Culane Energy Corp.
TSX VENTURE : CLN

Culane Energy Corp.

February 24, 2009 13:27 ET

Culane Provides 2008 Fourth Quarter Results

CALGARY, ALBERTA--(Marketwire - Feb. 24, 2009) - Culane Energy Corp. ("Culane" or the "Company") (TSX VENTURE:CLN) is pleased to provide the highlights of its 2008 financial results with a spotlight on the fourth quarter. These results are preliminary. Audited financial results for 2008 along with a new reserve report will be released at the end of April 2009, along with an update on any results from the injection of water into the reservoir currently underway at the Company's Killam Field.

2008 Highlights

- Gross revenues were $66.3 million for 2008 compared to $38.8 million for 2007, a 71% increase.

- Production averaged 2,310 BOE/d for 2008 compared to 2,116 BOE/d for 2007, a 9% increase. The fourth quarter production was 1,787 BOE/d with a mix of 74% oil and 26% natural gas.

- Prices for 2008 averaged $89.05 per bbl for oil and $8.63 per Mcf for natural gas compared to 2007 prices of $55.52 per bbl for oil and $6.47 per Mcf of natural gas.

- Cash flow was $36.1 million or $1.57 per share for 2008 compared to $19.4 million or $0.94 per share for 2007, an 86% increase in cash flow and a 67% increase in cash flow per share.

- Earnings were $10.2 million or $0.44 per share for 2008 compared to $1.3 million or $0.07 per share for 2007.

- Fourth quarter production dropped 26% to 1,787 BOE/d from the third quarter production of 2,409 BOE/d largely due to shut-in production pending the resolution of regulatory issues. Oil prices also fell over 50% from the 2nd and 3rd quarter levels of $106 and $108 per barrel respectively, to $50.20 for the fourth quarter. The combined result was cash flow falling to $2.6 million during the fourth quarter, 7% of the total 2008 cash flow.

- A total of 28 wells (net 27.1) were drilled in 2008 (27 in the 2007) resulting in 10 producing multi-leg horizontal oil wells, 5 producing gas wells, 9 suspended or standing cased wells waiting further development, 2 water injection wells, and 2 abandoned wells. Six wells were drilled in the fourth quarter.

- Capital expenditures of $23.3 million were invested in 2008, (97% at Killam) for the drilling and equipping of 28 wells. Another $21.5 million was spent on June 30, 2008 for the acquisition of additional oil and gas properties at Killam.

- On April 3, 2008 the Company issued 2,860,000 class A common shares at $7.00 per share for gross proceeds of $20,020,000.

- Bank debt plus working capital deficit (net debt) at December 31, 2008 is $13.6 million, down from $23.7 million at December 31, 2007. Debt to annualized cash flow is 1.29 to 1 (based on fourth quarter cash flow), while debt to equity is 0.25 to 1.

- The Company has a credit facility of $30 million. The next review is April 30, 2009.



