Cheyenne Energy Inc.
TSX VENTURE : CHY

Cheyenne Energy Inc.

August 24, 2006 09:00 ET

Cheyenne Releases Second Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 24, 2006) - Cheyenne Energy Inc. ("Cheyenne" or the "Company") (TSX VENTURE:CHY) is pleased to announce its financial and operating results for the three and six months ended June 30, 2006.



HIGHLIGHTS

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Three Months Ended Six Months Ended
June 30, June 30,
% %
2006 2005 Change 2006 2005 Change
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FINANCIAL ($'000s, Except Per
Share Amounts)
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Petroleum and Natural Gas
Revenue ($) 858 1,331 (36) 2,179 1,838 19
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Cash Flow from Operations ($) 466 381 22 965 437 121
Per Share-Basic and Diluted 0.03 0.02 50 0.07 0.03 133
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Net Income ($) 245 139 76 293 95 208
Per Share-Basic and Diluted 0.02 0.01 100 0.02 0.01 100
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Capital Expenditures, Net ($) 78 339 (77) 1,938 1,105 75
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Working Capital Deficiency
($) 3,290 2,407 37 3,290 2,407 37
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Common Shares Outstanding
('000s)
Basic 15,493 14,169 9 15,493 14,169 9
Diluted 15,881 14,376 10 15,881 14,376 10
Weighted Average Common
Shares Outstanding ('000s)
Basic 15,493 14,169 9 15,493 14,169 9
Diluted 15,493 14,216 9 15,493 14,201 9
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OPERATIONS
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Average Daily Production
Natural Gas (MCF/d) 1,384 1,761 (21) 1,573 1,252 26
Crude Oil and NGLs (BBLS/d) 11 12 (8) 11 11 -
Barrels of Oil Equivalent
(BOE/d 6:1) 242 306 (21) 273 219 25
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Average Product Prices
Realized
Crude Oil (CDN$/BBL) 73.83 63.24 17 68.55 61.38 12
Natural Gas (CDN$/MCF) 6.24 7.84 (20) 7.17 7.58 (5)
Barrels of Oil Equivalent
(CDN$/BOE) 39.04 47.78 (18) 44.05 46.32 (5)
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In this report, all references to barrels of oil equivalent ("BOE") are calculated converting natural gas to oil at a ratio of six thousand cubic feet of natural gas to one barrel of oil. This is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

"Cash flow from operations" is a non-GAAP measure that represents cash generated from operating activities before changes in non-cash working capital. The Company's determination of cash flow from operations may not be comparable to that reported by other companies.

PRESIDENT'S MESSAGE TO SHAREHOLDERS

The second quarter of 2006 was quiet for the Company as it waited to regain access to its exploratory well drilled in December 2005. The Company was restricted from access to the northwestern Alberta lands at Hawk as a result of environmental and wildlife restrictions until the end of April. Subsequent wet weather in the second quarter further hampered the Company's access to the area. Subsequent to the end of the second quarter, the Company installed a pumpjack on the well at Hawk and is conducting further testing with an operational update to be released in the near future.

In the meantime, the Company concentrated on its operating cost structure efficiencies and on stabilizing current production to take advantage of the market prices. In this accord, the Company is proud to report that operating costs have been reduced to $8.78 per boe for the three months ended June 30, 2006 and $7.94 per boe for the six months ended June 30, 2006. This is in comparison to $10.50 per boe and $10.90 per boe for the same periods in the previous year.

The controlled operating costs and Alberta Royalty Tax Credit refund received during the second quarter resulted in the 22% increase in cash flow to $466,000 over the previous year. The ARTC refund related to the compensatory royalty paid on a Camrose lease and was received after the Company filed its tax return for the 2005 taxation year.

Additionally, the Company's net income was positively affected by the reduction in the federal and provincial tax rates enacted during the second quarter. Net income of $245,000 for the three months ended June 30, 2006 was 76% higher than the same period one year ago.

Operationally, production for the second quarter was down 21% from the same period in 2005, but production for the first of 2006 was up 25% from the same period in 2005. The decline in the quarter is a result of natural declines occurring in the reservoir.

Capital expenditures for the quarter were minimal as the Company awaited to gain access to northwestern Alberta which has been disrupted by weather conditions. As reported earlier, once the Company regains access to the Hawk area, final completion and further testing of the exploratory well will be performed. Until such time, capital plans for the remainder of 2006 continue to be undetermined.

Liquidity & Capital Resources

The Company's net negative working capital position at June 30, 2006 totaled $3,289,818. The Company has a revolving production loan with a financial institution with $2,575,000 drawn on the $3,000,000 available and a developmental demand loan with a financial institution, of which $nil was drawn on the $700,000 available at June 30, 2006. The Company had a loan payable to a shareholder of the Company in the amount of $70,000 which was repaid before July 31, 2006. At June 30, 2006 the Company was in breach of its bank covenant requirement to maintain a 1:1 working capital ratio, however the Company received a waiver from its financial institution and has determined October to be the timing for a mid-year review of its credit facility.

At August 21, 2006 the Company had 15,493,187 common shares outstanding; 100,000 warrants outstanding with an exercise price of $0.70 per warrant; and 200,000 stock options outstanding with an exercise price of $0.55 per option.

The Company funds its capital expenditure program through a combination of cash flow, bank borrowing and the equity market. For the remainder of 2006, the Company expects to continue to use a combination of the preceding sources to further its business plan of growth.

Additional Information

Complete financial statements and additional information relating to Cheyenne is available on the Company's website at www.cheyenneenergy.com or on SEDAR at www.sedar.com.

This press release contains forward-looking statements. These forward-looking statements can generally be identified as such because of the context of the statements including words such as the Company "believes", "anticipates", "expects", "plans", "may", "estimates" or words of a similar nature. These statements are based on current expectations and are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Accordingly, readers are cautioned and no assurances can be given that any of the events anticipated by the forward-looking statements will occur, or if any of them do so, what benefits that we will derive there from. The Company does not undertake any obligation to publicly update or revise any forward-looking statements.

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

Contact Information

  • Cheyenne Energy Inc.
    Tim Cooney
    President & CEO
    (403) 296-2590
    or
    Cheyenne Energy Inc.
    Adeline Roth
    Vice President Finance & CFO
    (403) 296-2590
    Email: admin@cheyenneenergy.com