Culane Energy Corp.
TSX VENTURE : CLN

Culane Energy Corp.

August 14, 2007 20:22 ET

Culane Energy Releases 2007 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 14, 2007) - Tuesday August 14, 2007. Culane Energy Corp. ("Culane") (TSX VENTURE:CLN) announces its financial and operating results for the three and six months ended June 30, 2007. The unaudited financial statements and related Management's Discussion and Analysis for the second quarter of 2007 have been filed with Canadian securities regulatory authorities on SEDAR at www.sedar.com and posted on the Company's website at www.culaneenergycorp.com.

The second quarter of 2007 remained a very productive period for Culane. The Company continued its drilling program in the Killam South property, resulting in significant increases in production, cash flow and new reserves. The drilling program, which commenced in November 2006, directly offset Culane's existing Killam North property and resulted in the identification of several new oil and gas pools.

During the second quarter of 2007, 8 wells (100% interest) were drilled at Killam South resulting in 5 multi-leg horizontal oil wells, two standing cased observation wells and one natural gas well. Culane is currently constructing a 4.5 mile natural gas pipeline that will allow the Company to produce up to an estimated additional 1,000 BOE/d of natural gas that is currently behind pipe due to natural gas capacity issues with Culane's natural gas processor. The total cost of this pipeline is $600,000. This pipeline is expected to be completed later in the third quarter.

During and subsequent to the second quarter Culane has increased its land exposure in the Killam South and Killam North areas from 4 sections (2,560 acres) to approximately 19 sections (12,000 acres) of land. The land base consists mostly of 100% working interests with 4 sections having a 50% working interest. Culane has assembled this land base through a combination of land sales, acquisitions and strategic farm-ins. Culane has identified up to 6 new Lloydminster oil pools on these lands that have existing well control analogous to its recently developed Killam South pools. The acquisition of additional lands in the Killam area will continue. The Company has permitted and commenced a 3D seismic program approximately 30.0 square miles in areal extent that is expected to be completed and interpreted in the third quarter of 2007. Following the completion and interpretation of the 3D seismic program a drilling program will commence.

Subsequent to the end of the second quarter, Culane drilled 3 (100% interest) additional multi-leg horizontal oil wells in Killam South. A fourth multi-leg horizontal oil well is currently being drilled. From the commencement of the Killam South program in November 2006 to present, a total of 28 wells (28 net) have been drilled, 20 (17 oil, 3 natural gas) which were on production by June 30, 2007, four oil wells waiting to be tied in, two standing cased wells and two shut-in natural gas wells. This includes two wells which were successfully re-drilled for oil. Culane intends to continue its drilling program of 100% multi-leg horizontal oil wells in Killam South identified by 3D seismic.

The waterflood study for the combined areas of Killam North and Killam South is nearing completion. All the laboratory reservoir core and fluid analysis is being incorporated into the reservoir model. The study for Killam North and South will be completed in the fourth quarter of 2007. A pilot waterflood program will begin implementation in the fourth quarter of 2007.

At Nelson (100% interest), Culane has two oil wells producing 200 BOE/d of oil and associated natural gas. Culane is acquiring two lines of 2D seismic on the 1.5 sections of land acquired in the fourth quarter of 2006, and expects to identify exploration locations on those lands to be drilled in the fourth quarter of 2007.

Culane's current production from all areas based on field estimates is approximately 3,000 BOE/d, 70% oil. Of this total, 220 BOE/d is produced at Killam North, 2,500 BOE/d at Killam South, 200 BOE/d at Nelson, and 80 BOE/d at Redwater. This production estimate includes production from 17 of the 21 new Killam South multi-leg horizontal oil wells, and 3 of the 5 new Killam South natural gas wells. Culane has two natural gas wells (1,000 BOE/d combined) shut-in due to lack of processing capacity at the third-party facility. Culane is presently constructing a 4.5 mile natural gas pipeline that is expected to be completed by early September. Culane is also currently completing and equipping 4 new multi-leg oil wells capable of approximately 800 barrels per day of initial oil production.

