Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

March 15, 2007 08:30 ET

Ember Resources Inc. Reports Reserves and Provides 2006 Financial Results

CALGARY, ALBERTA--(CCNMatthews - March 15, 2007) -

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 audited financial statements and related management's discussion and analysis ("MD&A") for the year ended December 31, 2006 on www.sedar.com. All references to the period ended December 31, 2005 refer to the six months from Ember's inception on July 7, 2005 to December 31, 2005.



Financial Highlights

----------------------------------------------------------------------------
Three
Three months Period
months ended Year ended Year over
ended Dec 31, ended Dec 31, Year
(000's except Dec 31, 2005 Dec 31, 2005 Percentage
per unit amounts) 2006 Restated 2006 Restated Change
----------------------------------------------------------------------------
Natural gas sales $ 3,784 $ 2,630 $10,414 $ 4,404 136
----------------------------------------------------------------------------
Funds from operations $ 2,057 $ 1,855 $ 4,627 $ 3,016 53
----------------------------------------------------------------------------
- per share basic $ 0.07 $ 0.06 $ 0.15 $ 0.11 36
----------------------------------------------------------------------------
- per share diluted $ 0.07 $ 0.06 $ 0.15 $ 0.10 50
----------------------------------------------------------------------------
Net Income (loss) $ (300) $ 925 $(3,512) $ 1,122 (413)
----------------------------------------------------------------------------
- per share basic
& diluted $ (0.01) $ 0.03 $ (0.12) $ 0.04 (400)
----------------------------------------------------------------------------
Capital investment
(including abandonment) $ 6,007 $ 26,659 $34,887 $ 31,594 10
----------------------------------------------------------------------------
Total assets $82,410 $ 78,446 $82,410 $ 78,446 5
----------------------------------------------------------------------------
Net debt including
working capital
deficiency (surplus) $11,095 $(19,172) $11,095 $(19,172) (158)
----------------------------------------------------------------------------
Average shares - basic 30,417 28,176 30,417 28,176 8
----------------------------------------------------------------------------
Average shares - diluted 30,417 29,121 30,417 29,121 4
----------------------------------------------------------------------------

Operating Highlights

----------------------------------------------------------------------------
Three Three
months months Year Period Year over
ended ended ended ended Year
(000's except Dec 31, Dec 31, Dec 31, Dec 31, Percentage
per unit amounts) 2006 2005 2006 2005 Change
----------------------------------------------------------------------------
Daily avg gas production
(mcf/d) 6,107 2,475 4,655 2,405 94
----------------------------------------------------------------------------
Daily avg production
(boe/d) 1,018 412 776 401 94
----------------------------------------------------------------------------
Average sales price
($/mcf) 6.74 11.55 6.13 9.95 (38)
----------------------------------------------------------------------------
Royalties ($/mcf) 0.40 1.05 0.62 0.80 (22)
----------------------------------------------------------------------------
Operating expenses ($/mcf) 1.36 1.55 1.54 1.40 10
----------------------------------------------------------------------------
Transportation expenses
($/mcf) 0.19 0.25 0.21 0.29 (25)
----------------------------------------------------------------------------
Operating net back ($/mcf) 4.79 8.70 3.76 7.46 (50)
----------------------------------------------------------------------------
Operating net back ($/boe) 28.71 52.22 22.51 44.77 (50)
----------------------------------------------------------------------------
Gross CBM wells
drilled (net) 1.0/1.0 34/34 28.0/27.5 44.0/43.0 (36)/(36)
----------------------------------------------------------------------------
- Mannville 1.0/1.0 6/6 4.0/3.5 8.0/7.0 (50)/(50)
----------------------------------------------------------------------------
- Horseshoe Canyon -/- 28/28 24.0/24.0 36.0/36.0 (33)/(33)
----------------------------------------------------------------------------
Land (000s of net acres) 292 308 292 308 (5)
----------------------------------------------------------------------------


Highlights

Financial performance

- Funds from operations for the year were $4.627 million ($0.15/share diluted) versus $3.016 million ($0.10/share diluted) in the six month period in 2005. Fourth quarter funds from operations were $2.057 million ($0.07/share diluted) compared with $1.855 million ($0.06/share diluted) in fourth quarter 2005.

