Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

March 23, 2011 08:15 ET

Ember Resources Inc. Reports 2010 Annual Results and Reserves Information

CALGARY, ALBERTA--(Marketwire - March 23, 2011) -

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. ("Ember") (TSX:EBR) announced today that it has filed its audited financial statements and related management discussion and analysis ("MD&A") for the year ended December 31, 2010 on www.sedar.com. In addition Ember is releasing its 2010 reserve information which will be included in its annual information return to be filed later this month.



Financial Highlights
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Three Three
months months Year Year
ended ended ended ended
($000s except per December December Percent December December Percent
share amounts) 31, 2010 31, 2009 Change 31, 2010 31, 2009 Change
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Natural gas sales $ 7,438 $ 9,659 (23) $ 34,152 $ 36,872 (7)
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Funds from
operations $ 2,119 $ 3,230 (34) $ 12,101 $ 13,517 (10)
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- per share basic
& diluted (1) $ 0.03 $ 0.05 (40) $ 0.16 $ 0.25 (36)
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Net loss $ (7,509)$ (4,431) 69 $(20,467) $(19,006) 8
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- per share basic
& diluted $ (0.10)$ (0.07) 43 $ (0.27) $ (0.35) (23)
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Property and
equipment
additions $ 1,367 $ 6,611 (79) $ 13,309 $ 14,299 (7)
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Property acquisition - $ (80) NA $ 425 $ 3,133 (86)
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Property disposition - $ 6 NA - $ 5,710 NA
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Total assets $342,864 $365,539 (6) $342,864 $365,539 (6)
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Net bank debt and
working capital $ 83,914 $ 81,744 3 $ 83,914 $ 81,744 3
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Shares outstanding 74,897 74,897 - 74,897 74,897 -
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(1) See "Non-GAAP Measurements".

Operating Highlights

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Three Three
months months Year Year
ended ended ended ended
December December Percent December December Percent
31, 2010 31, 2009 Change 31, 2010 31, 2009 Change
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Daily average gas
production (Mcf/d) 22,796 23,583 (3) 23,631 25,320 (7)
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Daily average
production (BOE/d) 3,799 3,931 (3) 3,939 4,220 (7)
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Average sales price
($/Mcf) 3.55 4.45 (20) 3.96 3.99 (1)
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Realized gain
commodity hedge
($/Mcf) 0.42 0.14 200 0.30 0.18 67
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Realized gain foreign
exchange ($/Mcf) 0.32 - NA 0.09 - NA
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Royalties expense
($/Mcf) 0.16 0.29 (45) 0.19 0.18 6
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Operating expenses
($/Mcf) 1.41 1.70 (17) 1.38 1.44 (4)
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Transportation
expenses ($/Mcf) 0.21 0.17 24 0.20 0.17 18
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Operating netback
($/Mcf) 2.51 2.43 3 2.59 2.38
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Operating netback
($/BOE) 15.09 14.62 3 15.48 14.28 8
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CBM wells drilled
(gross/net)
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- Horseshoe
Canyon 2.0/0.9 29.0/20.9 (93)/(96) 33.0/19.6 50.0/33.0 (34)/(41)
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Land (000s of net
acres) 398 460 (13) 398 460 (13)
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Highlights

Financial performance

-- Funds from operations decreased 10% to $12.1 million ($0.16/share
diluted) from $13.5 million ($0.25/share diluted) in 2009. Fourth
quarter funds from operations were $2.1 million ($0.03/share diluted)
compared with $3.2 million ($0.05/share diluted) in fourth quarter 2009.
Funds from operations for 2010 were comparable to 2009 as many factors
were relatively unchanged for the year. Natural gas prices were down by
1% and production volumes were down by 7% for the year. These factors
were somewhat offset by hedging gain increases of 117% and operating
cost reductions of 4%.
-- The Company recorded a net loss of $20.5 million in 2010 (net loss
$0.27/share diluted) as compared to net loss of $19.0 million
($0.35/share diluted) in 2009. Net loss for the quarter was $7.5 million
(net loss $0.10/share diluted) versus a net loss of $4.4 million (net
loss $0.07/share diluted) in Q4 2009.
-- Capital expenditures including property acquisitions totaled $13.8
million as compared to $11.7 (net of dispositions of $5.7 million)
million in 2009. Net capital expenditures for the fourth quarter were
$1.4 million compared with $6.6 million in Q4 2009.
-- At year-end 2010 Ember had net bank debt and working capital totaling
$83.9 million.
-- Ember continued to improve or maintain low cost structures in 2010.
Operating costs were $1.38/Mcf ($8.31/BOE), general and administrative
costs were $0.40/Mcf ($2.39/BOE) and the effective royalty rate was
4.9%.