Culane has commissioned an updated engineering reserve report, expected to be completed in the third quarter of 2007, to recognize reserve additions from the new wells and also incorporate the waterflood potential at Killam North.

During the second quarter of 2007, Culane's credit facility was increased to $18 million as a result of the drilling activity.

2007 Second Quarter Highlights

- Revenues of $11.1 million were recorded in Q2, compared to $3.9 million in Q1 2007 and $4.1 million in Q2 2006.

- Production averaged 2,476 BOE/d in Q2, compared to 869 BOE/d in Q1 2007 and 731 BOE/d in Q2 2006.

- Funds from operations reached $7.6 million ($0.37 per share - basic) for the first six months of 2007, $5.9 million ($0.29 per share - basic) for the second quarter 2007.

- Drilled 8 (100% interest) wells at Killam in Q2 resulting in 4 producing wells, 2 standing cased wells and 2 waiting to be tied in. A total of 20 wells were drilled in 2007 including 2 re-drills.

- Capital expenditures of $25.9 million were invested in 2007, $9.1 million in the second quarter.

- Credit facilities increased to $18 million.



Operations
----------------------------------------------------------------------------
Financial and Operating Highlights
Three months ended June 30 2007 2006
----------------------------------------------------------------------------
$ $/BOE $ $/BOE
--------------------------------------------
Petroleum and natural gas
revenues 11,058,546 49.08 4,131,814 62.09
Royalties, net of ARTC (3,120,483) (13.85) (1,385,702) (20.82)
Operating costs (1,666,034) (7.39) (260,225) (3.91)
----------------------------------------------------------------------------
Subtotal 6,272,029 27.84 2,485,887 37.36
Other income 980 - 680 -
General and administrative (240,200) (1.07) (342,963) (5.15)
Interest and financing expense (135,022) (0.60) - -
----------------------------------------------------------------------------
Funds from operations 5,897,787 26.17 2,143,604 32.21
Stock based compensation (650,408) (2.89) (228,097) (3.42)
Depletion, depreciation and
accretion (4,092,981) (18.16) (993,185) (14.93)
Future income tax provision (589,775) (2.62) (314,323) (4.72)
----------------------------------------------------------------------------
Net earnings 564,623 2.50 607,999 9.14
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Production BOEs BOEs/day BOEs BOEs/day
----------------------------------------------------------------------------
225,307 2,476 66,541 731
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----------------------------------------------------------------------------


----------------------------------------------------------------------------
Financial and Operating Highlights
Six months ended June 30 2007 2006
----------------------------------------------------------------------------
$ $/BOE $ $/BOE
--------------------------------------------
Petroleum and natural gas
revenues 14,975,277 49.33 6,440,109 54.40
Royalties, net of ARTC (4,162,884) (13.71) (2,008,076) (16.96)
Operating costs (2,594,905) (8.55) (519,338) (4.39)
----------------------------------------------------------------------------
Subtotal 8,217,488 27.07 3,912,695 33.05
Other income 36,922 0.12 27,600 0.23
General and administrative (493,903) (1.63) (493,226) (4.17)
Interest and financing expense (144,997) (0.48) - -
----------------------------------------------------------------------------
Funds from operations 7,615,510 25.08 3,447,069 29.11
Stock based compensation (1,060,105) (3.49) (248,413) (2.10)
Depletion, depreciation and
accretion (5,504,508) (18.13) (1,716,584) (14.50)
Future income tax provision (661,828) (2.18) (503,823) (4.25)
----------------------------------------------------------------------------
Net earnings 389,069 1.28 978,249 8.26
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Production BOEs BOEs/day BOEs BOEs/day
----------------------------------------------------------------------------
303,534 1,677 118,395 654
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Production
Three months ended June 30 2007 2006
----------------------------------------------------------------------------
% %
--------------------------------------------
Crude oil (Bbls/d) 1,668 67 700 96
NGLs (Bbls/d) 4 - - -
Natural gas (Mcf/d) 4,824 33 190 4
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BOE/d (6:1) 2,476 100 731 100
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----------------------------------------------------------------------------

Six months ended June 30 2007 2006
----------------------------------------------------------------------------
% %
--------------------------------------------
Crude oil (Bbls/d) 1,121 67 638 98
NGLs (Bbls/d) 7 - - -
Natural gas (Mcf/d) 3,291 33 96 2
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BOE/d (6:1) 1,677 100 654 100
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----------------------------------------------------------------------------


At June 30, 2007 the Company had 30 (net 27.3) wells on production compared to 8 (net 5) at June 30, 2006.

