Castle Rock Petroleum Ltd.

Castle Rock Petroleum Ltd.

April 18, 2007 09:00 ET

Castle Rock Petroleum Ltd.: 2006 Financial and Operating Results

CALGARY, ALBERTA--(CCNMatthews - April 18, 2007) - Castle Rock Petroleum Ltd. (TSX VENTURE:RCK.A) (TSX VENTURE:RCK.B) ("Castle Rock") today filed with Canadian securities authorities its audited financial statements and Management's Discussion and Analysis for the year ended December 31, 2006. Copies of the filed documents may be obtained through SEDAR at or by visiting Castle Rock's website at

Financial and Operating Summary

Year Ended Three Months Ended
December 31, December 31,
2006 2005 2006 2005

Financial Highlights
($000s except per share amounts)

Oil and gas revenue 1,367 593 398 463
Royalties (267) (129) (76) (106)
Interest income 104 114 25 23
Production and transportation (538) (95) (157) (67)
General and administrative (966) (824) (273) (275)
Financing charges (985) - (770) -
Cash flow from (used by) operations (1,285) (341) (853) 38
Per share - basic and diluted (0.07) (0.03) (0.04) -

Depletion, depreciation and accretion (6,676) (392) (728) (342)
Stock-based compensation (33) (24) (4) (8)
Goodwill impairment (1,000) (141) - (141)
Future income tax recoveries 2,758 144 501 122
Net loss (6,236) (754) (1,084) (331)
Per share - basic and diluted (0.32) (0.06) (0.05) (0.02)

Issue of shares 2,312 11,720 360 -
Capital expenditures 6,131 4,965 1,638 970
Proceeds on property dispositions 3,659 60 577 60
Corporate acquisition (net of working
capital acquired) - 3,765 - -
Working capital (441) 2,279 (441) 2,279
Shareholders' equity 3,571 10,957 3,571 10,957
Total assets 7,236 13,938 7,236 13,938

Year Ended Three Months Ended
December 31, December 31,
2006 2005 2006 2005

Operating Highlights

Average daily production (boe/day) 93 22 97 69

Selling prices:
Natural gas ($ per mcf) 6.59 12.07 7.31 12.22
Oil and natural gas liquids
($ per barrel) 68.28 69.45 58.18 66.75

Field netbacks ($/boe):
Selling price 40.24 72.35 44.58 73.23
Royalties (7.87) (15.75) (8.57) (16.78)
Production and transportation (15.84) (11.55) (17.57) (10.61)
Field netbacks 16.53 45.05 18.44 45.84

Share Capital Information

Shares outstanding (000s):
Weighted average during the period 19,545 11,805 20,602 14,881
Period end - Class A 11,902 9,075 11,902 9,075
Period end - Class B 900 900 900 900

Overview of 2006

Sales volumes averaged 93 boe per day in 2006, comprised almost exclusively of natural gas. Average selling prices of $6.59 per mcf of natural gas and $68.28 per barrel of oil and NGLs generated oil and gas revenue of $1,367,000. Cash used by operating activities was $1,285,000 and the net loss was $6,236,000. Results for 2006 were adversely affected by lower natural gas prices, higher operating expenses, financing charges of $985,000, write downs of oil and gas properties totaling $4,852,000 and a goodwill impairment of $1,000,000.

Expenditures on property and equipment totaled $6,131,000 in 2006. Six (2.60 net) wells were drilled, resulting in one (0.25 net) producing gas well at Valhalla and one (0.50 net) potential gas well at Hotchkiss. Two minor acquisitions were completed in 2006, both of which involved additional interests in Castle Rock operated properties.

Castle Rock commenced 2006 with working capital of $2,279,000, no bank debt and an obligation to incur approximately $6,500,000 in expenditures that would qualify as Canadian Exploration Expenses ("CEE") for income tax purposes. The spending obligation represented the balance of qualifying expenditures Castle Rock needed to incur pursuant to the Company's $10.0 million initial public offering ("IPO") of flow-through shares completed in March 2005.

Castle Rock's 2006 capital expenditure program was financed by property dispositions, equity issues and a reduction in working capital. Five property dispositions generated proceeds totaling $3,659,000 in 2006. In the first quarter, $191,000 was received on the sale of a portion of Castle Rock's interest in a producing gas well located in southern Alberta. During the third quarter, three dispositions were completed for proceeds of $2,891,000. The largest transaction involved the sale of one half of Castle Rock's interests in the Pearce, Hotchkiss, Valhalla, Herronton and Morse areas. During the last quarter of 2006, Castle Rock disposed of its entire interest in a gas well located in southeast Alberta for proceeds of $577,000. During 2006, Castle Rock completed two equity issues. In March, a private placement was completed raising $1,952,000 through the issuance of 1,627,000 Class A Shares at $1.20 per share. In October, Castle Rock issued 1,200,000 Class A Shares valued at $0.30 per share to acquire oil and gas properties.

Castle Rock completed 2006 with a working capital deficit of $441,000 and no bank debt. The December 31, 2006 working capital deficit includes flow-through share commitments of $1,784,000, which is included in current liabilities. The $1,784,000 is comprised of amounts due to the subscribers to Castle Rock's IPO and to the Canada Revenue Agency. The payable was recorded at the end of 2006 and is based on a flow-though spending shortfall of $3,490,000. During the first quarter of 2007, Castle Rock made payments of $827,000, which included the entire amount due to the Canada Revenue Agency and a portion of the amount due to the IPO subscribers. At the end of the first quarter of 2007, the remaining amount due to the IPO subscribers is approximately $957,000.


Castle Rock's immediate goal is to resolve its liquidity problem. This may involve the sale of a portion or all of the Company's assets, the issuance of new equity and/or a corporate transaction. Certain transactions may require shareholder approval and could be very dilutive. Measures in progress to conserve cash include a reduction in personnel and a minimal capital expenditure program. On a longer term basis, Castle Rock has an opportunity base that includes high impact exploration and lower risk development potential.

Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Except for statements of historical fact, all statements in this news release - including, without limitation, statements regarding production estimates, potential reserves and future plans and objectives of Castle Rock - are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from anticipated results include risks and uncertainties most of which are beyond Castle Rock's control such as: risks relating to estimates of reserves and recoveries; production rates and operating cost assumptions; development risks and costs; the risk of commodity price and currency fluctuations; general economic and industry conditions; political and regulatory risks; environmental risks; stock market volatility; access to sufficient capital from internal and external sources; and other risks and uncertainties as disclosed under the heading "Risk Factors" and elsewhere in Castle Rock's documents filed from time-to-time with the TSX Venture Exchange and other regulatory authorities. The reader is cautioned that assumptions used in the preparation of such information, while considered reasonable by Castle Rock at the time, may prove to be incorrect. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Contact Information

  • Castle Rock Petroleum Ltd.
    Roger Hume
    Chairman and CEO
    (403) 290-3262 or Toll free: 1-888-290-3255
    Castle Rock Petroleum Ltd.
    Michael Makinson
    VP Finance and CFO
    (403) 290-3261 or Toll free: 1-888-290-3255