Cyries Energy Inc.

Cyries Energy Inc.

March 03, 2005 09:30 ET

Cyries Energy Inc. Releases 2004 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CYRIES ENERGY INC.

TSX SYMBOL: CYS

MARCH 3, 2005 - 09:30 ET

Cyries Energy Inc. Releases 2004 Results

CALGARY, ALBERTA--(CCNMatthews - March 3, 2005) - Cyries Energy Inc.
("Cyries") announces today that it has filed its audited financial
statements and related management's discussion and analysis for the
period July 2, 2004, the date Cyries commenced operations, to December
31, 2004 on www.sedar.com. Certain selected operational and financial
information for the period from July 2, 2004 to December 31, 2004 is set
out below and should be read in conjunction with Cyries' audited
financial statements and related MD&A.



Financial Highlights

---------------------------------------------------------------------
Quarter ended Period ended
December 31, 2004 December 31, 2004
---------------------------------------------------------------------

Petroleum and natural gas sales 6,834 11,352

Net earnings 1,171 1,551
Per share basic 0.05 0.07
Per share diluted 0.04 0.06

Cash flow from operations 3,783 5,951
Per share basic 0.16 0.25
Per share diluted 0.14 0.22

Capital expenditures 16,670 32,558

Bank debt and working
capital deficiency 9,313 9,313

Weighted average shares outstanding
Basic 24,218 23,646
Diluted 27,756 27,082

Average Sales Price
Oil $/bbl 52.05 51.28
Natural gas $/mcf 7.19 7.06
NGL $/bbl 42.62 43.11
---------------------------------------------------------------------
Total $/boe 45.19 44.69

Average Daily Production
Oil bbl 382 358
Natural gas mcf 7,041 5,830
NGL bbl 88 66
---------------------------------------------------------------------
Total boe 1,644 1,396

Production expenses $/boe 7.11 6.94

Operating netback $/boe 28.34 27.04

Undeveloped land gross 70,803
net 49,876

Farm-in acreage net acres 53,512
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CHAIRMAN'S MESSAGE

2004 Results

- Production increased over 100 percent from roughly 1,000 boe per day
in July to over 2,000 boe per day at the end of the year. Fourth quarter
production averaged 1,644 boe per day an increase of 44% from the third
quarter.

- The drilling program resulted in 17 gross wells (12.9 net) drilled at
a 100 percent success rate.

- Only 9 of the 17 wells were tied-in by year-end, with the remainder to
be tied-in during the first quarter of 2005.

- Based on Cyries' drilling success, the drilling program was
accelerated in 2005. An additional drilling rig was added in January and
three rigs are currently operating.

- Since year-end 11 more wells have been drilled, with 100% success. The
majority of these new wells will be tied in by March 31, 2005.

- Capital spending for the period July 2, 2004 to December 31, 2004 was
$32.6 million, substantially all related to the drilling program. The
forecast capital program for 2005 was increased in January, 2005 to $55
million.

- Year-end proved reserves increased 122% to 4.5 million boe from 2.0
million at the beginning of the period. Likewise, proved plus probable
reserves increased 120% to 5.7 million boe compared to 2.6 million boe.
Gilbert Laustsen Jung Associates Ltd. ("GLJ"), an independent qualified
reserves evaluation firm, evaluated 100% of the company's reserves.

- Finding, development and acquisition costs related to the 2004 capital
program, including the increase in future development costs, were $12.27
per proved boe and $9.84 per proved plus probable.

2005 Outlook

Concurrent with a $20 million equity issue at $8.20 per share in
January, Cyries announced an increase in its capital expenditure program
for 2005 to $55 million. The capital program is expected to fund the
drilling of 30-35 wells in 2005. Cyries is off to a strong start and
currently expects to drill 15 wells in the first quarter.

Exploration will continue to be focused in the Deep Basin of northwest
Alberta. Cyries has been successful at acquiring additional land in this
area through both Crown land sales and through various farm-in
arrangements. The company's existing land position and inventory of
drilling locations is sufficient to sustain the drilling program through
2005 and into 2006.

Cyries reported strong operating netbacks of $27.04 per boe in 2004,
primarily as a result of high oil and natural gas prices. Cyries has a
higher netback in comparison to the industry average due to the
high-energy content of the Company's natural gas production combined
with a low operating cost structure. Netbacks are currently expected to
improve further in 2005 as a result of lower operating costs per boe.
Cyries currently believes that its operating costs could improve by up
to $0.75 per boe as a result of higher production volumes.

