Turnkey E&P Inc.
TSX : TKY

Turnkey E&P Inc.

August 09, 2007 14:33 ET

Correction From Source: Turnkey E&P Inc. Announces Second Quarter 2007 Results

CALGARY, ALBERTA--(Marketwire - Aug. 9, 2007) - The release distributed August 8, 2007 at 18:33 ET has been revised. The complete and correct version is as follows.

Turnkey E&P Inc. (TSX:TKY) ("Turnkey"), today announced its financial and operating results for the three and six months ending June 30, 2007.

The figures presented below are expressed in thousands of U.S. dollars, except where otherwise stated.



Selected Consolidated Financial Information
Three and six months ended June 30, 2007


Three months Six months
ended June 30, ended June 30,
----------------- -----------------
2007 2006 2007 2006
$ $ $ $
------- ------- ------- -------
Financial Results
Revenue 5,107 5,745 6,575 11,502
Operating expenses 4,902 5,618 6,879 10,921
Financial items 703 784 1,295 1,362
Net loss (896) (992) (2,409) (1,817)
Loss per share - basic and diluted (0.04) (0.04) (0.10) (0.07)

June 30, December 31,
2007 2006
$ $
--------- ------------
Financial Position
Cash and cash equivalents 33,802 47,519
Working capital 38,834 46,462
Long-term debt 75 Nil
Shareholders' equity 91,669 93,623


Operating and Financial Highlights

Turnkey reported a loss of $896 in the second quarter of 2007 compared to $992 in the same period in 2006.

The Corporation uses its drilling rigs to drill on its own oil and natural gas properties as well as providing contract drilling services to third party customers. Revenues from drilling on owned properties are eliminated in the consolidated financial statements.

Turnkey's drilling rig utilization in the second quarter of 2007 was 62% comprised of 138 days drilling activity for third party customers and 89 days drilling on its own properties in Louisiana.

Contract CASING DRILLING ®

The drilling division owns and operates four purpose built CASING DRILLING ® rigs. Starting in mid August, three of the rigs will be working for operators where Turnkey E&P has no interest in their lands. Two of these three rigs will be working on "day rate" contracts and one rig will be working on a "turnkey" basis. To date, the "turnkey" bids for CASING DRILLING ® difficult wells have been very successful, and the Company plans to continue this strategy. The fourth rig will be moving to the Company's Cox Pad in the Clear Creek Field to start a series of directional wells.

Exploitation and Production

Louisiana Beauregard Parish - Redevelopment Project Status

Turnkey's redevelopment project is well underway in the Clear Creek Field. This field has been intensely worked and re-interpreted by Turnkey's technical staff down to the individual reservoir level. Redevelopment efforts are focused on bypassed pay potential in multiple reservoirs within the 1,200 foot thick Cockfield Formation at depths between 8,300 and 9,500'.

The first three wells have been drilled and have encountered objectives as predicted by subsurface mapping. These wells will be completed as producers and are currently either waiting on completion or still in the testing phase. Initial drilling results have demonstrated support for the significant reserve potential that was anticipated to be remaining in this multi-pay zone area. First online production should commence in the third quarter. Refinements to formation evaluation and cost reduction measures are currently being implemented. New drilling and completion strategies should reduce costs even further. Plans are in place to reduce the time between completion and commercial production. An inventory of future objectives has been determined and the next well locations are ready to be drilled.

Offset well activity by other operators is increasing in the area and has been spurred on by Turnkey's success. This activity may prove to be an additional benefit to Turnkey because of our dominant land position in the area and recently constructed infrastructure including tie-in facilities for gas production. Offset operators will need to find ways to transport and market their production. In addition, a 3-D seismic shoot is in progress in a search for deeper targets in the Wilcox Formation that underlies the Cockfield at depths of about 12,000' to 13,000' where there is a prolific producing zone in the immediate vicinity of Turnkey's lands. This horizon has not been evaluated on Turnkey's acreage and this deeper potential provides additional upside in our project area. We are also evaluating options to optimize water disposal activities associated with production.

W. Cox No. 1 Well

Turnkey's first well in the Clear Creek Field is the W. Cox No. 1. This well was drilled in February 2007 to a depth of 9,590'. The location of this first test was selected based on detailed subsurface mapping of the Cockfield Formation and thorough reconstruction of the field's production history. Geological targets were encountered as mapped and numerous shows were reported while drilling. Multiple pay sands were logged in the Cockfield and will be tested.