- The Company recorded a net loss of $3.512 million in 2006 (net loss of $0.12/share diluted) as compared to net income of $1.122 million ($0.04/share diluted) in the six month period ended December 31, 2005. Net loss for the quarter was $300,000 (net loss of $0.01/share diluted) versus net income of $925,000 ($0.03/share diluted) in Q4 2005.

- Capital expenditures in 2006 totaled $34.887 million as compared to $31.594 million spent in 2005. Capital expenditures for the fourth quarter totaled $6.007 million as compared to $26.659 million in Q4 2005.

- At year-end 2006 Ember had net bank debt and a working capital deficiency totaling $11.095 million. Subsequent to year end, Ember reduced its net bank debt and a working capital deficiency through the issue of 5,660,400 common shares at $2.65 raising $15 million net. Of this amount $8.75 million was used for an asset acquisition with the balance of $6.25 million applied to debt and to working capital. Currently the Company has a $15 million line of credit.

- Net asset value at December 31, 2006 is estimated at $3.68/share. Including recently acquired assets at Acme, Alberta net asset value is estimated at $3.96/share. Net asset value is calculated using net present value of proved plus probable reserves at discounted at 10% with forecasted prices and $200/acre for undeveloped land.

Production growth

- Production for the year averaged 4.7 mmcf/d as compared to 2.4 mmcf/d in 2005. Fourth quarter production increased 147% to 6.1 mmcf/d from 2.5 mmcf/d in fourth quarter 2005. Production per share increased 134% in Q4 2006 compared to Q4 2005.

- Fourth quarter production was up 23% from the third quarter's 4.9 mmcf/d, the fourth consecutive double-digit quarter of production growth.

- Current production is estimated at 6.5 mmcf/d. Volumes are expected to remain flat in the first half of 2007 due to reduced drilling and capital spending in Q4, pump changes on Mannville CBM wells, and longer than expected de-watering time on new drills. Production growth should accelerate in the second half of 2007 with the resumption of drilling, and plans for shut-in wells to be brought onstream at the recently acquired Acme property.

Reserve Additions

- Ember increased reserves with the drilling of 27.5 net wells. Total proved plus probable reserves increased 74% to 27.4 Bcf from 15.7 Bcf in 2005. Proved plus probable reserves per share increased 65% from 2005.

- Ember's total finding and development costs, before future capital, are estimated at $26.40/boe proved and $15.63 proved plus probable. Including future capital, finding and development costs are estimated at $ 26.44/boe proved and $21.84/boe proved plus probable.

- Proved, probable and possible reserves at December 31, 2006 totaled 40.6 Bcf. Finding and development costs including possible reserves are estimated at $7.86/boe before future capital and $18.30/boe including future capital.

- Including Ember's recent acquisition at Acme Alberta, on March 1, 2007, total proved, probable and possible reserves have increased 373% to 74.2 Bcf from 15.7 Bcf year-end 2005.

"In our first full year of operations, we have been on target with all of our operational benchmarks. While we faced major gas price declines which required us to curtail capital spending in the second half of 2006, production has continued to climb and our reserve growth has been excellent. Our low cost Horseshoe Canyon CBM development program has provided the cashflow and low risk reserve additions allowing us to make excellent progress on the commercialization of our Mannville coals. When combined with our new assets at Acme and our strong balance sheet, we are confident that we are well positioned to step up our activity levels, and continue to deliver value to shareholders," said Doug Dafoe, Ember Chairman and CEO.