Operations
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Financial and Operating Highlights
Years ended December 31 2008 2007
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(000's) $ $/BOE $ $/BOE
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Petroleum and natural gas
revenues 66,355 78.47 38,771 50.20
Royalties, net of ARTC (17,524) (20.73) (10,735) (13.90)
Operating costs (9,829) (11.62) (6,679) (8.65)
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Subtotal 39,002 46.12 21,357 27.65
Interest income - - 37 0.05
General and administrative (2,177) (2.57) (1,293) (1.67)
Interest and financing expense (738) (0.87) (675) (0.88)
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Funds from operations 36,087 42.68 19,426 25.15
Stock based compensation (1,532) (1.81) (1,906) (2.47)
Depletion, depreciation and
accretion (19,394) (22.94) (15,063) (19.50)
Future income tax provision (4,978) (5.89) (1,118) (1.45)
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Net earnings 10,183 12.04 1,339 1.73
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Production BOEs BOEs/day BOEs BOEs/day
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845,597 2,310 772,284 2,116
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Funds from operations per share
Basic / diluted $1.57/1.54 $0.94/0.91
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Earnings per share
Basic / diluted $0.44/0.43 $0.07/0.06
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Financial and Operating Highlights
Three months ended December 31 2008 2007
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(000's) $ $/BOE $ $/BOE
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Petroleum and natural gas revenues 7,910 48.10 11,870 51.71
Royalties, net of ARTC (1,901) (11.56) (3,429) (14.94)
Operating costs (2,674) (16.26) (2,126) (9.26)
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Subtotal 3,335 20.28 6,314 27.51
Interest income - - - -
General and administrative (589) (3.58) (423) (1.84)
Interest and financing expense (100) (0.61) (300) (1.31)
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Funds from operations 2,646 16.09 5,591 24.36
Stock based compensation (359) (2.18) (329) (1.43)
Depletion, depreciation and accretion (4,335) (26.36) (4,626) (20.15)
Future income tax provision/recovery 344 2.09 (208) (0.92)
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Net earnings (loss) (1,704) (10.36) 428 1.86
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Production BOEs BOEs/day BOEs BOEs/day
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164,439 1,787 229,523 2,495
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Funds from operations per share
Basic / diluted $0.11 / 0.11 $0.27/0.26
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Earnings (loss) per share
Basic / diluted ($0.07) / (0.07) $0.02/0.02
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Production
Years ended December 31 2008 2007
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% %
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Crude oil (bbls/d) 1,633 71 1,438 68
NGLs (bbls/d) 3 - 5 -
Natural gas (Mcf/d) 4,048 29 4,039 32
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BOE/d (6:1) 2,310 100 2,116 100
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Three months ended December 31 2008 2007
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% %
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Crude oil (bbls/d) 1,319 74 1,668 67
NGLs (bbls/d) 2 - 3 -
Natural gas (Mcf/d) 2,801 26 4,943 33
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BOE/d (6:1) 1,787 100 2,495 100
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Production averaged 2,486 BOE/d over the first three quarters of 2008 and then dropped to 1,787 BOE/d during the fourth quarter. The drop was largely due to nine horizontal oil wells shut in at the end of the third quarter pending the resolution of regulatory issues. At December 31, 2008 the Company had 37 horizontal oil wells and 13 (net 10.6) gas wells on production, and 13 shut in wells. This compared to 32 (net 31.5) horizontal oil wells and 7 (net 6.5) gas wells on production at December 31, 2007. During 2008 the Company added 15 producing wells from its drilling program, and acquired a further 7.5 (net) producing wells through the purchase of a competitor's interest at Killam on June 30, 2008.

Ninety-six percent of the Company's production in 2008 came from the Company's Killam field in east central Alberta.

During the fourth quarter the Company had four new horizontal oil wells and one gas well commence production, partially offsetting lost production from the nine wells shut in at the end of the third quarter. Some of the shut in wells will likely be converted to water injectors as part of the Company's water flood scheme being implemented in 2009. At the end of January 2009, two horizontal wells which were shut in earlier in the year were brought back on production.



Prices
Years ended December 31 2008 2007
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Crude oil ($/Bbl) 89.05 55.52
Natural gas ($/Mcf) 8.63 6.47
NGLs ($/Bbl) 83.06 51.07
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Three months ended December 31 2008 2007
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Crude oil ($/Bbl) 50.20 58.58
Natural gas ($/Mcf) 6.79 6.29
NGLs ($/Bbl) 52.09 62.32
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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.

Operating expenses were $11.62/BOE for 2008 compared to $8.65/BOE for 2007, a 34% increase. The cost of fuel, chemicals, supplies and services, parts and maintenance, and trucking have all increased in 2008. In addition, maintenance and minor workovers were required after the first year of operation of the new wells at Killam, while the properties acquired at Killam on June 30, 2008 had higher operating costs compared to the Company's existing Killam wells due to the older equipment and facilities in place. The water cuts (the share of water produced with the oil) have also increased leading to more water hauling and disposal during 2008. The commencement of water injection at the Company's new facilities at Killam North in January 2009, should reduce these costs.

The Company is currently buying back stock under its previously announced normal course issuer bid. To date 498,500 common shares have been acquired and following their return to treasury Culane will have 23,373,854 common shares outstanding.

With the current economic environment, Culane still anticipates being able to fund its 2009 and 2010 capital projects from cash flow.

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 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 and certain assumptions with respect to the foregoing. 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). 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.

23,447,054 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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