Cyries will continue to pursue multi-zone gas weighted drilling
opportunities in the Deep Basin area of Alberta. We feel the company has
a competitive advantage in this area due to its technical knowledge,
land position and experience in the area. While this is a very
competitive area of the basin, it does continue to provide superior
returns for the company.

RESERVES

The corporate reserve estimates, dated January 1, 2005 were prepared by
the independent engineering firm of GLJ in accordance with the
definitions set out under National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities ("NI 51-101"). GLJ evaluated 100%
of Cyries' reserves. Total proved reserves as at December 31, 2004 were
4.5 million barrels of oil equivalent and proved plus probable reserves
were 5.7 million barrels of oil equivalent. Reserve information may not
add due to rounding.



Summary of Oil and Gas Reserves
Based on Forecast Prices and Costs

Light and
Medium Oil Heavy Oil Natural Gas
----------- ----------- --------------
Gross Net Gross Net Gross Net
(mbbl)(mbbl) (mbbl)(mbbl) (mmcf) (mmcf)
----------- ----------- --------------
Proved Developed Producing 561 490 47 40 14,324 10,749
Proved Developed Non-Producing 159 123 - - 4,812 3,167
Proved Undeveloped 89 82 - - 451 338
----------- ----------- --------------
Total Proved 809 695 47 40 19,587 14,254
Total Probable 218 191 20 17 5,348 3,930
----------- ----------- --------------
Total Proved Plus Probable 1,027 886 66 57 24,935 18,184
----------- ----------- --------------
----------- ----------- --------------


Natural Gas
Liquids BOE
------------ -----------
Gross Net Gross Net
(mbbl) (mbbl) (boe) (boe)

Proved Developed Producing 330 224 3,325 2,546
Proved Developed Non-Producing 60 39 1,021 690
Proved Undeveloped 2 1 166 140
------------ -----------
Total Proved 392 265 4,512 3,376
Total Probable 104 72 1,232 934
------------ -----------
Total Proved Plus Probable 495 336 5,744 4,310
------------ -----------
------------ -----------


Summary of Oil and Gas Reserves
Based on Constant Prices and Costs

Light and
Medium Oil Heavy Oil Natural Gas
----------- ----------- --------------
Gross Net Gross Net Gross Net
(mbbl)(mbbl) (mbbl)(mbbl) (mmcf) (mmcf)
----------- ----------- --------------
Proved Developed Producing 585 511 47 41 14,451 10,844
Proved Developed Non-Producing 163 125 - - 4,823 3,174
Proved Undeveloped 90 83 - - 453 339
----------- ----------- --------------
Total Proved 838 719 47 41 19,726 14,357
Total Probable 226 197 20 19 5,421 3,984
----------- ----------- --------------
Total Proved Plus Probable 1,064 916 68 60 25,148 18,341
----------- ----------- --------------
----------- ----------- --------------


Natural Gas
Liquids BOE
------------ -----------
Gross Net Gross Net
(mbbl) (mbbl) (boe) (boe)

Proved Developed Producing 332 225 3,371 2,584
Proved Developed Non-Producing 60 39 1,027 693
Proved Undeveloped 2 1 168 141
------------ -----------
Total Proved 394 266 4,566 3,418
Total Probable 105 72 1,256 952
------------ -----------
Total Proved Plus Probable 499 338 5,822 4,370
------------ -----------
------------ -----------


Net Present Value of Reserves

Cyries' crude oil, natural gas and natural gas liquids reserves were
evaluated using GLJ's product price forecasts effective January 1, 2005
prior to the provision for income taxes, interest, debt service charges
and general and administrative expenses. The actual oil and natural gas
reserves and future production will be greater than or less than the
estimates provided in this press release. The estimated future net
revenue from the production of the disclosed oil and natural gas
reserves does not represent the fair market value of these reserves.
Cyries has adopted the standard of 6 mcf:1 boe when converting natural
gas to barrels of oil equivalent. Boes may be misleading, particularly
if used in isolation. A boe conversion ratio of 6 mcf:1 boe is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.



