DeeThree Exploration Ltd.

DeeThree Exploration Ltd.

March 31, 2010 19:46 ET

DeeThree Reports 2009 Financial Results and Announces Filing of Its 2009 Year End Disclosure Documents

CALGARY, ALBERTA--(Marketwire - March 31, 2010) -


DeeThree Exploration Ltd. ("DeeThree" or the "Company") (TSX VENTURE:DTX) is pleased to release its financial and operational results for the year ended December 31, 2009. DeeThree has filed its audited consolidated financial statements for the year ended December 31, 2009 and related management's discussion and analysis with Canadian securities regulatory authorities. In addition, DeeThree has filed its Annual Information Form which includes DeeThree's statement of reserves data and other oil and gas information for the year ended December 31, 2009 as mandated by National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. DeeThree's materials may be viewed in their entirety on

Financial and Operational Accomplishments
During 2009, DeeThree achieved numerous financial and operating milestones, posting record year-over-year results that included:

  • Increasing oil and gas revenues 204% to $5.0 million.
  • Improving funds from operations 203% to $1.1 million or $0.08 per diluted share.
  • Growing average production 417% to 558 boe/d and exiting the year at 700 boe/d, with an additional 350 boe/d of production awaiting tie-in.
  • Drilling 10 gross (10.0 net) wells for an overall success rate of 80%.
  • Increasing proved reserves 80% to 1.7 mmboe and proved plus probable reserves 75% to 2.1 mmboe.
  • Achieving top decile finding and development costs of $9.71/boe proved and $8.63/boe proved plus probable.
  • Attaining a recycle ratio of 1.2 times proved and 1.4 times proved plus probable, with a netback of $11.96/boe and a 97% exposure to natural gas.
Years Ended December 31, 2009   2008   Change  
(000s, except per share amounts) ($ ) ($ ) (% )
Oil and gas revenues 5,018   1,649   204  
Funds from operations (1) 1,112   367   203  
  Per share – basic and diluted 0.08   0.03   167  
Net loss 2,837   435   552  
  Per share – basic and diluted 0.21   0.03   600  
Capital expenditures 8,778   18,773   (53 )
Working capital (deficiency) 375   (2,710 ) 114  
Shareholders' equity 24,674   16,676   48  
(000s) (# ) (# ) (% )
Share Data (2)            
At year-end 15,518   12,965   20  
Weighted average            
  Basic 13,660   12,965   5  
  Diluted 13,945   13,045   7  
          (% )
  Natural gas (mcf/d) 3,257   603   440  
  Crude oil and NGLs (bbls/d) 15   7   114  
  Total (boe/d) 558   108   417  
Average wellhead prices            
  Natural gas ($/mcf) 3.94   6.38   (38 )
  Crude oil and NGLs ($/bbl) 60.36   93.49   (35 )
  Total ($/boe) 24.64   41.97   (41 )
Operating cost ($/boe) 8.61   15.65   (45 )
Operating netback ($/boe) 11.96   17.34   (31 )
  Proved (mboe) 1,713   952   80  
  Proved plus probable (mboe) 2,060   1,178   75  
  Total net present value – proved plus probable            
    (10% discount, before tax) ($000s) 29,271   23,449   25  
Gross (net) wells drilled            
  Gas (#) 8 (8.0 ) -- (-- ) -- (-- )
  Oil (#) -- (-- ) -- (-- ) -- (-- )
  Standing (#) -- (-- ) -- (-- ) -- (-- )
  Dry and abandoned (#) 2 (2.0 ) -- (-- ) -- (-- )
  Total (#) 10 (10.0 ) -- (-- ) -- (-- )
Average working interest (%) 100   --   --  
(1) Funds from operations and funds from operations per share are not recognized measures under Canadian generally accepted accounting principles. Refer to the Management's Discussion and Analysis for further discussion.
(2) Shares outstanding have been adjusted to reflect the reverse takeover as described in note 1 to the consolidated financial statements as if it occurred at the beginning of the year.
(3) For a description of the boe conversion ratio, refer to the commentary at the beginning of the Management's Discussion and Analysis.

Fiscal 2009 was a year of significant corporate change as well as financial and operational achievements for DeeThree, providing a platform for growth in 2010 and beyond.

Corporate Evolution and Activities
DeeThree commenced operations as a privately held natural gas and crude oil company in January 2007 with focused activities and investments in key areas of Alberta. On June 25, 2009, DeeThree completed a reverse takeover of Royal Capital Corp., a public capital pool company, and began trading on the TSX Venture Exchange on June 26, 2009. This business transaction, which was funded by a diversified public shareholder base, enabled the Company to reduce its debt to nominal levels, provided liquidity for our shareholders and accelerated an aggressive exploration and development program.

We entered 2009 with an asset base of $20.5 million, production averaging approximately 500 boe/d, restricted cash of $6.0 million, $2.7 million in net debt, 10.1 million shares outstanding and a strong management and technical team ready to grow the Company.

