Corridor Resources Inc.

Corridor Resources Inc.

August 14, 2012 16:00 ET

Corridor Announces Second Quarter Results

HALIFAX, NOVA SCOTIA--(Marketwire - Aug. 14, 2012) - Corridor Resources Inc. ("Corridor") (TSX:CDH) announced today its second quarter financial results.

The following table provides a summary of Corridor's financial and operating results for the three and six months ended June 30, 2012, with comparisons to the three and six months ended June 30, 2011. Corridor's financial statements and management's discussion and analysis for the second quarter have been filed on SEDAR at and are available on Corridor's website at

All amounts referred to in this press release are in Canadian dollars unless otherwise stated.

Selected Financial Information
Three months ended June 30 Six months ended June 30
thousands of dollars except per share amounts 2012 2011 2012 2011
Sales $ 2,708 $ 5,547 $ 6,864 $ 13,571
Net loss $ (2,435 ) $ (3,643 ) $ (4,089 ) $ (5,821 )
Net loss per share - basic and diluted $ (0.028 ) $ (0.041 ) $ (0.046 ) $ (0.066 )
Cash flow from operations(1) $ 104 $ 1,942 $ 1,394 $ 5,514
Capital expenditures $ 853 $ 873 $ 1,640 $ 1,578
Total assets $ 199,345 $ 296,928 $ 199,345 $ 296,928
1. Cash flow from operations is a non-IFRS measure. Cash flow from operations represents net earnings adjusted for non-cash items including depletion, depreciation and amortization, deferred income taxes, share-based compensation and other non-cash expenses. See "Non-IFRS Financial Measures" in Corridor's MD&A for the six months ended June 30, 2012.


  • Despite low natural gas prices in 2012, Corridor had cash flow from operations of $104 thousand in Q2 2012 and $1,394 thousand for the six months ended June 30, 2012. Cash flow from operations decreased from $1,942 thousand in Q2 2011 due to lower natural gas sales partially offset by lower transportation, production and general and administrative expenses. Corridor had cash and cash equivalents as at June 30, 2012 of $7,958 thousand, working capital of $9,350 thousand and no outstanding debt.
  • Natural gas sales for Q2 2012 decreased to $2,361 thousand from $5,155 thousand for Q2 2011 due to the decrease in the average natural gas sales price to $2.86/mscf in Q2 2012 from $4.83/mscf in Q2 2011 and the decrease in the average daily natural gas production to 9.1 mmscfpd in Q2 2012 from 11.7 mmscfpd in Q2 2011. During the quarter, natural gas prices at Henry Hub dropped below US$2.00/mmbtu which resulted in Corridor's decision to shut-in four McCully wells during May and June with a gross average lost daily production of approximately 1 mmscfpd. Corridor expects to resume production of these wells late in Q3 2012. Premiums at Dracut remained strong and averaged US$1.00/mmbtu for the six months ended June 30, 2012. Natural gas prices at Henry Hub and Dracut began to increase towards the latter half of June 2012 averaging over US$4.00/mmbtu at Dracut during this period.
  • During the quarter, Corridor's environmental assessment for the Old Harry exploration well was deemed a designated project under the Canadian Environmental Assessment Act and, as a result, the Canada-Newfoundland and Labrador Offshore Petroleum Board has to process and make a decision on Corridor's environmental assessment prior to July 6, 2013. Corridor is confident that the Old Harry regulatory processes can be completed in a timeline which will accommodate Corridor's proposed project schedule. Corridor currently proposes to drill an exploration well at Old Harry within the 2014-15 timeframe.
  • The Province of New Brunswick has recently issued recommendations for new proposed environmental requirements which allow for the exploration and development of oil and gas in New Brunswick. Corridor is working with the government and other stakeholders to ensure best practices are followed and oil and gas activities can be completed in a safe and responsible manner.
  • During the quarter, Corridor attempted to conduct well testing activities at the Green Road B-41 shale gas well but could not complete this operation due to unsuccessful efforts to recover a tool stuck in the well in 2011. Corridor intends to retest this well at a later date subject to equipment availability.
Q2 2012 Netback Analysis
Three months ended June 30 Six months ended June 30
thousands of dollars except $/mscf 2012 2011 2012 2011
Natural gas sales $ 2,361 $ 5,155 $ 6,125 $ 12,861
Royalty expense - (127 ) (8 ) (456 )
Production expense (706 ) (1,103 ) (1,501 ) (2,218 )
Transportation expense (1,018 ) (1,359 ) (2,114 ) (3,050 )
Netback $ 637 $ 2,566 $ 2,502 $ 7,137
Natural gas production (mmscf) 826 1,067 1,730 2,208
Natural gas production per day (mmscfpd) 9.1 11.7 9.5 12.2
Natural gas sales ($/mscf) $ 2.86 $ 4.83 $ 3.54 $ 5.82
Royalty expense ($/mscf) - (0.12 ) - (0.21 )
Production expense ($/mscf) (0.85 ) (1.03 ) (0.87 ) (1.00 )
Transportation expense ($/mscf) (1.23 ) (1.27 ) (1.22 ) (1.38 )
Netback ($/mscf) $ 0.78 $ 2.41 $ 1.45 $ 3.23

