FIRSTLAND Energy Limited
TSX VENTURE : FLD

FIRSTLAND Energy Limited

August 19, 2005 14:00 ET

FIRSTLAND Energy Limited Second Quarter Interim Report, for the Period Ending June 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 19, 2005) - FIRSTLAND Energy Limited (TSX Venture:FLD) presents the financial and operating results for the second quarter ended June 30, 2005. The following chart compares the second quarters and first six month periods for the current and past year.



CORPORATE HIGHLIGHTS ($ Thousands, except per share amounts)

3 Months Ended 6 Months Ended
------------------------------------------------------------------------
June 30 June 30 June 30 June 30
2005 2004 2005 2004
------------------------------------------------------------------------
Petroleum and Natural Gas Revenue 163 223 324 441
Net Income (loss) 27 15 88 64
Per Share 0.00 0.00 0.01 0.01
Cash Flow from Operations 54 110 143 247
Per Share 0.00 0.01 0.01 0.02
Net Capital Expenditures 90 153 178 263
Shareholders' Equity 3,907 3,820 3,907 3,820
Debt - - - -
Working Capital 1,489 1,522 1,489 1,522
Natural Gas Production (Mcf/d) 215 317 218 380
Oil Production (bbl/d) 4.5 6 5.5 6
Natural Gas Equivalent (1:6) 243 353 251 416
Barrel Oil Equivalent (6:1) 40 59 42 69
Natural Gas Selling Price ($/Mcf) 7.03 6.70 6.67 5.64
Oil Price ($/bbl) 61.79 48.96 60.78 46.55
Operating Expenses ($/BOE) (6:1) 11.15 6.93 9.94 5.67
Cash Flow Netback $/BOE (6:1) 14.92 20.47 18.77 19.76
Petroleum & Natural Gas Land Holdings
Gross Acres (Thousands) 239 242 239 242
Net Acres (Thousands) 230 234 230 234
Royalty Acres (Thousands) 30 29 30 29
Common Shares (Millions)
June 30 12.40 12.40 12.40 12.40


REPORT TO SHAREHOLDERS

FIRSTLAND recorded lower revenue and cash flow from operations in the second quarter of 2005. These declines were a direct result of lower production which averaged 40 barrels of oil equivalent per day (BOED) in the second quarter compared to 59 BOED a year earlier. Lower production than anticipated at Botha, and Frog contributed to the decline. New production at Marwayne, where FIRSTLAND holds a convertible gross over riding royalty (GORR) commenced in May but the well is not expected to significantly impact Company revenues. Three coal bed methane wells drilled on Company lands in 2004 have not been placed on production and are awaiting further development in their respective areas.

Total petroleum and natural gas revenue fell by 27% to $163,000 in the second quarter of 2005 from $223,000 a year earlier. Similarly, cash flow from operations dropped by 49% to $54,000 ($0.00 per share) this year from $110,000 ($0.01 per share) in 2004. The Company's production is weighted 88% towards natural gas which fetched $7.03 per thousand cubic feet (Mcf) this year compared to $6.70 per Mcf in the second quarter a year ago.

Three wells were drilled on Company lands during the first half of 2005.

During the second quarter two shallow infill wells were drilled on a section of Company land in the Coronation area of east central Alberta. FIRSTLAND holds a non convertible GORR in a third well that is currently producing tight gas at approximately 30 Mcf per day. The Company will hold a similar interest in the two new wells which are expected to commence production during the third quarter.

In the first quarter, a well, drilled on a 480 acre tract of Company land in the Lone Pine area of south central Alberta, was cased as a potential natural gas well and subsequently completed in April. A second well was recently licensed on the tract. FIRSTLAND holds a non convertible GORR in the wells and the 480 acres. Our partner in these wells has elected to drill another well on an additional 1,280 acres (2 sections) of Company land in the immediate area. The partner will earn a 100% interest to depth drilled in one section (640 acres) with the commitment well subject to a non convertible GORR payable to FIRSTLAND and will have an option to drill a second well to earn in the balance of the lands. Further success at Lone Pine could lead to substantial infill development drilling.

Earlier this year, FIRSTLAND entered into a farm out arrangement with an industry partner on pre-selected Company lands in northwest Alberta. The partner has licensed the first two wells on different tracts of Company land in the Sturgeon Lake area. The wells, 1,400 meter Triassic tests, are expected to commence drilling operations within the next few weeks. FIRSTLAND will retain a GORR in the wells and the one section spacing units earned by the wells convertible to a working interest at pay out. The partner holds a continuing option to elect to drill additional wells on the pre-selected lands under similar terms.

FIRSTLAND is currently involved with industry partners in a number of seismic and drilling options that are focused on Company lands.

At Matziwan, subsequent to reviewing third party seismic data, an industry partner has elected to shoot a 3D seismic program over 640 acres of Company land. After conducting the program the partner can elect to drill a well to earn an interest in the land. If a test well is drilled, FIRSTLAND would retain a GORR in the well and land, convertible to a working interest at pay out.

