Castle Rock Petroleum Ltd.

Castle Rock Petroleum Ltd.

August 28, 2007 14:10 ET

Castle Rock Petroleum Ltd.: Financial and Operating Results For the Three and Six Months Ended June 30, 2007

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2007) - Castle Rock Petroleum Ltd. ("Castle Rock") (TSX VENTURE:RCK.A) (TSX VENTURE:RCK.B) has filed with Canadian securities authorities its unaudited financial statements and Management's Discussion and Analysis for the three and six months ended June 30, 2007. Copies of the filed documents may be obtained through SEDAR at or by visiting Castle Rock's website at


Three Months Six Months
2007 2006 2007 2006
Financial Highlights
($000s except per share amounts)

Oil and gas revenue 428 411 902 705
Royalties (51) (79) (150) (140)
Interest income 5 27 17 48
Production (253) (166) (470) (243)
General and administrative (146) (254) (380) (496)
Financing charges - (86) - (138)
Cash flow from (used by) operations (17) (147) (81) (264)
Per share - basic and diluted nil (0.01) nil (0.01)

Depletion, depreciation and accretion (215) (1,793) (2,434) (2,045)
Stock-based compensation (5) (13) (7) (22)
Goodwill impairment - (1,000) - (1,000)
Future income tax recoveries - 897 - 1,013
Net loss (237) (2,056) (2,522) (2,318)
Per share - basic and diluted (0.01) (0.10) (0.12) (0.12)

Issue of shares - - - 1,952
Capital expenditures (3) 807 166 2,898
Proceeds on property dispositions - 191 - 191
Working capital (deficiency) (687) 1,060 (687) 1,060
Shareholders equity 1,057 7,118 1,057 7,118
Total assets 3,170 12,322 3,170 12,322

Operating Highlights

Average daily sales volumes (boe/day) 106 123 110 98

Selling prices:
Natural gas ($/mcf) 7.33 6.01 7.44 6.58
Oil and natural gas liquids ($/bbl) 61.77 74.37 61.92 75.60
Field netbacks ($/boe):
Selling price 44.55 36.58 45.20 39.92
Royalties (5.32) (6.98) (7.50) (7.92)
Production (26.27) (14.79) (23.52) (13.75)
Field netbacks 12.96 14.81 14.18 18.25

Share Capital Information

Shares outstanding (000s):
Weighted average during the period 20,902 20,702 20,902 18,929
Period end - Class A 11,902 10,702
Period end - Class B 900 900


During the second quarter of 2007, Castle Rock concluded an initiative to resolve the Company's working capital deficiency. In June 2007, the Company announced that it had entered into an agreement, effective April 1, 2007, to sell the majority of its production and a significant part of its asset base for proceeds of $1,450,000 (subject to normal industry adjustments). On closing, this transaction will allow the Company to reimburse subscribers to Castle Rock's $10.0 million initial public offering of flow-through shares completed in March 2005 for the loss of the tax benefit to them for unspent flow-through share obligations.

In addition, the Company concluded its maximization process commenced in 2006, announcing in July 2007, that Castle Rock and Arrow Energy Ltd. ("Arrow") (together the "Parties") had executed an agreement to effect a business combination whereby Arrow will acquire all of the outstanding Class A and Class B shares in Castle Rock in exchange for common shares of Arrow on the basis of one (1) Arrow common share for every five (5) Class A Shares of the Company and one (1) Arrow share for every one-half (1/2) Class B Share of the Company. The business combination is by plan of arrangement under the provisions of the Business Corporations Act (Alberta) ("the Plan"). The information circular detailing the Plan was mailed to the respective shareholders of Castle Rock and Arrow on August 16, 2007 and the meeting of Castle Rock shareholders is scheduled to take on September 13, 2007. The Parties have agreed to a non-competition fee in the amount of $50,000 in certain circumstances if the Plan is not completed.

The Plan will allow Castle Rock shareholders continued participation in the upside of Castle Rock's remaining asset base through their stake in Arrow, an emerging oil and gas company focused on the acquisition, exploration, exploitation and development of oil and natural gas in the Western Canadian Sedimentary Basin.

The directors of Castle Rock have approved the transaction and urge shareholders to vote in favour of the business combination with Arrow by attending the Special Shareholders Meeting to be held on Thursday, September 13, 2007 at 10:00 am in the Trophy Room at the Calgary Petroleum Club, or by completing the proxies already mailed out to shareholders of record.


Castle Rock recorded average sales volumes of 106 boe per day in the second quarter of 2007, comprised of 613 mcf per day of natural gas and 4 barrels per day of oil and NGLs. This represented a decrease of approximately 8% from the first quarter of 2007. The first quarter 2007 natural gas volumes included adjustments received from third party facility operators that relate to 2006. Average selling prices of $7.33 per mcf of natural gas and $61.77 per barrel of oil and NGLs generated oil and gas revenue of $428,000 down from $474,000 in Q1 2007. Cash used by operating activities was $17,000 and the Company recorded a net loss of $237,000. On a cash basis, results for the second quarter of 2007 were adversely affected by lower revenues, the result of production declining 8% and by a 3% decline in natural gas prices and by higher production expenses but positively affected by an adjustment to crown royalties and lower general and administrative expenses.

In light of its financial position, Castle Rock's six month capital expenditure program was limited to amounts required to maintain the value of existing assets. Expenditures totaled $166,000 for the six month period and included amounts spent on completions and facilities in the Hotchkiss and Valhalla areas and amounts spent on projects commenced in late 2006. During the quarter Castle Rock farmed out a property and recovered a portion of expenditures previously incurred in anticipation of future drilling. Castle Rock did not participate in any drilling during the first two quarters of 2007.

Staffing cutbacks and changes and other cost cutting measures initiated by Castle Rock during late 2006 and 2007 have resulted in reduced general and administrative expenses that are expected to continue into the future.

At June 30, 2007, Castle Rock had a working capital deficit of $687,000 and no bank debt. The working capital deficit includes a flow-through share commitment of $957,000, which is included in current liabilities. This amount is due to the subscribers to Castle Rock's $10.0 million initial public offering of flow-through shares completed in March 2005. Castle Rock did not meet the full spending commitment and is required to reimburse the subscribers for the resulting loss of income tax benefits. The working capital deficiency has been addressed and rectified with the sale of certain assets. It is expected that the sale will close in mid-September and generate proceeds of $1,450,000 (subject to normal industry purchase price adjustments).

At June 30, 2007, Castle Rock held an interest in four (1.9 net) producing wells. Work in the Hotchkiss and Pearce areas is ongoing, although the pace is slower than originally planned. The Hotchkiss and Pearce areas were non-producing during the first two quarters of 2007.

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.
    Paul A Pypers
    President, COO and CFO
    (403) 290-3269 or Toll Free: 1-888-290-3255