Culane Energy Corp.

Culane Energy Corp.

November 27, 2009 16:21 ET

Culane Energy Releases 2009 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 27, 2009) - Culane Energy Corp. (TSX VENTURE:CLN) ("Culane" or the "Company") announces its financial and operating results for the third quarter ended September 30, 2009. The unaudited Financial Statements and related Management's Discussion and Analysis have been filed with Canadian securities regulatory authorities on SEDAR at and posted on the Company's website at

2009 2008 2009 2008

1,229 2,409 Daily production - BOE 1,470 2,486
25.12 55.52 Net Back per BOE 24.52 52.36

2,327 11,653 Cash flow - ($000's) 8,079 33,440
0.10 0.49 Cash flow per share (basic) 0.35 1.47

(1,211) 3,613 Earnings (loss) - ($000's) (4,464) 11,887

- 4 Wells drilled 4 22
4,320 3,529 Capital expenditures - ($000's) 8,138 17,434
- 164 Acquisitions - ($000's) - 21,543
- - Dispositions - ($000's) (408) -


Working Capital (deficit) - ($000's) 370 (1,373)

Bank debt - ($000's) (11,049) (8,979)

Net debt - ($000's) (10,679) (10,352)

Basic shares outstanding 24,519,754 23,872,354

(per share information stated below is based on weighted average - basic
outstanding shares)

- In early 2009, the Company began injecting water at its Killam North water-flood pilot project and drilled four additional injection wells. In mid November of 2009, the Company received regulatory approval to commence its full field water-flood program. The water-flood facilities were completed during the third quarter and the full field water-flood has commenced.

- Production averaged 1,470 BOE/d for the first three quarters of 2009 compared to 2,486 BOE/d for the same period in 2008, a 41% decline. (Q3/09 - 1,229, Q3/08 - 2,409). Production mix for 2009 is 72% oil and 28% natural gas, of which 96% is from the Company's Killam oilfield in east central Alberta.

- Prices for 2009 averaged $55.31 per bbl for oil and $3.98 per Mcf for natural gas compared to 2008 prices of $98.95 per bbl for oil and $9.02 per Mcf of natural gas. Net backs were $24.52 per BOE for 2009 and $52.36 per BOE for 2008, a 53% reduction.

- Gross revenues were $18.8 million for 2009 (Q3 - $5.8, Q2 - $6.8, Q1 - $6.2) compared to $58.4 million for the first three quarters of 2008, a 68% decrease. This was due to a 41% decrease in the Company's production for 2009 compared to the first three quarters of 2008, and a 45% decrease in the average commodity prices received in the two comparative periods.

- Cash flow for 2009 was $8.1 million, or $0.35 per share, compared to $33.4 million for the first three quarters of 2008, or $1.47 per share, a 76% decrease in per share cash flow. (Q3/09 - $2.3 (0.10/share), Q2/09 - $3.0 (0.13/share), Q1/09 - $2.7 (0.12/share)).

- The Company recorded a loss of $4.5 million for 2009, or $0.19 per share, compared to earnings of $11.9 million, or $0.52 per share in the first three quarters of 2008. The Company recorded depletion costs of $13.4 million for the first nine months of 2009 and $15 million for the same period in 2008.

- Capital expenditures of $8.1 million were invested in 2009 ($5.2 on water-flood facilities, related pipelines, and injection wells at Killam, $1.9 on undeveloped lands and seismic costs in a new area of exploration, and $1.0 of additional development costs at Killam).

- Net debt (bank debt less working capital) at September 30, 2009 was $10.7 million compared to $13.2 million at December 31, 2008 and $10.4 million at September 30, 2008. Debt to annualized cash flow is 1.15 to 1 (based on third quarter cash flow), while debt to equity is 0.21 to 1.

- The Company was drawn to $11 million on its primary credit facility of $27 million at September 30, 2009.

- Earlier in the year, the Company purchased and returned to treasury, 723,500 common shares of Culane at an average price of $0.99 per share, through the Normal Course Issuer Bid process.

- On September 29, 2009 the Company issued 1,397,000 flow-through common shares at $2.15 per share for gross proceeds of $3 million. There are 24,519,754 common shares outstanding at September 30, 2009 and November 26, 2009 (26,139,754 fully diluted).

During the third quarter of 2009, Culane continued its focus on government regulatory issues, reservoir engineering and water flood injection facility construction for the Killam oil pools. On the regulatory front, Culane received the required regulatory approvals in the second week of November for four separate Killam water flood applications submitted by Culane earlier this year. Culane commenced construction of its water injection facilities mid July. Construction of the water injection facilities, including pipelines, was completed on October 3rd, 2009. This central injection facility will service all Culane lands in the Killam area. This construction project remained on schedule and came in under budget by $225,000. The total budgeted cost of the water injection facilities was approximately $2.9 million.