During 2009, we made several key changes to both our Board of Directors and senior management team by appointing Mr. Michael Kabanuk as our Company Chairman and Ms. Gail Hannon as Chief Financial Officer. Subsequent to year-end, we were also fortunate to have Mr. Henry Hamm join our Board. Mr. Hamm is an independent businessman with many years of diversified business experience. Our expanded team has the expertise and experience to lead DeeThree in this exciting next phase of our Company's development. DeeThree's directors and officers continue to maintain a significant share position in the Company, currently holding approximately 26% of the Company's outstanding shares.

The Company exited 2009 with positive working capital of $0.4 million on an $8.0 million credit facility, which was subsequently increased to $12.0 million. Also subsequent to year-end, we completed a bought deal brokered financing pursuant to which DeeThree issued 4,197,500 common shares at a price of $2.40 per share and 1,236,250 flow-through common shares at a price of $2.80 per share for total gross proceeds of $13.5 million. Proceeds from the financing, combined with our current cash flow and increased credit facility, provide DeeThree with a healthy balance sheet and the financial flexibility required to fund and grow existing operations.

DeeThree has operations in the Lethbridge, Killam, Balsam and Chinchaga areas of Alberta. During 2009, the Company's entire capital program was allocated towards the Lethbridge property, and throughout 2010, we will continue to focus on this core area. DeeThree entered the Lethbridge region in November 2008 through a property acquisition and development commitment, and as a result, 2009 marked our first full year of operations in this area. The Lethbridge property provides our Company an excellent platform capable of organic growth from a multitude of opportunities. The area is known for its underexploited, multi-zone gas and oil potential along with highly prospective opportunities. The development commitment required DeeThree to drill ten wells and acquire one township of seismic data in 2009, which we successfully completed. Subsequent to year-end, we completed an additional 18-kilometre pipeline extension that has enabled two wells to be brought on-stream at a combined rate of approximately 350 boe/d.

Although our other three operating areas – Killam, Balsam and Chinchaga – possess development potential, no activities were undertaken in 2009 due to the tremendous upside and multitude of opportunities in the Lethbridge area. Combined year-end exit production from these three properties was approximately 51 boe/d.

On January 1, 2010, DeeThree Exploration Inc. changed its name to DeeThree Exploration Ltd. in conjunction with the amalgamation of DeeThree Exploration Inc. with DeeThree Exploration Ltd., its wholly owned operating subsidiary.

In March, 2010 the Company entered into the following fixed price physical contracts:

Daily Quantity Term of Contract Fixed Price (AECO)
700 GJ/d Apr. 1, 2010 – Oct. 31, 2010 $4.67/GJ
700 GJ/d Apr. 1, 2010 – Oct. 31, 2010 $4.48/GJ
700 GJ/d Apr. 1, 2010 – Dec. 31, 2010 $4.485/GJ

As global economic and business conditions begin their modest recovery, DeeThree remains well positioned to weather the economic uncertainties and volatile commodity markets. We are closely monitoring developments in the oil and gas sector, pursuing opportunities that align with our corporate strategies to reinforce our objective in creating shareholder value. DeeThree's 2010 capital budget, currently set at $20.0 million, will focus on the continued development and expansion of our Lethbridge core area, including the drilling of another 20 wells, shooting and processing two additional townships of seismic data. We are confident that with the Company's estimated current year cash flow of $6.0 million to $7.0 million, increased credit facility of $12.0 million and $13.5 million in gross proceeds from our recent financing, we will be able to execute our 2010 program without the need to further access the capital markets. We have a great deal of flexibility surrounding our future plans, and with favorable market conditions and operating successes, can ramp up our program or reduce our spending as required.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or DeeThree's future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. DeeThree believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon by investors. These statements speak only as of the date of this press release and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this press release contains forward-looking statements, pertaining to the following: projections of market prices and costs, supply and demand for oil and natural gas, the quantity of reserves, oil and natural gas production levels, capital expenditure programs, treatment under governmental regulatory and taxation regimes, expectations regarding DeeThree's ability to raise capital and to continually add to reserves through acquisitions and development, and projections of market prices and costs.

With respect to forward-looking statements contained in this press release, DeeThree has made assumptions regarding, among other things: the legislative and regulatory environments of the jurisdictions where DeeThree carries on business or has operations, the impact of increasing competition, and DeeThree's ability to obtain additional financing on satisfactory terms.

DeeThree's actual results could differ materially from those anticipated in these forward-looking statements as a result of risk factors that may include, but are not limited to: volatility in the market prices for oil and natural gas; uncertainties associated with estimating reserves; geological, technical, drilling and processing problems; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel.

This forward-looking information represents DeeThree's views as of the date of this release and such information should not be relied upon as representing its views as of any date subsequent to the date of this release. DeeThree has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information.

BOE Presentation
References herein to "boe" mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf : 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • DeeThree Exploration Ltd.
    Martin Cheyne
    President and Chief Executive Officer
    (403) 263-9130