Corridor Resources Inc.
TSX : CDH

Corridor Resources Inc.

November 11, 2010 16:00 ET

Corridor Announces Third Quarter Results

HALIFAX, NOVA SCOTIA--(Marketwire - Nov. 11, 2010) - Corridor Resources Inc. ("Corridor")(TSX:CDH) announced today its third quarter financial results.

The following table provides a summary of Corridor's financial and operating results for the three and nine months ended September 30, 2010, with comparisons to the three and nine months ended September 30, 2009. Corridor's financial statements and management's discussion and analysis for the third quarter have been filed on SEDAR at www.sedar.com and are available on Corridor's website at www.corridor.ca.

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

Selected Financial Information

thousands of dollars except per share amounts Three months ended
September 30
  Nine months ended
September 30
  2010   2009   2010   2009
Revenues $ 5,471   $ 5,901   $ 21,694   $ 37,600
Net earnings (loss) $ (2,281 ) $ (3,442 ) $ (5,203 ) $ 3,492
Net earnings (loss) per share - basic $ (0.026 ) $ (0.039 ) $ (0.059 ) $ 0.040
Net earnings (loss) per share - diluted $ (0.026 ) $ (0.039 ) $ (0.059 ) $ 0.040
Cash flow from operations(1) $ 1,938   $ 1,815   $ 10,112   $ 22,165
Capital expenditures $ 7,372   $ 9,823   $ 20,141   $ 32,580
Total assets $ 296,352   $ 306,790   $ 296,352   $ 306,790
(1) Cash flow from operations is a non-GAAP measure. Cash flow from operations represents net earnings adjusted for non-cash items including depletion, depreciation and amortization, future income taxes, stock-based compensation and other non-cash expenses. See "Non-GAAP Financial Measures" in Corridor's management's discussion and analysis for the three and nine months ended September 30, 2010.

Highlights

  • During Q3 2010, natural gas production averaged 11.0 mmscfpd net to Corridor (including production from penalty wells) with an average natural gas sales price of $4.96/mscf, resulting in a net loss of $2,281 thousand and basic and diluted net loss per share of $0.026.
  • Natural gas revenues for Q3 2010 decreased slightly to $5,021 thousand from $5,167 thousand for Q3 2009 as the decrease in production from 14.5 mmscfpd in Q3 2009 to 11.0 mmscfpd in Q3 2010 was mostly offset by the increase in the average natural gas sales price from $3.87/mscf in Q3 2009 to $4.96/mscf in Q3 2010. The decrease in natural gas production is partly as a result of the decreased drilling activities in 2009 and 2010 in response to the lower natural gas prices and partly as a result of the lower than expected production from the L-37 well drilled in Q2 2010.
  • Net earnings for Q3 2010 increased by $1,161 thousand to a net loss of $2,281 thousand from $3,442 thousand for Q3 2009 reflecting mostly the decrease in depletion expense resulting from the lower natural gas production.
  • During Q3 2010, the 2010 oil exploration program on Anticosti Island was completed. As part of this program, three wells were drilled to evaluate the oil potential of the Trenton/Black River and Mingan Group formations in the Jupiter, Chaloupe and Saumon prospects located in the east central part of the island. While exploration results to date on Anticosti Island may appear disappointing, the presence of live oil shows and permeable reservoir development combined with the very large number of prospects are positive factors for future oil exploration on the island. A key objective for the Anticosti drilling program was to core part of the oil bearing Macasty shale overlying the Trenton formation in the Chaloupe well. A conventional core of approximately 27 metres was recovered and analysis of the reservoir character and fluid content of the core has commenced. The oil-prospective Macasty shale is present across virtually the entire island, with Corridor holding approximately 900,000 net acres (1.5 million gross acres) in this potential unconventional oil play. Corridor and Petrolia Inc. have commenced activities aimed at attracting a knowledgeable shale oil player to farm-in on this play, and initial interest by several potential players has been strong, due in part to the large area covered by this unconventional oil play.
  • During the quarter, Apache Canada Ltd. ("Apache") completed the drilling and casing of the first two horizontal wells in the Frederick Brook shale play located north of Elgin, New Brunswick. Apache has advised Corridor that the hydraulic fracture stimulation program for the Green Road L-41 well and the Will DeMille M-59 well has commenced and frac operations are estimated to be completed by the end of November, 2010. Corridor expects testing results will be available in early 2011 following the clean-out and subsequent flow testing of these wells.
  • During the quarter, Corridor substantially completed the installation of an inlet compressor aimed at increasing the production at the McCully Field in New Brunswick. The installation of the inlet compressor was a success with final actual costs expected to be below budget by $900 thousand and with an initial production uplift of 5 mmscfpd achieved early in Q4 2010. Start up issues did require longer than planned shut-downs in late September and early October with the inlet compressor becoming fully operational in late October.
  • During the quarter, Corridor completed a site survey at a proposed drilling location on the Newfoundland and Labrador side of the Old Harry structure in the Gulf of St. Lawrence in preparation for the anticipated drilling of an exploration well on this giant prospect within the next two years. The site survey was completed within four days at an estimated cost of $1,300 thousand.

