Daylight Energy Ltd.

Daylight Energy Ltd.

April 19, 2011 17:16 ET

Daylight Energy Provides Operational Update and Declares Q2 2011 Dividends- Non-Core Asset Sale Success Leads to Capital Budget Increase

CALGARY, ALBERTA--(Marketwire - April 19, 2011) - Daylight Energy Ltd. ("Daylight" or the "Corporation") (TSX:DAY) is pleased to provide an operational update and declare Q2 2011 dividends.


Pembina Cardium Horizontal Oil Program

Daylight continues to have success in our Pembina Cardium drilling as a key component of our 2011 capital program. During Q1 2011, Daylight drilled 11 (9.5 net) wells in Brazeau, Tomahawk and East Pembina out of our currently budgeted 2011 drilling program of 28 wells. During Q1 2011, a total of 10 (8.5 net) wells were placed on production including 4 (3.2 net) drilled in Q4 2010. The 30 day initial production rate for Q4 2010 wells brought on production during Q4 2010 and Q1 2011 is 183 boe per day, consistent with our results in the Pembina Cardium play to date. The remainder of the Q1 2011 drills are expected to be placed on production during Q2 2011, with the exception of one well which will be completed after spring break-up. Extreme weather conditions during the late winter and early spring, including cold temperatures and very high snow accumulations, caused delays in completion and tie-in of several of our Q1 Pembina Cardium wells. Field indications are that spring break-up could be more extensive than normal due to the extremely high volume of snow accumulated in many of Daylight's operating areas, and in particular the Pembina area.

Resource Play Natural Gas

In addition to the Cardium activity detailed above, Daylight has been selectively drilling our extensive inventory of natural gas resource play development opportunities. During Q1 2011, Daylight successfully added production in a wide variety of different resource play gas developments reflecting the depth of inventory in Daylight's portfolio. Of particular note are three new liquids rich vertical Rock Creek gas wells. These 3 (2.3 net) wells in the Pembina area came on production in early Q2 2011 at rates of 3, 7 and 10 MMcf per day with liquids yields in excess of 50 bbls per MMcf. Based on these successful well results, Daylight is planning additional follow-up locations and evaluating potential horizontal development of the Rock Creek in the Pembina area. Daylight has over 70 net sections of Rock Creek rights in the Pembina area.

In our key resource play area of Elmworth, Daylight drilled another highly successful horizontal Cadomin gas well (60% working interest), initially coming on production late in Q1 2011 at over 9 MMcf per day. Also in Elmworth, Daylight drilled a new Nikanassin gas well (100% working interest) with a horizontal length of over 1,000 meters. Geological indications from this well and offset vertical wells indicate a pay thickness in the upper Nikanassin of approximately 90 meters. This well is planned for completion in the second quarter. In Wapiti, Daylight drilled another liquids rich Montney horizontal gas well (50% working interest) during Q1 2011 and this well is scheduled for completion after spring break-up. In our West Central core area, Daylight is pleased to announce a very successful liquids rich Wilrich gas well (47.5% working interest) that came on production during Q1 2011 at over 9 MMcf per day.

As disclosed in Daylight's press release dated March 15, 2011, a third party processing disruption at the K3 gas plant resulted in a significant portion of Daylight's liquids rich natural gas production from its West Central and Wapiti Montney properties being temporarily shut in during Q1 2011 and early Q2 2011. As at the date of this press release, production was beginning to flow to this plant again and we anticipate full recovery of these volumes. Field estimates of Daylight's production volumes for Q1 2011 indicate average daily production of approximately 39,250 boe per day, which is consistent with our previous guidance taking into consideration the third party processing disruption at the K3 gas plant and the impact of the severe weather conditions discussed above. Daylight's current production exceeds 41,000 boe per day with additional production volumes yet to be recovered related to the K3 outage and several new wells scheduled to be brought on stream early in Q2 2011. Daylight's bank debt at March 31, 2011 was approximately $320 million.

Non-Core Asset Sales

Daylight is pleased to announce that the Corporation has executed two separate purchase and sale agreements relating to the disposition of certain non-core assets for gross cash proceeds of approximately $44 million, prior to customary closing adjustments. These non-core assets to be disposed of represent average daily production of approximately 1,600 boe per day (90% natural gas). These transactions are expected to close prior to the end of April 2011. These assets lie outside Daylight's core growth area in the premier Deep Basin area of Alberta and British Columbia and were not considered to be competitive with our other assets for attracting growth capital. Subsequent to the closing of these transactions, over 95% of Daylight's production will be within our Deep Basin core area.

The disposition transactions are subject to customary approvals and other industry standard closing conditions. There is no guarantee that these disposition transactions will be completed. FirstEnergy Capital Corp. has acted as exclusive financial advisor to Daylight with respect to the non-core asset dispositions.