At Iosegun, in the Sturgeon Lake area of northwest Alberta, FIRSTLAND has entered into a drilling option arrangement with an industry partner. The partner, after drilling an offsetting well, will have until December 31, 2005 to elect to drill a well on three sections (1,920 acres) of Company land. If a well is drilled FIRSTLAND would retain a GORR in the well and spacing unit convertible to a working interest at pay out and a working interest in the balance of the lands.

At Dixonville, and Kirkwall, seismic options entered into earlier this year with industry partners failed to lead to drilling commitments. At Kirkwall, in eastern Alberta, FIRSTLAND received new seismic data as part of the option arrangement. At Dixonville, in the Peace River arch area of northwest Alberta, the 640 acre tract of Company land is now subject to a drilling option arrangement with a new partner.

During the second quarter FIRSTLAND distributed a lease offering of Company lands in central and southern Alberta. Subsequent to this offering a number of deals have been entered into with various industry partners. FIRSTLAND has agreed to sell a total of four parcels in different areas in the eastern plains for a cash consideration of $292,000. Also, in west central Alberta, where 10 sections (6,400 net acres) were dealt, FIRSTLAND will receive $250,000 and has a commitment for a 2,700 meter farm out well. The Company will retain a non-convertible GORR in the lands. All of the deals are set to close during the third quarter and do not impact the current reporting period.

In the second quarter of 2005, the Company acquired 3,200 net acres of petroleum and natural gas rights in Alberta. Total investment in land acquisition and maintenance for the period was $90,000. At the end of the second quarter of 2005, FIRSTLAND held 239,000 gross (230,000 net) acres of petroleum and natural gas rights in the Province of Alberta.



BALANCE SHEET

June 30, 2005 December 31, 2004
------------------------------------------------------------------------
Assets

Current
Cash and short term investments $ 1,449,521 $ 1,535,559
Accounts receivable 91,071 98,935
------------------------------------------------------------------------
1,540,592 1,634,494
Property and Equipment 3,027,038 2,942,331
------------------------------------------------------------------------
$ 4,567,630 $ 4,576,825
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities

Current
Accounts payable and
accrued liabilities $ 51,972 $ 112,292
Asset Retirement Obligation 88,363 84,963
Future Tax Liability 520,000 560,000
------------------------------------------------------------------------
660,335 757,255
------------------------------------------------------------------------
Shareholders' Equity
Share Capital 3,016,920 3,016,920
Retained Earnings 890,375 802,650
------------------------------------------------------------------------
3,907,295 3,819,570
------------------------------------------------------------------------
$ 4,567,630 $ 4,576,825
------------------------------------------------------------------------
------------------------------------------------------------------------


Signed on behalf of the board:

A. David van der Lee P. Wayne Wells

(signed) (signed)
A. David van der Lee - Director P. Wayne Wells - Director



STATEMENT OF INCOME AND RETAINED EARNINGS

Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------------------------
(Unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Income

Royalty income $ 64,311 $ 78,690 $ 122,789 $ 147,746
Production 98,453 143,824 201,107 293,447
Interest 2,177 7,674 17,965 16,476
------------------------------------------------------------------------
164,941 230,188 341,861 457,669
------------------------------------------------------------------------
Expenses

Accretion 1,700 1,582 3,400 3,148
Depletion, depreciation
and amortization 45,772 72,741 91,539 152,454
General and administrative 41,428 39,625 63,873 59,957
Management fees 24,000 24,000 48,000 48,000
Operating 40,604 37,195 75,581 70,875
Transportation 1,994 2,952 4,082 5,040
Crown Royalties
(net of ARTC) 2,605 16,481 7,661 27,055
------------------------------------------------------------------------
158,103 194,576 294,136 366,529
------------------------------------------------------------------------
Income Before Income Taxes 6,838 35,612 47,725 91,140
Income Taxes - Future
(recovery) (20,000) 21,000 (40,000) 27,000
------------------------------------------------------------------------
Net Income 26,838 14,612 87,725 64,140
Retained Earnings,
beginning of period 863,537 761,108 802,650 689,809
------------------------------------------------------------------------
Retroactive Change in
Accounting Policies

Asset retirement obligation - - - 21,771
------------------------------------------------------------------------
Retained Earnings,
end of period $ 890,375 $ 775,720 $ 890,375 $ 775,720
------------------------------------------------------------------------
------------------------------------------------------------------------
Basic and Fully Diluted
Income per Share $ 0.00 $ 0.00 $ 0.01 $ 0.01
------------------------------------------------------------------------
------------------------------------------------------------------------


STATEMENT OF CASH FLOW

Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------------------------
(Unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Operating Activities