Operating performance

-- Average daily production decreased 7% to 23.6 MMcf/d from 25.3 MMcf/d in
2009, primarily due to lower capital and drilling activity levels in
2010 compared to 2009.
-- The drilling program continued to record 100% success with all wells
targeting the highly predictable Horseshoe Canyon coals. In 2010, Ember
drilled 33 wells (19.6 net) predominately at Acme.
-- Proved plus probable reserves increased 4% to 140.7 Bcfe from 135.7 Bcfe
in 2009. As a resource play, Ember's drilling is focused on converting
undeveloped reserves into the developed producing categories; during the
year 10.8 Bcf was converted into the proved producing category at a cost
of $1.23/Mcfe.
-- Finding, development and acquisition ("FD&A") costs for the year,
including changes in future capital, were estimated at $1.28/Mcfe
($7.68/BOE) for proved reserves and $1.58/Mcfe ($9.48/BOE) for proved
plus probable reserves.
-- Operating netbacks for the year were $2.59/Mcfe ($15.48/BOE) resulting
in a recycle ratio, including changes in future capital, of 2.0 for
proved reserves and 1.6 for proved plus probable reserves.

Reserve Highlights

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December 31, December 31, Change
2010 2009
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Reserves (Bcfe)
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Total proved 106.2 96.0 11%
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Total probable 34.6 39.7 (13%)
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Total proved plus probable 140.8 135.7 4%
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Total possible reserves 31.3 33.9 (1%)
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Total proved plus probable plus
possible 172.0 169.6 2%
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Reserve life index 2P- years 17.0 15.8 7%
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Proved plus probable reserves
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Net present value before tax ($
Millions)(1)
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Discount rate at 10% 195.5 295.0 (34%)
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Discount rate at 15% 142.7 230.7 (38%)
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Drilling Activity
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Gross wells 31.0 50.0 (38%)
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Net wells 18.7 33.0 (43%)
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Success rate 100% 100% -
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- Reserves include royalty interest reserves

(1) Net present values for December 31, 2010 and December 31, 2009 were
calculated using McDaniel's price forecasts dated January 1, 2011 and
January 1, 2010, respectively.


Reserves

Reserve information is based on an independent reserve evaluation report prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") dated March 11, 2010 with an effective date of December 31, 2010. Certain minor properties representing less than 2% of total proved plus probable reserves were evaluated internally and reviewed by McDaniel and are included in their report. The report was prepared in accordance with the COGE Handbook and National Instrument 51-101- Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Complete NI 51-101 reserve disclosure will be included in Ember's Annual Information Form ("AIF") which will be filed on SEDAR in March 2011. The following table summarizes the Company's reserve information based on the McDaniel report and using the current published McDaniel (2011-01) price forecast.



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Reserves Net Present Values
Bcfe Before Income Tax ($ millions)
(Company Discounted at
Sales)
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0% 5% 10% 15% 20%
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Proved
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Developed producing 56.1 189 137 107 88 75
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Developed non-producing 2.3 8 6 4 3 3
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Undeveloped 47.9 109 61 34 17 7
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Total proved 106.2 306 204 146 109 85
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Total probable 34.6 138 79 50 34 24
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Total proved plus probable 140.8 444 283 196 143 108
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Total possible 31.3 148 76 45 29 20
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Total proved, probable & possible 172.0 592 358 240 172 128
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- Reserves include royalty interest reserves

-- Ember has a large inventory of Horseshoe Canyon locations exceeding 450+
net wells; 375 net wells were recognized in Ember's year-end reserves,
of which 258 are considered proved undeveloped and 78 net wells are
classified as probable undeveloped. In addition, 39 net wells are
classified as possible locations (1 mile to 2 miles from existing
production) and 80 net locations are currently unbooked (more than 2
miles from existing production).

