Daylight Energy Ltd.

Daylight Energy Ltd.

October 18, 2010 07:00 ET

Daylight Energy Provides Production & Operations Update With Continuing Cardium Success, Declares Q4 2010 Dividends and Announces Redemption of Series B, 8.5% Convertible Debentures

CALGARY, ALBERTA--(Marketwire - Oct. 18, 2010) - Daylight Energy Ltd. ("Daylight" or the "Corporation") (TSX:DAY) is pleased to provide an update of our recent production and operational activities, declare a monthly $0.05 per share dividend for Q4 2010 and announce the redemption of our Series B, 8.5% Convertible Unsecured Subordinated Debentures (the "Series B Debentures").

Production & Operations Update

The primary focus of our 2010 drilling program has been the Cardium light oil development in Pembina, where new horizontal and multi-frac completion technologies have brought the largest legacy conventional oil field in Alberta back into the forefront of new light oil development. Daylight spud 11 (10.5 net) Cardium wells since spring break-up, adding to the 9 (8.4 net) wells drilled during Q1 2010. Of the 20 (18.9 net) Cardium wells drilled to date, 18 (16.9 net) are completed and on production with 2 (2.0 net) wells scheduled for completion during Q4 2010. Production data for all of Daylight's 2010 Pembina Cardium wells drilled to date are presented in the following table:

Daylight 2010 Pembina Cardium Results to Date

Average Calendar Day Boe Production Rate Over
Indicated Period (i)
Well 7 day Avg. 15 day Avg. 30 day Avg. 90 day Avg.
Tomahawk 16-28 2,113 1,430 1,059 1,151
Tomahawk 3-14 311 267 217 132
Tomahawk 12-29 135 97 73 46
Brazeau 1-35 356 262 186 113
Tomahawk 16-15 274 203 155 103
Brazeau 3-35 141 112 87 57
Brazeau 13-36 412 352 259 156
Brazeau 1-11 744 621 472 270
Brazeau 8-26 146 119 85 60
Brazeau 5-29 462 348 263
Tomahawk 15-15 138 119 97
Brazeau 16-18 66 57 45
Brazeau 12-36 314 273 212
Tomahawk 13-21 976 791
Brazeau 5-27 117 100
Tomahawk 13-14 295 233
Tomahawk 14-28 112
Brazeau 8-28 403
Average 417 337 247 232

(i) Field estimates post recovery of load fluid. Blank cells indicated that the well has not been on production for the indicated time period and are not included in the calculated average for that column.

Of note for the preceding data:

-- Top producing well Tomahawk 16-28 continues producing with outstanding
-- Tomahawk 13-21 offset well averaged 976 Boe per day in its first 7 days,
Daylight's second best well to date.
-- 247 Boe per day actual average 30 day rate exceeds Daylight's type curve
30 day rate of 200 Boe per day by over 23%.
-- Six of Daylight's nine wells that have been on production for 90 days
have averaged over 100 Boe per day over that time period, with the
Tomahawk 16-28 well averaging 1,151 Boe per day over that period.

Daylight will continue to focus our capital program towards this play, expecting to drill at least 10 additional wells during the remainder of 2010.

Field estimates during Q3 2010 indicate that Daylight achieved production of over 42,000 Boe per day during the quarter with production, drilling, completion and tie-in operations on track to deliver Daylight's 2010 annual guidance of approximately 42,000 Boe per day with a December 2010 exit rate of approximately 45,000 Boe per day. Both annual and December 2010 exit estimates are prior to the impact (if any) of our current non-core Disposition program. Despite unusually wet conditions in many of Daylight's core properties, the Corporation is pleased to announce that 13.7 net wells were spud by Daylight during Q3 2010.

In addition to the above activity Daylight, has been pursuing our well established Deep Basin Core Cadomin resource play gas development in Elmworth and our high liquids natural gas opportunities in our West Central Core area, developing our extensive inventory of Bluesky, Cardium and Wilrich drilling locations. Daylight anticipates releasing our full Q3 2010 financial and operating results after close of trading on Tuesday, November 2, 2010.

Cash Dividends Maintained

Daylight's Q4 dividends are maintained at our existing level of $0.05 per share per month. Details of these dividends are as follows:

Dividend Per
Record Date Ex-Dividend Date Dividend Payment Date Share(i)
October 29, 2010 October 27, 2010 November 15, 2010 $0.05
November 30, 2010 November 26, 2010 December 15, 2010 $0.05
December 31, 2010 December 29, 2010 January 17, 2011 $0.05

(i) The dividend is considered an "eligible dividend" for tax purposes.

Daylight maintains its financial flexibility with bank debt of approximately $330 million drawn against our $650 million credit facility at September 30, 2010.

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).