With the completion of the water injection facilities and government approval of its water flood applications, Culane is in the process of increasing its water injection rates from approximately 1,250 up to 6,000 barrels per day, essentially recharging the Killam Lloydminster formation reservoir by increasing the reservoir pressure and subsequently reversing the oil production decline that occurred during the primary production phase of the reservoir. Since the beginning of 2009, Culane has injected in excess of 300,000 barrels of water back into two Lloydminster formation disposal wells located in Section 16. Culane has been closely monitoring the wells in section 16 since it started injecting the water and has seen a reduction of solution gas that is produced with the oil and an increase in the fluid levels in the majority of wells in this section. These are clear positive responses to the injection of water into the reservoir indicating that the water flood is beginning to increase pressure in the reservoir. Now that Culane has received its government approvals, Culane will increase the number of injection wells from 2 to 14. The injector wells have all been drilled and are a combination of both vertical and converted horizontal wells.

The next stage of development of the Killam water flood will be the addition of the surfactant polymer mixing skids to the water injection facility. The viscosity of Killam oil is approximately 20 centipoise. The viscosity of water is 1 centipoise. By adding a surfactant with an additive (to prevent adsorption of the surfactant to the rock), the viscosity of the oil can be lowered to around 15 centipoise (essentially making the oil lighter). By introducing minor amounts of polymer to the water the viscosity of the water can be increased to 3 centipoise. Existing pool analogies indicate that this combination added to the water flood can increase oil recoveries in excess of 40%. The "Discovered Petroleum Initially-in-place" at Killam net to Culane is estimated at approximately 42 million barrels of 24 API oil. Culane plans to implement the addition of surfactant polymer within six to eight months depending on pressure build ups in the reservoir. Culane views the Killam project as a solid low risk growing production base that along with rising oil prices will not only help to fund, but accelerate the next stage of growth for the Company.

In January of 2009, Culane commenced an active full cycle oil exploration initiative in Saskatchewan. Culane identified a window of opportunity created by the world economic collapse and decided to position itself in Saskatchewan for its next stage of organic growth through the drill bit. All of the drilling success Culane enjoys today has been generated in house by Culane's exploration and development team. On September 29, 2009 the Company issued 1,397,000 flow-through common shares at $2.15 per share for gross proceeds of $3 million. The proceeds of this financing will be used to initially fund Culane's new horizontal oil well exploration initiative in Saskatchewan. Horizontal drilling locations have been selected, surface leases are being acquired and surveying has commenced. The wells will then be licensed and drilling is expected to commence in January.

Production for the first three quarters of 2009 averaged 1,470 BOE/d with a mix of 72% oil and 28% natural gas. Gross revenues were $18.8 million for the first three quarters of 2009 with cash flow of $8.1 million for the first three quarters of 2009. Bank debt less working capital at September 30, 2009 was $10.7 million. Debt to annualized cash flow is 1.15 to 1 (based on annualized third quarter cash flow) while debt to equity is 0.21 to 1. The Company has a primary credit facility of $27 million and a $3 million development/acquisition facility currently in place. There are 24,519,754 common shares outstanding at September 30, 2009.

Culane has weathered the economic storm favourably within its peer group over the past year. Culane is fortunate that it is essentially an oil story. The Company has followed strict financial controls, not only over the past year but since its inception. With the full implementation of the water flood at Killam, Culane expects to see a reversal of production declines and a return to much higher oil production rates. The advantage to Culane shareholders is that the Killam assets generate oil revenues that have allowed Culane to reduce its debt, and take advantage of the economic downturn by expanding into other oil prone areas through its ongoing exploration program. This will effectively increase shareholder value now and in the near future. Culane will continue to exploit in-house developed, high working interest oil opportunities, and grow the Company mainly through the drill bit as it has done since its inception.

Culane is a healthy junior oil company with a solid oil production base and well established recoverable oil reserves. The Company has both the financial and technical capability to continue its growth from a small junior oil company into a medium size oil company during this next cycle of high oil prices, which Culane feels has already begun. Going forward, Culane anticipates that rising oil production rates out of Killam coinciding with increasing oil prices, will allow the Company to fund its future growth in new oil prone areas.

About Culane Energy Corp.

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


This press release contains forward-looking statements. More particularly, this press release contains statements concerning anticipated results from the Company water flood program, oil recoverability, and anticipated exploration activities. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Culane. Although Culane believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Culane can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Culane' Annual Information Form which has been filed on SEDAR and can be accessed at

The forward-looking statements contained in this document are made as of the date hereof and Culane undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

24,519,754 Common Shares


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