The first zone to be tested was the Cockfield "B-6" Sand at a depth of 9,350'. The "B-6" tested 595 barrels of oil per day, 1.1 million cubic feet of gas per day and no water on a 14/64" choke with flowing pressure of 1,996 psi for two hours from 18 feet of perforations. The well averaged 435 barrels of oil per day, 881 thousand cubic feet of gas per day and no water on a variable choke from 14/64" to 12/64" with flowing tubing pressure of 2,005 psi over a 12-hour period. The "B-6" has not previously produced in the Clear Creek Field. Testing further indicates that the current completion interval has excellent performance capabilities and that this reservoir should have good lateral extent.

The W. Cox No. 1 well is currently waiting on a flowline that will allow for the production of associated gas. Other pay zones in the well will be tested at a later date. The success of the W. Cox No. 1 is a good start to Turnkey's redevelopment program. Results confirm the presence of bypassed pay in the abandoned Clear Creek Field. This well sets up several direct offset well locations that will be drilled as part of the overall redevelopment strategy.

Richard Doornbos No. 1 Well

The Richard E. Doornbos No. 1 is the second well drilled by Turnkey. The well was drilled to a depth of 9,690', logged on April 4, 2007 and is located approximately two miles to the east of the W. Cox No. 1 well. The location for the Doornbos well was selected because it is an area of the field where the Cockfield "B" series sands were expected to be particularly well developed. Mud log shows were again recorded while drilling throughout the Cockfield section. Objectives came in as mapped and open hole logs indicated multiple pay zones.

Test results on individual zones were inconsistent with petrophysical interpretations and are still under evaluation. Cementing and completion procedures are also being reviewed. Selected zones may be retested. In the short term, the decision has been made to complete in the Cockfield "A" at 8,860'. Test rates from the Cockfield "A" yield an 8% - 10% oil cut. More testing is required to confirm these rates. The lower than expected oil cut may also be affected by the lack of cement bond over the interval. In which case, a cement squeeze and re-perforation procedure would likely reduce the amount of water production and increase the percentage of oil to expected rates. These results do however confirm earlier reservoir analysis which indicated that there are still significant quantities of hydrocarbons to be recovered from this zone, even with a substantial water cut and reduced reservoir pressure. The "A" reservoir has the capacity to produce a high volume of total fluids. As such, even a small percentage of oil cut can be produced commercially. The "A" was the primary, historical, field pay in the Clear Creek Field having produced approximately 12 million barrels of oil and approximately 25 BCF. Successfully producing commercial quantities from the "A" in the Doornbos well adds yet another production dimension to the redevelopment project. The opportunities for Cockfield "A" completions extend field-wide. Additionally, this completion will provide valuable insight into future plans for secondary or tertiary recovery in the Cockfield "A" and other Clear Creek Field reservoirs. The Richard E. Doornbos well is waiting on completion facilities.

Patsy Cox No. 1 Well

Turnkey's most recent well, the Patsy Cox No. 1 is located approximately one half mile to the northwest of the W. Cox No. 1 well. The Patsy Cox No. 1 is currently testing multiple pay zones that were encountered with drilling shows and that were determined productive by log analysis. The Cockfield "B-3" at 9,250 has already been tested oil productive. Initial "B-3" tests show an 18% - 20% oil cut, which may be conservative. Further testing will be performed on this zone to confirm the percentage of oil. This highly permeable zone is capable of producing significant fluid volumes. The Cockfield "B" and Cockfield "A" will be tested next. Rates from these zones will help determine the most beneficial completion program for the well. Successful completion of the Patsy Cox well proves up additional offset locations for future development.

Hurricane Creek

Turnkey's attention will soon shift to the Hurricane Creek portion of the project area which is located approximately two miles to the north of Clear Creek Field. The Cockfield Formation is also the primary objective at Hurricane Creek.

This release and Turnkey's website referenced in this release contain forward-looking statements including expectations of future production and components of cash flow and earnings. Investors are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Turnkey. These risks include, but are not limited to; the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to; operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks including, without limitation, blowouts and spills, and the uncertainty of estimates and projections of production, costs and expenses. The risks outlined above should not be construed as exhaustive. Investors are cautioned not to place undue reliance on any forward-looking information. Turnkey undertakes no obligation to update or revise any forward-looking statements.

CASING DRILLING ® is a registered trademark of Tesco Corporation

Contact Information

  • Turnkey E&P Inc.
    R. M. (Bob) Tessari
    President and Chief Executive Officer
    (281) 248-8822