FIRSTLAND Energy Limited
TSX VENTURE : FLD

FIRSTLAND Energy Limited

November 16, 2005 13:00 ET

FIRSTLAND Energy Limited: Third Quarter Interim Report, for the Period Ending September 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Nov. 16, 2005) - FIRSTLAND Energy Limited (TSX Venture:FLD) presents the financial and operating results for the third quarter and nine months ended September 30, 2005. The following chart compares the corresponding periods for the current and past year.



CORPORATE HIGHLIGHTS ($ Thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Petroleum and Natural
Gas Revenue 146 164 470 606
Net Income (loss) 46 33 133 93
Per Share 0.00 0.00 0.01 0.01
Cash Flow from Operations 68 83 211 329
Per Share 0.01 0.01 0.02 0.03
Net Capital Expenditures (671) 181 (495) 310
Shareholders' Equity 3,017 3,017 3,017 3,017
Debt - - - -
Working Capital 2,228 1,552 2,228 1,552
Natural Gas Production (Mcf/d) 188 291 208 337
Oil Production (Bbl/d) 4 4 5 6
Natural Gas Equivalent (Mcf/d) 212 315 238 373
Barrel Oil Equivalent (Bbl/d) 34 52 40 62
Natural Gas Selling
Price ($/Mcf) $ 7.69 $ 5.79 $ 6.94 $ 5.80
Oil Price ($/Bbl) $ 67.93 $ 55.59 $ 62.64 $ 49.38
Operating Expenses
($/BOE) (6:1) $ 13.63 $ 7.73 $ 11.21 $ 6.65
Cash Flow Netback
$/BOE (6:1) $ 21.88 $ 17.53 $ 19.33 $ 19.49
Petroleum & Natural
Gas Land Holdings
Gross Acres (Thousands) 228 248 228 248
Net Acres (Thousands) 218 240 218 240
Royalty Acres (Thousands) 27 28 27 28
Common Shares (Millions)
September 30 12.40 12.40 12.40 12.40
Fully Diluted 13.05 13.05 13.05 13.05


REPORT TO SHAREHOLDERS

FIRSTLAND recorded lower revenue and cash flow from operations in the third quarter of 2005. Production fell to average 34 barrels of oil equivalent per day (BOED) from 52 BOED a year earlier. Petroleum and natural gas revenue fell by 11% to $146,000 in the third quarter of 2005 from $164,000 a year earlier. Accordingly, cash flow from operations dropped by 18% to $68,000 ($0.01 per share) this year from $83,000 ($0.01 per share) in 2004. The declines in production were offset in part by increased natural gas prices which averaged $7.69 per thousand cubic feet (Mcf) this year compared to $5.79 per Mcf in the third quarter a year ago. Falling production can be attributed to natural decline rates combined with a loss of seasonal production at Cranberry and a supply disruption at Botha where FIRSTLAND did not sell natural gas in the third quarter. The disruption at Botha, although less than 10% of the company's production is based on an allocation issue that currently remains unresolved.

Three wells were drilled on Company lands during the third quarter of 2005.

At Lone Pine, immediately north of Calgary, a 1,300 meter Lea Park test was drilled and cased as a potential gas well on a one section (640 acre) tract of Company land subject to a farm out agreement with an industry partner. The partner has elected to drill a second well on an offsetting section of Company land and drilling is expected to commence before the end of this year. FIRSTLAND will retain a non convertible gross over riding royalty (GORR) in the wells and the lands. Earlier this year, the same partner drilled a gas well on a nearby 480 acre tract of Company land also at Lone Pine. A second well has been licensed on the tract. Similarly, FIRSTLAND will hold a non convertible GORR in the land and wells.

In the Sturgeon Lake area of northwest Alberta, two 1,400 meter Triassic test wells were drilled on separate tracts of Company land subject to a farm out and rolling option agreement with an industry partner. Both of the wells, new pool wildcats, were dry and abandoned. While the results at Sturgeon Lake were disappointing, the Company was exposed to new pool exploration with substantial upside.

