Ember Resources Inc.
TSX : EBR

Ember Resources Inc.

November 09, 2010 08:15 ET

Ember Resources Inc. Reports Third Quarter 2010 Results

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2010) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Ember Resources Inc. ("Ember") (TSX:EBR) announced today that it has filed its unaudited financial statements and related management's discussion and analysis ("MD&A") for the quarter ended September 30, 2010 on www.sedar.com.



THIRD QUARTER RESULTS

Financial Highlights

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Three Three
months months
ended ended
September September Percent
($000s except per share amounts) 30, 2010 30, 2009 Change
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Natural gas sales $ 7,706 $ 6,639 16
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Funds from operations $ 1,944 $ 48 3,950
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- per share basic & diluted (1) $ 0.03 $ - NA
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Net loss $ (4,997) $ (7,287) (31)
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- per share basic & diluted $ (0.07) $ (0.14) (50)
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Property and equipment additions $ 1,115 $ 2,472 (55)
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Property acquisition $ (3) $ 1 (400)
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Property disposition - $ 584 NA
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Total assets $ 351,896 $ 363,919 (3)
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Net bank debt and working capital $ 82,855 $ 97,553 (15)
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Shares outstanding 74,897 51,367 46
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Nine Nine
months months
ended ended
September September Percent
($000s except per share amounts) 30, 2010 30, 2009 Change
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Natural gas sales $ 26,714 $ 27,213 (2)
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Funds from operations $ 9,982 $ 10,287 (3)
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- per share basic & diluted (1) $ 0.13 $ 0.20 (35)
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Net loss $ (12,958) $ (14,575) (11)
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- per share basic & diluted $ (0.17) $ (0.28) (39)
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Property and equipment additions $ 11,942 $ 7,688 55
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Property acquisition $ 425 $ 3,213 (87)
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Property disposition - $ 5,704 NA
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Total assets $ 351,896 $ 363,919 (3)
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Net bank debt and working capital $ 82,855 $ 97,553 (15)
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Shares outstanding 74,897 51,367 46
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Operating Highlights

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Three Three
months months
ended ended
September September Percent
30, 2010 30, 2009 Change
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Daily average gas production (Mcf/d) 23,168 24,528 (6)
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Daily average production (BOE/d) 3,861 4,088 (6)
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Average sales price ($/Mcf) 3.62 2.94 23
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Realized gain commodity hedges($/Mcf) 0.30 - NA
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Realized gain foreign exchange ($/Mcf) 0.06 - NA
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Royalties expense ($/Mcf) 0.19 0.22 (14)
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Operating expenses ($/Mcf) 1.48 1.54 (4)
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Transportation expenses ($/Mcf) 0.20 0.17 18
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Operating netback ($/Mcf) 2.11 1.01 109
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Operating netback ($/BOE) 12.63 6.10 107
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CBM wells drilled (gross/net)
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- Horseshoe Canyon - / - 8.0 / 4.8 NA / NA
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Land (000s of net acres) 436 470 (7)
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----------------------------------------------------------------------------
Nine Nine
months months
ended ended
September September Percent
30, 2010 30, 2009 Change
----------------------------------------------------------------------------
Daily average gas production (Mcf/d) 23,912 25,905 (8)
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Daily average production (BOE/d) 3,985 4,317 (8)
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Average sales price ($/Mcf) 4.09 3.85 6
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Realized gain commodity hedges ($/Mcf) 0.27 0.19 42
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Realized gain foreign exchange ($/Mcf) 0.02 - NA
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Royalties expense ($/Mcf) 0.21 0.13 62
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Operating expenses ($/Mcf) 1.38 1.36 1
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Transportation expenses ($/Mcf) 0.20 0.18 11
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Operating netback ($/Mcf) 2.59 2.37 9
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Operating netback ($/BOE) 15.58 14.16 10
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CBM wells drilled (gross/net)
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- Horseshoe Canyon 31.0 / 18.7 21.0 / 12.1 48 / 55
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Land (000s of net acres) 436 470 (7)
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Q3 2010 Highlights

Financial performance

- Funds from operations for the three months ended September 30, 2010 increased to $1.9 million ($0.03/share diluted) from $0.0 million ($0.00/share diluted) for the same period in 2009. The increase reflects 5% lower average production of 23,168 Mcf/d, and higher interest costs, offset by a 23% price increase to $3.62 per Mcf and gains on derivatives, lower operating, royalties and general and administrative expenses.