Reserves

- Ember increased reserves with the drilling of 27.5 net wells. Total proved plus probable reserves increased 74% to 27.4 Bcf from 15.7 Bcf in 2005. Proved plus probable reserves per share increased 65% from 2005.

- Possible reserves have been recognized by the Company's independent engineers for the first time in 2006. A total of 13.2 Bcf of gas was recorded in the possible category, 85% of which was attributable to successes in the Mannville coals at Manola. Proved, probable and possible reserves at December 31, 2006 totaled 40.6 Bcf. Finding and development costs including possible reserves are estimated at $7.86/boe before future capital and $18.30/boe including future capital.

- On March 1, 2007 Ember completed the acquisition of the Acme property in Alberta. A total of 33.6 Bcf of proved, probable and possible reserves were acquired at a cost of $8.75 million. On a pro-forma basis, total proved, probable and possible reserves have increased 373 % to 74.2 Bcf from 15.7 Bcf year-end 2005.

Reserve Summary, Forecast Prices as of December 31, 2006

Ember's reserves were evaluated by Sproule & Associates, an independent engineering firm. The following is a summary of the evaluation of the Company's reserves as of December 31, 2006.



----------------------------------------------------------------------------
Company
Share of
Remaining
Reserves Company Share of Net Present Values
Gross Before Income Tax ($ millions)
BCF Discounted at
----------------------------------------------------------------------------
All Reserve Categories 0% 10% 15%
----------------------------------------------------------------------------
Proved Developed Producing 8.2 41.2 32.0 28.9
----------------------------------------------------------------------------
Proved Developed
Non-producing 1.2 5.9 4.5 4.1
----------------------------------------------------------------------------
Proved Undeveloped 5.6 23.9 14.0 10.9
----------------------------------------------------------------------------
Total Proved Reserves 15.0 71.0 50.5 43.9
----------------------------------------------------------------------------
Probable Reserves 12.4 42.0 19.3 13.6
----------------------------------------------------------------------------
Total Proved plus Probable
reserves 27.4 113.0 69.8 57.5
----------------------------------------------------------------------------
Possible Reserves 13.2 27.1 11.9 7.7
----------------------------------------------------------------------------
Total Proved, Probable &
Possible Reserves (1) 40.6 140.1 81.7 65.2
----------------------------------------------------------------------------

(1) Includes future capital of $8.4 million for proved reserves, $21.2
million for probable reserves and $32.5 million for possible reserves
for a total of $62.1 million in future capital costs.


Reserve Summary, Forecast Prices as of December 31, 2006 - Acme Area

The Acme property which was acquired on March 1, 2007 was evaluated by McDaniel & Associates, an independent engineering firm. The following is a summary of the evaluation of the reserves associated with the Acme property as of December 31, 2006 using forecasted prices provided by Sproule & Associates. Capital and net present values differ from previously reported numbers due to differences in forecasted prices used by Sproule and McDaniel at December 31, 2006.



----------------------------------------------------------------------------
Company
Share of
Remaining
Reserves Company Share of Net Present Values
Gross Before Income Tax ($ millions)
BCF Discounted at
----------------------------------------------------------------------------
All Reserve Categories 0% 10% 15%
----------------------------------------------------------------------------
Proved Developed Producing 0 0 0 0
----------------------------------------------------------------------------
Proved Developed
Non-producing 0 0 0 0
----------------------------------------------------------------------------
Proved Undeveloped 14.1 29.4 11.7 6.7
----------------------------------------------------------------------------
Total Proved Reserves 14.1 29.4 11.7 6.7
----------------------------------------------------------------------------
Probable Reserves 13.3 32.4 11.6 6.4
----------------------------------------------------------------------------
Total Proved plus Probable
reserves 27.4 61.8 23.4 13.1
----------------------------------------------------------------------------
Possible Reserves 6.2 20.8 7.2 4.4
----------------------------------------------------------------------------
Total Proved, Probable &
Possible Reserves (1) 33.6 82.6 30.5 17.5
----------------------------------------------------------------------------

(1) Includes future capital of $27.7 million for proved reserves, $21.0
million for probable reserves and $4.9 million for possible reserves
for a total of $53.6 million in future capital costs.