2007 second quarter production came from 26 wells at Killam averaging 2,301 BOE/d for the quarter, 2 wells at Redwater averaging 82 BOE/d, and 2 wells at Nelson providing an average of 93 BOE/d for a total 30 wells and 2,476 BOE/d of production. First quarter 2007 production averaged 869 BOE/d.

Since October 2006 the Company's drilling program at Killam has drilled and cased 25 wells (including 2 re-drills), of which 20 were completed and on production before the end of the second quarter 2007. Effective April 1, 2007 the Company also acquired an additional 5% working interest in one section at Killam which included six wells on production (25 BOE/d) during the first half of 2006 and 2007.



Prices
Three months ended June 30 2007 2006
----------------------------------------------------------------------------
Crude oil ($/Bbl) 51.68 63.40
Natural gas ($/Mcf) 7.28 5.52
NGLs ($/Bbl) 51.75 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Six months ended June 30 2007 2006
----------------------------------------------------------------------------
Crude oil ($/Bbl) 51.76 54.92
Natural gas ($/Mcf) 7.40 5.52
NGLs ($/Bbl) 46.10 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Company's oil production from Killam in central Alberta is a medium gravity crude with a quality similar to 'Hardisty Bow River' for pricing. The Company receives current market prices for its oil and gas, and there are no commodity hedge contracts in place.

Capital Expenditures

97.5% of the capital expenditures for 2007 have been directly related to the Killam field in central Alberta.



Three months ended June 30 2007 2006
----------------------------------------------------------------------------
% %
--------- ----------
Land 134,856 2 3,471 -
Geological and geophysical 25,772 - 8,264 1
Drilling and completion 4,057,845 45 1,644,195 77
Plant and facilities 3,665,370 41 482,623 22
Acquisitions of oil & gas
properties 1,150,221 12 - -
Other assets 9,521 - 7,482 -
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Exploration and Development
Expenditures 9,043,585 100 2,146,035 100
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Six months ended June 30 2007 2006
----------------------------------------------------------------------------
% %
--------- ----------
Land 173,187 1 6,083 -
Geological and geophysical 29,024 - 12,478 1
Drilling and completion 16,987,273 66 4,439,114 76
Plant and facilities 7,564,516 29 1,355,299 23
Acquisitions of oil & gas
properties 1,150,221 4 - -
Other assets 34,113 - 7,482 -
----------------------------------------------------------------------------
Exploration and Development
Expenditures 25,938,334 100 5,820,456 100
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----------------------------------------------------------------------------


Liquidity and Capital Resources

Funds from operations reached $7.6 million for the first six months of 2007, $5.9 million for the second quarter. 20 of the 25 wells drilled in the last nine months were on production for all or a portion of second quarter 2007. Funds from operations are expected to increase significantly from this greater production base.

At June 30, 2007 net working capital deficiency was $15.0 million with available credit facilities of $18 million. The credit facilities were increased from $12 million to $18 million in the second quarter with the interest rate lowered by 0.125% to bank prime plus 0.25%. The Company plans to finance future capital expenditures by using cash flow and available bank credit facilities.