Reserves Reconciliation

The following table sets forth the changes between the reserve volumes
estimates made as at December 31, 2009 and as at December 31, 2010, based
on forecast prices, before royalties:

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Reserves - Bcfe Proved Total Proved plus Proved plus
Company sales Developed Proved Probable Probable
Producing plus Possible
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December 31, 2009 53.8 96.0 135.7 169.6
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Extensions/Improved recovery 0.0 6.0 8.2 10.1
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Technical Revisions 3.4 4.3 (0.4) (5.6)
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Category Transfers 7.8 5.6 0.7 0.0
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Acquisitions 0.0 3.4 5.5 6.5
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Economic factors (0.3) (0.4) (0.3) (0.0)
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Production (Estimate) (8.6) (8.6) (8.6) (8.6)
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December 31, 2010 56.1 106.2 140.8 172.0
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- Reserves include royalty interest reserves

Finding, development and acquisition costs

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Proved Total Proved plus Proved plus
Developed Proved Probable Probable
Producing plus Possible
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Net Additions - Bcfe 10.8 15.5 8.1 4.5
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Property plant and
equipment $ 13.7 $ 13.7 $ 13.7 $ 13.7
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Changes in future capital $ 0 $ 10.4 $ 7.8 $ 6.4
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Total capital $ 13.7 $ 24.1 $ 21.5 $ 20.1
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Current year-$/Mcfe
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F&D costs $ 1.23 $ 1.02 $ 1.25 $ 1.86
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FD&A costs $ 1.27 $ 1.28 $ 1.58 $ 1.83
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Recycle ratio -FD&A 2.0 2.0 1.6 1.4
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3 year averages-$/Mcfe
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F&D costs $ 1.46 $ 1.32 $ 1.23 $ 1.04
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FD&A costs $ 4.64 $ 3.68 $ 3.24 $ 2.75
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Recycle ratio -FD&A 0.7 0.8 0.9 1.1
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Price Forecast

The following table summarizes McDaniel's current (2010-10) price forecast.

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NATURAL GAS
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Henry Hub AECO-CSpot Exchange Rate
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YEAR ($US/ MMBtu) ($Cdn/MMBtu) ($US/$Cdn)
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Forecast
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2011 4.55 4.25 0.975
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2012 5.30 4.90 0.975
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2013 5.75 5.40 0.975
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2014 6.30 5.90 0.975
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2015 6.80 6.35 0.975
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2016 7.35 6.75 0.975
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2017 7.70 7.10 0.975
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2018 8.00 7.40 0.975
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2019 8.20 7.60 0.975
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2020 8.35 7.75 0.975
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The weighted average realized sales price including hedges for Ember for 2010 was estimated at $4.35/Mcf for natural gas.

Strategic Alternatives Process

Ember announced on October 29, 2010 that, after a review of its then current share price, reserves, production, cash flows and debt levels, among other matters, its board of directors decided to initiate a process to identify and consider strategic alternatives. Strategic alternatives may include, but are not limited to, a sale of the Company, recapitalization, merger or other business combination, a sale of a material portion of the Company's assets or, farmin or farmout transactions, among other alternatives. The strategic alternatives process is currently on-going.

The board of directors will consider all alternatives and has appointed a special committee made up of independent directors to direct the process. The Company has engaged Macquarie Capital Markets Canada Ltd. as its financial advisor to conduct a full analysis and investigation of Ember's strategic alternatives. Ember does not intend to disclose developments with respect to the strategic review process until the board of directors has approved a definitive transaction or strategic option, unless otherwise determined or required by law. There are no guarantees that the process will result in a transaction or, if a transaction is entered into, as to its terms or timing.

As referred to above, Embers' audited financial statements and related MD&A for the year ended December 31, 2010 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.

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.

Reserve information in this press release is based on an independent reserve evaluation report prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") dated March 11, 2011 with an effective date of December 31, 2010.

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
    President & CEO
    403 270-0803
    403 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Terry S. Meek
    Executive Vice-President & COO
    403 270-0803
    403 270-2850 (FAX)
    or
    Ember Resources Inc.
    Mr. Bruce Ryan
    Vice-President Finance & CFO
    403 270-0803
    403 270-2850 (FAX)
    www.emberresources.com