Net Present Values Based on Forecast Prices and Costs

Before Deducting Income Taxes
Discounted At
---------------------------------------
0% 5% 10% 15% 20%
(MM) (MM) (MM) (MM) (MM)
------- ------ ------ ------ ------
Proved Developed Producing 70,722 57,504 49,277 43,575 39,339
Proved Developed Non-Producing 19,223 16,635 14,443 12,726 11,381
Proved Undeveloped 3,856 3,274 2,829 2,482 2,205
------- ------ ------ ------ ------
Total Proved 93,800 77,413 66,549 58,783 52,924
Total Probable 27,218 18,306 13,569 10,693 8,780
------- ------ ------ ------ ------
Total Proved Plus Probable 121,019 95,718 80,118 69,476 61,704
------- ------ ------ ------ ------
------- ------ ------ ------ ------


After Deducting Income Taxes
Discounted At
---------------------------------------
0% 5% 10% 15% 20%
(MM) (MM) (MM) (MM) (MM)
------- ------ ------ ------ ------
Proved Developed Producing 67,983 54,647 46,541 41,001 36,923
Proved Developed Non-Producing - - - - -
Proved Undeveloped - - - - -
------- ------ ------ ------ ------
Total Proved 82,863 67,385 57,467 50,513 45,329
Total Probable - - - - -
------- ------ ------ ------ ------
Total Proved Plus Probable 101,090 79,511 66,407 57,530 51,071
------- ------ ------ ------ ------
------- ------ ------ ------ ------


Net Present Values Based on Constant Prices and Costs

Before Deducting Income Taxes
Discounted At
---------------------------------------
0% 5% 10% 15% 20%
(MM) (MM) (MM) (MM) (MM)
------- ------ ------ ------ ------
Proved Developed Producing 80,244 64,442 54,591 47,790 42,770
Proved Developed Non-Producing 22,373 18,945 16,234 14,166 12,570
Proved Undeveloped 4,425 3,689 3,137 2,714 2,381
------- ------ ------ ------ ------
Total Proved 107,042 87,076 73,963 64,670 57,721
Total Probable 31,250 21,024 15,519 12,152 9,910
------- ------ ------ ------ ------
Total Proved Plus Probable 138,293 108,100 89,481 76,822 67,631
------- ------ ------ ------ ------
------- ------ ------ ------ ------


After Deducting Income Taxes
Discounted At
---------------------------------------
0% 5% 10% 15% 20%
(MM) (MM) (MM) (MM) (MM)
------- ------ ------ ------ ------

Proved Developed Producing 74,374 59,291 50,088 43,808 39,204
Proved Developed Non-Producing - - - - -
Proved Undeveloped - - - - -
------- ------ ------ ------ ------
Total Proved 91,731 73,805 62,378 54,406 48,497
Total Probable - - - - -
------- ------ ------ ------ ------
Total Proved Plus Probable 112,556 87,719 72,606 62,387 54,985
------- ------ ------ ------ ------
------- ------ ------ ------ ------


Reconciliation of Reserves by Principal Product Type Based on Forecast
Prices and Costs

Light and Medium Oil Heavy Oil
------------------------ ------------------------
Net Net
Proved Proved
Net Net Plus Net Net Plus
Proved Probable Probable Proved Probable Probable
(mbbl) (mbbl) (mbbl) (mbbl) (mbbl) (mbbl)
------ -------- -------- ------ -------- --------
At June 30, 2004 248 48 296 47 20 67
------ -------- -------- ------ -------- --------
Extensions 305 66 371 - - -
Improved Recovery 85 53 138 26 8 34
Technical Revisions 89 22 111 (30) (11) (41)
Discoveries - - - - - -
Acquisitions - - - - - -
Dispositions - - - -
Economic Factors 13 2 15 6 - 6
Production (45) - (45) (9) - (9)
------ -------- -------- ------ -------- --------
At December 31, 2004 695 191 886 40 17 57
------ -------- -------- ------ -------- --------
------ -------- -------- ------ -------- --------


Conventional Natural Gas Natural Gas Liquids
------------------------ ------------------------
Net Net
Proved Proved
Net Net Plus Net Net Plus
Proved Probable Probable Proved Probable Probable
(mbbl) (mbbl) (mbbl) (mbbl) (mbbl) (mbbl)
------ -------- -------- ------ -------- --------
At June 30, 2004 7,393 2,123 9,516 48 14 62
------ -------- -------- ------ -------- --------
Extensions 6,073 1,329 7,402 174 31 205
Improved Recovery 1,443 620 2,063 18 17 35
Technical Revisions (2,041) (891) (2,932) 6 - 6
Discoveries 1,892 645 2,537 16 5 21
Acquisitions 259 94 353 12 5 17
Dispositions - - - - - -
Economic Factors 31 10 41 - (1) (1)
Production (796) - (796) (9) - (9)
------ -------- -------- ------ -------- --------
At December 31, 2004 14,254 3,930 18,184 265 71 336
------ -------- -------- ------ -------- --------
------ -------- -------- ------ -------- --------


The January 1, 2005 pricing forecasts presented below apply to the
Company. The information therein has been prepared by GLJ. These prices
have been utilized in determining the reserves and net present values
noted above.



