Churchill Energy Inc.

Churchill Energy Inc.

August 23, 2007 18:49 ET

Churchill Announces Q2 Results

CALGARY, ALBERTA--(Marketwire - Aug. 23, 2007) - Churchill Energy Inc. (TSX VENTURE:CEI) ("Churchill") announces operational and financial results for the six months ended June 30, 2007.


Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006 Change
FINANCIAL ($, except
share data)

Oil and gas revenues,
before royalties 1,957,225 1,913,784 4,008,176 3,317,387 21%

Funds from operations 409,690 957,134 1,414,504 1,092,119 30%
Per Share- Basic and
diluted ($ per share) 0.01 0.03 0.05 0.04 25%

Net income (loss) (654,940) 802,442 (1,166,801) 548,283 (313%)
Per Share - Basic and
diluted ($ per share) (0.02) 0.03 (0.04) 0.02 (300%)

Capital Expenditures 731,102 12,191,978 6,894,639 14,654,576 (52%)

Total assets 55,906,457 47,375,644 55,906,457 47,375,644 18%

Working capital
(deficiency) (1) 798,132 (355,312) 798,132 (355,312) 325%

Bank debt 10,590,375 2,388,741 10,590,375 2,388,741 343%

Weighted average
shares outstanding
Basic 31,048,141 27,839,808 31,048,141 24,713,245 26%
Diluted 31,048,141 28,091,947 31,048,141 24,973,718 24%

OPERATIONS (units as

Average Daily
Crude oil and NGLs
(bbls/d) 139 154 147 154 (5%)
Natural gas (mcf/d) 1,840 1,814 1,880 1,485 27%
Barrels of oil
equivalent (boe/d) 446 456 460 401 15%

Average Product Prices
Crude oil and NGLs
($/bbl) 51.56 64.60 51.06 55.45 (8%)
Natural gas ($/mcf) 7.55 6.03 7.58 6.54 16%
Combined ($/BOE) 47.25 45.72 47.28 45.36 4%

Netback 28.20 30.22 29.62 25.25 17%

Wells Drilled
Gross - 6 2 10 (80%)
Net - 1.15 0.95 1.93 (51%)

Success - 50% 100% 70% 30%
Undeveloped land (net
acres) 53,673 55,255 53,673 55,255 (3%)

(1) Excludes bank debt and the risk management contracts


- Production averaged 446 boe per day in the second quarter of 2007, relatively unchanged from the 456 boe per day in the second quarter of 2006 due mainly to the disposition of non-operated production in SE Saskatchewan in the fourth quarter of 2006. Second quarter production is typically lower due to maintenance activities at both Churchill operated and third party non-operated facilities resulting in production being shut-in. Production in the third quarter is expected to increase as operations return to normal and the 1-16-59-2W6 (0.85 net) well comes on stream late in the third quarter. Operations had been temporarily suspended on the 1-16-59-2W6 well in March due to weather conditions in the area and have recommenced in the third quarter.

- Churchill realized funds from operations of $409,690 ($0.01 per share) in the second quarter of 2007 compared to $957,134 ($0.03 per share) in 2006. The decrease in 2007 funds from operations was mainly due to a higher effective royalty rate, higher interest charges as a result of the increase in bank debt and higher general and administrative costs.

- Capital expenditures for the quarter were $731,102 of which the majority was spent on installing centralized compression at the 8-1-56-27W4 site in Alexander, repairing the Grand Forks 1-32-10-13W4 well for salt water disposal and participation in a seismic shoot in Chime. The Company did not drill any wells in the second quarter of 2007.

- Churchill's operating netback was $28.20 per boe in the second quarter of 2007, compared to $30.22 per boe realized in the second quarter of 2006. The lower operating netback was mainly due to lower realized crude oil prices as a result of the sale of SE Saskatchewan light oil in 2006 and a higher effective royalty rate partially offset by higher natural gas prices and lower operating costs.


Churchill Energy Inc. ("Churchill" or the "Company") is pleased to report to shareholders the Company's activities in the second quarter of 2007. The Company had very limited activity in the quarter due to spring breakup and access restrictions in the Smoky area that were in place until mid-July.

During the second quarter of 2007 the Company spent $731 thousand on equipment, facilities, completions and seismic.

In the Alexander area the Company participated in the installation of a centralized compressor to alleviate back pressure problems which will allow for increased production from the wells in the area. Early indications are positive as the Company is seeing better production rates from a number of our wells in the area in Q3. Churchill has participated in one (0.1 net) well that was cased as a potential gas well and has one (0.1 net) well that is scheduled to be drilled in Q3.

Operating costs in the quarter increased to $16.47 from $11.03 in the first quarter as a result of a scheduled battery turnaround in Grand Forks and planned facility turnarounds that affected production in Chime, Smoky and Killam.

The Company has moved onto the 1-16 well in Smoky and expects to be able to report on results late in the third quarter.


Natural gas prices have dropped significantly and are expected to continue to be weak in Q3 as a result of the absence of warm weather in the eastern United States and continued storage injections. Oil prices continue to show strength on a go forward basis. Prices for both commodities continue to be volatile.

Churchill continues to evaluate potential property acquisitions and corporate opportunities. The Company does believe that there will be numerous opportunities to acquire or merge in the latter part of the year as a result of low natural gas prices, challenging capital markets and higher debt levels for juniors and the need for a large segment of the juniors to grow significantly in order to get market recognition. The federal governments trust announcement last October has also significantly changed the landscape for junior oil and gas companies.

The Company has a large inventory of drilling locations, a number of which are drill ready. These locations have the potential to grow the Company significantly. The challenge for the Company is to be able to get these wells drilled in the current environment. We look forward to updating you on our progress.

On behalf of the Board of Directors,

(signed) "Kelly D. Cowan" (signed) "James P. Baker"
Kelly D. Cowan, James P. Baker,
Chief Executive Officer President

August 23, 2007

Churchill will be filing its quarterly report for the six months ended June 30, 2007 including the financial statements, accompanying notes and MD&A on SEDAR ( and on the company's website at Churchill is a Calgary-based junior oil and natural gas company with operations in Alberta and Saskatchewan. The common shares of Churchill are listed on the TSX Venture Exchange and trade under the symbol "CEI".

Forward Looking Statements: Certain information regarding Churchill in this news release including management's assessment of future plans and operations, production estimates, drilling inventory and wells to be drilled, timing of drilling and tie-in of wells, productive capacity of new wells, capital expenditures and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, 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, the timing and length of plant turnarounds and the impact of such turnarounds and the timing thereof, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence Churchill's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits Churchill will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Churchill's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (, at Churchill's website ( Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Churchill 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.

BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

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