Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

August 08, 2008 08:30 ET

Ember Resources Inc. Reports 2008 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 8, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Ember Resources Inc. (TSX:EBR) ("Ember") announced today that it has filed its unaudited financial statements and related management's discussion and analysis ("MD&A") for the quarter ended June 30, 2008 on www.sedar.com.



Financial Highlights

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Three Three Six Six
(000s months months months months
except per ended ended ended ended
share June 30, June 30, Percentage June 30, June 30, Percentage
amounts) 2008 2007 Change 2008 2007 Change
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Natural gas
sales $ 7,358 $ 3,217 129 $ 12,833 $ 7,037 82
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Funds from
operations $ 4,568 $ 1,559 193 $ 7,219 $ 3,488 107
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- per share
basic &
diluted $ 0.13 $ 0.04 225 $ 0.20 $ 0.10 100
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Net income
(loss) $ 1,942 $ (268) 825 $ 2,010 $ (375) 636
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- per share
basic &
diluted $ 0.06 $ (0.01) 700 $ 0.06 $ (0.01) 700
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Capital
investment
additions $ 2,435 $ 2,382 2 $ 5,487 $ 6,953 (21)
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Property
acquisition $ - $ - - $ - $ 8,806 (100)
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Total
assets $109,235 $93,901 16 $109,235 $ 93,901 16
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Net debt $ 17,949 $ 8,405 114 $ 17,949 $ 8,405 114
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Outstanding
shares 36,103 36,075 - 36,103 36,075 -
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Operating Highlights

----------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, Percentage June 30, June 30, Percentage
2008 2007 Change 2008 2007 Change
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Daily avg gas
production
(mcf/d) 8,045 5,068 59 8,004 5,477 46
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Daily avg
production
(boe/d) 1,341 845 59 1,334 913 46
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Average sales
price ($/mcf) 10.05 6.98 44 8.81 7.10 24
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Royalties
($/mcf) 0.81 0.26 212 0.80 0.48 67
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Operating
expenses
($/mcf) 1.84 1.17 57 1.82 1.20 52
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Transportation
expenses
($/mcf) 0.17 0.20 (15) 0.18 0.20 (9)
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Operating
netback ($/mcf) 7.23 5.35 35 6.01 5.22 15
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Operating
netback
($/boe) 43.40 32.09 35 36.04 31.30 15
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CBM wells
drilled
(gross/net) 4.0/2.1 0/0 NA/NA 22.0/10.9 1.0/1.0 2,100/990
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- Mannville 0/0 0/0 0/0 0/0 1.0/1.0 (100)/(100)
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- Horseshoe
Canyon 4.0/2.1 0/0 NA/NA 22.0/10.9 0/0 NA/NA
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Land (000s of
net acres) 262 300 (13) 262 300 (13)
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Highlights

Financial performance

- Second quarter funds from operations increased 193% to $4.6 million ($0.13/share diluted) from $1.6 million ($0.04/share diluted) in 2007.

- Net income was $1.9 million for the second quarter of 2008 ($0.06/share diluted) as compared to a net loss of $268 thousand ($0.01/share diluted) in 2007.

- Capital expenditures totaled $2.4 million as compared to $2.4 million in Q2 2007. Second quarter capital expenditures are typically limited by restricted field access due to spring break-up and wet conditions.

- At the end of Q2 2008 Ember's net bank debt and working capital deficiency totaled $17.9 million. The Company recently negotiated an increase in its bank line of credit to $35 million.

- Significant improvement in the debt to cash flow ratio and balance sheet flexibility has resulted from higher cash flows and an expansion of bank lines of credit. Second quarter annualized debt to cash flow ratio decreased to slightly less than 1 times net debt.

Operating performance

- Average production for the quarter increased 59% to 8.0 mmcf/d from 5.1 mmcf/d in 2007. Production per share increased by 59% over the same period. Second quarter production remained flat with the first quarter due to limited field access and no new well additions. Ember's production base, which is primarily from Horseshoe Canyon coals, continues to demonstrate low declines and production stability.

- Drilling activity was minimal due to persistent rain in May and June. Four wells (2.1 net) were drilled at the Acme property. Wet conditions have continued into the third quarter requiring the bulk of second and third quarter drilling to be deferred until September. Ember expects to drill 30 net wells by the end of Q3, which is on track with the 2008 budget.

