in Jersey, Channel Islands, whereby Gemini will provide limited-recourse funding of US$4.0 million for the purchase and installation of the gas compression units as part of development operations in the Company's Amguri Field in Assam, India. Gemini will not earn a participating interest in the field, nor will it be responsible for future capital costs. Gemini will only be entitled to receive repayments based on Canoro's 60% share of gross revenue from the Amguri Field ranging from 8% before recovery of the US$4.0 million and 4% thereafter.

The agreement also provides that Canoro shall have the option between July 2012 and December 31, 2012 after Gemini's recovery of its initial investment to buy back Gemini's entitlement for US$5.1 million. If such option is exercised by Canoro, Gemini will be granted, subject to TSX Venture approval, warrants to subscribe for two million common shares of the Company, exercisable within six months from the date of issue at a subscription price of CDN $0.20 per share. The transaction between Canoro and Gemini was in part brokered by Saether Capital Corp., an independent Canadian financial consultancy, specializing in providing innovative financing alternatives for the Canadian resource industry (www.saethercapital.com).

Operations update

The Amguri A-14 well was drilled and completed within the Tipam sand in late 2008. Initial test results indicate that the well is capable of flowing over 6.0 million standard cubic feet per day ("MMcf/d"). No signs of depletion were apparent from the pressure build-up analysis.

The pipeline for the Amguri A-14 well tie-in into the central process facility was completed at the end of May 2009. The well was put into production on 2nd June at an initial rate of 1.0 MMcf/d (0.6 MMcf/d net to Canoro) dry gas on a 10/64" choke with a with a tubing head pressure of 2180 psig (shut in tubing head pressure was 2200 psig). The rate is expected to be increased up to 4 MMcf/d (2.4 MMcf/d net to Canoro) in conjunction with the demand for gas from the local tea gardens that occurs during the six-month growing season starting in late June. Prior to bringing the A-14 well on production the Amguri field was producing 4.1 MMcf/d (2.5 MMcf/d net) gas with an associated 300 barrels per day ("bpd") (180 bpd net) of condensate, or 590 barrels of oil equivalent per day ("boed") net to Canoro. Production has been restricted pending the installation of the condensate recovery and gas compression facility. The facility, which is primarily comprised of gas compression for injection and condensate stabilization, is on schedule for Q1 2010 commissioning. All major pieces of equipment have been ordered and are in the manufacturing process. Construction is anticipated to commence in Q4 2009.

The Amguri A-11 well is planned to be converted from a Main Barail gas producer to a dual completion well for gas injection into the Main Barail and production from the Mid-Barail formations by the end of Q3 2009. Subsequent to recompletion, the well will be produced solely from the Mid-Barail formation. The conversion is not expected to add significant incremental condensate daily production, but designed to preserve the reservoir pressure in the Main Barail zone until gas injection is implemented for optimal recovery of condensate reserves.

The planned installation of an electric submersible pump (ESP) in the Amguri A-5 oil well, brought back on stream in early 2009, has been postponed while watercut performance is being evaluated. The well had been producing approximately 30 bpd of oil net to Canoro prior to being shut in due to water influx. Canoro is currently reviewing the reservoir and well characteristics to determine the feasibility and options for a water shut-off work over.

Work continues on the Pre-Stack Depth Migration ("PSDM") re-processing of Amguri 3D seismic data with initial results expected in Q3 2009 and subsequent re-interpretation being completed in Q4 2009.

Management

In line with the Company's focus on operations and maintaining tight financial controls, Canoro announces a number of changes to senior management. The Company is pleased to announce the appointment of the following officers and senior managers with immediate effect. Mr. S. Brian Gieni is appointed Senior Vice President, Chief Financial Officer and Country Manager India. Mr. Gieni replaces Stephen Nerland as Country Manager and is now based in the Company's offices in New Delhi.

Ryan Ellson has been appointed Vice President Finance. Mr. Ellson has been working as Corporate Controller & Director of Finance for the Company since January 2008. Prior to joining Canoro, Mr. Ellson acted as the Controller of Delphi Energy Corp. a TSX-listed oil and gas company. Mr. Ellson is a Chartered Accountant and attended the University of Saskatchewan where he earned a Bachelor of Commerce degree and a Masters of Professional Accounting degree.

Given the current industry environment and the level of operations, Canoro has eliminated the position of Vice President of Operations and John Kroshus has left the organization to pursue other interests.

Formerly Area Managers for the Company's Amguri operations, Darcy Dorscher and Ken Read have been appointed joint Directors of Operations. Previous to joining Canoro, Darcy Dorscher, P.Eng. spent six years with Nations Energy Company Ltd.'s Kazakh subsidiary, Karazhanbasmunai, the last year as General Manager and the previous five years as Manager of its Engineering & Geology Department. Mr. Dorscher has an additional 15 years experience in reservoir, production, and facility engineering and production operations, gained at various projects within the former Soviet Union (FSU), Qatar and Canada. He earned his Chemical Engineering degree at the University of Alberta and is a member of the Society of Petroleum Engineers and Association of Professional Engineers Geologists and Geophysicists of Alberta.

Previous to joining Canoro, Ken Read spent seven years with Nations Energy in Azerbaijan and Kazakhstan in a variety of capacities, including Operations Manager, Drilling Manager and Executive Director. Mr. Read has over 30 years experience in drilling and production operations in Canada, China and the former Soviet Union (FSU). He earned a Petroleum Drilling Technologist Diploma (Honours) from the Southern Alberta Institute of Technology (SAIT) and is a Certified Engineering Technologist (C.E.T.) by the Alberta Society of Engineering Technologists (A.S.E.T.).

Mr. Robert Wynne, appointed a director of the Company in November 2008, will assume an active role in the Company as Managing Director and Chief Operating Officer. Les Kondratoff will continue as President and Chief Executive Officer and have a strategic focus on expanding the Company's asset portfolio.

The Company will announce its Fiscal 2009 year-end audited financial results and independent reserves evaluation on 29th July 2009.

Canoro is an independent international oil and gas exploration and production company based in Calgary, Canada and New Delhi, India with operations in the Assam/Arakan basin of northeast India.

Common shares of Canoro trade on the TSX Venture Exchange under the symbol 'CNS'.

This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond Canoro's control. Such risks and uncertainties include, without limitation, 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, 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. Canoro'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, including the amount of proceeds, that Canoro will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Canoro 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 Canoro 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.

Non-GAAP terms

The Press Release contains the terms "funds from operations", and "netbacks" which are not recognized measures under Canadian generally accepted accounting principles. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations has been defined by the Company as net earnings adjusted for non-cash items (depletion, depreciation and accretion, stock-based compensation, unrealized (gain)/loss on foreign exchange, and unrealized investment (gain)/loss) and excludes the change in non-cash working capital related to operating activities and expenditures on asset retirement obligations and reclamation. Canoro's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP.

Barrel of oil equivalent

Where amounts are expressed on a barrel of oil equivalent (boe) basis, natural gas volumes have been converted to barrels of oil equivalent at six thousand cubic feet to one barrel of oil equivalent (6 mcf = 1 boe). This conversion ratio is the convention used in the oil and natural gas industry and is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead. The use of boe's may be misleading, particularly if used in isolation.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this News Release.

Contact Information

  • Canoro Resources Ltd.
    Ryan Ellson
    Vice President Finance
    (403) 410-6777
    or
    Canoro Resources Ltd.
    Robert S. Wynne
    Managing Director & COO
    (403) 592-6295
    or
    Canoro Resources Ltd.
    Suite 700, 717 - 7th Ave SW.
    Calgary, Alberta T2P 0Z3
    Website: www.canoro.com