Funding of Capital Program
Three months ended June 30 2007 2006
----------------------------------------------------------------------------
$ $
--------------------------
Issuance of shares (share issue costs) (16,212) 18,000
Funds from operations 5,897,787 2,143,604
Bank indebtedness 11,726,145 -
Change in working capital and other (8,564,135) (15,569)
----------------------------------------------------------------------------
9,043,585 2,146,035
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Six months ended June 30 2007 2006
----------------------------------------------------------------------------
$ $
--------------------------
Issuance of shares, net of costs 231,054 71,946
Funds from operations 7,615,510 3,447,069
Bank indebtedness 14,551,410 -
Change in working capital and other 3,540,360 2,301,441
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25,938,334 5,820,456
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----------------------------------------------------------------------------


-------------------------------------------------------
Six
2007 Per Share First Second Months To
Information Quarter Quarter June 30
-------------------------------------------------------
FINANCIAL $
-------------------------------------------------------
Funds provided by
operations 1,717,723 5,897,787 7,615,510
-------------------------------------------------------
Per share - basic 0.08 0.29 0.37
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Per share - diluted 0.08 0.27 0.35
-------------------------------------------------------
Earnings (loss) (175,554) 564,623 389,069
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Per share - basic (0.01) 0.03 0.02
-------------------------------------------------------
Per share - diluted (0.01) 0.03 0.02
-------------------------------------------------------


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2006 Per Share First Second Third Fourth
Information Quarter Quarter Quarter Quarter Annual
----------------------------------------------------------------------------
FINANCIAL $
----------------------------------------------------------------------------
Funds provided by
operations 1,303,465 2,143,604 2,052,645 1,562,512 7,062,226
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Per share - basic 0.07 0.11 0.11 0.08 0.37
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Per share - diluted 0.06 0.11 0.10 0.08 0.35
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Earnings (loss) 370,250 607,999 739,462 (117,718) 1,599,993
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Per share - basic and
diluted 0.02 0.03 0.04 (0.01) 0.08
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CULANE ENERGY CORP.
Balance Sheets
(unaudited)
----------------------------------------------------------------------------

June 30, December 31,
2007 2006
$ $
--------------------------------
ASSETS

CURRENT
Cash and cash equivalents - 6,827,670
Accounts receivable and prepaid assets 5,454,332 2,662,940
--------------------------------
5,454,332 9,490,610
Property and equipment 37,763,455 16,929,602
--------------------------------
43,217,787 26,420,212
--------------------------------
--------------------------------

LIABILITIES

CURRENT
Accounts payable and accrued liabilities 5,942,502 6,438,421
Bank indebtedness 14,551,410 -
--------------------------------
20,493,912 6,438,421

Asset retirement obligation 793,416 393,388
Future income taxes 878,773 216,945
--------------------------------
22,166,101 7,048,754
--------------------------------
--------------------------------

SHAREHOLDERS' EQUITY

Share capital 19,621,425 19,244,091
Contributed surplus 1,841,067 927,242
Deficit (410,806) (799,875)
--------------------------------
21,051,686 19,371,458
--------------------------------
43,217,787 26,420,212
--------------------------------
--------------------------------


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CULANE ENERGY CORP.
Statements of Operations and Comprehensive Income and Deficit
Three and Six months ended June 30, 2007 and 2006
(unaudited)
----------------------------------------------------------------------------

Three Months Six Months
2007 2006 2007 2006
$ $ $ $
------------------------- -------------------------
REVENUE
Petroleum and natural
gas sales 11,058,546 4,131,814 14,975,277 6,440,109
Royalty expense (3,120,483) (1,385,702) (4,162,884) (2,008,076)
------------------------- -------------------------
7,938,063 2,746,112 10,812,393 4,432,033
Interest 980 680 36,922 27,600
------------------------- -------------------------
7,939,043 2,746,792 10,849,315 4,459,633
------------------------- -------------------------

EXPENSES
Operating 1,666,034 260,225 2,594,905 519,338
General and
administrative 240,200 342,963 493,903 493,226
Stock based compensation 650,408 228,097 1,060,105 248,413
Interest and financing
costs 135,022 - 144,997 -
Accretion 7,867 2,823 15,735 5,646
Depletion and
depreciation 4,085,114 990,362 5,488,773 1,710,938
------------------------- -------------------------
6,784,645 1,824,470 9,798,418 2,977,561
------------------------- -------------------------
Earnings before tax 1,154,398 922,322 1,050,897 1,482,072