A significant amount of exploration is already slated for Company lands during the remainder of this fall and winter drilling season.

A 2,800 meter test well is currently being drilled on Company lands in the Brazeau area of west central Alberta. FIRSTLAND holds a non convertible GORR in the well and ten sections (6,400 acres) of land subject to a farm out agreement with an industry partner. The Company also has received a $250,000 cash consideration as part of the agreement when the well commenced drilling operations on November 6, 2005.

At Matziwin, in southeast Alberta, our partner has, after conducting a 3D seismic program, elected to drill a Paleozoic test on a one section (640 acre) block of Company lands. FIRSTLAND will retain a GORR in the well and lands convertible to a working interest at pay out and holds a working interest position in a surrounding area of mutual interest. The well is expected to commence drilling by November 15, 2005.

In the Simonette area of northwest Alberta, partners have committed to drill a 2,300 meter Fernie test on a five section
(3,200 acre) block of Company land. The well is expected to commence drilling before January 31, 2006. The partner will earn an interest in three sections (1,920 acres) with the first well and will have an option to drill a second well to earn in the balance of the lands. FIRSTLAND has the right to elect to participate at casing point for a working interest or revert to a non convertible GORR in each well.

In the Giroux Lake area of northwest Alberta, immediately east of Simonette, partners have elected to drill an exploratory test on a one section (640 acre) tract of Company land. The well is expected to commence drilling by the end of this year. FIRSTLAND will hold a GORR in the well and land convertible to a working interest at pay out. The partner has a rolling option to elect to continue to drill and earn in additional Company lands within the general area.

In the Mearon area of northwest Alberta, FIRSTLAND has entered into a farm out and sale arrangement that involves 15 sections (9,600 acres) of Company lands. Our partner has committed to drill two wells to earn an interest in 13 of the sections and also paid $500,000 to purchase FIRSTLAND's working interest in the remaining two sections. FIRSTLAND will retain a non convertible GORR in the fifteen sections and two shut in gas wells in the area. Drilling operations are expected to be conducted during the first quarter of 2006.

At Clear Prairie, immediately to the south of Mearon, FIRSTLAND has entered into a seismic option agreement with an industry partner that involves four sections (2,560 acres) of Company land. Our partner has committed to shoot a seismic program within the next few months and by doing so can elect to drill on and earn an interest in the Company lands. The first well would earn an interest in two of the four sections and the partner would have an option to drill a second well to earn in the balance of the lands. FIRSTLAND would retain a GORR in each well convertible at pay out to a working interest.

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 the right to elect to drill a well on three sections (1,920 acres) of Company land. If the 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.



