Forent Energy Ltd.

TSX VENTURE : FEN


Forent Energy Ltd.

November 16, 2012 07:00 ET

Forent Announces Third Quarter 2012 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - Nov. 16, 2012) - Forent Energy Ltd. (TSX VENTURE:FEN) ("Forent" or the "Company") announced today its third 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 and nine months ended September 30, 2012 with comparisons to the three and nine months ended September 30, 2011. Forent's financial statements and Management Discussion and Analysis for the three and nine months ended September 30, 2012 and 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

Three months ended
September 30,
Nine months ended
September 30,
2012 2011 2012 2011
($ ) ($ ) ($ ) ($ )
Revenues 905,774 905,854 2,620,388 3,072,498
Net earnings (loss) (303,305 ) (684,299 ) (2,045,594 ) (1,853,529 )
Net earnings (loss) per share - basic and diluted - (0.01 ) (0.02 ) (0.02 )
Capital expenditures 479,213 741,361 3,293,765 2,217,178
Total assets 13,557,844 15,161,949 13,557,844 15,161,949
Working capital (426,728 ) 1,604,379 (426,728 ) 1,604,379
Funds provided by operations 95,950 140,877 520,326 383,253

Financial and Operating Results of the Third Quarter 2012

  • the Company continued to generate positive cash flow in the period amounting to $95,950;
  • annual average oil and gas production decreased by 12 percent compared to 2011;
  • general and administrative expenses increased 42 percent overall and increased on a per boe basis $11.82 per boe, primarily due to a significant non-recurring professional fee;
  • operating expenses decreased 1 percent to $30.19 per boe; and,
  • operating netbacks for the period increased by 29% to $14.97 per boe.

Overview of the Third Quarter 2012

The Company spent considerable effort during the third quarter in the successful conclusion of its search for a partner for the exploration of its 29 section Montgomery AB, exploration opportunity. Forent enjoyed relatively stable oil and gas production throughout most of the quarter, although the Mervin heavy oil field was shut in in late September. Partly as a result of the Mervin situation, cash flow in the third quarter declined to $95,950 from the $238,269 achieved in the second quarter of 2012.

Nova Scotia

After drilling two exploration wells (Alton #1 and South Branch #1) earlier in the year, the Company incorporated the information into its geological model and has greatly improved its understanding of the subsurface of the Alton Block. The Company believes it has identified the key risks associated with the Gays River reef play and has been able to determine a go forward strategy to explore the geophysical anomalies on the Alton Block. It should be recognized that all of the 10 to 12 geophysical anomalies 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.

Montgomery, Alberta

During the second quarter the Company achieved a significant milestone with the signing of a definitive farm-out agreement with BlackShale Resources, Inc. ("BlackShale"), a wholly owned subsidiary of Houston based Kerogen Exploration LLC. BlackShale is a private company that specializes in identifying and exploiting unconventional oil and gas opportunities in Canada. After extensive assessment of regional light oil resource play opportunities in Western Canada, BlackShale chose Forent's Montgomery lands as one of its initial projects for light oil exploration.

Under the terms of the Agreement, BlackShale has agreed to fund the cost to drill and complete a vertical test well to the base of the Mannville Formation, a depth of approximately 3,100 metres, to earn a 70% interest in all PNG rights to the base of the deepest formation penetrated in four contiguous sections of land, while Forent will retain 30% of its pre-farmout interest in these four sections. Upon drilling the first well and having evaluated all of the formations in the borehole, BlackShale may exercise an option to drill additional vertical or horizontal wells under similar earning conditions.

Mervin, Saskatchewan

During the third quarter of 2012 production averaged 145 bbls per day or about 5 bbls per day greater than the second quarter of 2012. In mid-September a neighboring operating company initiated a well re-entry program on lands adjacent to Forent's Mervin oil field. During the re-entry operations on the first well in this program, a deeper formation was inadvertently penetrated containing quantities of water with hydrogen sulfide ("H2S"). This H2S contaminated water flowed uncontrolled for a number of days into the Waseca formation, from which Forent was previously producing sweet oil, resulting in the Waseca formation becoming contaminated. As a result of H2S in the produced water, Forent shut in the Mervin field on September 22nd as a safety precaution. Upon taking appropriate operating measures to remove the H2S from the produced water, oilfield operations were restarted on October 4th. Forent continues to ship most of its production to the US Gulf Coast via rail car and experienced a premium of approximately $10 per bbl, as compared to the Canadian pipeline price.

Outlook for the balance of 2012

The farm-out agreement with BlackShale Resources Inc. ("BlackShale") that was announced on August 30, 2012 is moving forward with BlackShale expected to commence drilling of the first well in November. This vertical well will be drilled to the base of the Mannville Formation in order to evaluate all geological zones encountered. In addition to a full suite of well logs, BlackShale intends to take extensive core samples, specifically over the Second White Speck Formation ("2WS"). All technical data will be thoroughly evaluated over several months in order to determine the best completion methodology for the 2WS horizontal well that is expected to be drilled in 2013. Forent will also utilize the well data in order to further evaluate its 23 section, proprietary 3D seismic dataset.

At Mervin SK, the Company is seeing several positive indications such as the return of casing gas, reduced fluid in the six well bores and a modest return in oil production in the range of 20 to 30 bpd. The Company's cash flow is expected to be materially impacted in the fourth quarter of 2012, until normalized production resumes. Forent is in discussions with the offsetting company in order to restore full production as quickly as possible, address ongoing operational matters and consider appropriate compensation for the impairment of the Company's Mervin field.

In Nova Scotia, the Company is looking at all alternatives to continue our exploration efforts in Nova Scotia, including bringing in a partner. The next logical step would be a surface geochemical study that can be conducted for approximately $200,000. It is believed this will measure the differing levels of hydrocarbons encountered in our two exploration wells and will allow high grading of a number of the geophysical anomalies seen on the Alton Block.

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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