Net income (loss)
for the period $ 26,836 $ 14,612 $ 87,725 $ 64,140
Items not involving cash
Accretion 1,700 1,582 3,400 3,148
Depletion, depreciation
and amortization 45,772 72,741 91,539 152,454
Future taxes (20,000) 21,000 (40,000) 27,000
------------------------------------------------------------------------
Cash Provided By
Operations 54,308 109,935 142,664 246,742

Net change in non-cash
working capital 4,564 (13,349) (52,456) 89,203
------------------------------------------------------------------------
Cash provided by
operating activities 58,872 96,586 90,208 335,945
------------------------------------------------------------------------
Investing Activities

Acquisition of property
and equipment (89,511) (152,644) (177,585) (262,835)
Proceeds on disposition
of property and equipment - - 1,339 133,899
------------------------------------------------------------------------
(89,511) (152,644) (176,246) (128,936)
------------------------------------------------------------------------
Net Change in Cash
Position (30,639) (56,058) (86,038) 207,009
Cash Position, beginning
of period 1,480,160 1,695,944 1,535,559 1,432,877
------------------------------------------------------------------------
Cash Position, end of
period $1,449,521 $1,639,886 $1,449,521 $1,639,886
------------------------------------------------------------------------
------------------------------------------------------------------------


NOTES TO FINANCIAL STATEMENTS

June 30, 2005 (Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Firstland Energy Limited ("Firstland" or the "Company") is incorporated under the laws of the province of Alberta. The Company is engaged in acquisition, exploration, development and production of petroleum and natural gas reserves in Canada.

The interim consolidated financial statements of Firstland Energy Limited ("Firstland") have been prepared in accordance with Canadian generally accepted accounting principles and are consistent with the presentation and disclosure in the audited consolidated financial statements and notes thereto for the year ended December 31, 2004. The interim financial statements contain disclosures which are incremental to Firstland's annual financial statements. Certain disclosures, which are normally required to be included in the notes to the financial statements have been condensed or omitted. The interim financial statements should be read in conjunction with Firstland's audited consolidated financial statements and notes thereto for the year ended December 31, 2004.

The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts; actual results could differ from those estimates. The amounts recorded for depletion, cost center ceiling test on oil and gas assets, asset retirement obligations, and stock based compensation are based on estimates. Management has made estimates and assumptions for proved reserves, probable reserves, future production rates, commodity prices, future costs, and other relevant assumptions in order to prepare these statements. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.

The Company follows the accounting policies disclosed in the notes to its annual audited consolidated financial statements for the period ending December 31, 2004.



2. PROPERTY AND EQUIPMENT

June 30, 2005
------------------------------------------------------------------------
Accumulated Net book
June 30, 2005 Cost amortization value
------------------------------------------------------------------------
Undeveloped land $ 2,063,258 $ 86,797 $ 1,976,461
Petroleum and natural
gas properties 4,189,649 3,141,486 1,048,163
Furniture and fixtures 6,440 4,026 2,414
------------------------------------------------------------------------
$ 6,259,347 $ 3,232,309 $ 3,027,038
------------------------------------------------------------------------
------------------------------------------------------------------------


December 31, 2004
------------------------------------------------------------------------
Accumulated Net book
December 31, 2004 Cost amortization value
------------------------------------------------------------------------
Undeveloped land $ 1,885,672 $ 86,797 $ 1,798,875
Petroleum and natural
gas properties 4,190,988 3,050,340 1,140,648
Furniture and fixtures 6,440 3,632 2,808
------------------------------------------------------------------------
$ 6,083,100 $ 3,140,769 $ 2,942,331
------------------------------------------------------------------------
------------------------------------------------------------------------


At June 30, 2005, petroleum and gas properties included $2,063,258 million relating to the cost of unproved properties that have been excluded from the depletion and deprecation calculation.

The Company made assumptions for the purposes of conducting a ceiling test on its petroleum and natural gas properties at June 30, 2005. Where possible the Company based its assumptions on the forecasted prices and costs from its reserves report dated December 31, 2004.

3. WEIGHTED AVERAGE SHARES OUTSTANDING

The weighted average number of common shares issued and outstanding for the periods reported is as follows:




Six months Ending Six months Ending
June 30, 2005 June 30, 2004
------------------------------------------------------------------------
Basic shares 12,400,000 12,400,000
Diluted shares 12,449,310 12,519,483


Three months Ending Three months Ending
June 30, 2005 June 30, 2004
------------------------------------------------------------------------
Basic shares 12,400,000 12,400,000
Diluted shares 12,465,437 12,534,616


Contact Information

  • FIRSTLAND Energy Limited
    David van der Lee
    President and Chief Executive Officer
    (403) 264-9223
    (403) 264-9085 (FAX)
    Email: corp@firstlandenergy.com
    or
    FIRSTLAND Energy Limited
    Suite 800, 839 - 5 Avenue SW
    Calgary, Alberta, T2P 3C8