Q3 2010 Netback Analysis

thousands of dollars except $/mscf Three months ended September 30   Nine months ended September 30  
  2010   2009   2010   2009  
Natural gas revenues $ 5,021   $ 5,167   $ 20,259   $ 35,543  
Royalty expense   (29 )   (82 )   (350 )   (1,685 )
Production expense   (851 )   (717 )   (2,572 )   (2,359 )
Transportation expense   (1,478 )   (2,040 )   (5,042 )   (7,661 )
Netback $ 2,663   $ 2,328   $ 12,295   $ 23,838  
                         
Natural gas production (mmscf)   1,012     1,336     3,596     4,399  
Natural gas production per day (mmscfpd)   11.0     14.5     13.2     16.1  
                         
Natural gas revenues ($/mscf) $ 4.96   $ 3.87   $ 5.63   $ 8.08  
Royalty expense ($/mscf)   (0.03 )   (0.06 )   (0.10 )   (0.38 )
Production expense ($/mscf)   (0.84 )   (0.54 )   (0.72 )   (0.54 )
Transportation expense ($/mscf)   (1.46 )   (1.53 )   (1.40 )   (1.74 )
Netback ($/mscf) $ 2.63   $ 1.74   $ 3.41   $ 5.42  

Natural gas revenues decreased to $5,021 thousand in Q3 2010 from $5,167 thousand in Q3 2009 due to the decrease in the average daily production to 11.0 mmscfpd in Q3 2010 from 14.5 mmscfpd in Q3 2009, which was mostly offset by the increase in the average natural gas sales price to $4.96/mscf in Q3 2010 from $3.87/mscf in Q3 2009. The decrease in production is largely due to the decision of the Company to suspend drilling activities early in Q2 2009 in response to the lower natural gas prices, which resulted in only three wells being drilled and completed in Q1 2009 and only the L-37 well being drilled in Q2 2010 in the McCully Field. This well is currently shut-in for a pressure build-up before conducting further testing operations and potential future fracturing operations.

The decrease in the royalty expense per mscf for Q3 2010 to $0.03/mscf from $0.06/mscf for Q3 2009 is due to the significant decrease in the natural gas revenues during the period without a corresponding decrease in deductions allowable in the royalty calculation.

Gross production expense for Q3 2010 of $1,023 thousand is consistent with the gross production expense for Q3 2009. However, net production expense increased to $851 thousand in Q3 2010 from $717 thousand in Q3 2009 due to the decrease in Corridor's joint venture partner's share of production due to the decreased overall production from the McCully Field.

Transportation expense for Q3 2010 decreased to $1,478 thousand from $2,040 thousand for Q3 2009 due to a decrease in natural gas production, two decreases in the cost of U.S. firm tolls effective August 1, 2009 and April 1, 2010, respectively, and a stronger Canadian dollar as compared to the U.S. dollar in 2010 compared to 2009.

2010 Outlook

Corridor has decreased its estimate of the average daily net production for 2010 from 13.7 mmscfpd to 13.3 mmscfpd to reflect the additional time required for the inlet compressor to become fully operational. Corridor has also decreased its estimate of the average natural gas sales price to US$3.75/mmbtu at Henry Hub for the remainder of 2010. As a result, Corridor's 2010 budget for revenues has decreased from $33 million to approximately $29 million.

As a result, Corridor's previously estimated cash flow from operations for 2010 is forecast to decrease by approximately $2.7 million to $12.5 million and Corridor has reduced its 2010 capital budget from $24.4 million to $22.5 million. The net decrease in the capital expenditure program consists of the delay of the core hole drilling at Sally's Brook, north of the McCully Field and lower than expected costs for the inlet compressor and gas plant maintenance.

Corridor is a 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 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 in Elgin, New Brunswick. In June 2007, Corridor completed the construction of a field gathering system, a gas plant and a pipeline lateral connecting the McCully Field to markets through the Maritimes & Northeast Pipeline.

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 the following: the 2010 budget, including expected revenues, costs, capital expenditures, cash flow, natural gas prices, production, drilling and development plans; a potential farm-in on Anticosti Island, and Apache's drilling and fracturing plans.

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. These factors include, but are not limited to: risks associated with oil and gas exploration, financial risks, substantial capital requirements, bank financing, government regulation, environmental, prices, markets and marketing, issuance of debt, variations in exchange rates and hedging. Further information regarding these factors may be found under the heading "Risk Factors" in Corridor's annual information form for the year ended December 31, 2009 and its most recent management's discussion and analysis. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. 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 and oil commodity prices, exchange rates, 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. 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 budget, revenues, expenses, capital expenditures and cashflow from operations, which are provided for the purpose of forecasting the financial position of Corridor at the end of the 2010 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

  • Corridor Resources Inc.
    Phillip R. Knoll, President
    902-429-4511
    902-429-0209 (FAX)
    www.corridor.ca