Canoro Resources Ltd.
TSX VENTURE : CNS

Canoro Resources Ltd.

December 22, 2008 18:27 ET

Canoro Updates Operations and Future Plans

CALGARY, ALBERTA--(Marketwire - Dec. 22, 2008) - Canoro Resources Ltd. "Canoro" or the "Company" (TSX VENTURE:CNS) announces its follow-up operational results for the recent Amguri well testing program and plans for 2009.

Operational Update

The Company has completed production testing operations in the Amguri field on both the A-12 and A-14 appraisal wells drilled in October and November 2008 respectively. The A-14 production test was successful, delivering test rates up to 4.8 mmscfd of dry gas from the Tipam formation. The A-12 well production testing of the two main Barail intervals was unsuccessful in spite of log analysis indications of hydrocarbons and primarily tested water in both the Barail and mid Barail sands. However, an estimated flow rate of 0.5 million cubic feet per day, with associated water, from the Basal Sandstone, while not making this a commercial success, does indicate another prospective zone in the field. The A-12 well appears to be in a separate compartment and not connected to the larger compartment at A-11. The Company has temporarily suspended follow-up drilling to re-evaluate its geological model of Amguri. This will be assisted by the completion a detailed Pre-Stack Depth Migration ("PSDM") seismic analysis of Amguri to further the Company's understanding of the structural complexity of the field. This work has been advanced and is expected to be completed by the end of the first quarter in 2009.

The Amguri A-14 appraisal well was tested in the upper Tipam Formation. A three-day production test on this section yielded maximum rates of 4.8 mmscfd on an 8mm choke with a tubing pressure of 2100 pounds per square inch ("psi"), and a stabilized final rate of 2.7 mmscfd on a 6 mm choke with a tubing head pressure of 2,180 psi. These results, combined with a subsequent pressure buildup test, support the Company's view that the A-14 well is an excellent dry gas well which could be capable of flowing over 6 mmcfd dry gas at minimal pressure drawdown. This discovery allows the Company to sell dry natural gas to available local markets as well as re-injecting excess Tipam gas for voidage replacement thereby enhancing liquids production from the discovered Barail Formation currently producing. The Company plans to commence the building of a six-inch diameter flow line to the production facilities at the A-6 well site to facilitate both gas sales and gas re-injection from A-14.

The overall productive capability of the Amguri field is currently being reviewed and the Company is currently focused on optimizing the gas compression and re-injection scheme in the field to maximize cash flow and reserve recovery from the Barail Formation. Canoro submitted this month to the regulator a Full Field Development Plan ("FFDP"). The FFDP calls for the installation of compression and gas re-injection by September 2009 and, in addition, to facilitate the design and construction of a gas plant to process the liquids-rich gas from the field.

Outlook

The Company is in a strong financial position with zero debt, working capital of US$18.5 million as of November 30, 2008 and has positive funds from operations in the current commodity price environment. In light of the economic environment and the need to complete the technical work on a revised geological model of Amguri, the Company is reducing 2009 capital expenditures to approximately US$15 million subject to economic and commodity issues. The Company will focus on increasing the production and cash flow from the existing wells through implementation of the compression and injection scheme and connecting previous successful wells to current infrastructure.

As a result of changing the drilling schedule, the Company has released one of the two active drilling rigs contracted in the area. The Dergaon # 2 appraisal well on the AA-ON/7 block was spud on December 17, 2009. The purpose of the appraisal well is to establish sufficient commercial gas reserves to justify development of the field. The existing discovery well Dergaon #1 was recompleted in 2005 in the Cretaceous sands and flow tested at 1.06 mmscfd. Under the terms of the Production Sharing Contract, the Dergaon #2 well will complete obligations in the Assam section of the block.

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 equals 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.
    S. Brian Gieni
    Vice President, Finance & CFO
    (403) 543-5742
    or
    Canoro Resources Ltd.
    Les Kondratoff
    President & CEO
    (403) 543-5741
    or
    Canoro Resources Ltd.
    700, 717 - 7th Ave SW
    Calgary, Alberta T2P 0Z3
    CANADA
    Website: www.canoro.com