Exall Energy Corporation
TSX : EE

Exall Energy Corporation

November 12, 2008 08:58 ET

Exall Energy Corporation Announces Results for the Three and Nine Months Ended September 30, 2008

CALGARY, ALBERTA--(Marketwire - Nov. 12, 2008) -

(All amounts are in Canadian dollars unless stated otherwise)

Exall Energy Corporation ("Exall Energy" or the "Company") (TSX:EE) is pleased to announce financial and operating results for the three and nine months ending September 30, 2008.

Exall achieved record production and cash flow results in the third quarter of 2008 due to successful drilling in the first quarter of 2008.

Highlights of the period include:

- Production increased to 412 boe per day comprised of 76 percent oil and natural gas liquids and 24 percent natural gas,

- Funds from operations increased to $2.2 million for the quarter or $0.06 per share,

- Commenced plans for the waterflood project at Marten Mountain, Mitsue area of Alberta, that will allow increased production rates,

- Commenced drilling a potential oil producer and/or water injection well in October 2008 on lands acquired during the third quarter at an Alberta crown land sale,

- Increased reserves allowed for an expanded credit facility after the quarter end to $5 million.



HIGHLIGHTS Three months ended Nine months ended
September 30 September 30
percent percent
2008 2007 change 2008 2007 change
--------------------------------------------------------------------------
Financial ($)
Gross
revenue 3,992,318 1,010,384 295 7,320,904 2,852,551 157
Funds from
operations 2,235,414 341,640 554 3,845,006 1,241,607 210
Basic and
diluted per
share 0.06 0.01 500 0.10 0.04 150
Net income
(loss) 731,938 (716,674) - 1,122,077 (406,380) -
Basic and
diluted per
share 0.02 (0.02) - 0.03 (0.01) -
Capital
expenditures,
net 749,168 306,419 144 4,680,068 4,382,023 7
Net debt 1,058,742 2,853,540 (63) 1,058,742 2,853,540 (63)

Operations
Daily
production
Crude oil(bbl) 302 85 256 173 78 121
Natural gas
liquids(bbl) 13 14 (4) 14 13 11
Natural gas
(mcf) 581 534 9 550 502 10
Total daily
production
(boe @ 6:1) 412 188 119 279 175 60
Netback per
boe (6:1)($) 68.43 32.28 112 60.96 34.18 78


Overview

The record production of 412 boe per day attained during the third quarter was due primarily to the drilling success at Marten Mountain, Mitsue area of Alberta during the first quarter of 2008. The well produced at an average rate of 760 boe per day plus 150 mcf per day of gas, when placed in production through temporary facilities and restricted choke for the last two weeks of March. The well was shut in during the spring break-up period. Construction of a permanent bridge and permanent all-weather road to the site has been completed, allowing the well to be put back on production starting July 22, 2008. The well produced at an average rate of 550 boe per day (325 net to Exall) through the month of August. The well is currently shut in to allow the drilling of the second of three additional development locations established by this well. The first well in the program was spud October 8, 2008. It is a potential oil producer and/or water injection well on lands acquired at the September 3, 2008 Alberta crown land sale. The acquisition of the new lands has a major impact for Exall in that it brings control of the waterflood application process to Exall. Ownership of a water injection well will allow the Company to apply for Waterflood Project status and Good Production Practice (GPP) approval, which will allow higher production rates from the currently restricted 14-1 horizontal well and subsequent development wells to be drilled in the fourth quarter and in 2009. Construction of the pipeline and battery facilities currently under design will begin once Waterflood Project status is given and higher production rates have been approved.

Results of Operations

Production for the third quarter of 2008 of 412 boe per day resulted in record financial and operating results for the Company. Funds from operations for the quarter of $2.2 million or $0.06 per share were the result of the increased production and impacted by record high commodity prices. Net income for the quarter was $731,938 or $0.02 per share. On a year to date basis funds from operations of $3.9 million is a 212 percent increase over the prior year and net income of $1.2 million is a significant improvement over the net loss in 2007. At September 30, 2008 the Company had net debt of $1.2 million on a credit facility that has been expanded to $5 million.

Outlook

The corporate production objective for 2008 exit was set between 800 and 1,000 boe per day earlier this year. The successful drilling and completion of the Marten Mountain horizontal well has assured that the company will meet that goal, in terms of production capability although production may be restricted due to government regulations or other factors such as weather or rig availability. The proven reserves and production capability established by the well have increased the corporate cash flow and borrowing power sufficiently to fund further development of that key property, as well as other assets owned by the Company. The exit production target will be met through the development drilling and by establishing a waterflood project which will allow higher production rates.

Exall is currently drilling two wells in the Marten Mountain area of Mitsue. Pipeline and battery facilities are in the design and permitting phase and the Company expects to have final commitments to proceed with construction after successful completion of the first development well. Completion of the project is scheduled for the winter of 2009 to coincide with higher production rates upon the waterflood project approval.

Two additional wells are planned for the Black Spruce area of Mitsue during the winter of 2009. Black Spruce is a channel prospect analogous to Marten Mountain with large reserves and production potential.

The horizontal well drilled in Jayar, Alberta during the first quarter of this year (14.5 percent WI) continues to produce at 140 boe per day (20 net). Exall will be participating (8.7 percent WI) in the drilling of another horizontal infill well at Jayar, to be drilled in the first quarter of 2009. Additional wells are planned in the area through the coming year, dependent on the successful results of this well. Exall has an average 14.5 percent working interest in future wells.

Exall will also be participating in seismic acquisition and the drilling of a development well in the Aitken Creek, British Columbia area, offsetting the original gas discovery well drilled in 2004. The Company has an average 22.5 percent working interest in ten drilling spacing units in the area and is currently negotiating additional interest.

Reader Advisory

Certain selected financial and operational information for the three and nine months ended September 30, 2008 is set out above and should be read in conjunction with the unaudited financial statements and related management's discussion and analysis (MD&A) for the three and nine months ended September 30, 2008 filed on SEDAR at www.sedar.com and on the Company's website at www.exall.com.

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.

About Exall

Exall Energy Corporation is a junior oil and gas company active in its business of oil and gas exploration, development and production from its properties in Alberta, British Columbia and Texas. Exall is currently developing a new oil discovery in north-central Alberta which will add significant production over the next six months. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol EE.

Please visit Exall Energy's website at: www.exall.com.

Contact Information

  • Exall Energy Corporation
    Frank S. Rebeyka
    Vice Chairman & CEO
    (403) 815-6637
    or
    Exall Energy Corporation
    Roger N. Dueck
    President & COO
    (403) 237-7820 x 223
    (403) 262-4723 (FAX)
    Email: info@exall.com
    Website: www.exall.com