Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

March 18, 2008 08:30 ET

Ember Resources Inc. Reports 2007 Annual Results

CALGARY, ALBERTA--(Marketwire - March 18, 2008) -

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Ember Resources Inc. ("Ember") (TSX:EBR) announced today that it has filed its audited financial statements and related management's discussion and analysis ("MD&A") for the year ended December 31, 2007 on www.sedar.com.



Financial Highlights

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(000s except Three Three
per share months months Year Year
amounts) ended ended Percent- ended ended Percent-
December December age December December age
31, 2007 31, 2006 Change 31, 2007 31, 2006 Change
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Natural gas sales $ 3,890 $ 3,784 3 $ 13,338 $ 10,414 28
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Funds from
operations (1) $ 1,552 $ 2,056 (25) $ 6,094 $ 4,627 32
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- per share
basic & diluted $ 0.04 $ 0.07 (43) $ 0.17 $ 0.15 13
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Net income (loss) $ 1,186 $ (300) 495 $ 44 $ (3,512) 101
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- per share
basic & diluted $ 0.03 $ (0.01) 400 $ 0.00 $ (0.12) 100
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Capital
investment
additions $ 7,178 $ 6,053 19 $ 21,008 $ 34,887 (40)
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Property
acquisition $ (173)$ - NA $ 8,633 $ - NA
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Total assets $108,315 $ 82,410 31 $108,315 $ 82,410 31
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Net debt $ 19,681 $ 11,095 77 $ 19,681 $ 11,095 77
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Shares
outstanding 36,103 30,415 19 36,103 30,415 19
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Operating Highlights

----------------------------------------------------------------------------
(000s except Three Three
per share months months Year Year
amounts) ended ended Percent- ended ended Percent-
December December age December December age
31, 2007 31, 2006 Change 31, 2007 31, 2006 Change
----------------------------------------------------------------------------
Daily avg gas
production
(mcf/d) 7,175 6,107 17 5,829 4,655 25
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Daily avg
production
(boe/d) 1,196 1,018 17 971 776 25
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Average sales
price ($/mcf) 5.89 6.74 (13) 6.27 6.13 2
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Royalties
($/mcf) 0.53 0.40 33 0.44 0.62 (29)
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Operating
expenses ($/mcf) 1.71 1.36 26 1.33 1.54 (14)
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Transportation
expenses ($/mcf) 0.19 0.19 - 0.20 0.21 (5)
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Operating
netback ($/mcf)
(1) 3.46 4.79 (28) 4.30 3.76 14
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Operating
netback ($/boe)
(1) 20.80 28.71 (28) 25.89 22.51 14
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CBM wells drilled
(gross/net) 17.0/ 1.0/ 1,600/ 41.0/ 28.0/ 46/
16.5 1.0 1,550 37.3 27.5 36
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- Mannville -/ 1.0/ (100)/ 1.0/ 4.0/ (75)/
- 1.0 (100) 1.0 3.5 (71)
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- Horseshoe Canyon 17.0/ -/ NA 40.0/ 24.0/ 67/
16.5 - 36.3 24.0 51
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Land (000s of
net acres) 285 292 (2) 285 292 (2)
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(1) See "Non-GAAP Measurements".


Highlights

Financial performance

- Funds from operations increased 32% to $6.1 million ($0.17/share diluted) from $4.6 million ($0.15/share diluted) in 2006. Fourth quarter funds from operations were $1.6 million ($0.04/share diluted) compared with $2.1 million ($0.07/share diluted) in fourth quarter 2006.

- The Company recorded net income of $0.04 million in 2007 ($0.00/share diluted) as compared to a net loss of $3.5 million (net loss of $0.12/share diluted) in 2006. Net income for the quarter was $1.2 million ($0.03/share diluted) versus net loss of $0.3 million (net loss of $0.01/share diluted) in Q4 2006.

- Capital expenditures including property acquisitions totaled $29.6 million in 2007 as compared to $34.9 million spent in 2006. Capital expenditures for the fourth quarter totaled $7.2 million as compared to $6.0 million in Q4 2006.

- At year-end 2007 Ember had net bank debt and a working capital deficiency totaling $19.7 million. Currently the Company has a $25 million line of credit.

- Net asset value at December 31, 2007 is estimated at $3.82/share. Net asset value is calculated using net present value of proved plus probable reserves discounted at 10% with forecasted prices and $200/acre for undeveloped land.

Operating performance

- Average production for the year increased 25% to 5.8 mmcf/d from 4.7 mmcf/d in 2006. Fourth quarter production increased 17% to 7.2 mmcf/d from 6.1 mmcf/d in fourth quarter 2006.

- Drilling activity was timed with start-up of the Acme property resulting in operational momentum in the fourth quarter and into 2008. Fourth quarter production increased 39% to 7.2 mmcf/d from the third quarter average of 5.2 mmcf/d.

- Proved plus probable reserves increased 87% to 51.3 Bcf up from 27.4 Bcf in 2006. Proved developed producing reserves increased 77% to 14.5 Bcf. Proved plus probable reserves per share increased 58% from 2006.

- Ember's total finding, development and acquisitions costs, before changes in future capital, are estimated at $9.66/boe for proved reserves; $6.84/boe for proved plus probable reserves. Including changes in future capital, finding and development and acquisition costs are estimated at $16.54/boe proved and $11.81/boe proved plus probable.

