Forent Energy Ltd.
TSX VENTURE : FEN

Forent Energy Ltd.

May 25, 2012 07:00 ET

Forent Announces Positive First Quarter 2012 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - May 25, 2012) - Forent Energy Ltd. (TSX VENTURE:FEN) ("Forent" or the "Company") announced today its first quarter financial results based on International Financial reporting Standards ("IFRS").

The following table provides a summary of Forent's financial and operating results for the three months ended March 31, 2012 with comparisons to the three months ended March 31, 2011. Forent's financial statements and Management Discussion and Analysis for the three months ended March 31, 2012 have been filed on SEDAR at www.sedar.com and are available on Forent's website at www.forentenergy.com.

All amounts referred to in the press release are in Canadian dollars unless otherwise stated.

Selected Financial Information

Three Months ended March 31
2012 2011
($ ) ($ )
Revenues 890,456 877,064
Net earnings (loss) (1,049,559 ) (1,056,483 )
Net earnings (loss) per share - basic and diluted (0.01 ) (0.01 )
Capital expenditures 1,648,285 590,609
Total assets 14,997,915 15,083,077
Working capital 1,045,540 2,022,555
Funds provided (used) in operations 186,107 (55,005 )

Financial and Operating Results - First Quarter 2012

  • The Company was cash flow positive in the first quarter and enjoyed positive corporate netbacks, compared to in 2011;
  • average oil and gas production increased 3 percent compared to 2011;
  • weighted average commodity selling prices decreased by 12 percent vs. 2011, due to significantly lower natural gas prices;
  • overall oil and gas revenues decreased by 9 percent to $884,299 from $969,198;
  • operating expenses decreased 45 percent to $17.23 per boe; and
  • operating netbacks for the period improved appreciably from $9.29 per boe in 2011 to $17.22 per boe in 2012.

Overview of the First Quarter 2012

The Company had a very active first quarter in Nova Scotia, where it drilled and cased the Alton #1 well and prepared to drill a second well on the Alton Block (South Branch #1). Forent enjoyed reasonable oil production and significant third party water volumes at its Mervin Saskatchewan facility. Crude oil and natural gas liquids prices remained high, allowing the Company to largely maintain netbacks, however, natural gas prices fell significantly from price levels received in the first quarter of 2011. On February 22nd the Company completed a non-brokered private placement for gross proceeds of $400,000, consisting of flow-through common shares and units, with the funds allocated to exploration on the Alton Block. Forent remains debt free and cash flow positive.

Nova Scotia

Forent spudded its first reef oil exploration well (Alton #1) on February 14th and the well was completed at the end of the month. The well encountered the flank of a Gays River reef, a shaley dolomite, lying on a Meguma basement high. Several significant natural gas kicks were detected during the well drilling and live oil was found in the mud tank, indicating an active petroleum system and suggesting that there are natural gas liquids or light oil associated with the natural gas. The logs indicated minimal porosity and permeability near the well bore and as such, the company does not anticipate production from this well, however, future wells drilled into the same reef may be productive. The well has been cased and left in a condition that it may be easily re-entered for further evaluation. In addition, it was drilled within the financial and time parameters established prior to spud and the company is encouraged by the results.

Montgomery, Alberta

The Company continues to seek a partner or partners for its 29 section Montgomery exploration opportunity. While we are in discussion with a number of parties there has not been any substantive progress in identifying a partner. Montgomery remains a very important piece of the Company's go-forward strategy. The property has the potential to have a significant impact on the Company's common share value.

Mervin, Saskatchewan

During the first quarter of 2012 production averaged approximately 130 bbls per day from the Mervin property. While we have witnessed considerable changes in individual well production from month to month, overall field production is experiencing only slight decline. In addition to the oil production noted above, the Company received approximately 230,000 bbls of third party water for disposal and earned approximately $130,000 in water disposal revenue, as well as, additional volumes of recovered crude oil. We expect production from Mervin to decline slightly over the balance of 2012.

Outlook for the balance of 2012

Management believes that there is considerable upside in the value of the Company's common shares with the successful exploration of its interests at Montgomery, Alberta. We continue to market the Montgomery exploration opportunity and are currently in discussions with several parties in an effort to complete a multiple well farm-out later this year. The Company has interests in 29 contiguous sections with an average working interest of approximately 85%. We have identified more than a dozen drilling locations, including multi-zone, three-way structural closures of significant areal extent, as well as, a number of Second White Specs prospects, that appear similar to a very successful nearby Second White Specs well.

As a result of the positive drilling results from the Alton #1 well and the disappointing results from the South Branch #1 well, the Company is reviewing all geological and geophysical data related to the Alton Block, in an effort to determine how best to move forward. It must be recognized that all of the dozen or so geophysical reef-like features that have been identified on the Alton Block are distinct exploration opportunities, such that a lack of success at any one does not rule out the potential for success at a different location. Forent has more than fulfilled its work commitments on the Alton Block and accordingly, is not required to commit significant capital to this project over the next 12 to 18 months.

In Mervin, the Company will continue its efforts to optimize production and attract third party water volumes. We have recently experienced a significant drop in third party water, as a result of one of our major customers drilling its own water disposal well. The Company is canvasing other producers in the area in order to attract other volumes and expects that it will be successful in this effort. Even with the decline in third party volumes, Forent enjoys significant operating cost savings as a result of owning its own water well and by having its six production wells tied into the facility.

We have recently started shipping a portion of our production to the US Gulf Coast via rail car in order to take advantage of the premium price being offered and as long as the price premium remains, will maximize the volumes sold in this manner.

Shares of Forent trade on the TSX Venture Exchange under the symbol "FEN.V".

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements such as the estimates of reserves, the references to Forent's exploration program and drilling program and capital expenditures relating to, and timing of, such programs are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. There are uncertainties inherent in forward-looking information, including factors beyond Forent's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in estimating reserves, including many factors beyond Forent's control, and no assurance can be given that the indicated level of reserves or the recovery thereof will be realized. Forent undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. Additional information identifying risks and uncertainties that could affect financial results is contained in Forent's filings with Canadian securities regulators, which filings are available at www.sedar.com.

The TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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