Future income tax 589,775 314,323 661,828 503,823
------------------------- -------------------------
Net earnings 564,623 607,999 389,069 978,249

Other comprehensive
income - - - -
------------------------- -------------------------
Comprehensive income 564,623 607,999 389,069 978,249

----------------------------------------------------------------------------

Deficit, beginning of
period (975,429) (2,029,618) (799,875) (2,399,868)

------------------------- -------------------------
Deficit, end of period (410,806) (1,421,619) (410,806) (1,421,619)
------------------------- -------------------------
------------------------- -------------------------

Earnings per share
Basic 0.03 0.03 0.02 0.05
Diluted 0.03 0.03 0.02 0.05


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CULANE ENERGY CORP.
Statements of Cash Flows
Three and six months ended June 30, 2007 and 2006
(unaudited)
----------------------------------------------------------------------------
Three Months Six Months
2007 2006 2007 2006
$ $ $ $
------------------------- -------------------------
CASH FLOWS RELATED TO
THE FOLLOWING ACTIVITIES:

OPERATING
Net earnings 564,623 607,999 389,069 978,249
Adjustments for:
Stock based compensation 650,408 228,097 1,060,105 248,513
Depreciation, depletion
and accretion 4,092,981 993,185 5,504,508 1,716,584
Future income tax 589,775 314,323 661,828 503,823
------------------------- -------------------------
5,897,787 2,143,604 7,615,510 3,447,069
Changes in non-cash
working capital (1,337,317) 100,853 (1,113,476) (490,100)
------------------------- -------------------------
4,560,470 2,244,457 6,502,034 2,956,969
------------------------- -------------------------

FINANCING
Issue of common shares,
net of costs (16,212) 18,000 231,054 71,946
Bank indebtedness 11,726,145 - 14,551,410 -
------------------------- -------------------------
11,709,933 18,000 14,782,464 71,946
------------------------- -------------------------

INVESTING
Additions to property
and equipment (7,893,364) (2,146,035) (24,788,113) (5,820,456)
Changes in non-cash
working capital (7,226,818) 119,578 (2,173,834) (991,532)
------------------------- -------------------------
(16,270,403) (2,026,457) (28,112,168) (6,811,988)
------------------------- -------------------------

Net increase (decrease)
in cash and cash
equivalents - 236,000 (6,827,670) (3,783,073)

Cash and cash
equivalents, beginning
of period - 649,940 6,827,670 4,669,013
------------------------- -------------------------

Cash and cash
equivalents, end of
period - 885,940 - 885,940
------------------------- -------------------------
------------------------- -------------------------

SUPPLEMENTARY INFORMATION
Interest received 980 680 36,922 27,600
Interest and financing
costs paid 135,022 - 144,997 -


RESIGNATION OF OFFICER

Culane Energy announces the resignation of Shivon Crabtree as Vice President of Finance, and CFO. Due to other commitments and responsibilities, Shivon's time available for Culane was becoming increasingly difficult to provide. The Board of Directors would like to thank Shivon for all her hard work and dedication to Culane from its inception.

APPOINTMENT OF OFFICER

Culane Energy is pleased to announce the appointment of Stewart Larsen as Vice President of Finance, and CFO. Stewart is a Certified Management Accountant who brings 29 years of oil and gas industry experience to Culane. Prior to joining Culane, Stewart was a senior officer with a number of junior oil & gas companies.

About Culane Energy Corp.

Culane Energy is a junior oil and gas company engaged in the exploration, development and production of oil and natural gas in Alberta.

ADVISORY: Certain information regarding Culane in this news release including management's assessment of future plans and operations, timing of drilling and tie-in of wells, productive capacity of the new wells, expected production rates, drilling success rates, dates of commencement of production, 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, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhausted. Additional information on these and other factors that could effect Culane's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Culane 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.

Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

20,660,854 Class A Shares

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

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