- Operating netbacks for 2007 were $25.89/boe resulting in a recycle ratio, including changes in future capital, of 1.6 for proved reserves and 2.2 for proved plus probable reserves. Ember's low operating costs of $7.96/boe and low royalty rate of 7% contributed to a strong operating and recycle ratio despite a relatively weak gas price of $6.27/mcf in 2007. Based on current strip prices, operating netbacks would increase to $34/boe further improving Ember's capital efficiency.

- Reserve life index is estimated at 5.6 years proved producing, 10.6 years total proved and 15.5 years for proved plus probable reserves. Almost all of Ember's reserves are derived from Horseshoe Canyon CBM reserves at Fenn-Big Valley and Acme, Alberta.

- Ember's inventory of Horseshoe Canyon development locations has increased to 200 wells.

- Ember has significant CBM resource potential in its Mannville coals. The Company's share of technically recoverable natural gas is estimated in a range of 88-423 Bcf.

First quarter 2008 operational update

- Ember drilled and completed an 18-well program (8.8 net) in the Acme area in first quarter 2008. Of the total, 17 (8.3 net) and one shut-in well were placed on production during the quarter. The new additions have lifted Ember's production in the Acme area to 3.5 mmcf/d. Drilling, completion and tie-in of the 17 wells were accomplished in six weeks from start to finish.

- Current production is estimated at 8.5 mmcf/d. Production is expected to accelerate in the second half of 2008 as 75% of planned capital spending will occur in the third and fourth quarters. Production for the full year is expected to average 9 mmcf/d with a year-end exit rate of 10 mmcf/d.

Outlook

North American natural gas markets and prices have improved dramatically over the past few months. Normal winter heating demands together with reduced imports of LNG have all but eliminated storage surpluses which had kept prices weak for the past two years. Ember's low cost and low royalty structure are expected to significantly improve operating netbacks during 2008.

Capital spending for 2008 is currently set at $15 million and will focus on low risk, low cost Horseshoe Canyon CBM wells at Ember's Acme and Fenn-Big Valley properties. An estimated 30-35 net wells will be drilled in these areas. If the current strength in natural gas prices holds, Ember has the ability to quickly add additional Horseshoe Canyon wells to its planned development programs.

In the Mannville coals, Ember plans to maintain its substantial potential resource base with limited capital expenditures and selective land purchases. Ember has conducted extensive appraisal drilling and testing on its land base and has established reservoir parameters that are conducive to commercial development. However, it has been difficult to establish repeatability of successful wells due to damage caused during the drilling process. Larger industry participants have encountered similar problems with wellbore damage and are experimenting with new drilling and completion techniques to unlock the potential of this significant resource base. Ember will continue to monitor the progress of these new techniques with the view to incorporating successful ones into its future capital programs.

"The stage is set for a renewed interest in the Mannville CBM resource play," said Doug Dafoe, Chairman and CEO. "With higher commodity prices, the industry is moving towards resource plays and is applying new technologies to extract those resources. We remain well positioned to leverage these new technologies as they become commercial. In the mean time, we have the expertise and drilling inventory to build production through our low-cost Horseshoe Canyon coals."

Based on current strip prices for AECO of $7.95/mcf, cash flow for the year is estimated at $13.3 million or $0.37/share, up 12% from guidance issued in January 2008. Year-end 2008 net debt is now estimated at $20.6 million or approximately 1.5 times annual cash flow. The Company has current bank lines of credit of $25 million.

As referred to above, Embers' audited financial statements and related MD&A for the year ended December 31, 2007 can be located at www.sedar.com or www.emberresources.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 Ember Resources Inc. at 403 270 0803.

Conference Call

A conference call to review Ember's 2007 year end results will take place on March 18, 2008 at 9:00 AM MDT (11:00 AM EDT). The conference call can be accessed by dialing in 15 minutes prior to the scheduled start at 1-866-334-3876. A live webcast will also be provided on: www.emberresources.com. A playback recording of the conference call will be available for 90 days and can be accessed by calling 1-866-245-6755 and enter the pass code 125759#.

Reader Advisory

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including future production, anticipated capital expenditures and development plans. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., 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 estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward looking statements and accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur. Except as required by law, Ember undertakes no obligation to update or revise any forward looking statements. Additional information on these and other factors that could affect the Company's operations or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.

BOE Disclosure: 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.

NON-GAAP MEASUREMENTS

This press release contains the terms "operating netback" and "funds from operations". These measurements should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with Canadian GAAP as an indicator of the Company's performance. The Company's determination of funds from operations and operating netback may not be comparable to that reported by other companies. The Company also presents funds from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculations used in determining earnings per share. Ember's peer companies in the oil and gas industry use the same definitions and for consistency the Company will continue to report in this manner.

Funds from operations are determined as operating cash flows before working capital adjustments. Management uses this term to compare with other companies that also report this measure, to manage debt facilities that may use this measure to guide determination of debt pricing, and to readily provide this information to investors that routinely request this measure. Operating netback is not a measure that is readily apparent in the GAAP prepared financial statements. It is an energy industry measure which measures funds flows at the field level by determining all field-related revenues less costs. The Company uses this measure to compare its field operations with those of its peers, and reports this measure to members of the investment community requesting it, or in the absence of the Company providing it, calculating the measure themselves.

Ember Resources Inc. is a resource company specializing in coalbed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember's shares are traded on the Toronto Stock Exchange under the trading symbol "EBR".

Contact Information

  • Ember Resources Inc.
    Mr. Douglas A. Dafoe
    Chairman & CEO
    (403) 270-0803
    (403) 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    President & COO
    (403) 270-0803
    (403) 270-2850 (FAX)
    Website: www.emberresources.com