Capital Budget Increase

The dispositions discussed above are a continuation of Daylight's strategic repositioning of our asset portfolio towards growth by monetizing non-core assets and focusing our financial and technical resources on our core growth assets at Pembina, West Central Alberta and Elmworth. The net proceeds from these dispositions will be utilized to fund an increase in Daylight's capital budget for 2011 to $300 million. Details of the impact on Daylight's guidance from this budget increase, the asset dispositions, and the production disruptions discussed above will be provided in conjunction with the release of our Q1 2011 results in May 2011.


Daylight maintains a Q2 2011 cash dividend to shareholders of Cdn$0.05 per share per month as follows:

Record Date     Ex-Dividend Date   Dividend Payment Date  Dividend Per Share
April 29, 2011    April 27, 2011            May 16, 2011            Cdn$0.05
May 31, 2011        May 27, 2011           June 15, 2011            Cdn$0.05
June 30, 2011      June 28, 2011           July 15, 2011            Cdn$0.05
(i) The dividend is considered an "eligible dividend" for tax purposes.     

Daylight expects to pay a sustainable dividend on a monthly basis, provided however that any decision to pay dividends on the common shares will be made by the Board of Directors on the basis of Daylight's funds from operations, earnings, financial requirements, commodity price levels, legal requirements and other conditions existing at such future times. Daylight currently intends to designate all dividends to be "eligible dividends" for the purposes of the Income Tax Act (Canada) such that shareholders who are individuals will benefit from the enhanced gross-up and dividend tax credit mechanism under the Income Tax Act (Canada).

Daylight is a growing intermediate oil and natural gas producing company with a high quality suite of resource play assets in Western Canada. Our highly focused team utilizes our technical expertise in exploitation, development and acquisitions to create long-term value for our shareholders. Our team has developed a multi-year inventory of repeatable, low risk exploitation resource play projects with substantial potential reserve additions on assets we currently own and control in the premier Pembina Cardium light oil fairway and in the premier Deep Basin area of Alberta and British Columbia.

Daylight has approximately 212 million common shares outstanding which trade on the TSX under the symbol DAY. Daylight Series C and D convertible debentures trade on the TSX under the symbols DAY.DB.C and DAY.DB.D, respectively.

Daylight's 2011 Annual General Meeting will be held on May 18, 2011 at 9:00 a.m. at the Sun Life Plaza Conference Centre.

An updated corporate presentation is available on Daylight's website at


Forward-Looking Information and Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward-looking statements and information concerning: Daylight's 2011 capital program, including allocation of expenditures associated therewith; payment of Q2 2011 dividends and future dividends declared and payable on the common shares; the anticipated record date and payment date in respect of Q2 2011 dividends; anticipated timing of drilling, completion and tie-in of additional wells, and in particular the Corporation's wells drilled during Q1 2011; additional production volumes related to the K3 gas plant outage and expected to be brought on stream early in Q2 2011; anticipated disposition of additional non-core assets during Q2 2011; estimated initial production rates; estimated liquids volumes associated with Daylight's natural gas resource play drilling opportunities; and field estimates regarding Q1 2011 production volumes.

The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by Daylight, including but not limited to expectations and assumptions concerning: prevailing and future commodity prices and exchange rates; applicable royalty rates and tax laws; future production rates; the performance of existing and future wells; application of existing technologies and future advancements in technology to Daylight's operations and drilling activities; the success obtained in drilling new wells; the inventory of new drilling locations; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labor and services, including but not limited to completion equipment and services; adequate weather and environmental conditions for drilling and completion activities, including transportation of associated equipment; the receipt, in a timely manner, of regulatory and third party approvals; and the receipt of required regulatory and other third party approvals in connection with non-core asset dispositions.

Although Daylight believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Daylight can give no assurance that they will prove to be correct. There is no representation by Daylight that actual results achieved during the periods identified in this press release will be the same in whole or in part as those forecast.

Since forward-looking statements and information 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 risks associated with the oil and gas industry in general such as: 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 and resource (including original oil in place) estimates; the uncertainty of estimates and projections relating to production, costs and expenses; health, safety and environmental risks; risks associated with weather and the impact on drilling and completion activities and the transportation of associated equipment; commodity price and exchange rate fluctuations; marketing and transportation of petroleum and natural gas and loss of markets; environmental risks; competition; risks associated with utilizing existing technologies and future technological advancements in Daylight's operations and drilling activities; failure to realize the anticipated benefits of acquisitions; risks regarding the integration of acquired entities and assets; incorrect assessment of the values of acquisitions; Daylight's ability to negotiate acceptable terms for non-core assets; Daylight's ability to obtain all third party and regulatory approvals necessary to dispose of such non-core assets; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other third party approvals; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive. Additional information on the factors that could affect the business, operations or financial results of Daylight are included in reports on file with applicable securities regulatory authorities, including but not limited to Daylight's Annual Information Form for the year ended December 31, 2010 and Management's Discussion and Analysis for the year ended December 31, 2010, each of which may be accessed on Daylight's SEDAR profile at or on our website at

The forward-looking statements contained in this press release are made as of the date hereof and Daylight 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.

Barrels of Oil Equivalent

"Boe" or "barrel of oil equivalent" means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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