BALANCE SHEET

September 30, 2005 September 30, 2005 December 31, 2004
------------------------------------------------------------------------
Assets
Current
Cash and short term investments $ 1,671,742 $ 1,535,559
Accounts receivable 615,795 98,935
------------------------------------------------------------------------
2,287,537 1,634,494
Property and Equipment 2,344,878 2,942,331
------------------------------------------------------------------------
$ 4,632,415 $ 4,576,825
------------------------------------------------------------------------
------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued
liabilities $ 59,502 $ 112,292
Asset Retirement Obligation 90,063 84,963
Future Tax Liability 530,000 560,000
------------------------------------------------------------------------
679,565 757,255
------------------------------------------------------------------------
Shareholders' Equity
Share Capital 3,016,920 3,016,920
Retained Earnings 935,930 802,650
------------------------------------------------------------------------
3,952,850 3,819,570
------------------------------------------------------------------------
$ 4,632,415 $ 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 Nine Months Ended
September 30 September 30
------------------------------------------------------------------------
(Unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Income
Royalty income $ 38,161 $ 51,847 $ 160,950 $ 199,593
Production 107,886 112,568 308,993 406,015
Interest and other 11,140 9,161 29,105 25,637
------------------------------------------------------------------------
157,187 173,576 499,048 631,245
------------------------------------------------------------------------
Expenses
Accretion 1,700 1,582 5,100 4,746
Depletion, depreciation
and amortization 11,175 43,910 102,714 196,348
General and administrative 13,905 18,078 77,778 81,830
Management fees 24,000 24,000 72,000 72,000
Operating 41,593 34,511 117,174 105,386
Transportation 1,044 2,492 5,126 7,532
Crown Royalties
(net of ARTC) 8,215 11,213 15,876 38,268
------------------------------------------------------------------------
101,632 135,786 395,768 506,110
------------------------------------------------------------------------
Income Before Income Taxes 55,555 37,790 103,280 125,135
Future (recovery)
Income Taxes 10,000 5,000 (30,000) 32,000
------------------------------------------------------------------------
Net Income 45,555 32,790 133,280 93,135
Retained Earnings,
beginning of period 890,375 771,925 802,650 689,809
------------------------------------------------------------------------
Retroactive Change
in Accounting Policy
Asset retirement
obligation - - - 21,771
------------------------------------------------------------------------
Retained Earnings,
end of period $ 935,930 $ 804,715 $ 935,930 $ 804,715
------------------------------------------------------------------------
------------------------------------------------------------------------
Basic and Fully Diluted
Income per Share $ 0.00 $ 0.00 $ 0.01 $ 0.01
------------------------------------------------------------------------
------------------------------------------------------------------------


STATEMENT OF CASH FLOW

Three Months Ended Nine Months Ended
September 30 September 30
------------------------------------------------------------------------
(Unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Operating Activities
Net income for the period $ 45,555 $ 32,790 $ 133,280 $ 96,336
Items not involving cash
Accretion 1,700 1,582 5,100 4,746
Depletion, depreciation
and amortization 11,175 43,910 102,714 196,348
Future taxes 10,000 5,000 (30,000) 32,000
------------------------------------------------------------------------
Cash Provided By Operations 68,430 83,282 211,094 329,430
Net change in non-cash
working capital (517,194) (21,014) (569,650) 68,783
------------------------------------------------------------------------
Cash provided by
operating activities (448,764) 62,268 (358,556) 398,213
------------------------------------------------------------------------
Investing Activities
Acquisition and development
of petroleum and natural
gas properties (371,625) (181,168) (549,210) (444,003)
Proceeds on disposition
of natural gas properties 1,042,610 231 1,043,949 134,130
------------------------------------------------------------------------
670,985 (180,937) 494,739 (309,873)
------------------------------------------------------------------------
Net Change in Cash Position 222,221 (118,669) 136,183 88,340
Cash Position, beginning
of period 1,449,521 1,639,886 1,535,559 1,432,877
------------------------------------------------------------------------
Cash Position,
end of period $1,671,742 $1,521,217 $1,671,742 $1,521,217
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash consists of cash and short-term investments


NOTES TO FINANCIAL STATEMENTS

September 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

September 30, 2005
------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
------------------------------------------------------------------------
Undeveloped land $1,516,389 $ - $1,516,389
Petroleum and natural
gas properties 3,978,736 3,152,463 826,273
Furniture and fixtures 6,439 4,223 2,216
------------------------------------------------------------------------
$5,501,564 $3,156,686 $2,344,878
------------------------------------------------------------------------
------------------------------------------------------------------------

December 31, 2004
------------------------------------------------------------------------
Accumulated Net book
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 September 30, 2005, petroleum and gas properties included $1,516,389 million relating to the cost of unproved properties that have been excluded from the depletion and depreciation calculation.

The Company made assumptions for the purposes of conducting a ceiling test on its petroleum and natural gas properties at September 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:

Nine months Ending Nine months Ending
September 30, 2005 September 30, 2004
------------------------------------------------------------------------
Basic shares 12,400,000 12,400,000
Diluted shares 12,471,903 12,528,444

Three months Ending Three months Ending
September 30, 2005 September 30, 2004
------------------------------------------------------------------------
Basic shares 12,400,000 12,400,000
Diluted shares 12,490,471 12,435,177



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