Reserve Summary, Forecast Prices as of December 31, 2006 - Pro-forma

The following table summarizes on a pro-forma basis Ember's reserves at year-end December 31, 2006 plus the Acme property which was acquired on March 1, 2007. The Ember reserves have been evaluated by Sproule & Associates, the Acme property was evaluated by McDaniel & Associates, both of which are independent engineering firms. The pro-forma case uses forecasted prices provided by Sproule and Associates.



----------------------------------------------------------------------------
Company
Share of
Remaining
Reserves Company Share of Net Present Values
Gross Before Income Tax ($ millions)
BCF Discounted at
----------------------------------------------------------------------------
All Reserve Categories 0% 10% 15%
----------------------------------------------------------------------------
Proved Developed Producing 8.2 41.2 32.0 28.9
----------------------------------------------------------------------------
Proved Developed
Non-producing 1.2 5.9 4.5 4.1
----------------------------------------------------------------------------
Proved Undeveloped 19.7 53.3 25.7 17.6
----------------------------------------------------------------------------
Total Proved Reserves 29.2 100.4 62.2 50.6
----------------------------------------------------------------------------
Probable Reserves 25.7 74.4 30.9 20.0
----------------------------------------------------------------------------
Total Proved plus Probable
reserves 54.8 174.8 93.2 70.6
----------------------------------------------------------------------------
Possible Reserves 19.4 47.9 19.1 12.1
----------------------------------------------------------------------------
Total Proved, Probable &
Possible Reserves (1) 74.2 222.7 112.2 82.7
----------------------------------------------------------------------------

(1) Includes future capital of $36.1 million for proved reserves, $42.2
million for probable reserves and $37.4 million for possible reserves
for a total of $115.7 million in future capital costs.


Finding, Development and Acquisition Costs

Ember's finding and development costs are comprised of two distinct CBM investments. Horseshoe Canyon coals which are commercial and are in development stage and Mannville coals which have been in the pilot and demonstration phase with some commercial success. A significant portion of Mannville capital costs are undeveloped and have not been assigned reserves.

- Finding and development costs for Horseshoe Canyon coals are estimated at $14.90/boe proved and $11.66 proved plus probable. Including future capital, finding and development costs are estimated at $14.72/boe proved and $12.49/boe proved plus probable.

- Finding and development costs for Mannville coals are estimated at $144.90/boe proved and $24.40/boe proved plus probable. Including future capital, finding and development costs are estimated at $147.30/boe proved and $42.60/boe proved plus probable.



----------------------------------------------------------------------------
Horseshoe Canyon Mannville Total
Coals (3) Coals (4) Company
----------------------------------------------------------------------------
Acquired assets (5) (1) (2) (1) (2) (1) (2)
07/07/2005
Proved $ 8.07 $17.29 n/m n/m $14.94 $24.16
----------------------------------------------------------------------------
Proved + Probable $ 5.14 $14.07 n/m n/m $ 9.52 $18.45
----------------------------------------------------------------------------
12/31/05
Proved $16.84 $14.69 $456.70 $456.70 $57.25 $55.31
----------------------------------------------------------------------------
Proved + Probable $ 9.77 $ 7.48 $ 86.00 $ 98.90 $27.89 $29.24
----------------------------------------------------------------------------
12/31/06
Proved $14.90 $14.72 $144.90 $147.30 $26.40 $26.44
----------------------------------------------------------------------------
Proved + Probable $11.66 $12.49 $ 24.40 $ 42.60 $15.63 $21.84
----------------------------------------------------------------------------
Inception to date
Proved $12.69 $15.68 $280.70 $282.30 $28.18 $31.10
----------------------------------------------------------------------------
Proved + Probable $ 8.65 $12.05 $ 48.90 $ 65.60 $16.43 $22.42
----------------------------------------------------------------------------