Natural gas sales decreased to $2,361 thousand in Q2 2012 from $5,155 thousand in Q2 2011 due to the decrease in the average natural gas sales price to $2.86/mscf in Q2 2012 from $4.83/mscf in Q2 2011 and the decrease in the average daily natural gas production to 9.1 mmscfpd in Q2 2012 from 11.7 mmscfpd in Q2 2011.

The decrease in the royalty expense per mscf for Q2 2012 to nil from $0.12/mscf for Q2 2011 is due to the significant decrease in the natural gas sales resulting from low natural gas prices and lower production in Q2 2012, while the deductions allowable in the royalty calculation did not decrease significantly.

Production expense per mscf in Q2 2012 decreased to $0.85/mscf from $1.03/mscf in Q2 2011 due to the decrease in work-over activities in 2012 and the decrease in repairs and maintenance expenses as Corridor's annual shut-down was completed in the second quarter of 2011 but this year will be completed in the third quarter.

Transportation expense decreased to $1,018 thousand for Q2 2012 from $1,359 thousand for Q2 2011 due to the decrease in natural gas production and a decrease of $0.06/mmbtu in the cost of the firm transportation toll on the Canadian side of the M&NP effective January 1, 2012.

2012 Outlook

Corridor has increased its forecasted 2012 cash flow from operations from $1,500 thousand to $2,500 thousand to reflect the increase in the 2012 forecast natural gas sales. Corridor has increased its forecast average natural gas sales price for 2012 from $3.55/mscf to $3.70/mscf (consisting of US$2.68/mmbtu at Henry Hub, a premium at Dracut of US$0.78/mmbtu and an estimate of the exchange rate at $0.98 U.S. per Canadian dollar). Corridor has also increased its forecast average net daily gas production for 2012 from 9 mmscfpd to 9.1 mmscfpd.

Based on available working capital of $9.5 million at December 31, 2011 and Corridor's current capital budget of approximately $2.0 million, Corridor is forecasting a net positive working capital of approximately $10 million at December 31, 2012 with no outstanding debt. However, Corridor's board of directors may approve additional capital expenditures in 2012 relating to one or more of Corridor's prospects.

Corridor is an Eastern Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick, Prince Edward Island and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas reserves and production in the McCully Field near Sussex, New Brunswick and discovered crude oil reserves in the Caledonia Field near Sussex, New Brunswick in 2008. In addition, Corridor has contingent resources and discovered resources of shale gas in Elgin, New Brunswick.

Forward Looking Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to: business plans and strategies; timing and expectations regarding resumed production of shut-in wells in the McCully Field; timing and outcome of regulatory process in respect of the Old Harry Prospect; drilling an exploration well in the Old Harry Prospect and timing of such drilling; environmental regulation in New Brunswick, plans to conduct well testing at the Green Road B-41 well, natural gas sales, production, natural gas prices and cash flow from operations in 2012; debt and net positive working capital as at December 31, 2011 and the 2012 capital budget.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Corridor and its shareholders.

Forward-looking statements are based on Corridor's current beliefs as well as assumptions made by, and information currently available to, Corridor concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas commodity prices, future natural gas production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. These factors may be found under the heading "Risk Factors" in Corridor's Annual Information Form for the year ended December 31, 2011.

The forward-looking statements contained in this press release are made as of the date hereof and Corridor does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Certain of the forward-looking statements in this press release may constitute "financial outlooks" as contemplated by National Instrument 51-102 Disclosure Obligations, including information related to projected revenues, expenses, capital expenditures and production for 2012 and working capital and net debt as at December 31, 2012, which are provided for the purpose of forecasting the financial position of Corridor at the end of the 2012 financial year. Please be advised that the financial outlook in this press release may not be appropriate for purposes other than the one stated above.

Contact Information

  • Phillip R. Knoll
    Corridor Resources Inc.
    (902) 429-4511
    (902) 429-0209 (FAX)