- Net loss for the third quarter was $5.0 million (loss $0.07/share diluted) versus a net loss of $7.3 million (loss $0.14/share diluted) for the same period in 2009.

- Capital expenditures for the third quarter were minimal totaling $1.2 million including capitalized expenses of $0.6 million as compared to $2.5 million for the same period in 2009.

- Cost structures continue to decline. Operating costs were $8.87/BOE in the third quarter averaging $8.25/BOE for the nine months; general and administrative costs were $2.22/BOE in the quarter averaging $2.19/BOE for the nine months; and royalty costs were $1.18/BOE or 5.4% of revenue in the quarter averaging $1.23/BOE or 5% of revenue for the nine month period.

- The effective royalty rate of 5.4% for the third quarter 2010 versus 1.6% in the second quarter reflects GCA recoveries that typically occur in the second quarter for the previous year, and lower Crown royalties on production in both quarters.

- Interest costs increased during the quarter to $4.95/BOE compared to $3.64/BOE in 2009. Despite lower borrowing, interest costs increased as the effective interest rate was 8.2% versus 5.6% in the comparable period.

- Net bank debt and working capital at September 30, 2010 totaled $82.9 million, down from $97.6 million a year earlier. This reflects a debt reduction strategy that has included a $20 million equity offering and non-core asset sales in 2009.

- The Company has extended its credit facilities to November 10, 2010 and is negotiating the terms of the facility during the expected term out period from November 10, 2010 to April 29, 2011. Term out of the facility requires cancellation of the working capital facility on the term out date and a reduction of the production facility to the amount drawn ($86.0 million). On September 30, 2010 the Company had $1.9 million of cash on hand and had drawn its credit facility to $86.4 million for a net position of $84.5 million.

Operating performance

- Production for the quarter averaged 23.2 MMcf/d as compared to 24.5 MMcf/d in 2009. Company declines continue to reflect the long-life nature of Ember's CBM production as there have been minimal investments as well as asset dispositions in the past 12 months.

- The operating netback for the quarter was $12.63/BOE compared to $6.10/BOE in 2009. Gas prices were $4.04/BOE higher at $21.69/BOE, realized hedging gains were higher by $2.19/BOE, royalties were lower by $0.15/BOE and operating and transportation expenses were $0.15 lower at $10.07/BOE.

Strategic Alternatives

Ember previously announced that, after a review of its current share price, reserves, production, cash flows and debt levels, among other matters, its board of directors has decided to initiate a process to identify and consider strategic alternatives with a view to enhancing shareholder value. Strategic alternatives may include, but are not limited to, a sale of the Corporation, 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.

Ember continues to trade at a substantial discount to its net asset value despite having a significant reserve base, land position, production and infrastructure in low cost, long life, natural gas CBM resources in the province of Alberta. 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.

Guidance update

In response to the low gas price environment and Ember's announcement that it is seeking strategic alternatives, production and spending guidance has been revised for the balance of 2010. During the remainder of the year and during the strategic alternatives process Ember will limit capital spending and drilling activity.

Production is expected to average 23-24 MMcf/d, and capital spending has been reduced to $13 million from $15 million. This should result in the drilling of 20 net wells for the full year. Year-end net bank debt and working capital are estimated at $82 million.

As referred to above, Embers' unaudited financial statements and related MD&A for the quarter ended September 30, 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 unaudited financials and related MD&A can be obtained on request without charge by contacting Ember Resources Inc. at 403 270-0803.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements including anticipated production levels, levels of bank debt, negotiations in respect of Ember's credit facility, 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 prices 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 filings 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
    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 C. Ryan
    Vice-President Finance & CFO
    403 270-0803
    403 270-2850 (FAX)
    www.emberresources.com