(1) Finding and development costs ($/boe) before future capital
(2) Finding and development costs ($/boe) including future capital
(3) 2006 Horseshoe Canyon coal capital totals $18 million plus change in
future capital of $1.3 million for proved +probable reserves; Inception
to date expenditures are $34.5 million plus $13.6 million in future
capital for proved + probable reserves
(4) 2006 Mannville coal capital totals $16.9 million plus change in future
capital of $12.6 million for proved + probable reserves; Inception to
date expenditures are $46.8 million plus $16.0 million in future capital
for proved + probable reserves
(5) Acquired assets were assigned carrying values of $15.2 million, $8.2
million was assigned to Horseshoe Canyon coals and $7 million was
assigned to Mannville coals


Operations

Mannville Coals

Ember has made significant strides towards commercialization of its Mannville coal resource. Continuous improvements to existing technologies and the application of new technologies have yielded positive results from Mannville horizontal wells during the year. Some of that success has been recognized by our independent engineers with a total of 0.8 Bcf proven, 4.7 Bcf of probable and 11.2 Bcf of possible reserves recorded at year-end.

Four horizontal wells were drilled in 2006, three at Manola and one at Rosalind. Two are considered commercial having achieved production rates of 200 and 400 mcf/d respectively. Both of these wells were put on production without stimulation and continue to meet expectations. Two wells required additional stimulation and are in the early stages of de-watering post stimulation. Two alternative stimulation techniques were used to help evaluate the effectiveness of various stimulation treatments.

A total of 9 (7.5 net) horizontal wells are planned for 2007, the first of which is currently drilling with the balance to be drilled in the second half of 2007. Capital associated with these new wells is estimated at $12 million. Goals for this year's program will include repeating past drilling and completion success and optimizing stimulation techniques if required.

Horseshoe Canyon Coals

Production continues to grow from Ember's Horseshoe Canyon development program at Fenn-Big Valley. Ember is currently working on a number of recompletions, and a summer drilling program of up to 15 wells.

Ember's newly acquired Acme property is well advanced in both regulatory approvals and infrastructure design and planning. Initially Ember will focus on development around existing shut-in wells. With a capital allocation of $15 million, Ember will be able to install sufficient plant and pipeline capacity to tie-in 9 of the 10 existing wells and drill and tie-in another 18 development wells. This activity is expected to add an additional 3 mmcf/d in productive capacity with additional upside from commingled conventional sands with the Horseshoe Canyon coals. This project could be completed prior to the end of 2007; Ember is looking to re-allocate capital or source additional capital for this project.

2007 Guidance

As previously released, with additional funds raised in the private placement, Ember estimates total 2007 capital spending of $30 million, including the Acme acquisition. Funding for this program will come from cash flow, existing lines of credit and the private placement completed in March. Capital will be deployed to Mannville projects with an estimated nine ( 7.5 net ) new horizontal wells to be drilled this year; investment in Horseshoe Canyon assets at Fenn-Big Valley will combine re-completions and new drills with an estimated 20 new wells to be put on production during the year. Production is estimated to average 7.5 mmcf/d for the full year with a target exit rate of 9 mmcf/d by year end. Capital programs could increase by a further $15 million if the first phase of the Acme project is completed in the current year. Ember is currently considering financing options for the first phase of the Acme development program. Exit rates would increase to 12 mmcf/d with minimal impact to full year averages as additions would be expected to occur late in 2007.

As referred to above, Embers' audited financial statements and related MD&A for the year ended December 31, 2006 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 2006 year end results will take place on March 15, 2007 at 9 AM MDT (11 AM EDT). The conference call can be accessed by dialing in 15 minutes prior to the scheduled start at 1-866-542-4239. 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 1-800-408-3053 and enter the pass code 3216860#.

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)