- Ember continued to optimize field operations, reducing operating costs and increasing performance of producing Mannville wells. During the quarter, wellhead compression was installed on a key well in Rosalind, increasing productivity to 200 mcf/d. This well has been on production since September 2006 and has produced a total of 56 mmcf of gas. Ember is considering drilling an offset horizontal well later in the year.

OFFER FOR CORDERO ENERGY INC.

Ember has entered into an arrangement agreement (the "Arrangement") with Cordero Energy Inc. ("Cordero") to acquire all of the outstanding common shares of Cordero for a total consideration of $5.50 per Cordero share, payable, at the election of each Cordero shareholder, in cash or 2.683 common shares of Ember.

A maximum aggregate of $70 million and a minimum aggregate of $55 million in cash will be payable to the Cordero shareholders under the Arrangement. To fund the cash component of the Arrangement, Ember has entered into subscription agreements totaling $55 million ("Subscription Receipts") at a price of $2.05 per Subscription Receipt. Each Subscription Receipt will be convertible into one Ember share upon completion of the Arrangement with Cordero.

Ember and Cordero shareholders will vote at special shareholders' meetings to approve the Arrangement and Subscription Receipts on September 3, 2008. The directors and officers of Cordero, and other shareholders of Cordero representing approximately 36.4% of the outstanding Cordero shares, have agreed to vote their shares in favor of the Arrangement, subject to certain terms and conditions, or the receipt of a superior offer.

Key attributes of the combined Company would be as follows;

- The core operated properties of Cordero's Malmo and Buffalo Lake areas are in close proximity to Ember's core operated properties of Acme, Fenn-Big Valley and Rosalind, all of which are concentrated along major CBM fairways in east central Alberta;

- Approximately 29 mmcf/d (4,800 boe/d) of natural gas production, predominately from Horseshoe Canyon Coals ("HSC") and complementary conventional sands;

- Based on 2007 year-end reserves, 96 Bcf of proved and 150 Bcf of proved plus probable reserves, over 80% of which are HSC CBM reserves;

- Long life, predictable reserves with a reserve life index of 14.2 years.

- High netback natural gas production benefiting from low royalty rates and low operating costs, and;

- 450 low-risk development HSC CBM locations in inventory to provide for immediate growth.

The following tables illustrate combined results of Ember and Cordero based on activities during the six month and three month periods ended June 30, 2008. The tables make no assumptions, including transaction costs, economies of scale, operational and administrative synergies or accounting adjustments, other than the simple addition of certain individually reported Q2 2008 six and three month unaudited financial and operating results.



Six months ended June 30, 2008

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Combined
($ in 000s) Ember Cordero Entity
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Daily avg gas production (mcfe/d) 8,004 21,336 29,340
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Daily avg production (boe/d) 1,334 3,556 4,890
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Gross revenue $ 12,833 34,657 47,490
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Funds from operations $ 7,219 20,227 27,446
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Net income $ 2,010 663 2,673
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Net debt $ 17,949 50,930 68,879
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Total book value of assets $ 109,235 208,364 317,599
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Three months ended June 30, 2008

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Combined
($ in 000s) Ember Cordero Entity
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Daily avg gas production (mcfe/d) 8,045 20,964 29,009
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Daily avg production (boe/d) 1,341 3,494 4,835
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Gross revenue $ 7,358 19,298 26,656
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Funds from operations $ 4,568 10,941 15,509
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Net income $ 1,942 2,005 3,947
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Net debt $ 17,949 50,930 68,879
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Total book value of assets $ 109,235 208,364 317,599
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"Ember reported outstanding results for the second quarter demonstrating the cash generation and profitability of our CBM-focused strategy. The combination of Ember and Cordero will create a larger operational base, providing additional cost savings and a strong drilling inventory to fuel both growth and profitability in the future," said Doug Dafoe, Chairman and CEO of Ember.

As referred to above, Embers' audited financial statements and related MD&A for the quarter ended June 30, 2008 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 unaudited 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 second quarter 2008 results will take place on August 8, 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 1-866-585-6398. 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 entering the pass code 757200#.

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.

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)