Forent Energy Ltd.
TSX VENTURE : FEN

Forent Energy Ltd.

August 29, 2011 07:00 ET

Forent Announces Strong Second Quarter and Achievement of Key Corporate Milestones

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2011) - Forent Energy Ltd. (TSX VENTURE:FEN) ("Forent" or the "Company") is pleased to announce its second quarter financial results based on International Financial Reporting Standards ("IFRS"), which are the new accounting principles generally accepted in Canada.

Forent achieved the following key corporate milestones:

  • Positive cash flow over the first six months with no outstanding debt;
  • the successful completion of the Nova Scotia 2D seismic program; and
  • the selection of three Nova Scotia drilling locations and the securing of a drilling rig for the anticipated early November 2011 spud date.

The following table provides a summary of Forent's financial and operating results for the three and six months ended June 30, 2011 with comparisons to the three and six months ended June 30, 2010. Forent's financial statements and management discussion and analysis ("MD&A") for the three months and six months ended June 30, 2011 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

3 months ended June 30, 2011 3 months ended June 30, 2010 6 months ended June 30, 2011 6 months ended June 30, 2010
($) ($) ($) ($)
Revenues 1,297,141 435,054 2,218,165 777,145
Net earnings (loss) (81,756) (292,984) (662,971) (1,190,234)
Net earnings (loss) per share – basic and diluted - - (0.01) (0.02)
Capital expenditures 778,976 2,158,206 1,475,817 2,612,989
Total assets 15,481,473 12,611,767 15,481,473 12,611,767
Working capital 1,615,191 2,437,913 1,615,191 2,437,913
Funds provided (used) in operations 298,689 (97,843) 287,643 (257,555)

Financial and operating – Second Quarter of 2011

  • Average oil and gas production in the second quarter increased by 86 percent compared to 2010;
  • average commodity selling prices for oil, NGL's and natural gas increased by 95 percent vs. 2010;
  • overall oil and gas revenues increased by 198 percent to $1,297,141 from $435,054 in 2010;
  • operating expenses per boe increased 15 percent to $23.09 per boe from $20.14 in 2010;
  • corporate operating netbacks for the quarter improved appreciably from negative $9.28 per boe in 2010 to a positive $9.71 per boe in 2011, the first time in the Company's history that it has experienced a positive corporate netback;
  • general and administrative expenses increased 46 percent, but fell on a per boe basis by 23 percent to $15.67 per boe; and
  • the Company generated cash flow of $298,689 in the first quarter of 2011, compared to a cash burn of $97,843 in 2010.

Overview of the Second Quarter 2011

The second quarter saw the Company make considerable progress on its two major exploration opportunities; the onshore Alton Block in Nova Scotia and its southern Alberta Montgomery exploration property. In addition, Forent successfully accessed the Canadian equity market, raising $2.25 million (gross) in May, through the issue of flow through common shares, with the majority of the proceeds to be applied to the Company's Nova Scotia 2D seismic program. The Company achieved a significant increase in funds from operations in the three months ended June 30, 2011, over the same period in 2010, with funds from operations increasing to $298,689 from funds used in operations of $97,843, respectively. Most of this increase is attributable to the successful redevelopment of the Company's Mervin, Saskatchewan property.

Montgomery, Alberta

The Company completed its interpretation of the 23 section 3D seismic data that was acquired in December 2010 and initiated its search for a partner to explore its 27 contiguous sections in southern Alberta. At this time the Company has narrowed its search for potential partners and is in discussions with a couple of entities. The Company is hopeful that it can identify a partner in the near future.

Forent holds a unique exploration land position at Montgomery, where it has identified a number of 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. The lands have never been explored due to lack of surface access, which Forent was able to obtain late last year. During the second quarter the Company continued to expand its program of engaging the local surface land owners in order to help to ensure that any access concerns are identified and addressed prior to drilling and operations are conducted in a safe, effective and acceptable manner, with limited impact on the environment. This has included a recent assessment of the native grasses and wild flowers on the lands.

Alton Block, Nova Scotia

Forent initiated its 2011 exploration program early in the second quarter. On April 26th the Company held a successful Open House in Stewiacke, Nova Scotia to review its 65 km 2D seismic program with local residents. Approximately 60 residents and interested parties attended the meeting and shortly thereafter the seismic permitting process was initiated. All preparatory work necessary for the seismic acquisition program was completed by the end of June 2011.

The Company has dedicated considerable resources to ensuring that all stakeholders, including members of nearby First Nations, understand Forent's 2011 objectives for the Alton Block. While there were a number of issues raised by local residents, the Company addressed all concerns to the residents' satisfaction and was able to conduct a successful seismic acquisition program, on time and on budget. Onshore petroleum exploration in Nova Scotia is an industry that's in its infancy in comparison to the western Canadian sedimentary basin. Forent has taken an approach that is focused on ensuring all stakeholders are informed and educated as to the exploration process that the Company is pursuing. Specifically, the Company has indicated that it is drilling for crude oil into the reef structures it has identified and will not need to hydraulically fracture any of the proposed wells.

Mervin, Saskatchewan

During the first quarter of 2011, the Company experienced a significant increase in the amount of water produced with the oil and production was shut down for most of the month of February. Although production was largely restored during the second quarter, operating costs remained high due to an increase in the volume of water produced. After breakup, the Company initiated a program to tie its six producing wells into its water disposal well but was delayed in this effort as a result of surface access impediments, which have now been resolved. Forent expects to have this tie-in completed early in September, at which time significant cost savings are likely to be achieved.

Outlook for the balance of 2011

The Company has significant plans for the balance of the year that should not only result in increased cash flow over the near term but also position Forent for meaningful future growth.

In Mervin, Saskatchewan the Company should complete the tie-in of the six producing wells into the salt water disposal well by early in September and anticipates saving close to $75,000 per month in operating costs. In addition, the Company should be able to more effectively accommodate third party salt water, thereby allowing it to establish additional revenues from a source that is independent of corporate oil and gas production levels.

The Company is continuing to seek a partner for its Montgomery, Alberta exploration opportunity, with the intention of completing a multiple well farm-out in the third quarter of the year. Forent expects the first well to be spud in the fourth quarter of the year.

In Nova Scotia, the Company completed its 65 km 2D seismic acquisition program at the end of July. The data has been processed and interpreted, as well as, being correlated to the information obtained from Forent's 2010 gravity gradiometry survey. Forent intends to submit an application to the government of Nova Scotia for the drilling of three exploration wells by the end of August and anticipates initiating drilling by early November 2011. A drilling rig, located in New Brunswick, has been secured and three locations identified. Forent is maintaining its comprehensive communications strategy in Nova Scotia, in a proactive effort to ensure a successful drilling program later this year.

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 term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet equal to one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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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