Redemption of Series B, 8.5% Convertible Debentures

Daylight has also determined to redeem for cancellation all of its Series B, 8.5% Convertible Unsecured Subordinated Debentures (the "Series B Debentures") with a redemption date of November 23, 2010 (the "Redemption Date"). There is an aggregate of $53,197,000 principal amount of Series B Debentures outstanding which have a maturity date of October 31, 2012. In connection with the redemption, Daylight will be required to pay a redemption amount of $1,050 for each $1,000 principal amount of Series B Debentures outstanding, for an aggregate redemption price of $55,856,850 (the "Redemption Price"), plus all accrued and unpaid interest up to but excluding the Redemption Date. In accordance with the terms of the indenture governing the Series B Debentures, Daylight will satisfy the Redemption Price by issuing and delivering to the holders of the Series B Debentures that number of freely tradable common shares of Daylight obtained by dividing the Redemption Price by 95% of the Current Market Price (as such term is defined in the indenture) of the common shares, less any applicable withholdings. No fractional common shares will be delivered but, in lieu thereof Daylight will pay the cash equivalent of such fractional common shares determined on the basis of the Current Market Price of the common shares on the Redemption Date, less any applicable withholdings. All interest accrued and unpaid on the Series B Debentures up to but excluding the Redemption Date will also be paid in cash.

Recommencement of Dividend Reinvestment Plan

Daylight has also determined to recommence the operation of basic dividend reinvestment component ("Basic DRIP") of its Premium Dividend™, Dividend Reinvestment and Optional Common Share Purchase Plan (the "Plan"), under which eligible Canadian-resident shareholders may reinvest the monthly dividends paid by Daylight in additional common shares of Daylight at a 5% discount to the average market price of the common shares (as defined in the Plan). The Premium Dividend™ component and the optional common share purchase components of the Plan will remain suspended at this time. The Basic DRIP component of the Plan will be available beginning with the dividend to be paid by Daylight on or about November 15, 2010 to shareholders of record on October 31, 2010.

Registered shareholders (i.e. a shareholder who has a physical share certificate or similar document issued in their own name) who want to enroll in the Basic DRIP may obtain the required Authorization Form from Valiant Trust Company (the Plan agent) or from Daylight upon request, or at Daylight's website at A registered shareholder who was a participant in the Basic DRIP in effect for Daylight's predecessor, Daylight Resources Trust, prior to its suspension will be deemed to be a participant in the Basic DRIP component of the Plan without any further action on their part. A shareholder who is a beneficial owner of common shares (i.e., a shareholder whose common shares are not registered in their own name but are instead held through a broker, investment dealer, financial institution or other nominee) must contact the broker or other nominee holder through which they hold their common shares to enroll in or confirm their continued participation in the Basic DRIP. In order to participate in the Basic DRIP for the dividends paid on or about November 15, 2010 to shareholders of record on October 31, 2010, proper Authorization Forms or enrolment instructions must be received by Valiant Trust Company no later than 3:00 p.m. (Calgary time) on October 28, 2010.

Daylight is a growing intermediate oil, liquids rich natural gas and resource play natural gas producing company with a high quality suite of diverse assets in Western Canada. Daylight's highly focused team utilizes technical expertise in exploitation, development and acquisitions to create long-term value for shareholders. The Daylight team has developed a multi-year inventory of repeatable, low risk exploitation resource play projects with substantial potential reserve additions on assets owned and controlled in the premier Deep Basin area of Alberta and Northeast British Columbia. Daylight has approximately 204 million Daylight Shares currently outstanding which trade on the Toronto Stock Exchange ("TSX") under the symbol DAY. Daylight Series B, Series C and Series D convertible debentures trade on the TSX under the symbols DAY.DB.B, DAY.DB.C and DAY.DB.D, respectively.

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; anticipated production levels for the balance of 2010; exit production rates for 2010; and expectations regarding future dividends declared and paid on the common shares, expectations regarding the redemption of the Series B Debentures, including the aggregate principal amount thereof outstanding at the redemption date; and recommencement of the Basic DRIP and the anticipated record date and payment date in respect thereof.

The forward-looking statements and information in this press release are based on certain key expectations and assumptions made by Daylight, including 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 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 labour 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 that all third party and regulatory approvals will be obtained for the redemption and delisting of the Series B Debentures and the recommencement of the Basic DRIP. This press release also includes expectations and assumptions concerning Daylight's previously announced intention to dispose of certain non-core assets, including our ability to negotiate acceptable terms of sale; market demand for the assets forming the disposition packages; and the receipt of required regulatory and other third party approvals for such 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 the non-core assets being marketed; Daylight's ability to obtain all third party and regulatory approvals necessary to dispose of such 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 these and other 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 Resources Trust's Annual Information Form for the year ended December 31, 2009 and Daylight Resources Trust's Notice of Annual and Special Meeting and Information Circular and Proxy Statement dated April 7, 2010, each of which may be accessed on Daylight Resources Trust's (the predecessor to Daylight) SEDAR profile at

The forward-looking statements and information 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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