GLJ January 1, 2005 Price Forecast

----------------------------------------------------------------------
WTI
Crude Edmonton
Oil Light Natural
Cushing Crude Gas at Inflation $US/$Cdn
Oklahoma Oil AECO-C Rate Exchange
Year ($US/bbl) ($Cdn/bbl)($Cdn/mmbtu) (%/year) Rate
----------------------------------------------------------------------
2005 42.00 50.25 6.60 2.0 0.82
2006 40.00 47.75 6.35 2.0 0.82
2007 38.00 45.50 6.15 2.0 0.82
2008 36.00 43.25 6.00 2.0 0.82
2009 34.00 40.75 6.00 2.0 0.82
2010 33.00 39.50 6.00 2.0 0.82
2011 33.00 39.50 6.00 2.0 0.82
2012 33.00 39.50 6.00 2.0 0.82
2013 33.50 40.00 6.10 2.0 0.82
2014 34.00 40.75 6.20 2.0 0.82
2015 34.50 41.25 6.30 2.0 0.82
Thereafter +2.0%/yr +2.0%/yr +2.0%/yr 2.0 0.82
----------------------------------------------------------------------
----------------------------------------------------------------------


Finding and development costs

The 2004 exploration and drilling program resulted in total proved
reserve additions of 2.75 million boe and 3.43 million boe on a proved
plus probable basis. As a result, finding and development costs related
to the 2004 capital program, including the increase in future
development costs, were $12.27 per proven boe and $9.84 per proven plus
probable. The calculation of the Company's finding, development are
noted in the table below.



Finding,
Exploration Change in Development
and Future and
Development Development Total Reserve Acquisition
(000's) Costs Costs Costs Additions Costs
---------------------------------------------------------------------
Proved 32,558 1,180 33,738 2,750 12.27
Proved
plus probable 32,558 1,180 33,738 3,430 9.84
---------------------------------------------------------------------
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As referred to above, Cyries' audited financial statements and related
MD&A for the period July 2, 2004, the date Cyries commenced operations,
to December 31, 2004 can be located at www.sedar.com or www.cyries.com.
To the extent investors do not have access to the internet, copies of
the audited financials and related MD&A can be obtained on request
without charge by contacting Cyries at (403) 262-9609 at 3200, 500 - 4th
Avenue S.W., Calgary, Alberta T2P 2V6.

CONFERENCE CALL

A conference call is scheduled to review the results of Cyries for 2004
and update 2005 on Thursday, March 3, 2005 at 9:00 am (mt), 11:00 am
(et). The conference call can be accessed by dialing in 15 minutes prior
to the scheduled start at 1-800-772-8997 or 1-416-695-9712. A live
webcast will also be provided on: www.cyries.com. A playback recording
of the conference call will be available for 7 days and can be accessed
by calling 1-888-509-0082 or 1-416-695-5275.

ANNUAL MEETING

Cyries' Annual Meeting is scheduled for 3:00 p.m. on Thursday May 16,
2005 in the McMurray Room at the Calgary Petroleum Club, 319 - 5th
Avenue S.W., Calgary Alberta.

FORWARD LOOKING STATEMENTS

Certain information regarding Cyries set forth in this document,
including management's assessment of Cyries' future plans and
operations, contain forward looking statements that involve substantial
known and unknown risks and uncertainties. These forward looking
statements are subject to numerous risks and uncertainties, certain of
which are beyond Cyries' control, including the impact of general
economic conditions, industry conditions, volatility of commodity
prices, currency fluctuations, imprecision of reserve estimates,
environmental risks, taxation policies, competition from other
producers, the lack of availability of qualified personnel or
management, stock market volatility and the ability to access sufficient
capital from internal or external sources. Cyries' actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward looking statements and, accordingly, no
assurance can be given that any of events anticipated by the forward
looking statements will transpire or occur, or if any of them do so,
what benefits that Cyries will derive therefrom. Cyries Energy Inc. is a
publicly traded Canadian energy company involved in the exploration,
development and production of natural gas and crude oil in western
Canada.

This news release shall not constitute an offer to sell or the
solicitation of any offer to buy securities in any jurisdiction. The
Cyries Energy Inc. common shares have not been nor will be registered
under the United States Securities Act of 1933, and they may not be
offered or sold in the United States absent registration or an exemption
from registration.

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Cyries Energy Inc.
    Donald F. Archibald
    Chairman & C.E.O.
    (403) 262-9609
    The Toronto Stock Exchange does not accept responsibility for the
    adequacy or accuracy of this release.